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 THE UNIVERSITY 
 OF ILLINOIS 
 LIBRARY 

 
 AN 
 
 
 THE GENERAL PRINCIPLES 
 
 AND 
 
 PRESENT PRACTICE 
 
 OF 
 
 BANKING, 
 
 IN 
 
 (EntjlanD anD Scotland ; 
 
 WITH 
 
 OBSERVATIONS UPON THE JUSTICE AND POLICY 
 
 OF AN 
 
 IMMEDIATE ALTERATION 
 
 IN 
 
 %\z charter of t^e Banfe of Cnfflanti, 
 
 AND THE 
 
 MEASURES TO BE PURSUED IN ORDER TO EFFECT IT. 
 
 BY T. JOPLIN. 
 
 SECOND EDITION. 
 
 NEWCASTLE UPON TYNE : 
 
 PRINTED BY EDWARD WALKER, PJLGRIM-STREET : 
 
 FOR BIDGEWAY AND CO. LONDON; AND ?ETEE HILL AND CO, 
 EDINBURGH. 
 
 1822. 
 
 Price Two S/iUJinf^s and Sidj)eiu<\
 
 2[>el)icati0n* 
 
 TO NONE CAN IT BE MORE PROPER TO DEDICATE A 
 WORK OF ANY KIND THAN TO THOSE WHOM IT PRO- 
 POSES TO SERVE, THEREFORE, 
 
 TO THE MAI^UFACTURERS, MERCHANTS, AND TRADES- 
 MEN, OF ENGLAND AND IRELAND, THIS ESSAY IS RE- 
 SPECTFULLY DEDICATED BY 
 
 THE AUTHOR.
 
 PREFACE. 
 
 The following Essay, though more immediately ad- 
 dressed to the Gentlemen, Merchants, and Others, of 
 Newcastle upon Tyne, Shields, Durham, and Sunder- 
 land, and their respective neighbourhoods, is equally 
 applicable to every part of England ; and it is to be 
 hoped, that the steps recommended to be pursued, in 
 order to procure an alteration in the Charter of the 
 Bank of England, or similar ones, will be immedately 
 taken, wherever it may be intended to establish Banks 
 on the principles recommended. A simultaneous 
 movement in different quarters, and a general combi- 
 nation in favour of the object proposed, would at once 
 render nugatory any opposition from those who may 
 expect to lose by it. 
 
 An effectual opposition, however, in the present 
 state of the public mind, need not be dreaded. The 
 absolute necessity of a change in our Banking System
 
 Vlll 
 
 has long been felt, and is quite obvious ; but the pre- 
 sent Bankers h^ve great influence in Parliament, and 
 might succeed, perhaps, in getting some half-measure 
 adopted, if the public were to shew the least indiffer- 
 ence or want of determination on the subject. 
 
 A perfect freedom with respect to the System of 
 Bankiaig which it may choose to adopt, more espe- 
 cially since this can be attained without injuring the 
 Bank of England, the country ought to look for, and 
 insist upon. Were the clause in its Charter, for in- 
 stance, expunged with respect to Country Banks only, 
 as has been done in Ireland, the same defective and 
 insecure principle of Banking would be continued in 
 the metropolis, and the System would still be bad 
 where it ought to be best. 
 
 In London, it is requisite that more confidence 
 should be placed in Bankers than in any other part 
 of the kingdom. The circumstances of individuals 
 cannot there be known as in the country, by the ob- 
 servation and report of their neighbours, hence they 
 are obliged to make reference to their Bankers when 
 it is necessary to verify their credit, who can or who 
 will only know the credit they are entitled to, by the 
 goodness of their accounts; and consequently those
 
 IX 
 
 who have any considerable credit to maintain, are 
 always obliged to keep large balances in their hands. 
 Country Bankers are under the necessity of doing the 
 same, in order to meet the bills upon London, which, 
 in the way of their business they have to draw. A 
 great number of noblemen and country gentlemen of 
 large property, also keep their accounts with them, 
 which together with the great money transactions of 
 foreign nations and governments now ncgociated in 
 London, with all of which the Bankers have more or 
 less to do, necessarily render the business of the Lon- 
 don Banks immense. 
 
 The large balances which the merchants in London 
 must keep with their Bankers, would not only with 
 Public Companies be safe, but productive. At pre- 
 sent they get nothing for them but their Banker's 
 good word ; while with such Companies they would 
 also be allowed three or four per cent, interest. 
 
 The Plan recommended to the inhabitants of New- 
 castle, it will, perhaps, be best to pursue every where. 
 The Deputies of a Company will always have more 
 weight than individuals, however respectable. There 
 can, also, it is trusted, be little doubt of success ; and 
 even should any serious opposition arise, by a pro-
 
 per union there need be no great fear of overcoming 
 it. The present System can never be supported a- 
 gainst the united convictions of both government and 
 the country.
 
 AH 
 
 dBsuv on I5anftitt0» 
 
 XjANKS are by far the most important of all 
 our commercial establishments. They are the 
 fountains of our currency, the depositories of 
 our capital, and at once the wheels and pillars 
 of our trade. Business to any great extent 
 could not be carried on without them ; and all 
 who have cash transactions of any kind are 
 more or less dependent upon them : the landed 
 proprietor finds them a convenient place of de- 
 posit for the ready money he possesses, or a 
 useful resource in case of need ; the capitalist, 
 when he deems them safe, can lodge his money 
 with them, receive interest for it, and have it 
 ready when the chances of trade or changes of 
 property may throw a desirable purchase in his 
 way ; merchants and traders of every denomi- 
 nation are enabled through them to send money
 
 to, and receive it from the most distant places, 
 to raise money when in want of it upon the 
 Bills which they receive from their customers, 
 to have those Bills presented for payment 
 through a channel which in general secures 
 their being duly honoured, and to deposit in 
 them that money which any particular occasion, 
 or the current demands of their business re- 
 quire ; while their Promissory Notes furnish 
 the country with a useful and convenient cir- 
 culating medium, and are in the hands of every 
 one. 
 
 They are, therefore, intimately connected 
 with every class of society. Every person who 
 has any thing to do either with capital or mo- 
 ney is interested in their stability. But the 
 capitalist, merchant, manufacturer, and trades- 
 man, and all who have large payments to make 
 and receive, are continually under the necessity 
 of trusting them in amounts, the loss of which 
 might prove their utter ruin ; besides having 
 daily to confide in them for the negotiation of 
 Bills and advances of capital, which, in com- 
 mercial transactions, are continually required. 
 
 On this account, a very deep interest is felt 
 in the welfare of Banks. Nothing can in any 
 way affect them without exciting the immediate 
 attention of the public, and (if it involve their 
 credit) without producing the greatest possible 
 agitation and alarm. Thus when the slightest
 
 ^apprehension is entertained respecting their 
 solvency, however groundless it may sometimes 
 prove, a run upon them immediately takes 
 place. That is, hundreds of people immediate- 
 ly crowd the doors of the Banks, to demand 
 payment of the Notes they hold, or to with- 
 draw that money out of their hands, which 
 they have deposited with them. This puts a 
 stop to their usual Banking operations, and 
 people in trade cannot receive that accommo- 
 dation upon which they have relied, and upon 
 which the regularity of their payments, and 
 consequently their credit, depends: while, at 
 the same time, no person can make remit^tances 
 without placing their money in a state of peril, 
 which they can only ascertain to be groundless, 
 by waiting until it is over. All is, therefore, 
 confusion ; and the whole community is thrown 
 into a state of apprehension and alarm, which 
 may be better conceived than described. 
 
 Upon such occasions the greatest exertions 
 are always made to allay the fears, and restore 
 the confidence of the pubhc ; and very great 
 risks are sometimes run in doing so. It is not 
 unusual for the friends of a Bank so situated, 
 to issue out Bills or Notices, pledging them- 
 selves to the public, to take its Notes in pay- 
 ment, to any amount. By which measure, 
 should the Bank happen to stop, many of them 
 would necessarily be ruinecf. Within these few 
 B <2
 
 years, pledges of this kind were repeatedly is- 
 sued in favour of the Durham, Stockton, and 
 Sunderland Banks, all of whom ultimately fail- 
 ed ; but as they were not attended with any se- 
 rious consequences, it is probable that the 
 Banks did not stop payment immediately when 
 they were issued, or perhaps the public may 
 have overlooked the obligation contracted, and, 
 from inadvertency, not have called upon the 
 parties to redeem the pledge they had given. 
 
 We may, however, form some idea of the in- 
 conveniences in which the mercantile world are 
 involved, when people are found wandering so 
 far out of the track of ordinary prudence as to 
 guarantee the security of establishments with 
 whose affairs they have no intimate acquaint- 
 ance, and whose insolvency would involve them 
 in certain destruction. 
 
 Nothing, in fact, can affect the credit of the 
 Banks without being immediately felt in a cor- 
 responding degree by the public ; and the ac- 
 tual stoppage of an extensive Banking concern 
 deranges the whole frame of mercantile affairs, 
 and carries confusion, misery, and ruin, into 
 every department of society. 
 
 Great, however, as the inconveniences are, 
 which the discredit of Banks, and consequent 
 runs upon them occasion : and great as are the 
 calamities by which their failures are uniformly
 
 attended, they are, both in this country and Ire- 
 land, of very common occurrence. 
 
 By an account printed in the appendix to 
 the Lords' Report upon the Bank resuming 
 Cash Payments, it appears, that in the last 
 twenty years, (that is, twenty years previous to 
 1818), no fewer than two hundred and thirty 
 commissions of bankruptcy had been issued 
 against Country Banks alone; an average of 
 failures, proportioned to tlie total number of 
 them, in all probability far exceeding that of 
 any other regular business. 
 
 Sometimes, as if epidemically, the Banks of 
 a whole district will fail together, as was the 
 case a year or two ago, in the south of Ireland. 
 That part of the country was, in consequence, 
 involved in the greatest distress ; its trade was 
 materially injured, and a shock given to its 
 prosperity, from which it is said not yet to have 
 recovered. The same event happened also in 
 the counties of Northumberland and Durham a 
 few years back, when the Durham, Sunderland, 
 and Stockton Banks failed within a short time 
 of each other. This district, however, was 
 better able to endure it, though the inconveni- 
 ences generally felt were great, and the suffer- 
 ers numerous j and, even in this town, to which 
 the evil but partially extended, the want of 
 confidence and the general state of alarm which
 
 6 
 
 it produced, must be fresh in the recollection 
 of every one. 
 
 Now, while England and Ireland are con- 
 tinually subject to disasters of this kind, it 
 seems an extraordinary fact, that Scotland is 
 totally free from them : the Scotch Banks rare- 
 ly, if ever, either failing or losing money. 
 
 No one, I dare say, will, from this, imagine, 
 that there is any thing different in the nature 
 of their money transactions, or that trade is 
 subject to fewer vicissitudes in Scotland than 
 with us. I believe that trade is pretty much 
 the same in both nations, or if there is any dif- 
 ference, that the merchants of Scotland are the 
 more speculative, and less stable of the two. 
 But the true cause of the difference is to be 
 found in the nature of their respective Bank- 
 ing Establishments : the Scotch Banks being 
 Joint Stock Companies, while the English 
 Banks are private concerns. 
 
