^"1- '^L: r" /- 'r \ THE UNIVERSITY OF ILLINOIS LIBRARY -^ REVIEW BANKING SYSTEM OF BRITAIN; OBSERVATIONS ON THE INJURIOUS EFFECTS OF THE BANK OF ENGLAND CHARTER, AND THE GENERAL BENEFITS OF UNRESTRICTED BANKING COMPANIES. EDINBURGH : PRINTED FOR STIRLING ^ SLADE, C. 4 W. 13. WHlTTAKEn, JOHN RICHARDSON, AND G. COWIE J, CO. LONDON. 1821. Leiffi! Printed by A' Allardke. PREFACE. Literary Critics, to use their occasional language, must find it impossible to wade through the following dri/ remarks on mere business topics. Any preliminary address to them, in the usual apologetic or propitiatory strain, would, therefore, be superfluous ; but, to prevent all unfounded suspicions of sinister motives, or concealed Banking influence, the author considers it proper to declare, that not one word of these observations, or of the let- ters therein mentioned, was written with the advice or co-operation of any other person — that he is uninfluenced by prejudices for or against the institutions and parties alluded to — and that his own probable interest might rather have led him to desire the perpetuation of Banking restrictions in England. November 3, 1821. ERRATA. r: Page S8, line 16, for on this point read of a similar nature. J 93, 8, for partnership read partner sMjjs. 115, 8, for loses read losses. > 127, 23, for diminutions read diminution. ^ 131, 25, for maintan read maintain. \ 146, 2, for 1813 read 1810. ^; IS*, 1, for di-atver read drawee. i 176, 4, for o/" read flM^w?e«^?n^-. ^ PF r^£: 5^JI/£ AUTHOR, A REVIEW OF THE BULLION QUESTION, AND DEFENCE OF ABSTRACT CURRENCY. , [ OBSERVATIONS ON THE BANKING SYSTEMS OF ENGLAND and SCOTIiAND. In 1819 I addressed a Letter to Lord Castle- re agh, pointing out, in detail, the various con- sequences and apparent impolicy of the regula- tion, which has hitherto prevented Banking Companies in England from comprising more than six partners in each, with the single ex- ception of the Bank of England ; and, sub- sequently, sent another to Lord Liverpool, requesting he would lay it before the Parlia- mentary Committee, — then investigating the effects of legislative restrictions on trade, — provided he thought the consideration of Banking restrictions could be regularly entered upon by that committee ; to which his Lord- ship replied, that these limitations did not come within the range of their inquiries, A short 6 time afterwards, Lord Liverpool cfFected the repeal of a similar law in Ireland * ; and every well-wisher to British interests will rejoice to see the same liberty speedily extended to Eng- land, where the importance of a secm^e Bank- ing system is still greater, in proportion to its larger pecuniary transactions. In the hope of directly or indirectly contri- buting to the ultimate emancipation of the English Banks, from the injurious restriction in question, I again snatch a few hours, during very short intervals of leisure from business, to offer to public attention, the following out- line of the letters alluded to ; trusting to be excused for any defects which may have arisen from want of time to connect or condense this contrast of restricted and unrestricted Banking Companies, in the manner which might be desirable. Much has been said and written, of late years, on the impolicy of restrictions on trade, yet, somewhat unaccountably, the frequent and ruinous failures of English Banking Compa- nies, have not, so far as I know, produced * See Note A. any motion in Parliament, for the abroga- tion of the law which, up to this time, has confined the number of their partners to six ; and notwithstanding that the striking superi- ority and general advantiiges oi unlimited Bank- ing Copartneries in Scotland, have been long acknowledged, the richest, and by far the most populous and important portion of Britain, has been left exposed, since 1694, to all the disad- vantages of a contrary system. The exclusive right obtained, in that year, by the Bank of Eng- land, entitling it to be composed of more than six partners, appears to have been granted un- der the most mistaken notions of trade and of national interests, and the remark is still more applicable to the less excusable renewals of the charter in more enlightened times. The ascen- dancy acquired, in consequence, by the Bank of England, is sufficiently known ; and such are the prejudices with which we are apt to vie^y evils of long standing, that it has been a favou- rite project with some persons in Parliament, to prohibit provincial Bank issues entirely, as a remedy for the disorders and losses originating in the restriction they labour under as to part- ners ; and instead of abolishing one of the most absurd and pernicious monopolies of the seven- 8 teentli, these legislators of the iiineteenlh cen- tury, would thus voluntarily have offered still greater powers and immunities to the Bank of England proprietors, than they ever dreamt of asking. Lord Liverpool, when lately recom- mending the abolition of the Bank of Ireland's exclusive pi'ivileges, is reported to have assign- ed as a principal reason, for so doing, the simi- larity, he stated to exists betwixt the present want of capital in Ireland, and that want of it in Scotland, which rendered it unadviseable when the-Bank of Scotland was instituted by Act of Parlia mentto adopt a similar limitation, as . to Banking partnerships north of the Tweed, thereby implying that the Scotch Banks have only escaped subjection to this limitation all along from the national poverty. His Lordship seems certainly to have meant by this, to say, that the average wealth of individuals was not such, in Scotland and Ireland, as to enable any six of them, in general, to conduct Banking busi- ness with safety to the public, but that the greater individual wealth existing in England, rendered more than six partners there, super- fluous. But, in this argument, he appears to forget, that if individuals are richer, on 9 the average, in England, than in the sister kingdoms, its Banking operations are propor- tionally more extensive; or, in other words, that 100 Banking Companies, with an ave- rage capital of 5^50,000, and no more than six partners in each, might conduct the money transactions of Scotland, as safely as 400 Banks, with an average capital of L. 100,000 each, and the same number of partners, could manage those of England. His Lordship seems, also, to have forgot the appalling fact, that in j814. 1815. and 1816. no less than 200 of tho F.n^o-Hsli Bnnks stnpt pnympnfj^ a recent and unanswerable refutation of all theories on the blessings of Bank monopolies or restric- tions in England, whether adopted from the interested views or mistaken ingenuity of their supporters. There are, however, apparent ob- stacles to the instant removal of the evil in question. The government itself, seems to be strangely impressed with a notion of its own depcndance, in some respects, on the Bank of England ; and however inde^xindcnt it veallij v6", of any Bank whatever, the proprietors of the Bank of England may, probably, strive to promote and strengthen any such erro- neous ideas, as may be calculated to retard 10 the curtailment of its overgrown monopoly. Some people appear to expect, that they would, at once, imitate the example of the proprietors of the Bank of Ireland, who, una" mmously, gave up their exclusive rights, on the very first recommendation of govern- ment, even, it is understood, to the permis- sion of unrestricted Banking Companies in Dublin. But I rather suspect the Bank of England will oppose, more or less directly, the establishment of unrestricted Banking Compa- nies in the English provincial towns, before the expiry of their present charter ; and that, at all events, they will most strenuously resist every attempt to establish, either now or in future, that equitable and free competition, which ought to exist in the Banking business of the first commercial ciiy in the world. The pre - sent Bankers themselves, m ay possib ly be found o pposing their own liberation from the re strictive enactment as to partners. These gentlemen might, no doubt, become, in many instances, connected in the proposed unfet- tered Banking Companies ; but it is almost unnecessary to observe, that the loss of the in- dij^idual consequence they now enjoy, in vari- ous respects, and the reduction in their present 11 gains would be severely felt by them, whe- ther they became partners or not in future companies having a numerous body of proprie- tors. At this moment, they possess consider- able weight in the election of members of Parliament, and with many of these members directly or indirectly concerned with them in trade, and many more, perhaps, under pe- cuniary or other obligations to them, it is not altogether improbable^ that Bankers, if so inclined, would find parliamentary defen- ders of the present system. Many Bankers are also large holders of Bank of England Stock ; and if their own local or more imme- diate interests were even unaffected by the repeal of the restriction, they might istill dread its ultimate effects on the Bank of England itself. Various members of the government, and of Parliament, may be similarly situated, and therefore less disposed to enter with zeal upon improvements, they might imagine, likely to injure themselves. Ministers, even after proposing the repeal in Ireland, may, also, amidst the refinements of modern calcula- iioUf become somewhat alarmed at the prospect of so many democratic-looking institutions as unlimited Banking partnerships in every Eng- 12 lish county ; under the impression, that the in- fluence which, at present, secures the return of some of their supporters in Parliament is partly connected with, and dependent on the continu- ance of the existing restriction. The extent, in- deed, of Bank influence is, perhaps, more felt than acknowledged by all parties, in political matters ; and the present