 The Scotch Banks consist of a great num- 
 ber of Proprietors or Stock Holders, who con- 
 tribute, some to the extent of one hundred 
 pounds, some of a thousand, and some of many 
 thousands, with which they form a joint capi- 
 tal, establish a Bank, and entrust the manage- 
 ment of it to a Committee chosen from their 
 body, called a Court of Directors. The Eng- 
 lish Banks, on the contrary, never consist of 
 more than six partners, though often fewer, and
 
 are for the most part, managed by one, or at 
 the furthest by two of them. 
 
 To the uniform success of Joint Stock Bank- 
 ing Companies, history affords but one excep- 
 tion, viz. : — The case of the Douglass, Her- 
 ron, and Co. (or Ayr) Bank, some account of 
 which is given by Smith, page 58, vol. 2nd, of 
 his Wealth of Nations ; but if we examine the 
 circumstances which produced that failure, we 
 shall find it attributable to causes which are not 
 likely again to occur, and that as an exception, 
 it establishes the rule. 
 
 About fifty years ago, this Bank was esta- 
 blished in the West of Scotland, by a number 
 of country gentlemen, totally ignorant of busi- 
 ness, and entertaining erroneous views of Bank- 
 ing. Their object was not to make money, but 
 to furnish capital, (which was then scarce,) to 
 the country at large, in order to promote and 
 improve the cultivation of land, &c. This 
 they imagined could be done by means of a 
 few reams of paper, manufactured into Notes. 
 They were unable to see that it was not in the 
 power of any Bank to keep more Notes in cir- 
 culation than are wanted as a circulating me- 
 dium by the country, and that the surplus 
 would inevitably be returned upon them for 
 repayment. Conformably to the object of its 
 establishment, the Bank therefore issued its 
 Notes, with great freedom, in permanent loans.
 
 which were immediately expended in agricul- 
 tural improvements, and when they were re- 
 turned for payment (having been issued in ad- 
 vances which could not be recalled) it had no- 
 thing to pay them with ; and was compelled, in 
 a short time, to raise money by improvident ex- 
 pedients, at eight or ten per cent, when it had 
 lent it out to others at five. Such a mode of 
 business was not likely, of course, to be long 
 pursued. The Bank came to a stand in about 
 two years, its establish ers lost money, and it 
 now remains the only exception to the suc- 
 cess of such concerns. 
 
 It must, however, be understood that the 
 uniform success of the Scotch Banks, applies 
 only to the Joint Stock Companies. Private 
 Bankers fail in Scotland, as well as in other 
 places. The Private Banks in Scotland, how- 
 ever, are but few, and only one or two of them 
 at present issue Notes. They keep the accounts 
 of individuals, and transact business with the 
 Public Banks in the same manner as the Bankers 
 of London transact it with the Bank of Eng- 
 land. But the credit requisite even to Private 
 Banks is much greater in Scotland than with 
 us, in consequence of their having to compete 
 with establishments of superior stability, which 
 do business upon the same terms. 
 
 The only Bank failures, however, that I 
 have heard of in Scotland, with the exception
 
 of the Ayr Bank already spoken of, are the Mer- 
 chant Banking Company of Stirling, Grace's 
 Bank of Dumfries, and the Falkirk Union 
 Bank. The lirst two were each of them carri- 
 ed on by an individual, and the last had only 
 three partners. To these must be also added, 
 the Merchant Banking Company of Glasgow, 
 about twenty years ago, a very small concern, 
 which must likewise, I think, have been a Pri- 
 vate Bank, as but few particulars are generally 
 known respecting it. Had it been a Public 
 Establishment, a. greater degree of publicity 
 would have been given to its affairs. 
 
 In consequence of the uniform success of the 
 Public Banks of Scotland, the most unbounded 
 confidence is felt and reposed in them, both- by 
 the stock-holders and the public. Every holder 
 of stock, (except with the chartered companies) 
 however small the amount, incurs all the re- 
 sponsibility of a partner, yet that responsibility 
 having been proved by al! experience to be 
 merely nominal, has no effect whatever on the 
 sale of it. A person buys a hundred pounds 
 share of the stock of any of the Banks with the 
 same freedom that he would piuchase the same 
 amount of stock in the three per cent, consols, 
 without the responsii)iJity weighing with him 
 one shilling in the puichase. 
 
 In addition, however, to their success, some 
 of the Scotcli Banks have very considerable
 
 10 
 
 capitals, particularly the Edinburgh Banks, 
 which have from five to fifteen hundred thou- 
 sand pounds each. Hence their credit is al- 
 most unbounded, being considered by the 
 Scotch equal to that of the Bank of England 
 itself. The evils, therefore, which we suffer 
 from the feeble and fluctuating credit of most 
 of our Banks, and the disastrous failures of 
 many of them, are nearly unknown to the peo- 
 ple of Scotland. 
 
 From the very great credit enjoyed by the 
 Scotch Banks, they are enabled to transact bu- 
 siness to a much greater extent, and on very 
 different principles, than with us, by which still 
 more important, though less obvious benefits 
 are enjoyed, and which it will not be improper 
 for us in the first place to consider. 
 
 The original and proper business of a Banker 
 is to trade in capital. He ought to be that me- 
 dium between the borrower and lender in the 
 money market, which a merchant is in other 
 commodities. It is the business of a merchant 
 or trader to buy of the producer on the one 
 hand, and to sell to the consumer or retailer on 
 the other. He acquires a knowledge of both 
 parties, and they of him, and for his credit, 
 capital, labour, and knowledge, he charges a 
 profit upon the commodity which, through his 
 agency, is transferred from the party who has 
 it to sell,, to the party wanting to purchase it.
 
 11 
 
 Now, what a merchant is in other commodities, 
 the Scotch Banks are in tlie money market. 
 They borrow of those who have money to lend, 
 and lend to those who want to borrow, acquire 
 a knowledge of both parties, and charge a pro- 
 fit of one per cent, upon the transaction. Any 
 person opening an account, with them, re 
 ceives ibur per cent.* upon the balance in their 
 hands. He may pay money to the credit of his 
 account when he chooses, and is paid interest 
 for it from the day it is deposited ; he may 
 draw his money out of the Bank when and in 
 such sums as he thinks proper, and only loses 
 interest upon the sum drawn, from the day of 
 receiving it. On the contrary, any person 
 giving proper securities, may open an account 
 with them, and draw to the extent of the se- 
 curity given, for which they will charge him 
 five per cent, upon the fluctuating balance he 
 owes. Consequently, a person who has money 
 to lend is saved all the trouble, not unattended 
 with risk, of mortgages, and may have his mo- 
 ney, or any part of it, at any time, should a 
 desirable })urchase tall in his way ; whereas 
 with a mortgage he cannot draw his money 
 when he wants it — must take it altogether when 
 he does draw it — or, if the borrower chooses, 
 
 * Some of them liave lately reducod the interest tlicy 
 give, but others continue to give four per cent, as before. 
 . c 2
 
 12 
 
 must take it whether he wants it or not. Their 
 object, however, in borrowing, being to lend, 
 the facilities given to borrowers are equally 
 great. In the first place, they will discount 
 bills and other mercantile securities, that are 
 perfectly regular and good, at any time, and 
 to any amount, so that merchants can calculate 
 with certainty upon being accommodated in 
 the course of regular transactions to any ex- 
 tent, which is of infinite service to them, as it 
 would be better for a merchant not to have 
 such assistance at all, as to have any uncertain- 
 ty respecting it. In the next place, they grant 
 Cash Accounts, that is, any person in busi- 
 ness, by giving two suflScient securities, may 
 open' an account with them, and overdraw 
 them to the extent of the security given, for 
 which, as before stated, he is charged five per 
 cent, upon the balance he owes ; and very 
 great advances, not to mercantile men only, 
 but to all classes of persons, are made in this 
 way ; and in the last place, they make advan- 
 ces upon real property, some of them to a very 
 considerable extent. The plan they pursue, I 
 believe, is, for the proprietor to pledge his e- 
 state, or other property, with the Bank, for a 
 given amount, open an account with it, and 
 draw as his occasions may require to the a- 
 mount prescribed. Thus, when any persons 
 wish to borrow, the facilities held out to bor-
 
 13 
 
 rowers induce them equally with the lenders 
 to make application to the Bank. 
 
 As individuals often call in the money they 
 have lent out on mortgage when they can find 
 better employment for it, or when the death of 
 a party produces a division of his property, by 
 which a great expence to the mortgagee is in- 
 curred in procuring a fresh mortgage. Banks 
 are therefore more to be depended upon, and 
 borrowers being just as much wanted by them 
 as lenders, and the money which they lend 
 being rarely, or in fact, never, called in again 
 until it is the pleasure of the borrower to pay 
 it off, people, in want of money, will prefer 
 dealing with the Banks at even a higher per 
 centage, while lenders, on their part, prefer 
 dealing with them at a per centage something 
 less than individuals would give. Thus in con- 
 sequence of the security of their property, and 
 the readiness with which they can at all times 
 obtain it when wanted, a difference of one per 
 cent, is not found to be a sufficient inducement 
 for the borrowers and lenders to pass by the 
 Banks and to transact their business direct with 
 each other. If they tiid, the gain would, of 
 course, have to be divided between them, and 
 a half per cent, would be no compensation to 
 either party for the additional inconvenience, 
 risk, and trouble, in which they would be in- 
 volved. Whereas the Bank being open and
 
 14 
 
 ready at all times to meet the wants of each 
 party, unless among particular friends neither 
 party ever thinks of making further enquiries 
 upon the subject, but transact tlieir business 
 with the Banks as a matter of course. They 
 are, therefore, at once, the great depositories 
 of the money capital of the country, and the 
 source from whence the supplies of it are 
 drawn. 
 
 Although considerable advances are made 
 by the Scotch Banks upon real property, it is, 
 however, rather a ground of complaint, that 
 they have been too much in the habit of specu- 
 lating in the funds, when it miglit have been 
 more to the advantage of their country that 
 they should have lent out their capital at home ; 
 and while lending their money at home appears 
 to be preferable for a Public Bank to gambling 
 in the funds, it seems also to be the duty of 
 such an establisluuent to lend its money at 
 home whenever it can do so with equal safety. 
 
 The failures which continually take place 
 amongst the English, particularly the Country 
 Banks, and the consequent discredit in which 
 they are held, of course almost totally precludes 
 them from trading in capital in the manner 
 pursued by the Banks of Scotland. The Lon- 
 don Bankers are the only Bankers, it is general- 
 ly understood, who at all do so, and they are 
 not considered good mortgagees. The strict-
 
 15 
 
 ness in having powers of sale, kc, granted 
 them, which their hmited credit renders neces- 
 sary, in order to be able to call in their money 
 at the shortest notice, should the state of their 
 credit at any time require it, places the mort- 
 gager in a state of disagreeable dependance. 
 The business of an English Country Bank is, 
 however, principally confined to lending out 
 that capital which it raises by the circulation 
 of its Notes, and the comparatively small sums 
 deposited with it, mostly without interest, 
 (its customers seldom depositing more money 
 with it, than their current occasions require) 
 and to buying and selling Bills upon London. 
 The advances of capital which it makes are, of 
 necessity, principally confined to the discount- 
 ing of such short dated Bills of Exchange as 
 through its London agents can be turned at 
 any time into cash : for, being always liable to 
 be called upon to pay off its Notes, and all the 
 money in its hands, at the shortest notice, it 
 must always be prepared to do so ; and the 
 most prudently managed and best English 
 Banks are those which confine themselves most 
 strictly to the limits which their uncertain cre- 
 dit prescribes to them. 
 