administration may find it easier to obtain the favour or support, in this respect, of one of the present provin- cial Banks, whose partners are frequently col- lectors of taxes, &c., than of one with four or five hundred partners. At present, in towns where there is only one Bank, the leading part- ner may start, as parliamentary candidate, him- self, or support some particular friend as such ; and it is possible, he may indulge a degree of pique or animosity against individuals, whose votes he does not obtain, which they might have been unexposed to, had they merely voted against a Banker (or his friend), who had three or four hundred partners, many pf them dif^ fering in political sentiments from himself, and all less interested, at any rate, in his carir- vass, than in the fair and impartial admi- nistration of the Banh The influence of Bankers, in such elections, has been often 13 matter of regret ; and instances of their po- litical interference have occurred in Scot- land, which not only subjected them to the castigation of the periodical press, but also sent some of their customers to Banks with more numerous partners, where no bias, for or against individuals, on account of their political opinions, would be tolerated, and whose example every honest man must wish to see imitated. Whatever may be the ministe- rial obstacles to the removal of the restriction, they will disappear before the expressed desire of the public, as must, ultimately, all those start- ed by the Bank of England, or the existing Banks. In the meantime, if the power acquired by the Bank of England should prevent the im- mediate establishment of unrestricted Bankincr Companies in London, it surely will not be al- lowed to retard the enlargement of x>fovincial Banking partnerships. The latter step could not materially or at all affect the ultimate interests of^ the Bank of England, as the augmented money operations in the provincial districts, originat- ing in the extension of partners in their Bank- ing Companies, would be accompanied by such a corresponding augmentation of trade in Lon- don, as would probably enlarge the mctropoli- 14 tan circulation of the Bank of England to an extent fully compensating any 7'eduction in the present reserves of its notes by provincial Bank- ers, which might follow the formation of steady and respectable Banks, less exposed to sudden demands or " rwws" than many of the existing establishments. The most serious opposition, therefore, of the Bank of England, is likely to be reserved for any attempt to establish proper rival Banks in London; and to delay this as long as possible, the proprietors may probably offer to wave their rights under the present charter, so far as to allow unrestricted provincial partnerships immediately, or before 1833, when the charter expires, provided it is renewed to them for 20, 30, or 40 years, giving them the exclusive circulation o^ London. It would be easy, however, to evade the opera- tion of the law, which at present entitles the Bank of England to call on government to prohibit Companies with more than six part- ners carrying on banking business in England. Some of the Scottish Banks, finding their pa- per preferred in the north of England to that of several of the English provincial Banks, have indirectly carried on business in Carlisle, New- castle, Berwick, Alnwick, &c. ; but finding they 15 couid not do so with the requisite advantages and security, it was proposed, some years ago, to six of the most respectable partners in an Edin- burgh Bank of large capital, that they should, on their own account, and in their own names, transact banking business at Berwick, under the guarantee of the Edinburgh Bank ; and, as they could have issued its notes, they would have had the benefit of the guarantee, and the Bank of the circulation, without incurring those mutual risks, as to all losses, and obligations to divide profits, which may constitute such a direct partnership as the Bank of England might perhaps be only found entitled to challenge. Although this project was not carried into effect, it might have been ; and another more general mode of evading the effects of the restriction could be found in the extension of the practice which is sometimes followed by merchants, shop- keepers, &c. giving public intimation of their readiness to take, in all payments, the notes of a Bank suffering under a " rwn" at the same moment, or to guarantee the payment of such notes to a certain extent. A gentleman in the north of England, with whom I have corre- sponded on this subject, was so impressed with this method of counteracting the injurious cf- 16 fects of the Bank of England charter, as to have seriously intended the formation of a Banking Company with not more than six partners, but pcrmanentlT/ guaranteed by respectable indivi- duals, to a fixed extent each; and, as little or no interest is allowed by many English Banks on the current accounts of their custom- ers, I recommended to him, that he should propose an allowance of three, four, or five per cent, interest on all sums under a certain amount, deposited with the Bank by its guar- antees, as an inducement to their becoming such, which could not render them partners. It is probable, therefore, if not instant- ly abolished, that the restriction will be so evaded, in a short time, as to render the remaining twelve years of the Bank's charter less remarkable for provincial Bank failures than any similar period of the last forty years; and it would be highly impolitic, with tJiis prospect, to enter into any compromise at pre- sent with the Bank of England, which, in se^ cm-ino; the immediate establishment of unlimit- cd provincial copartneries, might saddle the inetropolis with its monoply still more com- pletely during the next half century. Al- though a decided admirer of the principle in 17 Banking, (accidentally stumbled on throngli the government necessities in 1797,) viz. that at least ojic great Bank in the country should be exempted from specie payments, I cannot discover any good reason for also conferring other exclusive privileges on this Bank, in addition to such exemption, nor any greater reason, even when this jirincijole is departed from, and metallic payments resumed, why only one Bank in London sJiouxl issue notcs^ and no ether Bank in or out of London be al- lowed to have more than six partners. In every view, it would be better for the public to offer an indemnity to the Bank for the instant and total repeal of the charter than to enter into any modified renewals cfit, which might prolong their monopoly of the London circulation, or at least prevent the establishment there of unrestricted Banks. In judging of this indemnity, we ought to re- member, that the Bank of England, ifuncha?'- iered, would still enjoy the great advantao-es of an immense capital, long experience, and un- bounded credit, in competing with new rivals, and that the prejudices of the public would operate long against the latter ; — that at |)re- sent the charter docs not secure them absolute- 18 lyagainst rival issuing Banks in London, Lanca- shire, &c. where their circulation is most ex- tensive, and, consequently, that the indemnity should be regulated, not by the extent of their circulation at present, but by its probable amount, were respectable local Banks to issue notes in Lancashire, and others to do so in London, even under the present restriction. It would be no difficult matter, perhaps, to find 120 individuals who might have the in- clination and ability to embark ^100,000 each in Banking, or 12 millions in all, so as to form twenty Banks with six partners, and a capital of £600,000 each, all issuing notes in London, The 60 or 70 non-issuing Banking Houses already established there, must have an ag- gregate capital equal, at least, to the above sum of 12 millions, however unequally held by individuals ; and if some regulations could be put in force to secure the public against any one of the above proposed Banks in Lon- don, commencing or continuing business with inadequate funds, there is abundant capital already amongst the private Bankers collective- ly, for the formation of such issuing Banking Companies, without calling in the aid of other capitalists. 19 If apprehensions were still entertained, thai with such respectable, although restricted, part- nerships the public or Bank of England might attempt to run one or more of the number down, these Banks could enter into an under- standing to aid each other, in such cases, either by money or credit, which could be easily effected without the smallest risk to any of them, under proper arrangements. It is owing, perhaps, to the want of precon- certed plans for mutual support, that none of the wealthy capitalists of London and Lancashire, have hitherto availed themselves of the power to issue notes ; but whatever may be the cause, the probable additional cir- culation enjoyed in consequence by the Bank of England, must certainly be deducted from any claim for indemnity on the present total amount of its issues, which might accompany an abandonment of the charter. It should also be remembered, that the Bank's circula- tion is now much greater than when coins were more in use; and after its accumulations of part of the immense gains it has derived from the restrictive act of 1797 *, and its con- nection with government, there would be no injustice, even to the present proprietors, in * See Note V>. 