 Credit is, in fact, the proper capital of a 
 Bank, without which it is impossible for the 
 business to be carried on with any great advan- 
 tage to the country, and for want of which the
 
 16 
 
 business of English Banks, extensive as it may 
 appear, is very short of what it ought to be, 
 being quite inconsiderable compared with the 
 Banks of S'cotland, or what it would be with a 
 different system. 
 
 Thus then, it appears to be the result of ex- 
 perience, that while our Banks are often de- 
 structive, at all times dangerous, and at the 
 very best totally inadequate, from want of sta- 
 bility and credit, to perform the proper func- 
 tions of Banks, the Scotch Banks never fail, 
 nor is any danger ever apprehended from 
 them ; and that, in consequence, Banking is 
 carried on in that kingdom to an extent un- 
 known, and, of course, with advantages total- 
 ly unfelt in our own. 
 
 We have stated that the superiority in the 
 success, as well as the stability and credit of 
 the Scotch Banks, arise from their being pub- 
 lic, and not private concerns, which is also 
 proved by our own experience. We have but 
 one Public Bank, the Bank of England, and it 
 has uniformly done well since its first establish- 
 ment. The same may be also inferred of the 
 Bank of Ireland, the only Public Bank in that 
 country ; for lately, when applying for a re- 
 newal of its charter, it appeared, that besides 
 its annual dividends, it had made and saved 
 half a million of money, a sum much greater
 
 17 
 
 than the Stock-holders had any conception of. 
 This at once })roves, that successful manage- 
 ment is not at all j)ecnhar to Scotland, or any 
 nation, hut is inherent in the system itself. 
 
 The cause of this difference proceeds from 
 the charters of the Banks of England and Ire- 
 land, which prevent, in their respective coun- 
 tries, more than six persons from entering into 
 a Banking concein, while, in Scotland, there 
 is no such monopoly, and Banks can be esta- 
 blished on the proper principles, and as many 
 people become partners in them as choose. 
 
 From the limited number of partners in our 
 Banks, their management has frequently fallen 
 into hands totally incompetent to such a trust. 
 There is, perhaps, nothing in the theory of 
 Banking very complicated. But to manage a 
 Bank well, requires a degree of firmness, 
 and judgment, which every individual does not 
 possess. If a Banker be too safe and injudi- 
 ciously cautious in his transactions, he Ts apt 
 to ruin his business for want of liberality ; if 
 too confident, to ruin himself for want of 
 prudence ; while he nmst possess firmness suffi- 
 cient to enable him to refuse the most pressing 
 solicitation of even his friends, when necessary 
 to do so. This knowledge, discrimination, and 
 firnniess, not only require natural talent in the 
 person possessing them, but previous j)ractice 
 and experience in the business of the world, 
 u
 
 18 
 
 Whereas persons are often placed in the manage- 
 ment of English Provincial Banks, by some con- 
 nection or other chance, which usually deter- 
 mines the lot of individuals in the common 
 affairs of life. Or, if they are chosen express- 
 ly for their presumed fitness for the trust, their 
 fitness will then depend upon whether the part- 
 ners who chose them, are themselves sufficient- 
 ly competent to form such a choice ; inde- 
 pendent of which, however, the energy and vi- 
 gilance of every individual is at times apt to 
 slumber, and we occasionally find the ablest 
 men get very far wa'ong. 
 
 Now, the true reason of the success of Pub- 
 lic Banks may be ascribed to their never being 
 managed by any single person, but by a Court 
 of Directors, periodically chosen by the holders 
 of stock ; and their fitness for the trust does not 
 depend upon the opinion of an individual or 
 two, but of hundreds, founded upon the clear 
 evidence which their successful management of 
 their own affkii's has afibrded. No man is ever 
 chosen as the director of a joint stock compa- 
 ny, where the choice is unbiassed by influence, 
 who has not given sufficient proof in the eyes 
 of the world of his ability for the management, 
 and has not justly inspired his fellow proprie- 
 tors with that confidence which tliey repose in 
 him. 
 
 The principal causes which produce the ruin
 
 19 
 
 of private Banks may be stated to be, — first, a 
 confusion in tlieir accounts, arising from a bad 
 or relaxed and careless management, so very 
 frequently exhibited in common affairs ; but 
 which, in Banking, must ever be fatal ; second- 
 ly, speculations with the capital in the Bank ; 
 and thirdly, and most frequently, accommoda- 
 ting great houses, either from motives of pri- 
 vate friendship, or the temi)tation of extra 
 Banking profits, until they are so involved that 
 they must stand or fall with them. The two 
 great failures which have happened in this part 
 of the country were Surtees, Burdon and Co. 
 and the Durliam Bank. Tlie first was produced 
 by entering into private speculations with the 
 capital in its hands, and the last by accommo- 
 dating a great mining concern. But with Pub- 
 lic Banks these causes, by which failures are 
 generally produced, cannot exist. In the first 
 place, the vigilant check necessarily kept upon 
 the accountant, and tliose who have the charge 
 of the books, which must at all times show, 
 without trouble to the Directors, the state of 
 the com])any's affairs, ])r(}vents the ])ossibility 
 of their getting back or into confusion. In the 
 next place, the Directors could not appropriate 
 the money of the Bank to views of private 
 speculation, if they were wishful to do so, 
 as they are a check upon each other. W 
 they were respectable men, they would not at- 
 i) 'Z
 
 20 
 
 tempt it, and if they were not, they would not 
 be there : besides, there is ik) instance recorded 
 of such a thing. In the third place, they have too 
 little personal interest in the Bank to be tempt- 
 ed by extra profit out of the path of safety, in 
 accommodating great houses : or if any of them 
 were influenced by private friendship to do so, 
 it could never be the case with them all ; and 
 they would be also in that respect a check upon 
 each other. 
 
 Independent of the general Court of Di- 
 rectors, there is also a Managing Director, 
 Cashier, Secretary, and Accountant, or some- 
 times Cashier, Secretary, and Accountant, or 
 Cashier and Accountant alone, according to 
 the business done, either the Cashier or Secre- 
 tary in the latter cases acting as Managing Di- 
 rector, and taking all the practical management ; 
 and if the Directors are careful to choose men 
 fit for these stations, and see that they do their 
 duty, the concern will generally succeed. 
 
 The Directors having in general business of 
 their own to attend to, cannot give their whole 
 attention to the Bank aflPairs. Their part is more 
 to deliberate, judge, and determine, than to con- 
 trive. Consequently the Managing Director, 
 or he who is at the head of the executive de- 
 partment, sits with and joins the Directors in 
 their deliberations, and proposes to them such 
 views and opinions as his practical knowledge
 
 21 
 
 and undivided attention to the affairs of the 
 Bank, suggest to him. These they take into 
 consideration, and approve, alter, or otherwise 
 direct, as tliey may tliink proper. The ener- 
 getic and profitable management of such a con- 
 cern, tlieretore, greatly depends upon the abi- 
 lity of its officers, who are expected to submit 
 a variety of views and propositions to the Di- 
 rectors, of which tliere is no fear that they adopt 
 any which are too speculative. The errors 
 of Public Banks are generally on the side of 
 safety, but the concern is apt to flag when the 
 practical management is not in the hands of 
 men possessed in some degree of ready appre- 
 hension, practical energy, and talent for busi- 
 ness ; and I understand, it is consistent with 
 experience, that when the officers of a Bank 
 are not of this description, the business of the 
 concern is apt to fall off, and to become less 
 profitable. 
 
 The business, however, of such a Bank, 
 though it may not be pushed, is seldom neg- 
 lected. When the Directors can give no at- 
 tention to the concern, they generally resign, 
 or when it is their turn to go out, are not 
 re-elected. On the other hand, they are not 
 likely to get wrong in taking uj) sanguine 
 views, by which individuals often mislead them- 
 selves. They are responsible in the estimation 
 of the Stock-holders for all that is done, and
 
 22 
 
 individually have but little to gain by success ; 
 whereas, if their management produced any 
 considerable loss to the concern, they would be 
 turned out of office, and stand committed with 
 the public in a manner that would render them 
 ridiculous, and necessarily produce feelings the 
 most disagreeable and painful. 
 
 As, therefore, it thus appears, that the causes 
 which operate in producing the failure of Pri- 
 vate Banks are totally prevented by the consti- 
 tution of Public Companies, we cease to wonder 
 at the uniform success by which the latter are 
 attended. But the risk incurred by Bankers is 
 not, perhaps, so great as we are apt to imagine. 
 With loans on property, or on the personal se- 
 curities required to establish a Cash account, 
 there is no risk at all. Property is not taken, 
 if not sufficient to cover the loan upon it, and 
 the sureties accepted when a cash account is o- 
 pened, are each of them required to be suffi- 
 ciently able to fulfil the obligation of the bond 
 they enter into. Should any thing happen to 
 either of them, another name must be immedi- 
 ately substituted. Independent therefore of the 
 party with whom the account is opened, there 
 are always two perfectly good and sufficient 
 sureties, to make up any deficiency, even to 
 the full amount of the debt, should it be called 
 for. 
 
 The greatest risk incurred by a Bank, is in
 
 ^3 
 
 the Discounting of Rills of Exchange ; though 
 it is, at the same time, its most desirable busi- 
 ness, from being the principal means by which 
 it keeps its Notes in circulation. But with this 
 class of business also, the risk, under pro- 
 per management, is much less than is sup- 
 posed. It is said, that the Bank of England, in 
 ordinary times, does not calculate upon a 
 greater loss than one pound in three hundred 
 thousand. Leith is quite a speculating town, 
 and its merchants are subject, in consequence, 
 to considerable vicissitudes. Yet the Branch of 
 the Commercial Bank there, during the first 
 four years of its establishment, did not lose one 
 pound out of many millions of discounts, al- 
 though, in consequence of having entirely new 
 connexions to form, it rejected no business that 
 it could with any degree of prudence accept. 
 The experience of those also, who live in coun- 
 try towns, where the losses which the Banks 
 sustain are generally known, will point out 
 to them, if they have made the observation, 
 that it is only very rarely that a well managed 
 Bank suffers any loss at all. 
 
 The Scotch 15anks, in fact, in the arrange- 
 ments which they make with their agents 
 established in distant towns, assume that there 
 is no risk whatever, and lay it down as a rule, 
 that if they incur any loss, they are to suffer it 
 themselves. The Directors in aeneral select
 
 24 
 
 for Agents, tried men of business, who have 
 proved, by the manner of conducting their own 
 affairs, their capability of successfully transact- 
 ing whatever may be confided to them. Secu- 
 rities are required of them, in a town of any 
 business, to the extent, I understand, of not 
 less than ten thousand pounds, and they receive 
 a fixed salary of (say) from two to four hundred 
 per annum, according to the size of the place 
 and business done in it. It is, I believe, gene- 
 rally calculated by the Agent, that if he can 
 make out a case of very unforeseen loss, it will 
 be partly allowed him ; but the assumed princi- 
 ple is, that there need be none at all. It is 
 a most curious circumstance, however, and 
 completely proves the insecurity of private 
 management in Bank affairs, that the Banks lose 
 more money through their agents than in any 
 other way. 
 
 The distance of the town, where the Agent 
 is established, from the Bank, renders it impos- 
 sible that any proper judgment can be formed 
 by the Directors, of the stability of the persons 
 with whom the Agent does business. The great 
 sum, however, required as a security, the business 
 character he possesses, and the risk he him- 
 self runs, naturally remove all suspicion as to 
 the prudence of his transactions. Shoidd his 
 affairs become involved, he is, perhaps, suffi- 
 ciently clever to hide it for a considerable
 
 25 
 
 length of time. This he probably does with 
 the hope of recovering himself, until the failure, 
 perhaps of some house he has imprudently ac- 
 commodated, or his deficiency is too great for 
 further concealment, when his own ruin, the 
 loss of the friends who are security for him, and 
 the loss of the Bank besides, to perhaps three 
 times the amount, prove his unfitness for the 
 trust that has been reposed in him. 
 
 This does not unfrequently happen, and no 
 greater proof of the insecurity of private ma- 
 nagement could well be afforded. If Agents, 
 without the temptation of profit, and under the 
 control of their Banks, cannot keep right, 
 how much more likely are Private Banks to 
 get wrong, without any such control, and 
 with all the usual temptations to influence 
 them ? 
 
 Although our Banking System, the worst 
 surely that could be devised, has been so long 
 in its present state, its effects seem not to have 
 forced themselves on the consideration either of 
 the government or the public, until lately, when 
 the failures in Ireland, and the lamentable ef- 
 fects ])roiluced by them, attracted the notice of 
 the whole kingdom, and called the attention of 
 those interested in the welfare of Ireland, to 
 the subject. 
 
 In a conversation which, in consequence, 
 
 £
 
 26 
 
 took place in the House of Lords, upon the 
 state of commercial credit in Ireland, the Mar- 
 quis of Lansdowne stated, that the present dis- 
 tress in Ireland was principally occasioned by 
 the late failures amongst the Banks in that 
 country, which failures were to be attributed 
 to the law that limited the number of partners 
 in Banking Firms, and he called upon Lord 
 Liverpool, with reference to Ireland, to reme- 
 dy the evil by an alteration in the law, in or- 
 der that proper Banks might be established. 
 In answer to this, Lord Liverpool said, " that 
 " not only did he agree in the suggestion of 
 " the Noble Marquis, but it was his anxious 
 " wish that the number of partners should be 
 " extended not only in Ireland, but in Eng- 
 " land,'* and instanced the hardship of Li- 
 verpool, Bristol, &c. being prevented from 
 establishing Banks that would be instrumental 
 to their prosperity and strength. 
 
 Since that time a negociation has taken place 
 between government and the Bank of Ireland, 
 in which it has been stipulated, that the Bank 
 shall give up the restrictive clause in its char- 
 ter with respect to Country Banks, and it has 
 done so without an objection. A bill has con- 
 sequently passed through parliament, by which, 
 in the country districts of Ireland, Public Banks 
 may now be established. 
 
 After what has been said by Lord Liverpool,
 
 as well as what has been done for Ireland, there 
 can be no doubt of the disposition of govern- 
 ment on the subject. It is the declared wish 
 of Lord Liverpool, who expressed the gene- 
 ral sentiment of ministers, (as their subsequent 
 conduct with respect to Ireland has proved) that 
 the impediment to the establishment of proper 
 Banks ought to be removed, and that this coun- 
 try should enjoy the advantages of a better 
 system. 
 
 To again call the attention of government 
 to the subject, is all that is now, therefore, ne- 
 cessary ; and it will be creditable to the spirit 
 and intelligence of the Gentlemen, Merchants, 
 and others of the town and neighbourhood of 
 Newcastle upon Tyne, to be the first to set the 
 example. The proper plan to pursue is, in the 
 first place to form a company, and then ap- 
 point a deputation to wait upon ministers, and 
 the Directors of the Bank of England, and ne- 
 gociate with them respecting the alteration pro- 
 posed, and at tlie same time, pursue such other 
 steps as may prove necessary to the ultimate 
 attainment of the object desired. 
 
 That such an application must be made by a 
 Company, to be made with proper effect, is 
 evident. A Company will carry with it a 
 weight which no individual can have, while it 
 will prove how much alive the country is to 
 the advantages of a better system, by its readi- 
 E 2
 
 28 
 
 ness to adopt it. It will also evince a proper 
 confidence in the declaration of ministers, as 
 made by Lord Liverpool, that they wished to 
 see a better system of Banking introduced ; 
 and there can be no doubt that the ministry will 
 have every disposition to give to their own de- 
 claration the earliest effect. 
 
 There is in fact but little doubt that govern- 
 ment will use all its influence to get the char- 
 ter altered, on an application to it for that pur- 
 pose. There can exist no reason why it should 
 not. Ministers have declared the clause a great 
 evil, and are bound by their sense of duty to 
 endeavour to remove it. They have done so 
 with respect to Ireland ; and can have no mo- 
 tive or apology for not doing so with respect to 
 us. Ministers, I suppose, will occasionally be 
 wrong as well as any other set of men. Yet so 
 far as we can see, they are generally conscienti- 
 ous. A sufficient ground may sometimes exist 
 for their opinions and conduct being at vari- 
 ance ; but there is evidently none in the pre- 
 sent case, and their co-operation may therefore 
 be relied upon. 
 
 The charter of the . Bank of England does 
 not, however, expire until 1833, and the ob- 
 noxious clause will require to be immediately 
 expunged from it. But this can be done with- 
 out injuring the Bank, and the wishes of minis- 
 ters, with the directors of the Bank, must neces-
 
 29 
 
 sarily be imperative. Besides, we have nothing 
 to fear from the directors themselves, who, in 
 conducting the affairs of the Bank, have always 
 acted upon disinterested and public spirited 
 principles. Neither can it be supposed that any 
 measure for the public welfare, which was con- 
 ceded by the Bank of Ireland without an ob- 
 jection, would be resisted by the Bank of Eng- 
 land. The consent of the directors to any 
 alteration which benefits the public without 
 materially injuring the Bank, may, therefore, 
 also be relied upon. Yet, as to anticipate the 
 worst, is sometimes the best policy, (viewing it 
 as a possible case that the directors may not be 
 at once disposed to accede to the wishes of the 
 nation,) we will examine whether, in that case, 
 parliament ought not to alter the clause with- 
 out their consent. 
 
 The Bank, though intimately connected with 
 government in its transactions, is an indepen- 
 dent establishment, governed by directors of its 
 own choosing. It was commenced by indivi- 
 duals as a speculation, and was chartered by 
 government on the grounds of its public utility. 
 Upon the same principle it has been continued 
 a Bank by its proprietors, and the charter re- 
 newed by government to the present day. It 
 would be absurd to su})j)ose that the Bank 
 proprietors would have carried on the Bank 
 merely to serve the public, had they not there-
 
 so 
 
 by served themselves, or that the public would 
 have conferred upon them, A. B. and C. the 
 holders of Bank Stock, any exclusive privilege 
 from time to time, except upon the ground of 
 public advantage. 
 
 That the Bank is held to be as much a pub- 
 lic institution as a private speculation, is evinc- 
 ed by the interference of Parliament in its 
 affairs. This interference is quite oppos- 
 ed to the common law of the land, yet it is 
 perfectly justifiable with respect to the Bank 
 of England, in consequence of its enjoying pri- 
 vileges as much for the public benefit as for 
 that of its proprietors. The Bank is in fact 
 an engine of the state ; and acts of parliament 
 are continually made for regulating its affairs, 
 without any reference to the proprietors, but 
 solely for the public convenience ; and the 
 right of parliamentary interference in its af- 
 fairs, when the public good is involved, is 
 clearly established by this usage. 
 
 It must, however, be kept in view, that 
 though the affairs of the Bank have been regu- 
 lated by the independent authority of parlia- 
 ment, its substantial interests have never been 
 infringed upon. At each renewal of its charter 
 a pecuniary fine, or loan at a reduced rate of 
 interest, has generally been exacted, by which 
 it has fairly purchased the profit to be made by 
 its charter during the term of it. Hence the
 
 SI 
 
 pecuniary emoluments which were intended to 
 be secured to it, have never been curtailed. 
 Mr Pitt, when he persisted in drawing the spe- 
 cie from the Bank, protected it from the conse- 
 quences of his doing so, by an act of parHament 
 to suspend the payment of its notes. From this 
 restriction it derived great advantage ; and al- 
 though when the Bank was ordered, by act of 
 parliament, to return to cash payments, the 
 measure was contrary to its interests, it only 
 restored the contract to its original footing. 
 
 Now the exclusive right of Banking, as a 
 Joint Stock Company, in this kingdom, is of no 
 advantage whatever to the Bank, except in 
 London and Lancashire, and the latter is pro- 
 bably the result of chance. The advan- 
 tage it derives from it is the monopoly which 
 it secures in those districts to the circulation of 
 its notes. Private Bankers, in London, are 
 not prevented, any more than Country Banks, 
 from issuing notes, if they thought proper, but 
 they would be continually liable to runs upon 
 them, from the never-ending rumours of the 
 metropolis. In the country, a Banker's proper- 
 ty is seen ; his economical habits, and prudent 
 management, if he possess those qualities, are 
 generally known, and a run upon him without 
 some cause, cannot so easily happen. In Lon- 
 don, on the contrary, the public at large, or even 
 the customers of a Bank, have hardly any means
 
 of forming a knowledge as to the management, 
 prudence, or property of its partners. Hence 
 its credit would be totally at the mercy of 
 every offended or malignant individual, runs 
 would continually happen upon one Bank or 
 another, and the town would be in a continual 
 commotion. No Bank, therefore, whatever may 
 be its present credit, would find its interest in 
 issuing notes, and it is probable that as the 
 charter, and the present system of Private 
 Banking now stands, it is perfectly effectual 
 in securing the Bank the monopoly of London. 
 In the country, however, with the exception 
 of Lancashire, Bank of England Notes have no 
 circulation at all. Country Banks issue their 
 Notes, in general, upon the same terms as the 
 Bank of England ; making no other charge 
 than the interest upon the Bills they discount. 
 The Bank of England having no means of issu- 
 ing its Notes out of London, the Country 
 Banks entirely possess the country circulation. 
 Independent of this. Bank of England Notes 
 would not pass in most parts of the kingdom, 
 as, where Local Notes can be had, no person 
 in the more Northern Counties, will take 
 a Bank of England Note if he can help it. 
 The signatures of Country Notes are, gene- 
 rally, written in a legible and distinct uni- 
 form character, peculiar to the writer, and well 
 known to -the public. Hence every person can,
 
 33 
 
 at least, attempt, to form a judgment, whether 
 a note is forged or not. Should his observation 
 upon hand-writing not be sufficient to enable him 
 to distinguish any discrepancies in it, or between 
 it and a printed fac-simile, the notes have, in ge- 
 neral, some little figure or etching, with which he 
 is familiar, and in which he might discover any 
 slight variation from the original. But, in con- 
 sequence of the number of Bank of England 
 Notes to be signed, from their not being more 
 than once issued, the signing clerks and signa- 
 tures are so numerous, and the latter are written 
 so hastily, that nothing can be ascertained from 
 them ; and the object of the signature is total- 
 ly defeated. I never remember having once 
 seen a person look at the signature of a Bank 
 of England Note, in order to ascertain whether 
 or not it was a forgery. The rest of the 
 Note is also little more than a piece of plain 
 printing, and presents (at least to a person in the 
 country,) nothing by which a forgery can be dis- 
 tinguished. Country Notes therefore are always 
 preferred. 
 