20 offering, under all these considerations, a com- paratively moderate compensation, were they to abandon the charter at the present moment. If it was estimated that, hy issuiiig notes, the re- stricted Banks of London and Lancashire could diminish the Bank of England's circulation, to the extent of 10 or 12 millions, and that, by the greater use of coins, other 5 or 6 millions could be reduced, too high a remainder for the Bank to claim indemnification upon would still be left, as it should be kept in view, that much of their circulation is derived from its transac- tions with government, which might be trans- ferred to, or divided amongst, some of the proposed issuing London Bankers, and also, that the reserves of Bank of England notes, presently kept by provincial Banks, could be materially lessened by various methods tend- ing to give the public greater confidence in these establishments, even before they may be freed from the existing restriction. After all these allowances, and recollecting that the abandonment of the charter does not prevent it carrying on a great business, the pub- lic and the proprietors may consider ^£1 50,000 or ^200,000 a year, a fair indemnity for the remaining currency of its charter, were the 21 Bank now to give it up. This sum is indeed so near the bonus given for the charter, viz. the permanent lodgment with government of the Bank's capital of ^61 1,686,800, and a loan of 3 millions, both at an interest of 3 per cent, that is from 1 to 2 per cent, below the average market rate ; that it may fairly be considered as nearly what the Bank considers it worth ; al- though, at same time, it is probable, from the general price of exchequer bills, that govern- ment is not actually benefited so much as 1 or 2 per cent, by taking this loan of 14 or 15 mil- lions from the Bank of England, instead of trusting to its obtainment from other sources. The next question is, where are the means of paying this indemnity ? To this it may be replied, that great savings are still practicable in the management of the national debt, the lodgement of public balances at interest, the mode of obtaining anticipations of the revenue, &c. especially under an unlimited competition amongst uncontracted Banking Companies; and we ought also to recollect, that if the present taxes did not become more productive from the stimulus the industry of the country might receive from improvements in Banking, a sliglit participation in the profits of supplying 22' the circulating medium, or an additional stump duty, on the notes of future unrestricted part- nerships, could easily enable government to pay this small annual indemnity for ten or twelve years ; but wherever the funds are to be found for this purpose, it will not surely be maintained, that the whole 50 or 60 millions of taxes, annually raised in Britain, are so care- fully collected and expended, that this paltry sum cannot be saved out of them ; or that a na- tion, whose resources are indicated by this en- ormous amount of taxation, is so reduced, that it must patiently submit to the deep-root ed and wide spread evils of a barbarous and antiquated monopoly law, from sheer inability to indem- nify the monopolists for dispensing with its operation. I shall not here enter into any minute examination of the history of the Bank of England, nor attempt to scan the motives, information, or accuracy, of some of its advo- cates and defenders at proprietory meetings, &c. The Bank has been very prudently con- ducted for the benefit of the proprietors in all its transactions with individuals, and whatever may be said to the contrary, by the directors Ctv proprietors themselves, they would think it a poor compliment to their arithmetical powers. 23 if a neutral person maintained, that they had not displayed equal calculation and perception of self-interest, in their arrangements with govern- 7nent, On the contrary, it is notorious that their connection with government has been the main source of their profits ; and if it is correctly alleged, t hat their mercantile discounts liave seldom exceeded 5 or 6 millions, and so fastidi^ ously granted, as to reduce their average loss, by bad bills, to £3 per million, th ese are by no means convincing proofs of sufficient anxiety in a Bank, possessing a circulation alone, of 28 to 30 millions, and indebted for so many other advantages to the nation, to reciprocate these benefits, as far as possible, by the most liberal . accommodations to the mercantile part of the community. So little benefit, indeed, appears to have been felt from its operations, that, at vari ous periods, proposals have been y nfiAf^ fnr theestabl ishm ent of one or more rival issuing Banks in London ; and, amongst other pamph- lets published for the promotion of that object, I understand Mr Maryatt*s is well deserving of perusal. The rule of the Bank of England to reject bjUs, having more than sixty days currency, and the other difficulties of obtaining regular and 24 liberal dtscounts tjiere^Jia veinduced the great-2_ er number oFmerchants. &c. in London, to transact excTusivelj with private Bankers, who charge commissions on their accounts, and al- though some of the latter may re-discount, occasionally, at the Bank of England, the amount seems to be included in the above- noticed total of the Bank's discounts, and, consequently, must be comparatively limited. The government is in reality equally inde- pendent of this Bank, with the great body of trad ers ; and, notwithstanding all that has been said respecting the non-payment of the debt due to it by government, the re- payment could be easily effected in a few hours after any announcement by ministers, that other capitalists were wished as creditors of the pub- lic, for the amount, in lieu of the Bank of Eng- land ; and the only result of paying this debt to the Bank, would be the employment of a large sum by it in general discounts, &c. which the capitalists alluded to are now em- ploying in similar channels. The country that has expended 2000 mil- lions since 1793, in its wars and in payment of the interest on its debt, &c. and whose real annual income is estimated at 5, 6, or 7 25 hundred millions^ must be entirely independ- ent of any Banking Company, whether its capital is 15 or 50 millions ; and, however de- sirable and convenient it may be to have companies of such solidity in this great com- mercial nation, they ought always to remem- ber in their dealings with government, or even with individuals, that establishments of equal or superior solidity could be formed at a days notice^ whenever the public becomes convinced that they are wanted, _ If the Bank of England proprietors could be imagined so foolish, as to threaten the dissolution of the concern, unless its charter was renewed^ the public need not be uneasy, even if this threat was carried into effect ; for, under free compe- tition, we may rest perfectly assured, that the original capitals and subsequent management of their successors in London would always pre- sent the most satisfactory security ; and, how- ever vast the extent of their transactions, that the same causes which produce, in the unob- structed course of affairs, institutions of all other kinds proportioned to the functions they have to discharge, would call into existence Banking establishments fully adequate to our highest future wants or wishes. It should be kept in 26 view, that although the Bank proprietors have been just supposed entitled to accept or reject any indemnity offered them — from the desire of preventing loss to those who have more re- cently purchased stock, at high prices, in the chance of the charter remaining unobjected to, until its expiry — still the public good must have been the ostensible ground, at least, for granting it originally ; and though no formal clause to this effect may have been consi- dered necessary in the charter itself, it may, perhaps be presumed, that in law and equity, the government or the public can insist on the discontinuance of the monopoly, whenever they may discover it to be unproductive of the beneficial consequences to society, the expec- tation of which could alone sanction its for- mation, and subsequent existence. I may have another opportunity of recurring to this sub- ject in examining the bullionist theories of currency, and shall therefore leave it to give a brief outline of the Scottish Banks ; and, although their capitals and operations may appear extremely insignificant in amount, to many in Threadneedle Street, I trust the pub- lic attention will be more directed to the principle they are founded on, and to its 27 probable effects, if recognized in the forma- tion of English Banking Companies. The Bank of Scotland was established under an ^ Act of Parliament in 1695, by William Pater- y son, who, about twelve months before, had'*^'**^^^^ founded the Bank of England, (in which it is said, no other Scotsman has been since allow- ed to hold the office of director ;) but it ap- pears that Scotland was then thought to pre- sent so limited an opening for Banking, that the charter of this Bank did not prohibit, like that of its great predecessor in England, the establishment of rival companies with more than six partners, and its projectors do not ap- pear to have anticipated the rapid approach of the period when it would be found unable to conduct the whole Banking business of Scot- land. This period is indicated by the commence- ment of the Royal Bank of Scotland in 1727, under a royal charter. The British Linen Company was incorporated in 1746, for the promotion of the linen manufacture, but, having been exclusively engaged for many years past in Banking operations, it some time ago, after a keen opposition from the two Banks already noticed, obtained a charter as a Bank. Its 28 capital is half a million, and that of the Royal Bank, and Bank of Scotland, one million and a half each. The partners in all the other Banks in Scotland are jointly and severally responsible for their engagements ; but, in the three chartered Banks, the liability of indivi- duals is limited to their shares of stock. The chartered Banks and their branches were for some time sufficient for the Banking busi- ness of so poor a country as Scotland then was, but as trade, agriculture, and manufac- tures, became more