 In Lancashire, however, there seems to be a 
 prejudice in favour of Bank of England Notes, 
 which is rather surj)rising. The Biinks there do 
 not, in consequence, issue their own, but Bank 
 of England paper, and to compensate this sup- 
 posed disadvantage, charge a commission up- 
 on their discounts; which method must ren- 
 
 F
 
 34. 
 
 der their business a great deal less hazard- 
 ous, and more profitable. Hence also they are 
 never subject to runs, and when they discount 
 a Bill, are sure of their commission of 5 or 10s. 
 per cent. Banks in other districts, on the con- 
 trary, that charge no commission, constantly 
 have their Notes returned upon them through 
 other Banks, the next day after issuing them ; 
 and, by this means, where the Lancashire Bank- 
 ers would gain a handsome profit, they often do 
 not make a farthing. By this prejudice, how- 
 ever, the Bank of England also enjoys the al- 
 most exclusive circulation of Lancashire. 
 
 It has been very usual to consider the de- 
 rangement and loss by the circulating medium, 
 particularly to the poor, the greatest evil at- 
 tending the failure of Banks. This is, however, 
 an erroneous view of the matter ; for Country 
 Notes are, upon the whole, a better currency 
 than Bank of England paper. A good deal of 
 present inconvenience may occasionally for a 
 short time be sustained where the Banks of a 
 country fail all together (as was before 
 mentioned of Ireland) ; but the loss by the 
 Notes in actual circulation is widely spread, 
 and, comparatively speaking, little felt. The 
 evil would be trifling if it extended no fur- 
 ther than to the Notes which are in the hands 
 of individuals ; that proportion which is held 
 by the lower classes, even taking it in the 
 aggregate, can never be considerable, more
 
 3,5 
 
 especially since the Savings' Banks were esta- 
 blished ; it will probably seldom exceed a 
 pound to a hand, and even in that case, the 
 Bank ought to fail on Saturday, the day on 
 which wages are generally both paid and spent. 
 The circulation is principally in the hands of 
 tradesmen, and the richer classes ; and there 
 are very few of the latter who would not prefer 
 the risk attending Country Paper, if it were 
 three times as great as it is, rather than incur 
 the plague, trouble, and inconvenience which 
 they suffer firom the fear of forgeries, so preva- 
 lent with Bank of England Paper, as well as 
 the loss by them, which there is no avoiding. 
 This is incontestably proved by the decided 
 preference which is actually given to the paper 
 of Country Banks wherever it is circulated. 
 
 Upon considering the generally acknowledg- 
 ed superiority of Country Notes, it seemed at 
 first natural to think that the prejudice existing 
 in Lancashire against them must have originated 
 with the Bankers in that part of the country 
 themselves, as it was apparently their interest to 
 support it. I had even formed a conjecture to 
 this effect, until I observed in the papers of the 
 day an account of the transactions and resolu- 
 tions of a meeting, held on the 1st of September 
 last, by the Merchants and Manufacturers of 
 Manchester on the subject. By the proceedings 
 at tliis meeting, it seems that the Bankers of 
 F '2
 
 36 
 
 tliat town, not content with the present profits 
 of their trade, have had it in contemplation to 
 issue notes, expecting, no doiibt, to enjoy their 
 present commissions, and the advantage to be 
 gained from the circulation of the country be- 
 sides. This scheme it is likely, in the end, they 
 would have found impracticable; for in the 
 free competition of this country, the profits of 
 no trade can be kept for any length of time 
 above their natural level, and the ruin of their 
 commissions, from the competition of other 
 Banks, would most probably have been the re- 
 sult. But the merchants and manufacturers 
 met for the purpose of resisting the attempt, 
 and refused to take the notes which it was 
 thus proposed to issue. A great deal of very 
 ingenious arguments were used by the pro- 
 posers of the resolutions entered into at this 
 meeting. The statement, however, which pro- 
 bably carried the most conviction and unanimi- 
 ty along with it, was the fact, that fewer of 
 those Banks f^il which do not issue Notes, than 
 of those which do. Now, as there is no reason 
 why Banks that issue notes, and get smaller 
 profits, should undertake greater risks than 
 those who have more temptations of profit to 
 influence them ; as also there can be nothing 
 in the mere issuing of their own notes very ma- 
 terially different from that of issuing those of 
 any other establishment ; and lastly, since
 
 37 
 
 though they may stop pa^^ment by a run, they 
 seldom become bankrupts wlien tliey are not 
 insolvent : the difference mentioned must prin- 
 cipally arise from the issuing of notes being 
 attended with the same risk, but with much 
 less profit. It is inconceivable that the issu- 
 ing of notes should make any other difference 
 than that which arises from reducing the com- 
 mission upon discounts. Bankers who circu- 
 late notes may, from the fear of runs, be ob- 
 liged to circumscribe their business, and with- 
 out great profits, may indulge in great ex- 
 pence ; or should they have lent out their 
 money too freely, they may also, it is true, be 
 brought to a stand by a run upon them ; but if 
 they are solvent, any loss which may be thus 
 caused will of course fall upon themselves. 
 
 The superior safety of those Banks which 
 do not issue notes, can, therefore, I apprehend, 
 only arise from their business paying them bet- 
 ter ; and if the merchants and manufacturers 
 of Manchester will continue to pay Messrs 
 Jones and Co., or Messrs Heywood and Co., 
 the same commission as before, they may be 
 safely allowed to do as they think proper. But 
 if the Bankers take the very sensible advice of 
 Mr Wood, they will make no further attempt to 
 alter their present system. The fear of runs 
 might compel them to curtail their business, 
 and they may be sure the profits of Banking in
 
 38 
 
 Manchester, as in other places, would find their 
 level. The probability therefore is, that if they 
 were to issue notes, they would discover, in the 
 end, that in grasping at the circulation, they had 
 only illustrated the fable of the Dog and the 
 Shadow. 
 
 The apprehensions expressed at this meeting, 
 that persons of no property would issue notes, 
 and maintain a circulation in competition with 
 Bankers of stability and credit, is supposing 
 what is contrary to experience, and could 
 never happen. But in this case there is lit- 
 tle doubt that, in time, the trade of Bank- 
 ing would not be so profitable in Manches- 
 ter, and the business would be done upon 
 more liberal terms ; if the Banks issued notes, 
 the present bankers might go out of the bu- 
 siness, others would not make so much mo- 
 ney, and they would consequently not be so safe 
 as the rich Bankers in question. In that view of 
 the subject, therefore, the meeting was right 
 in the resolutions it adopted. But to pay a 
 Banker an extra profit, in order to render you 
 safe in transacting with him, is the same as giv- 
 ing a premium for insurance against a sea risk. 
 It is prudent, at any rate, perhaps, to insure, 
 though the premium may be high, but it be- 
 comes a question for serious consideration, 
 whether you cannot get your insurance effected 
 at a cheaper rate. 
 
 The circulation of the Bank of Endand
 
 39 
 
 notes in Lancashire, is evidently fonnded upon 
 a view of the subject taken up by the manufac- 
 turers and merchants in Manchester alone, and 
 in consequence it is only enjoyed by a kind 
 of chance. To give the Bank that circulation 
 was evidently, therefore, not the intention of 
 the charter, while the tenure by which it is 
 held is too frail to be relied upon, and there- 
 fore can neither be argued upon as a matter of 
 right conferred by the charter, nor depended 
 upon as a source of profit. 
 
 The right, consequently, of the Bank to pre- 
 vent more than six partners entering into a 
 Banking Concern, is, with respect to the whole 
 kingdom except London, a right which confers 
 no advantage upon it, while it loosens the whole 
 frame of commercial credit, of which Banks are 
 the pillars and support. To call it, therefore, 
 a right, with respect to the country, is impro- 
 per; legally it may be so termed, but equi- 
 tably it is nothing but a wrong. 
 
 It seems also by the act which conferred it, 
 that this privilege was first granted by a mis- 
 take. By Stat. 6 Anne, c. 22, it was enacted 
 that *'Jdr securing the credit of the Bank of 
 '* England^" no other Banking Company in Eng- 
 land should consist of more than six partners. 
 Now it did not secure the credit of the Bank of 
 England in the smallest degree. The credit of 
 the Bank of England depended upon the a-
 
 40 
 
 mount of its capital and the state of its affairs* 
 This act merely ruined the credit of every other 
 Bank ; and it is almost certain that had the 
 true object of the bill been stated, and had the 
 preamble run thus '•^ for the intent and pur- 
 pose of ridnmg the credit of all the unchartered 
 Banks in England, it was enacted, (§pc." it may 
 be safely affirmed, that no such act would have 
 been passed by any British Parliament, at least 
 since the Revolution. The error then commit- 
 ted, has been continued to the present day ; but 
 when the practical evils produced by it have 
 been so severely felt, and are become so evi- 
 dent, it is the duty of parliament to correct it. 
 
 Parliamentary interference in the affairs of 
 the Bank, is, as we have endeavoured to shew, a 
 right whicli practice has conferred ; but, admit- 
 ting, for the sake of argument, our conclusions 
 on that view of tlie subject to be erroneous, it 
 must be obvious to the commonest apprehen- 
 sion, that there is a right in any government to 
 take from any body of men, a monopoly which 
 does them no good, while it does the country a 
 great deal of harm. An indefeasible right of 
 inflicting a wrong, would be a new principle in 
 our institutes. 
 
 The only permanent and substantial good 
 which the Bank derives from the clause in its 
 charter is the monopoly of the circulation of 
 London, and its neighbourhood. The circula-
 
 41 
 
 tion of Lancashire, as we have seen, cannot be 
 depended upon. 
 
 Now, a worse w^ay of securing the circula- 
 tion of London cannot be conceived. The ob- 
 ject is to prevent the Bankers of London from 
 issuing Notes ; and the manner of doing it is to 
 weaken their credit, and keep it so low that 
 they cannot. Nothing could be more simple^ 
 nor more effectual, than to prevent them from 
 issuing Notes, by enacting that they should not 
 do so. Instead of that, the object is accom- 
 plished by taking from them their credit, the 
 vital principle of their trade. It would be just 
 as proper to bleed a horse in order to diminish 
 his speed ; to take from him his strength in or- 
 der to reduce his action ; instead of an addition- 
 al bridle and curb, to restrain his pace by 
 the weakness produced from the frequent use 
 of the lancel ; you would, no doubt, thereby 
 effectually reduce his tire and check his speed, 
 but you would also ruin his constitution, and 
 the probability is, in such a case, that upon 
 the slightest trip, both horse and rider would 
 tumble into the ditcli. Nothing, in fact, 
 can be more absurd than the present man- 
 ner in which the monopoly is secured, while 
 its baneful influence extends to every part 
 of the country. The constitutions of our 
 Banks arc unequal to the burthens tiiey have 
 to support ; and it may be truly said, that the 
 
 G
 
 42 
 
 Banks and the country are continually, in some 
 part or other, tumbling together into a ditch, 
 and often one so deep that they never get pro- 
 perly out again. 
 
 It must be admitted that the restriction is 
 productive of less apparent ill consequences in 
 London than in the country. The reason of this- 
 is, that the business of Banking is more profit- 
 able in London, (where all business is generally 
 better managed) than it is in the country; for 
 it is principally in the hands of old houses, con- 
 ducted by acting partners, who have been all 
 their lives in the houses which they manage, 
 and who have raised themselves by their in- 
 dustry, experience, and talents. 
 
 All, therefore, that the country requires is, 
 that its monopoly be secured to the Bank of 
 England, in a more simple and direct manner. 
 That in lieu of the clause enacting, that not 
 more than six partners shall enter into other 
 Banking concerns, it be enacted that no Banks 
 shall issue notes within the boundaries of the 
 present monopoly. In doing this, there is no in- 
 fringement of the rights of the Bank. The ob- 
 ject of its charter is to give it an exclusive pri- 
 vilege, which, by this alteration, will be the 
 more effectually preserved ; for it is merely in- 
 cidentally secured by the present terms of it. 
 
 Government have no right to do the Bank 
 an injury, but they have surely a right to
 
 43 
 
 remove from its charter any impediment to the 
 public welfare, upon granting it an equivalent. 
 This is nothing more than the principle upon 
 which all Acts of Parliament are passed, for 
 making roads, canals, &c. through private pro- 
 perty. The individual is fully compensated 
 for the loss he sustains, and substantial justice 
 being done him, his inclinations are not con- 
 sulted in the matter. 
 
 If an argument in favour of the present sys- 
 tem should be drawn from the circulation 
 enjoyed by the Bank in Lancashire, the 
 merchants and manufacturers of Manchester 
 have it in their power, effectually to destroy its 
 efficacy. They have but to encourage, instead 
 of su])pressing Local Notes ; and whether the 
 present Banks issue them or not, they will, no 
 doubt, by the competition of trade from other 
 quarters, find their way into circulation. 
 
 It is, however, equally the interest of the 
 Bank, to have its monopoly secured in a more 
 direct and less questionable manner. Any per- 
 son may, at present, issue Notes in London, 
 and nothing but want of credit, prevents Pri- 
 vate Banks from doing it. If any plan, how- 
 €ve'r, should be thought of, to give the Notes of 
 Private Banks sufficient credit, there would, 
 doubtless, be found Banks to issue them, and 
 there can also be little question that the public 
 G 2
 
 44. 
 
 would, as in the country, give them a prefer- 
 ence. 
 
 Without entertaining any wish to deprive the 
 Bank of its monopoly, but to show that it does 
 not stand upon the securest footing, how easy 
 would it be for Private Banks in London to a- 
 dopt the plan proposed by the Chancellor 
 of the Exchequer two or three years ago, with 
 respect to country establishments. If, for in- 
 stance, a private Bank were to issue half a mil- 
 lion of paper, it might purchase stock to that 
 amount, and assign it to trustees, these trustees 
 might indorse and guarantee the notes, holding 
 the stock to meet their payment, should they 
 be ever called upon by the failure of the Bank. 
 There would then not only be value in the funds 
 sufficient to pay them with, which could not be 
 applied to any other purpose, but the holders 
 of the Notes, should it be necessary, would have 
 a claim upon the estate of the Bank to the full 
 amount of their value, and thus no apprehen- 
 sion respecting them could possibly be enter- 
 tained. A renewal would, of course, from time 
 to time, be requisite, but the trustees would 
 take care, for their own sakes, before they en- 
 dorsed a new Note, that an old one of the 
 same value should be cancelled. 
 
 Many other plans might, I have no doubt, 
 be contrived to attain the same object, and 
 render the Notes of private Bankers perfectly
 
 45 
 
 safe to the public, by which they need not as 
 now apply to the Bank of England for Notes, 
 but issue their own, and in that case the charter 
 of the Bank would be rendered almost useless. 
 The alteration proposed, therefore, is as much 
 the interest of the directors and pro})rietors of 
 the Bank, as of any set of men in the kingdom. 
 The charter of the Bank does not expressly con- 
 fer a monopoly, nor could it be discovered from 
 the charter itself, that the monopoly of a circu- 
 lation of Notes was intended. But if a mono- 
 poly was intended, there needed to have been 
 no fear of expressing it in words ; and it would 
 now be desirable to the Bank for it to have that 
 monopoly which it has paid for, clearly ex- 
 pressed and secured to it. Thus there can 
 be but little doubt that we shall meet with 
 the ready co-operation as well of the directors, 
 as of parliament and ministers, in the measure. 
 The only persons who will be injured by it, 
 will be the present Bankers. But no set of men 
 can expect a country to continue voluntarily to 
 submit to an evil after it has discovered the 
 cause and can a))})ly the remedy. They must 
 take the fate incident to all rights or institu- 
 tions, founded in error : as soon as truth appears, 
 the fabric, for want of its foundation, must be de- 
 stroyed. But on none can a loss fall more light- 
 ly. If a Banker be not independent of his trade, 
 he ought not to be a Banker. He lias gained a
 
 46 
 
 credit that he is not entitled to ; and to deprive 
 him of a business he should not, and could not 
 carry on, if the public were aware how little se- 
 curity he afforded them, is nothing more than an 
 act of justice. If he be independent of his bu- 
 siness, which the great majority of Bankers are, 
 he may lose, but cannot feel his loss very se- 
 verely. 
 
 The Clerks and Managers of those Banks, 
 whose business may be curtailed, will find as 
 good, if not better situations than they had 
 before, with the New Companies, who will, as 
 a matter of common sense, be anxious to em- 
 ploy them, for the sake of their practical know- 
 ledge. Hence we may safely calculate, that 
 the amount of positive injury to individuals, 
 produced by the loss of the means of support, 
 from the proposed change, will not be great ; 
 and by no means equal to what the failure of any 
 one considerable Banking Concern would occa- 
 sion, under the present system, if it be continued. 
 
 In order that we may form an idea of the 
 profit to be made by establishing a public Bank 
 in this town, we will next examine the suc- 
 cess that has attended those which we propose 
 for our models. 
 
 The stock of many o£ the Local Banks of 
 Scotland has sold much higher than the stock 
 of the Edinburgh Banks. The Edinburgh Banks,
 
 47 
 
 however, are those to which we shall more par- 
 ticularly refer, as the business of this town and 
 neighbourhood is sufficiently extensive to re- 
 quire an establishment of equal magnitude. 
 
 There are four Banks in Edinburgh : The 
 Royal Bank of Scotland, The Bank of Scot- 
 land, The British Linen Company, and The 
 Commercial Bank. Tlie last estabhshed was 
 the Commercial Bank, in 1810 ; it commenced 
 with a subscribed capital of Six Hundred Thou- 
 sand Pounds ; it has divided from 6 to 8 per 
 cent., and its stock is at present at 50 per cent, 
 premium. It has had to contend in a ground 
 completely pre-occupied, and the most ruinous 
 times in our mercantile history ; and in strug- 
 gling to form connexions, it has been led into the 
 midst of the failures that have happened, and 
 has met with considerable losses. The Directors 
 have, in consequence, reduced the dividend 
 from 8, which they had paid the first few years, 
 to 6 per cent. Its stock, however, has not f dl- 
 en in consequence. It has never, I under- 
 stand, been higher than it is at present ; and 
 there is little doubt, that had it continued to 
 divide 8 per cent., the stock would by this time 
 have doubled its original value. The Directors, 
 it is supposed, will not again divide more than 
 six per cent., until they have accumulated such 
 a reserved fund as that, in future, when the 
 dividends are increased, there may never be a
 
 48 
 
 necessity for their being reduced again. The 
 success upon the whole of this concern, consi- 
 dering the opposition it has encountered, which 
 was very great, and the bad times it has met 
 with, which were equally so, has not, I have 
 heard, disappointed its Stock-holders. 
 
 The Bank of Scotland, and Royal Bank Stock, 
 are at a premium, I understand, upon the ori- 
 ginal capital advanced, of from about 90 to 
 14-0 per cent. But their capitals are, I believe, 
 a million and a half each, being unnecessarily 
 large for the Trade of Edinburgh. Their cre- 
 dit would be as good, and their business as ex- 
 tensive, if they were to pay off half their capi- 
 tals, each Stockholder would then get as much 
 profit upon half his present stock as he now 
 does upon the whole of it. All that a Bank 
 can gain by capital is credit, and when its 
 capital is sufficiently large to put that upon the 
 most solid basis, it is as large as there is any 
 occasion for. More only incumbers it, and 
 and would be as well in the hands of the origi- 
 nal Stock-holders, many of whom would pro- 
 bably turn it to better account. 
 
 The most successful, however, of the four 
 establishments, has been the British Linen 
 Company. It commenced originally with one 
 hundred thousand pounds, which afterwards, 
 either by an accumulation of profits, or by a 
 further advance ol' capital, was doubled. Upon
 
 49 
 
 this capital it annually made very handsome 
 dividends, and also accumulated a reserved 
 fund, which, about eight or nine years ago, 
 amounted to nearly three hundred thousand 
 pounds, making its capital, in all, nearly half 
 a million. It was not then a Chartered Com- 
 pany, but it applied to Government for a char- 
 ter, and got one, the proprietors having, it is 
 understood, subscribed a small deficiency ne- 
 cessary to raise their capital to five hundred 
 thousand pounds. Since then they have gone on, 
 notwithstanding the precarious and disastrous 
 state of the mercantile world, with almost un- 
 paralleled success, so that now their half mil- 
 lion of stock is worth a million and a half; it 
 meets a ready sale at not less than two hun- 
 dred per cent, premium. I do not imagine that 
 their charter has contributed much, if any 
 thing, towards this increase of value. The 
 only advantage the charter gives, is to free the 
 Stock-holders from responsibility beyond their 
 respective shares in the capital of the Bank. 
 This, however, can be no advantage in Scot- 
 land, where the very idea of danger, beyond a 
 capital of half a million, would be considered 
 as one of the absurdest chimeras that could be 
 entertained. I do not suppose the stock of tlie 
 Commercial Bank, which is not chartered, sells 
 for a pound less on that account. It is, in pro- 
 portion to the interest paid upon it, nearly 
 
 H
 
 60 
 
 about the same price as the 3 per cent, consols, 
 and it is not likely a charter would raise it 
 higher. I therefore imagine that the value of 
 the British Linen Company*s stock arises alto- 
 gether from the ability with which the Bank is 
 managed, and the amount of dividends it con- 
 sequently makes. It must be also considered, 
 that government could not, with justice to the 
 public, and therefore would not, grant a char- 
 ter, if it was really any thing more than a name. 
 It would never agree to exonerate any set of 
 men who enjoyed a certain gain, from the loss 
 incident to it, and throw it upon the unsuspect- 
 ing public. It is only when the capital of a 
 Bank is sufficiently great to satisfy the most 
 sceptical doubt with regard to the safety of the 
 public, that a charter can ever be granted. 
 Besides which, if the freedom from personal 
 responsibility conferred by the charter on the 
 Stock-holders of the British Linen Company, 
 had been of any real use in freeing them from 
 risk, it must have destroyed their trade. No- 
 body would make permanent deposits in a 
 Bank, whose partners, by any peculiar privi- 
 lege, were freed from the loss which their own 
 transactions involved. They would naturally 
 have dealt with those that had no charter, in 
 preference, or with the other Chartered Banks 
 that had three times the capital. Had the
 
 51 
 
 charter not, in every respect been a mere dead 
 letter, it must have injured the concern. 
 
 It is evident, that if Banking is carried on at 
 all, it must be with a profit more than adequate 
 to the risk incurred ; and those who gain the 
 profit must take the risk they are paid for. 
 The reason why the charges of Bankers are so 
 small is, that they are found, with judicious 
 management, to cover all risk, besides leaving a 
 sufficient profit. 
 