extended, other respect- able Banks were established, and their num- bers have since kept pace with its increasing wealth and population. Several of these un- chartered Banks in Glasgow, Aberdeen, Mon- trose, Dundee, Perth, Cupar, Leith, and Dun- bar, are composed of a numerous and wealthy body of proprietors ; and one of them establish- ed in Edinburgh, about 10 years ago, with an original capital of 5£6005000,has nearly six hun- dred partners. The whole Scottish Banks are , al most without an exception, in equally good, credit ^ and, although some have only four, five, or six partners, they are, and must be, more respectable and trust-worthy than many of the English Banks, being obliged to corn- 29 jyete in public estimation with establishments possessed of very considerable capitals, and en- joying unlimited credit from the numbers and circumstances of their partners. Some of these more limited partnerships, in Edinburgh, Glas- gow, Greenock, Paisley, Stirling, Ayr, &c. stand so deservedly high, that they either engross a great share of the Banking business, where they are opposed to companies with a more numerous list of proprietors, or are left in the undisturbed possession, at their head-offices, or branches, of the business of a town or district. In England, on the contrary, the restriction as to partners appears to have introduced a lower standard, by which the relative credit and res- pectability of its provincial Banks is measured ; and fully admitting the great wealth and high character of many of those Banks, still it is well known, that a great number there have obtained tolerable credit, because less openly engaged, perhaps, than some of their neigh- bours, in mercantile concerns, who could not have commanded an equal degree of public con- fidence in Scotland. The fluctuations in the English Banks, can be traced in the annexed, table of the licences to issue notes taken out for eight years. In 1812 there were 761 30 Banks licensed, and in 1817 only 576. In Lincolnshire, 23 in 1814, and only 9 in 1816; in Leicestershire a reduction from 13 to 8, ap- pears betwixt 1814 and 1815 ; and similar va- riations occur in most of the other counties. In the table for Scotland, for the same period, also annexed, the very slight changes are al- most confined to Bank Agencies. Exclusive of the partners in the three chartered Banks, who are very numerous, these tables shew, that the unchartered Companies in Scotland have nearly as many partners as the whole provincial Banks in England ; and it is some- what remarkable, when six partners are legally allowed, that the average number in the English firms does not appear to exceed three in each; but this may probably arise from their Jgen- cies being included in the table as Banks, no notice being taken of the former. The largest, as well as the smallest of the Scottish Ban ks, re- ceive any sum, upon inter est^ at three or foiiL , >er cent ., px^^ppdiripfjive or ten pounds, repa y- Ing, whenrequired, the who le or part of such deposits, free of all charges of commission, •and in many cases, in sums so low as one, twoj or three pounds, to the humbler clas^ of depositors ; these sums being generally 31 lodged on what are termed " Interest Receipts.' ' vfc^ When partial payments are wished, the depo-^y^ ^ sitor or holder presents the receipt, bearing the ^^'^^ depositor's indorsation, and the Banker marks ^ ^ on the back thereof the sums so paid, taking an acknowledgement, at same time, from the person presenting it, for the amount. When the interest is wished o« these receipts, a new or " Renewal Receipt, " is generally granted for the principal sum, and the old re- ceipt, bearing the indorsation of the depositor, is cancelled. The interest is paid as often as is required, but this is not usually more than once or twice in a year, unless the deposits are un- usually large. In some parts of England I understand, no interest receipts are granted, but all sums are placed to the depositor's cre- dit, in current account, subject to a commission, and re-drawn by cheques on the Bank, a plan both inconvenient and expensive for small de- positors, and rather calculated to induce them to lodge money with private persons, for the sake of a higher interest, free of commission, though attended perhaps with greater risk. Almost every inducement to accumulation and indus- try, attending the Savings Bank scheme, has been virtually felt in the encouragement to 32 small deposits and money operations, thus held out, all along, by the Banks and Bank branches in Scotland ; and when we recollect that most of these companies have numerous partners and large capitals, we must acknowledge that, un- der proper management and free competition, inactivity, and an unaccommodating spirit are not the inevitable ^companiments of exten- sive Banking establishments. There are few branches of trade so peculiarly fitted, indeed, as that of Banking, to be con- ducted, under free competition, b y the commit- tees of a large bo dy^f p roprietors ; and the past gains of mos t of the Scottish Banks suffi- ciently prove, that, amidst the vast advantages the public has derived from them, they have never lost sight of their own interests. Their original stock, in most instances, is selling at an advance of 50, 100, 200, 300, or 500 per cent, and some even so high as 1200 per cent*. * The high credit of some of the Scottish Banks, owing to the numbers of their partners, rendered comparatively small advances of capital necessary; and the proprietors frequently paid in only a fourth or fifth part of their subscriptions, being liable, of course, in cases of emergency, to a call for the remainder. — Enjoying a wide circulation, and large sums of deposited money, their profits have been relatively great, contrasted with their capitals. One Bank in a northern town commenced a considerable number of years ago, ^3 ^.^,^^3 If England had enjoyed similar benefits, ^ since 1694, from unshackled Banking Compa-^ nies, it would have been a much richer, hap^^^^^r^. pier, and better peopled country at this mo/<^^rt ^ ment than it can be for many years to come^ ^'"' as must be evident to all who attempt to trace^^^ , ^ the effects on national industry, and accumu- ^ 6- ^>^,e^ ^ blic without exposing the affairs of any one^^**^^"'^^ " Bank ; particularly, if care was taken not to^^^^^<^ ^^ publish the combined results of fewer tha\\^^^^^ ^ eight or ten distinct concerns taken togethew^^^^^^^ Such inspections might be practicable and usc-^^^^ ,^ , ful, perhaps, even with the present restricted /*^^w^<^*,,^ copartneries ; but Vithey did not willingly sub-"**^"^^^^ ^ mit to the inspection of respectable persons, '*^^^^/ 40 on oath of secrecy, they could all make up re- turns to the same date, of the preceding or other items, withholding the nameof their firm from C^ \ the return, and only specifying in what divi- ^^^^^^ sion or district it was made ; and, in this view, *^*^^^ it might be proper that such division should ll!e^*^^.^ contain at least eight, ten, or twelve Banks, so 2^^^*^^—- as to encourage candid and accurate returns, by the greater certainty each Bank would then have, that the particidars of its own affairs could be less easily distinguished or guessed at ^ in this, than in a smaller mass of returns. _If_ ^S-^ charters were gr anted to provincial Banks, with _ large subscribed capitals, distinctly exempting; eac h proprietor from responsibility beyond th e_ extent of his orijorinal subscription, such Compa- nies, at leas t, could have no objections to sub- C ^^^^^Z^^^^nsii a periodical statement of their matters to ^ y^-^^ governm ent, especially if charters were, as they ^ff^^ >^perha ps ou^ht to be, unohtainahle without this y^^-^-^ condition. The public monies, and the pro- ^^^^ ceeds of bankrupt estates, &c. in Scotland, are -^J^ ordered, I believe, by Acts of Parliament, to be lodged with the chartered Banks there ; but if the original capital of these Banks is the only security they offer, government should as- certain, at regular intervals, that it remains 41 undiminished, or at least sufficiently large to sanction the continuance of the charter, and in this respect, parliamentary control over the Bank of England presents a good precedent. Although the principle of inspection is here recommended as a desirable check against fu- ture deficiencies, the present situation of the Scottish chartered Banks is above all suspicion ; and, I doubt not, they would cheerfully submit to government inspection, whenever it might be adopted. Government appears to have had it repeatedly in contemplation to prohibit pro- vincial Bankers from issuing notes under Jive pounds, as a partial preventive of the evils of their limitation in number of partners — but such a remedy would be worse than the dis- order. Much of the prosperity, the trade, mf^nnfar- tures, fisheries ^c. of Scotland have exhibited, durin g the last 30 or 40 years^ is attributed, and__ with apparent truth, to the anxiety of its Bank-^ ers to extend the circulation of their small notes, as they cou ld most effectually do so by assisting; ^roductive labourers, or those who paid wci^es m small sums, or bought raw produce, or manufactured articles in limited quantities. The confidence universally felt. in the siabi- 4^ lily of tliese Banks has rendeied them the principal depositories of money, (it is thought their deposits exceed 20 milKons,) and has enabled them to affor d permanent, liberal, and STEADY advances to manufacturers^ miners, agriculturists, &c. emplovin ,c r Jabourers : and Trom their eagerness to push the circulation of small notes, the greatest facilities are at all times presented to every industrious and en- terprising applicant, able to give tolerable se- curity, who may be likely to promote that object. The beneficial effects of that subdivision of labour, which makes it the business of Bankers to discover safe borrowers of capital, instead of each capitalist doing so for himself, are well known; and nothing seems better calculated to stimulate and enlarge the applications for money amongst reproductive borrowers, than the encouragements held out to them by Bank- ers, desirous, through their medium, of extend- ing their circulation. Tho usands o f ingenious and active men might have found their time only partially occupied — their talents repressed —and their additions to the wealth of society c orrespondingly unimportant, but for this feel- ing of self-interest ajaiQiij£st__the _Banks ; and_ 4^ I have elsewhere endeavoured to shew, that the bullionist theories, respecting the alleged depreciation of paper currency, resulting from such operations, are completely unfounded. The proposed prohibition of provincial issues under Jive pounds would strike at a very active and permanent cause of national wealth ; and if they even could grant the same accommoda- tions to the productive classes, by issuing gold, or Bank of England notes, instead of their own notes under five pounds, the provincial Banks would require to charge their customers some- thing additional on their transactions, so as to secure after this reduction in their circulation, their iwesent gains, which cannot be above or below the ordinary rate of profits on trade in general. That this effect would follow the ge- neral adoption of the Lancashire system, which many affect to admire, is sufficiently evident ; for whatever may be the advantages of substi- tuting Bank of England paper, mercantile bilis of exchange, and specie, in that county, instead of local bank issues, a Banker there must subject his customers to such extra charges, as will yield the same return on his capital, as he could derive from its employment elsewhere, with the same 44 risk and trouble, but at same time issuing his own notes. If we suppose that the whole provincial Banks in England realize two millions annually from their circulation, it is clear, that if Bank of England paper or specie was issued by them, instead of their own notes, and the same extent of business still conducted, the public would either lose the interest on 40 millions of specie, and be still obliged to compensate the Bankers for the loss of their circulation, or would be adding 2 millions to the present an- nual gains of the Bank of England, and paying other 2 millions to the provincial Bankers in the shape of commissions or new charges, in lieu of their present gains by issuing notes. The establishment of branches from the Bank of England might, no doubt, save the public from these extra charges, and has been often most urgently recommended in Parliament, not indeed with that object in view, but as a reme- dy for the apprehension, uncertainty, and ac- tual direct and indirect losses attending the present system. It is very improbable, how- ever, that so unwieldy a mass of operations could have been satisfactorily conducted under any possible arrangements j but supposing the practicahility of entirely superseding the present ^ provincial Banks, by branches from the Bank ^ ^ ^^^^^^,^^ of England, it is doubtful if its augmented cir-/^ ^^,^^S*^ culation, in consequence, would defray the ex- ^^A^^ pensesj and cover the looses at so many agen- cies, so generally beyond the immediate control of its directors. It is unlikely the Bank of England, if these branches had actually superseded the provin- cial Banks, v^^ould have discounted so freely as the latter, as its directors have been always more difficult to please on the score of securi- ty, both before and during the suspension of specie payments. Even where the security was unexceptionable, and with the exclusive power, betwixt 1797 and 1819, of discounting every good bill offered to them, whether the sum was one hundred or one million of pounds, they have repeatedly rejected such undoubtedly safe paper, on grounds not very discoverable by the public, whose provincial wants, therefore, it is probable, might have , been rather inadequately or capriciously re- 9 lieved under the proposed system of branches, particularly if, at these, they only discounted, as in London, bills at or under two months date. 46 The effects of this unsteadiness, as to dis- counts, and apparent ignorance of the true principles of trade and circulation at the Bank of England, during the last 22 years in parti- cular, aggravated as they unquestionably have been by the restriction on other Banking concerns, in regard to the number of partners engaged in them, will be more fully examined in the remarks on currency, the publication of which, as formerly noticed, will follow the present observations. The immense extent of mercantile hills of exchange circulating in England, appears to be so connected with the restriction on provin- cial Bank partnerships, as to demand particu- lar notice here, especially as such advantages are said to attend this description of currency as to have precluded the use of local Bank notes, until lately, i7i Lancashire, one of the most extensive fields for pecuniary transactions in Britain. I have already noticed the extra charges which must be imposed on money operations to compensate the want of profit from local issues, and, perhaps, these are sub- mitted to in Lancashire, in the fear that no part- nerships of six individuals, however respecta- ble, are entitled to such extended credit, as to supply the great amount of currency required by that county. Considerabl e expense and trouble a re incurr ed in bringing Bank of Eng -_ land notes from London, for the s mal ler p ay- ments of L an cashire \ a nd, it is said, these notes have been frequently at a p rf^rpinm nf 10 or 15 shinino:s per cent, nt. M^9 ,nrhpstprj X^p. whilst the circulation of mercantile bills, made payable in London to effect the larger pay- ments, is perhaps attended with much risk, trouble, and expense, that might be avoided by the repeal of the restriction under review. This may possibly be more apparent if we previously examine the mode of effecting pay- ments in Scotland. When a merchant in Edin- burgh sells goods to a person residing there, the latter grants an acceptance for the price, payable at his own house, or at his Banker's in Edinburgh, — if the drawer has occasion to use this bill in the course of his own pay- ments, he takes it a day or two, perhaps, b^e- fore the money is required, to his Banker, who discounts it, without commission, charg- ^^^^^^^ ing 5 per cent, interest ;, and either pays the ^ //-/^ proceeds in notes, or places them to the credit of the merchant's current account, bearing in- terest at 3 or 4 per cent. Should the mer- 4^ chant have a sum to pay to persons at a dis- tance, or to persons who are ignorant or doubt- ful as to his circumstances, he may prefer tak- ing the Banker's notes for the proceeds ; but in making payments to those who reside in his vicinity, or who have confidence in him, he will generally give a cheque on his Banker. In the case of a person in Aberdeen, for in- stance, discounting bills in this manner at the Bank there, and having occasion to pay the proceeds in Montrose, he may transmit the Aberdeen Bank notes, which pass current- ly in ever^ part of Scotland, as these and the notes of every provincial Bank, with only one exception, are retired in Edinburgh by agents appointed for that purpose ; or, if the expense and risk of transmitting notes to Montrose is considered too great, the person in Aberdeen remits his Banker's draft on Edinburgh^ at the par of eight days date, which will pass as cash in all places where the par with Edinburgh is equal to or exceeds the currency of the draft ; but if, in the course of its circulation, it is paid away for instance, in Glasgow, where the par on Edinburgh is only three or four days, the receiver will charge interest for the number of days this draft has to run be- 49 yond the Glasgow par. It is also very com- mon, to save the stamp of these drafts, for persons to pay in sums at the branches of a Bank, to be repaid to their correspondents at the other branches or offices of the same Bank ; but on this plan the Banker grants no re- ceipt, in general, for sums so lodged, in case of thereby incurring the penalties of the stamp act, and the payers, therefore, trust to his advis- ing the payment to be made at the proper place, on the person previously named by them, calling for it. Post bills, or Bankers' promissory notes, on sheets of paper, at sight, or 7 days sight, are also much used for effecting payments at some distance, and are equally negotiable as direct drafts on Edinburgh. Drovers, graziers, &c. having occasion to attend various cattle mar- kets, and being frequently uncertain when and where they may make purchases, are partially in the practiceof carrying Banker's receipts bcarincr interest, which are received b y the seller as casii — less any charge for negotiation by the Bank- ers, who may present them for payment to the grantors. This plan gives the holder the bene- fit of the interest, until he has occasion to pay away the receipts, and as they can be more ef- fectually stopt payment of, if lost or stolen, 50 than Bank notes, they present advantages which would certainly ensure the more gene- ral adoption of this practice, were it not doubt- ed by many Bankers, whether such unstamped interest receipts are legally indorsible from one person to another, like bills of exchange, and a penalty incurred by persons giving cash for them beyond 10 miles from the place where granted, — or whether an onerous indorsee can compel the grantor to pay, without regard to, or deduction of, any claims the latter may have on the original depositor. The depositor should, therefore, have the option of taking his receipts, either on stamped or unstamped pa- per, that is, of paying for the stamps, in the prospect of securing an equivalent, at least, by circulating the receipts in the manner above alluded to ; but Bankers may, probably, wish to discourage the use of a currency bearing intei^esf, although various obvious improve- ments could be introduced in this respect. The b uyers of goods, in provincial towns^ generally a ccept for them, payable at their own houses ; "^4^7^*4^^ y^ is quite customary for merchants resid- ^^^rlS) ing in Glasgow or Leith, for example, to hold bills, payable in every town in Scotland, where a Bank or Bank agency is established ; 51 these bills they can »;ct easily discounted, by the Banks of Glasgow and Lcith, even without the previous expense and trouble of getting them accepted, in general, for the moderate commission of f, J, or at most ^ per cent., which is found to be about as economical a way of negotiation as sending them for dis- count to the Bankers residing where the bills are payable, and getting drafts on Edinburgh, at 8, 10, or 12 days date for the proceeds, lia- ble to their charges of commission, stamps, postages, &c. The Banks in Edinburgh can, A^ ^^^^> afford to discount bills payable at the provin-X ^as^^^^l^^ cial towns, for a very small commission, owinp: ^^^^"'^^^ ^ to their either havinsi: branches in these towns,'^*^^'^^^ =— : ^ ^ . ---; — -\e^^Z>.