 The business for a Bank in this town and 
 neighbourhood, I should think by no means in- 
 ferior to that of either the Commercial Bank or 
 British Linen Company. In the present state 
 of the countiy, however, as it is far from being 
 certain that government may not be compelled 
 to reduce the interest of the national debt, it is 
 not necessary to make out a case of extravagant 
 profit, in order to induce capitalists to enter 
 into such a concern. Equal interest with 
 greater safety would of itself be a sufficient in- 
 ducement. But with the chance, which expe- 
 rience has reduced to a certainty, of increasing 
 their capital at least 50 per cent, what proba- 
 bility is there of capitalists turning their mo- 
 ney at present to such account in any other way ? 
 As this Bank will bo the first of the kind, it 
 will also, with equal management, be the best. 
 There is no connexion more stable than the 
 connexion of a Bank. When a person once 
 H ii
 
 52 
 
 opens an account with it, if he does his busi- 
 ness creditably, he never has occasion to leave 
 it ; and if he does not, he could gain nothing 
 by the change. Hence it generally happens 
 that merchants adhere through life to the Bank 
 they begin with, provided it stands. When, 
 however, in addition to this, we consider the 
 fine field which this great mining and commer- 
 cial district presents, we may be a little more 
 sanguine in our calculations. I should think 
 we have a right to expect as great a profit as 
 has ever been made by any public Bank yet 
 established. 
 
 Where public Banks have not been establish- 
 ed, and I may say, also, where private Banks 
 have, there appears always to have existed a 
 prejudice on the subject of Banking. On this 
 account, at the first formation of public Banks, 
 we generally iind it has been considered politic 
 to encourage them, by granting charters. That 
 there exists at present in this country a great 
 prejudice against Banl^s and Banking, from the 
 disasters they have produced both to the part- 
 nei's in them and the public, there can be no 
 question. As also there can be little doubt that 
 when the present impediment is removed, go- 
 vernment will be disposed, for the benefit of 
 commerce, and for the general convenience de- 
 rived from public Banks, to encourage them, I 
 should suppose that where a sufficient capital is
 
 5S 
 
 •nbscribed, there will be no objection to grant- 
 ing a charter, if it is required. I would there- 
 fore propose, that the Bank in question be 
 commenced with a capital sufficient to com- 
 mand a charter, if one was desired, or to 
 make it a matter of perfect indifference in the 
 event of government declining to grant char- 
 ters, whether one was to be had or not. It is 
 also reasonable to suppose, that in granting 
 charters, government will only require such an 
 amount of stock, to be possessed by each Bank, 
 as the business of the place where they may be 
 established, shall seem to render necessarv. 
 The capital required for a Bank in Manchester 
 or Liverpool, where mercantile transactions are 
 so large, could not be employed in a small town 
 like Sunderland, and would never pay in a town 
 like Newcastle. 
 
 Considering the business of this town and 
 neighbourhood, however, we should suppose 
 that government would not grant us a char- 
 ter under half a million of capital, if it would 
 even grant a charter at all with a less sum ; 
 and we should think, that with such a capital, 
 it would be immaterial whether we had a char- 
 ter or not. The most sceptical, whatever their 
 prejudices on the subject might be, could never 
 imagine any danger with such a security, either 
 to the public with a charter, or to the private 
 property of the Stock-holders without.
 
 54 
 
 So large a capital, however, would warrant a 
 greater extension of business than our own 
 town affords. The Edinburgh Banks have 
 agencies, and do business to a great amount, 
 in all the principal towns of Scotland, which 
 no doubt is on the aggregate found to pay 
 them. In that respect it is proposed, with re- 
 ference to the neighbouring towns at least, that 
 we shall follow their example : but while we do 
 this, we must also endeavour to improve by 
 their experience. And the following is the 
 plan we beg to submit : — 
 
 1. That a Bank with a capital of ^500,000 
 be established in Newcastle, with Branches at 
 Durham, Sunderland, Shields, and any other 
 place which may be hereafter determined upon. 
 
 ^. That no individual shall be allowed to hold 
 more stock than to the amount of two thou- 
 sand pounds. 
 
 3. That the capital be subscribed as follows : 
 — Two hundred thousand in Newcastle and 
 neighbourhood ; one hundred thousand in Sun- 
 derland ; fifty thousand in Durham ; fifty thou- 
 sand in Shields, and their respective neighbour- 
 hoods, and the other hundred thousand as may 
 be hereafter determined upon. 
 
 4. That the Bank in Newcastle be governed 
 by four Directors, three of them chosen by the 
 Newcastle Stock-holders, and the fourth to be
 
 55 
 
 their Chairman, and be chosen by the other 
 three. One of these Directors to go out an- 
 nually, and not for one year be eligible to be 
 re-elected. That the Chairman be elected an- 
 nually, and be eligible to be re-elected. 
 
 5. That the Branches be governed by three 
 Directors, chosen by their respective Stock- 
 holders, and a Chairman chosen by the three 
 Directors in the same manner as with the main 
 branch in Newcastle. 
 
 6. That the Branches be under the general 
 management and control of the Court of Di- 
 rectors in Newcastle, who shall receive daily 
 or weekly accounts of their transactions. 
 
 7. That the Chairman of the Branches form 
 with the Newcastle Directors a Committee of 
 General Management, and come into Newcas- 
 tle every month to examine the affairs of the 
 establishment, and consult and decide with the 
 Newcastle Directors all questions and rules of 
 General Management, which it may be neces- 
 sary from time to time to lay down. 
 
 8. That none but the Chairman, and the 
 Newcastle Directors, have any inspection of 
 the particular transactions of each Branch ; but 
 that a general meeting of the whole Directors 
 shall be periodically held for the purpose of 
 making laws, or may at any time be called to 
 consult upon any given question, either with 
 respect to the transactions of any Branch with
 
 S6 
 
 an individual, or upon any specific point of 
 management which may be proposed to it, and 
 its decision to control and bind the Committee 
 of General Management with respect to that 
 point ; and two Directors to have at any time 
 the power of calling a general meeting. 
 
 9. That there also be a Governor and De- 
 puty-Governor, the latter of whom to be chosen 
 by the Committee of General Management, 
 and the former either by the Directors at large, 
 or the Stock- holders. The Governor to be 
 principally an honorary appointment, and to be 
 a member of one of the two houses of parlia- 
 ment, and the Deputy-Governor some gentle- 
 man resident in Newcastle, who has leisure and 
 inclination to give his attention to the affairs of 
 the Bank, and preside at the monthly meetings. 
 
 10. That the executive officers of the Esta- 
 blishments consist of a Cashier and Accountant, 
 with a Secretary, if required ; and such other 
 Clerks as are necessary for each Branch, and a 
 Managing Director in Newcastle. 
 
 11. That the division into Branches extend 
 only to the division of the capital and manage- 
 ment, and not to the profits, which shall be 
 divided equally. 
 
 This gives a general outline, and I need n6t 
 go further. The first step that the Company 
 will have to take must necessarily be to appoint
 
 57 
 
 a Committee to procure all the laws and regu- 
 lations of the Public Banks of England and Ire- 
 land, and the leading Public Banks of Scotland. 
 They must examine into their com))arative suc- 
 cess, and the cause of it, and from their rules 
 draw out such a constitution, as, adapted to the 
 peculiarities of our local situation, shall be the 
 best fitted to secure both the safest and most 
 profitable management. In proposing this out- 
 line, my object is principally to suggest the en- 
 quiry, and not by any means to presume that a 
 better plan may not be adopted. That the 
 constitutions of some of the present Public 
 Banks are not so good as they might be, and 
 not suited to such a town as this, I am pretty 
 well convinced ; and as it is difficult to 
 make a change after a constitution is once act- 
 ed upon, it will be evidently proper to consider 
 the subject well beforehand. The outline 
 which I have given, I shall, however, take the 
 liberty of illustrating by a few explanatory ob- 
 servations. 
 
 In the first place, the capital proposed will at 
 once have the effect of giving the concern sta- 
 bility, and of securing the unlimited confi- 
 dence necessary to be rei)osed in it by the pub- 
 lic, in order to render it equally profitable and 
 useful. In the next place, limiting the amount 
 of stock held by each individual, will keep the 
 concern in the hands of the public. It is very 
 I
 
 58 
 
 usual witli Private Bankers and other wealthy 
 individuals, to buy largely of the Stock of the 
 Public Banks in Scotland, which is a disadvan- 
 tage to them, as the greater the number of per- 
 sons interested in supporting such a concern, 
 the better. There are two individuals who each 
 hold upwards of a hundred thousand pounds 
 of the British Linen Company's Stock, neither 
 of whose accounts with it are so profitable, nor, 
 in all probability, is their influence in its fa- 
 vour nearly so advantageous as the transac- 
 tions and influence of a respectable tradesman, 
 or merchant, would be, who was in a situation 
 to hold j^2000 Stock independent of the capi- 
 tal of his trade. One of them is, in fact, him- 
 self a Banker, and issues notes, so that he must 
 be a rival, as far as his business extends, and 
 not a friend to the Bank. By this means, it is 
 deprived of at least a hundred interested sup- 
 porters, which, by our plan, it would have, and 
 the profit of the smaller Stock-holder is dimi- 
 nished in a corresponding degree. There is 
 also another practical evil, of still greater im- 
 portance, which would be avoided. The Pri- 
 vate Bankers in Edinburgh who do not issue 
 Notes, keep an account with one of the Public 
 Banks, in the same manner as the London 
 Bankers do with the Bank oi England, and dis- 
 count with it, or draw upon it for the cash 
 they require. They have, generally, made it
 
 59 
 
 their policy, to buy largely of the Stock of the 
 Bank they do business with, so that by the 
 amount of their stock, together with tlieir pri- 
 vate influence as Bankers, they might get 
 themselves chosen Directors. By that means 
 they not only gain an undue preference in their 
 transactions with the Bank, but as it has been 
 proved, have, sometimes, for years together, 
 contrived to render the Bank totally subservi- 
 ent to the extension and profit of their own 
 private business. 
 
 Where great Public Banks are established, 
 there will always be trade to a certain extent 
 for such Bankers. They draw upon London, 
 act as Bill Brokers, charging a commission 
 upon their discounts, kc. and when capital is 
 scarce, by their superior credit and influence 
 in obtaining discounts, contrive sometimes to 
 do business to considerable extent. We may 
 consequently expect that the same, in a great- 
 er or less degree, will be the case in this town, 
 and as such Bankers liere will have tlie same 
 interest to prompt them as in Edinburgh, they 
 may be expected to endeavour to take the same 
 steps. But by limiting the amount of Stock 
 held by eacli individual to a^'2,000, no mono- 
 poly can take place, and one Stock-holder can- 
 not possess any advantage over anotlier. 
 
 Such persons generally, no doubt, get pos- 
 session of the Stock by giving the best price
 
 60 
 
 for it ; and by thus limiting the competition, 
 individual sellers will not get, at the moment, 
 quite as much as it woukl otherwise bring. By 
 a strict adherence, however, to the rule, the 
 profit of the concern will be improved, and in- 
 stead of a holder having to sell his Stock with 
 a dividend of 10 per cent., it may leave a divi- 
 dend of 12^. Thus though he may not get so 
 much for it when it comes into the market, as 
 with a free competition, yet he will evidently 
 get more for it than if, from the consequence 
 of such competition, the dividends were 2^ per 
 cent. less. 
 
 It may be said that j^2000 stock is not a 
 sum large enough to give any Directors a suffi- 
 cient interest in the management. To this it 
 may be answered, nor yet would three times 
 the amount, if they feh no interest in the ma- 
 nagement independent of the profit of their 
 stock. The Directors in general will be wealthy 
 individuals, with whom that profit can be of 
 little importance. 
 