*^ or to their actmo; as airents tor the local Banks therein ; and, in both cases, they can transmit a number of bills due about same time, and re- ceive returns for them in the money parcels they may be under the necessity of dispatching or receiving at any rate; and a Bank in Edin* burgh, for example, collecting bills payable there, for another in Stirling, may find their amount nearly balanced, by those it has sent for collection to the Bank in Stirling, or other- wise settled for, in account current betwixt them, without the actual transmission of cas//, 52 and without either charging commission to the other, but on the differences betwixt the sum of bills sent and received by it, for collection. If the buyers or sellers of goods, however, pre- fer domiciling such acceptances in Edinburgh, the acceptor can easily retire them through the provincial Banker he transacts with, or by di- rect correspondence with Banking or mercan- tile agents in Edinburgh ; only, in this case, the seller would require to charge the provin- cial buyer a loivei' price, than if the bills were made payable at the residence of the latter, as the expense of par, postages, and commissions, incurred by the buyer, in retiring his accept- ances, thus domiciled in Edinburgh, would generally exceed the charge for negotiation the seller incurs when he discounts provincial acceptances at an Edinburgh Bank or its branches. For instance, we shall suppose a merchant in Leith holds goods, for which a safe purchaser there is willing to grant his ac- ceptance, at three months date, /or ^^lOO, pay- able at his own house in Leith ; if an equally safe purchaser appears from Perth, the seller will not invoice these goods to him under £^100, 5s., for his acceptance, at 3 months date, pay- able in Perth, because he cannot get a bill pay- 53 able there, discounted in Edinburgh or Leith, for less than 5s. per cent, of commission, &c., of course, this charge by the seller, of 5s. more on the goods, in exchange for a Perth bill, than for a Leith acceptance, only leaves him the same profit as if the goods had been sold to a purchaser residing in Leith. On the other hand, if the seller wished the Perth purchaser to domicile the bill in Edinburgh or Leith, it might cost the acceptor 15s. to retire it^ when due, and the latter would, therefore, insist, that the goods should be invoiced at ^^99, 10s., so as to prevent them standing him 7nore, when thus paid for in Edinburgh, than if he had granted a bill for them, payable in Perth, amounting to efilOO, 5s. As this latter alter- native, however, would leave the seller 10s. poorer than the preceding, it is seldom adopted, and, instead of the Perth buyer paying 1 5s. to Bankers, for retiring his acceptance for ^99, 10s., made payable in Edinburgh, the seller pays them 5s. of commission, for discounting the buyer's bill for ',^100, 5s., payable in Perth. I do not know exactly the various causes of this difference in the charge of negociating a bill through an Edinburgh Bank, and of a provincial Bank retiring the acceptance of a 54 customer, which he has made payable in Edin- burgh; but such a difference seems to exist, and I notice it as tending to account for the very small number of bills accepted payable in Edinhurs:h, by persons residing in other parts of Scotland, One reason for this difference may be, that, in the above supposed case, the Bank of Scotland, for instance, may be able to dis- count, at Edinburgh, a bill made payable in Perth, for 5s. per cent, commission, from its hav- ing a branch there, and paying, of course, no commission on its collection, whilst a person in Perth, who deals exclusively with the Perth JSanJcing Company, may be obliged to pay both their commission, and also that of their Edin- burgh agent, for retiring his acceptance, made payable in Edinburgh ; and, at same time, he may feel it inconvenient to lodge funds, in this manner, for the payment of the bill before it falls due, a disadvantage he avoids by making it payable in Perth. I have been so minute on this point, because the practice in Scotland, of purchasers uni- formly granting t heir acceptances, made pay- able at their own house s, to sellers residing in the same place, and even doing the same gene- rally with sellers residing in other places, is so 55 different from the frequent custom in England^, of debtors granting to their creditors, residing in the same provincial town, acceptances made payable in London, and the still more univer- sal custom there, of paying all distant creditors with such paper. So accustomed, indeed, are the Edinburgh Banks to discount bills payable, in a varipty of distant towns in Scotland, th at they do not hesitate to take bills payable even in Liverpool, Bristol, Hull, Birmingham, Man- chester, Newcastle, Shields, Sunderland, Ber- wick, Carlisle, &c., with greater readiness than many of the English Banks themselves, ah though their facilities of intercourse with the latter places are generally inferior. I have already remarked, that the Scottish provincial Banks, (the Caithness Bank is the only exception, and their circulation, though in excellent credit, is consequently local,) have agents in Edinburgh, for retiring such of their notes as may be presented there for payment ; and they pass current in consequence of this arrangement, and the high credit of the is^fafets, not only in all parts of Scotland, but are fre- quently preferred, in the north of England, to the notes of some of the Banks in that quarter ; but as some of the respectable Banks in New- m castle, &c. have also agents in Edinburgh, for exchanging their notes, it is proper to state, that they pass very currently, also, in all parts of Scotland. It may, at first sight, appear, that there is little difference betwixt the Lancashire plan of individual traders accepting all or most of their bills payable in London^ and the Scottish Banks retiring all notes presented to their Edinburgh agents — seeing that these mercantile acceptan- ces, in England, are directly put into circulation, by indorsation from hand to hand, and from place to place, and that the acceptors pay agents for retiring them in London^ when due, whilst the drawers of such bills, in Scotland, exchange them for notes which the Bankers pay agents in Edinburgh for retiring or exchanging, when pre- sented there. It should be remembered, how- ever, that if Banks in Glasgow, for instance, should discount one or two hundred thousand pounds of bills, weekly, not one or two thou- sand of the notes issued, for the proceeds, may be presented to their agents, in Edinburgh, for payment ; for, as before mentioned, the parties obtaining these discounts settle all their local payments by the notes of, or by cheques on the discounting Banks ; and the issue of notes, in 57 such cases, is so economised, that for the hea- vier class of payments, the debtor who dis- counts bills at a Bank, merely transfers, in ge- neral, the whole or part of the proceeds to his creditor's current account, with the same or some other Bank in that place, by means of cheques^ Thus, if Carrick & Co. of Glasgow, discount ^^50,000 to a mercantile house there, the latter may give cheques on Carrick & Co. for that sum, to persons who pay them into the Thistle Bank of Glasgow; and as Carrick & Co. may have also cheques on that Bank for an equal sum, the whole of these operations may be completed by means of mutual ex- changes amongst the Banks, with nearly as small a sum of notes, in proportion, as is used to effect the settlement of the immense money transactions at the Lombard Street clearing house in London*. The Glasgow Banks, of course, also bring forward, in addition to such cheques, each others notes at these exchanges ; and, for the difference betwixt their total claims, the debtor Bank grants its draft at sight, or a short date, on Edinburgh or London, as may be previously arranged. In like manner, the ^rawc/i- cs of Banks effect exchanges with the Banks or * Sec Note D. 58 Branches in the same place ; and, if the Bank of Scotland's agent at Dumfries had issued ^£5000 of notes which had found their way into the hands of the British Linen Company's agent at Inverness, the agent for the Bank of Scot- land, at Inverness, would settle for them in Ids exchange with the British Linen Company's agent there. Comparatively few notes, there- fore, are sent to Edinburgh, excepting those the holders cannot get easily exchanged them- selves, in the provincial towns, such as, Dun- dee Bank notes, perhaps, in the hands of the Bank at Ayr, or in similar cases, where the is- suers may have no direct intercourse together, and no branches in the same place ; but, as al- ready observed, the practice of remitting Bank drafts upon Edinburgh, or bank post Bills, in- stead of Bank notes, when payments are to be made at a distance, and the ease and cheapness of passing drafts on distant debtors, through the various Banks, greatly tend to curtail the circulation of notis beyond the original district where they are issued, and, consequently, to reduce the expense, banks in a provincial town, incur in transmitting the notes of other banks, which are unexchangeable thef-e, to be ex- changed in Edinburgh. Notwithstanding the 59 liability of the provincial banks to be called on for specie, or Bank of England notes, for any of their own presented at their head office, or the place of payment, most people prefer pay- ing the stamp and par of their drafts on Edin- burgh or London, for the amount, to the trans- mission of such specie, or Bank of England paper, at considerable risk and expense. And although the public has always the option of demanding payment at the agents in Edinburg/i, for the whole notes circulating in Scotland, a comparatively small portion of the provincial Bank notes appear there for payment, from these and other circumstances already alluded to. But if even the whole notes issued by the provincial Banks, in exchange for local bills, discounted by them, were formally domiciled and presented for payment in Edinburgh, still there would be a much smaller sum paid to Edinburgh agents for retiring provincial bank notes, than would be paid to agents there, by individuals, for retiring the bills so discounted; if, in imitation of the Lancashire system, these bills were domiciled in Edinburgh, instead of where the acceptors reside, and circulated amongst traders, instead of the Bank notes they are now exclianged for, when discounted 60 to the drawer. In other words, an agent iii Edinburgh might charge a provincial Bank only £50 for retiring ^100,000 of its notes, when charging mercantile correspondents £500, for retiring 1000 of their acceptances of iJlOO each. The Banks in the west of Scotland have, generally, agents also in Glasgow, on whom they grant drafts, and who retire their notes, &c. If all the English provincial Banks were to appoint agents in London, for exchanging their notes, it might be useful to the public, and per- haps convenient for some of those most remote from that city, to have similar agents in one or more of the principal towns they are less dis- tant from; and many people might consider the necessity of having, in addition to their re- sources elsewhere, funds or credit with such provincial agents, a good check on the issuers' operations, which would render them still more careful and prudent. If there were any real advantages or savings to be realized by the Scottish public circulating mercantile bills, instead of Bank notes, they are always at full liberty to do so. Bills on London are certainly, to a small extent, direct- ly bought and sold amongst merchants, with- out the intervention of Banks ; because a mer- 61 chant who happens to hold an undoubtedly safe acceptance, payable in London, might get 15 or 20 days premium on it, from a per- son who requires to remit the same sum, when he could obtain no premium by dis- counting it with a Bank, The holders, how- ever, of London paper are seldom inclined to put it into general circulation, being more un- fond, perhaps, than the English traders, of ex- posing their transactions to other dealers, or afraid of its coming back on them unpaid, with expenses augmented in proportion to the number of hands it may have passed through. They, therefore, generally prefer discounting London paper, with a Bank, to selling it on change ; and it is even customary for mer- chants who hold bills on London, and have occasion themselves to make remittances of London paper, to exchange it, under the in- fluence of such considerations, for their Bank- er's drafts on London, at a loss of 20 days interest and stamps on the amount — that is, the Bankers allow no premium on a bill on- London at sight, for which they give cash or notes, but charge 20 days interest and stamp on any drafts on London at sight, they grant in exchange for cash or notes j and the best proof 62 that this charge will barely cover the expenses of providing funds in London to meet such Bank drafts, is to be found in the circumstance already noticed of the Scottish public, al- most universally preferring to take Banker's drafts on London, at 20 days date, in ex- change for their notes, instead of demanding gold, silver, or Bank of England notes, for them as they are legally entitled to do. As they are also all exchangable in Edinburgh, the holder can convert them there into specie or Bank of England paper, as readily as if he presented them to the issuers themselves in the provincial towns. These provincial notes do not indeed ac- tually bear to be payable in Edinburgh ; but it would be considered nearly as discreditable to the issuers, if their Edinburgh agents refused to exchange them, as if they were protested for non-payment where they are expressly made payable, and no instances of such refusals at Edinburgh are therefore allowed to occur. This convertibility into cash, both at the direct place of payment, being the head office of the provincial Banks, and in Edinburgh, does not require any considerable reserves of either specie or Bank of England notes, to be kept 63 by the issuers themselves, or their agents in Edinburgh. If the notes are presented for payment to the issuers, they are all in such credit, that their drafts on Edinburgh or Lon- don are preferred to Bank of England notes, or specie, because, as before remarked, the ex- pense of transmitting small notes or coins to Edinburgh or London, generally exceeds the par upon these cities at the provincial towns. Again, if provincial notes are presented to the agents in Edinburgh, they will give the notes of the Edinburgh Banks in exchange, for which, of course, the holder will receive such description of payment from these Banks as he may prefer. It will be seen from the fore- going particulars, that it is not customary, and, of course, not considered necessary, nor ulti- mately profitable to circulate mercantile bills in place of Bank notes in Scotland ; and that a provincial merchant, selling goods to a person residing in the same town, seldom thinks of taking his acceptance, payable in Edinburgh or London, for the price. The custom of merchants in Liverpool, &c. circulating mercantile acceptances in place of Banker's notes, in lai^ge payments, may be thought, by some people, to be attended with a 64 saving of one half the stamps, which they and the Bankers would have to use, were they dis- counting such bills and circulating Bank notes for the proceeds ; but it should be recollected, that even if notes were issued for the whole proceeds, such notes are re-issuable, either during three years, or as long as they last, and that, at any rate, a very small proportion only of the proceeds would actually be drawn out in Bank notes, if cheques were given for local payments ; and the saving in question would therefore be principally in the stamps of post bills or drafts on London, obtained from the Banks to effect payments at a distance. It may, no doubt, be very right for a Manchester manufacturer, who has sold goods to a safe man in London, to pay for cotton in Liver- pool by a draft on this London debtor, and equally right for the cotton merchant in Liver- pool to re-endorse it away to his own creditors out of Liverpool — but if the different classes of traders in Liverpool interchange paper, made payable in London, to the extent of 10 mil- lions sterling annually, for goods bought and sold, or finally consumed in Liverpool and its vicinity, the extra charge thus unnecessarily incurred for London agency, &c. in retiring 6S this total of such bills, would, at onJy 5 shil- lings per cent., amount to eg25,000 annually. I do not say that all local transactions are set- tled by London paper, or that goods are con- sumed in and around Liverpool to such an ex- tent, but most articles pass through various hands or processes before reaching the con- sumer, or being exported ; and goods valued at 2 millions sterling, may have been repre- sented, during this progress, by three, four, or five times that sum, in bills made payable in London, which, with more apparent propriety and economy, might have been made payable in Liverpool itself. It is said that the Liver- pool Bankers will not retire such acceptances, in general, unless the funds arelodged with them twenty days before they fall due ; an inconve- nience certainly of no small moment, which could be avoided by accepting them payable in Liverpool. It does not appear that in Lan- cashire, there is any general or Jixed par with London among all merchants and manufac- turers, some appearing to take good bills on London at 2 months date as cash, others, when foreign drafts on them, made payable in Liverpool, are presented, adding 20 days to their currency, if they accept them payable in 66 London, but as the Bankers charge J per cent, commission on the London bills they sell, al- lowing the purchaser the interest until they fall due, 20 days may be considered as the par in that quarter. No premium appears to be al- lowed by Bankers there, on London bills of- fered to them for discount ; and, on the con- trary, they have been known to charge ^ per cent, commission, on giving small Bank of England notes for Bank of England post bills, or large notes. In addition to the commission charged on re-endorsing or selling London bills, they charge the stamps of any drafts by themselves on their London agents, and Id or 2d on every bill lodged with the m, tocover_ postages, & c. is placed half-yearly or annually to the debit of their customers