 With respect to the division into Branches, 
 there can be no doubt that by thus effectually 
 embracing the business of the different towns 
 wherein they are established, the profit of the 
 concern will be materially increased, and that 
 capital, which might be too large for Newcas- 
 tle alone, become only proportioned to a plan 
 so much more comprehensive. But there will
 
 61 
 
 be also great advantages derived from it in the 
 system of management which it affords. 
 
 There are two objects to be aimed at in 
 planning the constitution of a Bank. First, its 
 safety : and next, its success. And though 
 safety is a natural consequence of success, yet 
 there may be great safety where the success is 
 but small. They are, in fact, partly opposed 
 to each other. That constitution which would 
 best secure the one might be very liable to di- 
 minish the other. In a multitude of Directors 
 there would be safety, but the chances w^ould 
 would not be so much in favour of success. It 
 is commonly said, and with truth, *• What is 
 every body's business is nobody's ;" and this in 
 some degree would be the case with a multi- 
 tude of Directors. The common routine of 
 transactions would be done by the officers of 
 the 'institution ; but no able or energetic, and 
 successful management would be attempted. 
 The responsibility lies with the Directors at 
 large. No individual director would conse- 
 quently take any step of the least importance 
 himself. Nothing would be done without a ma- 
 jority present, and too little interest would be 
 felt by the majority for it ever to attend. Be- 
 sides, when many people meet, they talk more 
 than they act : and if they differ in opinion, 
 are apt to do nothing, leaning always to the 
 safe side. Little being therefore done, and 
 always that little with superlative safety, the
 
 62 
 
 business of the concern would be liable to flag, 
 if not fall off altogether. It will sometimes hap- 
 pen, as with the Bank of England, where a 
 considerable business is necessarily done, that 
 with a number of Directors a good arrange- 
 ment may be adopted, and the management go 
 on tolerably well. But the Bank of England 
 derives its business from its monopoly, in spite 
 of its Directors, and not from its superior ma- 
 nagement. Four and twenty Directors could 
 never successfully compete with the manage- 
 ment of a smaller body. This is partly proved 
 by its own experience. It does business upon 
 the same principles as the Private Banks, yet 
 notwithstanding its superior crfedit, it gets little 
 or nothing to do, beyond the circulation of its 
 notes, and keeping the accounts of government. 
 On the contrary, were the Directors fewer, the 
 interest they felt would be greater. The whole 
 credit of the management woidd attach solely 
 to them ; they would acquire a better know- 
 ledge of it, do it with more ease and pleasure, 
 and give that spirit and energy to the direction 
 by which the business of the concern would be 
 extended, and its profits increased. There is 
 also another disadvantage arising from too many 
 Directors. Few people like their cash transac- 
 tions to be known, and none, that they should 
 come under the review and cognizance of their 
 neighbours, who might sometimes even be their
 
 63 
 
 rivals in trade. This will always be particular- 
 ly the case with borrowers, who are as good 
 customers, and as necessary to a bank, as lend- 
 ers : and when there is a great number of Di- 
 rectors, people are apt to feel that privacy is al- 
 most out of the question, 'i'his, I dare say, is one 
 of the principal causes which gives business to 
 the Private Bankers in Edinburgh ; and it will 
 always induce many country gentlemen (more 
 particularly those with whom a few shillings per 
 cent, is less an object) to do their business with 
 Private Banks in preference, if they possess the 
 requisite credit, or can give them the accom- 
 modation they require. 
 
 Now, by the plan proposed, we shall com- 
 bine all the advantages of both public and pri- 
 vate management, without the drawbacks of 
 either. 
 
 For these reasons, the fewer tlie Directors 
 the better : but there could not well be fewer 
 than four ; and, indeed, perhaps no Bank could 
 be safely trusted to the management of so small 
 a number. By the Branches being under the 
 control of the Newcastle Directors, however, 
 while they will enjoy all the advantages of the 
 most private management, they will have all 
 the security of the most public. The same will 
 be the case with the management at Newcas- 
 tle : it will regularly come under the inspection 
 and control of the Chairman of the Branch
 
 64 
 
 Directors, and any thing wrong in the manage- 
 ment will immediately be discovered, and cor- 
 rected or exposed. By this means, no doubt, 
 the transactions of individuals with the Bank 
 will be reviewed by more than four Directors. 
 They will, however, generally be strangers ; 
 and people have a m«ich greater objection to be 
 immediately under the cognizance of their 
 neighbours, and those they are known to, in 
 money matters, than they have to their aflrkirs 
 being reviewed by persons who do not know 
 them, and who only stand in the relation to- 
 wards them of A. to B. - 
 
 A declaration, however, if not an oath pub- 
 licly made, ought to be required from every 
 Director, that he would never make the trans- 
 actions of the Bank a subject of conversation 
 to any but those concerned in the management ; 
 and from the Committee of General Manage- 
 ment, that their individual communications to 
 the Branch Directors, should embrace only 
 points of general management, unless a gene- 
 ral meeting is to be called, and any question to 
 be discussed which shall involve the detail of 
 any particular transactions. By this means the 
 public might be continually reminded and as- 
 sured that their transactions would have the 
 greatest privacy possible, an assurance which 
 there can be little doubt, would be of consider- 
 able benefit to the business of the Bank.
 
 65 
 
 Another great advaiitaf^e of this plan is the 
 superior activity which the comparing and in- 
 specting of each others management will natu- 
 rally produce. Wliile tlie Directors at New- 
 castle will require a good account of the ma- 
 nagement of the Branches,^ they will naturally 
 be anxious to give as good an account to the 
 Branch Directors, in return. Thus by being 
 poised against each other, an emulation will 
 be excited, which, by keeping the interest and 
 attention of all parties continually alive, must 
 prove of incalculable service in promoting the 
 interest of the establivshment : for a falling off 
 in the time, trouble, and attention given by 
 those who are entrusted with the management, 
 is the easily besetting sin of the Directors of all 
 public concerns. 
 
 If the public could be equally assured of the 
 goodness of the management, it w^ould be bet- 
 ter that the Directors once chosen should never 
 be changed. The secrets of the Bank ought 
 to be kept in as small a compass as possible. 
 
 The management of a Bank also requires a 
 practical knowledge, which, of so great a busi- 
 ness, must take some time to acquire. Of this 
 the Scotch are aware, and though some of the 
 Directors go out every year, they generally re- 
 elect such as have been Directors before, so 
 that the same set of persons, whom experience 
 
 K
 
 66 
 
 has rendered the most fit, are continually in 
 the management. 
 
 In order, therefore, not to have more changes 
 than necessary, and to introduce no strange 
 faces that can be dispensed with, it is proposed 
 that but one DirectQr shall go out each year by 
 rotation, and that the order of rotation be not 
 imperative. If to retain a Director, whose use- 
 fulness is such, that his brother Directors think 
 he ought not to petire, or if to permit one to 
 go out who may have found that he cannot give 
 the attention required, the Directors choose to 
 alter it, so much the better. In so small a 
 number, it would neither be desirable to lose a 
 good Director, nor to retain a bad one ; and of 
 their respective qualifications and usefulness, 
 the Directors will themselves be the best judges. 
 It v/ill also generally happen, that there is some 
 one individual who has more time, takes more 
 pleasure and interest in, and gives more atten- 
 tion to, the management than the rest, and the 
 object in giving the Directors the choice of the 
 fourth member themselves is, that they may 
 choose this person for their Chairman. He will 
 always have the most knowledge of the trans- 
 actions of his particular branch, and will be the 
 fittest to give any explanations respecting it, 
 at the monthly meetings of the Committee of 
 General Management, and will have the most
 
 67 
 
 tact and fitness for that inspection and judg- 
 ment which he will be called upon to exercise 
 on the transactions of the other branches, that 
 will come under his review. 
 
 The monthly meetings of the Chairmen of 
 the Branches, with the Newcastle Directors, be- 
 ing for the purpose of scrutinizing and control- 
 ing each others management, it is possible 
 that differences of opinion may sometimes arise. 
 In order, however, to prevent such differences 
 from ever producing any disunion (which varie- 
 ties of opinion, when people are earnest in a 
 pursuit, have been known to cause) it is pro- 
 posed, that the Deputy Governor who presides 
 at these meetings, shall have nothing to do with 
 the particular management of any Branch. Be- 
 ing chosen by the Committee, whose respect 
 and confidence he will in consequence natural- 
 ly enjoy, he will possess sufficient influence to 
 prevent any such event from ever happening. 
 It is likely, however, from the character and 
 respectability of the parties, that a misunder- 
 standing is merely a possible, but not at all a 
 probable event. 
 
 The Governor having merely an honorary sta- 
 tion, should be chosen in a manner calculated 
 to convey the greatest compliment, and should 
 always be a member of one of the Houses of 
 Parliament, both in order that he may be a 
 man of undoubted rank, and in order to secure 
 K !2
 
 68 
 
 a parliamentary interest and co-operation in 
 promoting any measure, or procuring any act 
 which may hereafter be wanted. 
 
 The superior power of control possessed by 
 the general court of Directors, does not in- 
 volve its interference in the details of the 
 concern, and will not, consequently, in the 
 least degree, embarrass its operations, which 
 might be the case if it were called upon to 
 take a practical management. It will mere- 
 ly be a su})erior court of appeal, to which re- 
 ference may be made upon any particular ques- 
 tion or point, by the Committee of General 
 Management, or any two of its members. 
 Its" judgment and interference will be merely 
 occasional, and never exercised without be- 
 ing specially called for, which it is probable 
 will rarely be the case. The existence of the 
 power may be useful, however, though never 
 exercised. 
 
 Independent of these different checks, the 
 Managing Director ought to make periodical 
 visits, more particularly at the commencement 
 of the concern, to aid, with his advice and as- 
 sistance, the Directors of the Branches. By 
 thus diffusing his practical knowledge into every 
 department, a general luiiformity and harmony 
 in the direction of affairs, will subsist through- 
 out, which will render the positive application
 
 69 
 
 of any one of the checks an event rarely called 
 for. 
 
 By this plan, therefore, 1 should imagine, 
 that there would be every probability of the 
 establishment being conducted both with safe- 
 ty and success. The whole management, in 
 a short time, would become a very well under- 
 stood routine. Any appeals would merely 
 take place on particular occasions, by the Di- 
 rectors of the Branches requiring the addition- 
 al authority of the Committee of General Ma- 
 nagement ; or by the Committee of General 
 Management, on any important point, requir- 
 ing the additional authority of tlie general 
 Court of Directors, to relieve themselves from 
 responsibility. 
 
 Branches may also be established at Berwick, 
 Carlisle, Stockton, &c. upon the same princi- 
 ples, but the distance would be too great to re- 
 quire the monthly attendance of their Chair- 
 men. If they came once or twice a year, to 
 ascertain, for the benefit of their constituents, 
 the general state of the concern, it would be 
 sufiicienl. In any large town, however, where 
 an Agent was appointed, and any considerable 
 business done, it would be better to have a 
 Board of Directors. No business could be done 
 to any extent, without a discretionary power 
 exercised upon the spot ; and the experience of 
 the Scotcli Banks has proved, that it is not
 
 70 
 
 safe to entrust such a power to an Agent. With 
 these few observations, we will leave the plan 
 to the consideration of the public. 
 
 ^ In page 18, I have stated that no man is ever 
 chosen Director of a joint stock company, who is not fit 
 for it ; I find, however, that instead of ^s, it would have 
 been more correct to have said ought to be. 
 
 EDWARD WALKER, PRINTER, NEWCASTLE.
 
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