accounts, the debtor side of which is always charged with \ per cent, commission. From all appearances, therefore, one is led to suspect, that most of the Lancashire Bankers would prefer the sys- tem of settling almost all mercantile transac- tions by bills on London, as one which yields them more direct or indirect commissions, than they may suppose could be compensated by their issuing notes and encouraging the more extended use of local acceptances. But if mis- 67 informed as to the details of Banking in that quarter, or ignorant of the peculiar advantages derived from the absence of local issues, I shall be happy to see them minutely explained by persons of greater local knowledge. Some people unacquainted with trade, appear to imagine that the settlement of bills drawn, payable in London, for imports into Lanca- shire, is facilitated by buyers and sellers, re- siding within the county, making bills, for their mutual transactions also, payable in London ; but if the exports of Lancashire to other coun- ties in Britain, and to foreign places, are drawn for, payable in London, the amount will be permanently equal to the drafts upon Lan- cashire, domiciled in the metropolis, for its f??z- ports from such counties and foreign places, and the exporters have only to transfer the drafts they draw, or remittances they receive, thus made payable in London, to the impor- ters, to effect the adjustment of all the external transactions of the county. There does not appear any inevitable necessity for even the foreign imports and exports of Liverpool, be- ing all settled in London paper, and if a direct exchange betwixt it and the principal com- mercial places abroad was established, the im- 68 porters at Liverpool might save the greater part of their present expense of correspond- ence with, and commissions to London agents and local Bankers, for retiring foreign drafts upon them for goods. Considering the vast foreign trade of Liver- pool, and that the drafts, upon it, for imports would, in many instances, be exposed for sale, in places abroad, having equal remittances to make to it for its exports, there are apparently no great obstacles to the establishment of a di- rect exchange with most of the foreign mer- cantile towns of note ; and in situations where the drafts upon Liverpool, exposed for sale, exceeded the demand for them, they should still sell nearly as readily as if drawn payable in London ; because the extended foreign con- nections of Liverpool would always present the holders of such drafts with opportunities of disposing of them to advantage, seeing they could serve as remittances from the places abroad, where they were less to those in which they were more' in demand.* At all events, * Direct foreign exchanges are enjoyed by the less commercial ports of Bordeaux, Bilboa, Oporto, Cadiz, Seville, Barcelona, Trieste, Rotterdam, Antwerp, &c., in addition to the exchanges with the Capitals of France, Portugal, Spain, Austria, and Holland. 69 there could be little difference abroad, in the value of drafts upon London and Liverpool, under an unrestricted system of provincial Banking in this country, as, in that case, there would probably be little or no premium, even amongst merchants^ on London paper in Liver- pool, or, what is the same thing, little or no discount upon Liverpool paper in London. It would be also a saving of Banking and agency commissions, if bills on Liverpool, &c. were cur- rently bought and sold in the Exchange, &c. at London^ in the same manner as bills on Lon- don are bought and sold in Liverpool, and other provincial towns; and that the imitation of this practice, in the sale of provincial paper also, on the exchanges of such of these towns as are of mercantile importance, would be an economical improvement in the settlement of our internal transactions, will be evident to all who take the trouble to examine the present mode of ad- justing them. No proper trader will disre-" gard any suggestions, which may have the slightest chance of removing or abating charges on his operations, especially those of such weight, permanency, and frequency, as Bank- ing or agency commissions on bills and money and when it is recollected, that 70 the Chancellor of the Exchequer has been lately insisting on a reduction in the Banking charges on government remittances, I may be excused for recommending an equally keen scrutiny, on the part of individuals, into simi- lar charges, affecting private pecuniary opera- tions of a much greater amount than those of government.* ^.^^ Th e^ immense circu lation, in England, of bills made payable in London, 'nihich far ex- c eeds the whole Banking issues of the countri/j is ■^ partly to be ascribed to capitalists and others ^ > preferring investments of this description, to ^ a^ lodging their funds with doubtful or insecure Z^^^;^ Banks, particularly as they may thereby realize ^ ^^;,^^higher rate of interest. The " rwws " or sudden 'Cf^^ demands, to which these Banks are exposed, ^ ' may have also tended to produce this circula- ^/ *^^ |- Jqjj Qf billsj in particular the s ettlement of lo- " cal transactions by acceptances domicile d^Jji London, from the superior facility with which theyjcan^ be converted, in cases of em ergency, into Bank of England notes., through the me- diu m of London agents or bill brokers, who would n ot discount them if payable v^provin- cial towns, * See Note E, 71 . The Bankers will, therefore, prefer discount- ing bills thus domiciled ; and another reason for so domiciling them is, that when merchants, &c. are forced to indorse away, or circulate, bills of exchange, from the occasional or general re- luctance or inability of Bankers to discount them, they find those made payable in London, not only commanding more general currency throughout the country, but also preferable to provincial Bank notes for effecting payments at a distance ; as from these notes being usually payable in provincial towns, they are not well received beyond their immediate vicinity, from the difficulty of getting them exchanged, even where the issuers are in extended credit. Some of the Banks have, no doubt, made their notes payable in London ; but these at- tempts to secure a more distant or extended circulation have been greatly counteracted by the restriction on the number of their partners also restricting their credit, I have just alluded to the practice of re-dis- counting bills through London agents or bill bro- kers. These agents may, at the same moment, be buying bills for Banks in Cornwall, and selling for Banks in Northumberland ; the sur- plus funds of such concerns being frequently 72 invested in this circuitous and expensive man- ner, instead of the local wants of each trading circle being more immediately and directly sup- plied by the discounts of its own Banks. The London bills so purchased, through agents, having generally respectable names on them, can be more easily re-converted, through these agents, into Bank of England notes, on sudden emergencies, than provincial paper, and there- fore, not one eighth, it is said, of the funds at the command of the Banks is directly invested in local discounts ; and, for the same reason, we find exchequer bills, and similar securities, raised to prices yielding a very poor return of interest. Many may argue in favour of this circuitous mode of investing surplus funds ; but although the whole sum lent remains the same, whether directly or circuitously em- ployed, I cannot help thinking, that, by these investments, and their funding speculations, restricted Banks, instead of promoting indivi- dual enterprise and industry within their own circles, so effectually as they might other- wise do, present additional encouragement to government loans, and consequent profusion of national expenditure. Before concluding these remarks on the purchases and sales of London IB paper by provincial traders and Bankers, I may be allowed to observe, that whatever may be the advantages of the practice, it would cer- tainly be an improvement, were the Jlrst or second indorsers of such bills to refer, more generally, the subsequent indorsers, " in case of need," to persons in London, who would retire them, supra protest, for their honour or ac- count, when unpaid by the drawee or acceptor, A person, for instance, in Bristol, in good cir- cumstances, may indorse away a bill on Lon- don, for ^100, without such a reference, " in case of need," trusting that the previous names on it will attend to the due payment. The bill may afterwards pass through the hands of twenty indorsers, the last of whom may have received it from some correspondent in Ger- many, to whom, in ignorance of the preceding parties, or for other reasons, he may send it back, in the event of non-acceptance or non- payment, with charges of protest, commission, exchange, re-exchange, postages, &c. ; from Germany it may be returned to France, or even America, incurring fresh charges in its progress, until the first intimation of its disho- nour to the Bristol indorser, some weeks after it is due, is accompanied with a demand for 74 £20 or £30 perhaps, of expenses, on this small bill, while his chance of recovering even the principal from the original makers, may have been considerably diminished in the in- terval. When bills of this kind, as is gener- ally the case, are even confined, in their circulation, to England, still the expenses of their return under protest, through mani/ in- dorsers, are always considerable, and, as each of them may be unexpectedly called on for payment in succession, fifteen or twenty per- sons may be thus put to trouble and incon- venience, whereas, if it had born a reference by the drawer or first indorser, to a London agent in case of need, the first one or two names upon it could only be subjected to the unpleasant consequences of its dishonour, which would also be intimated to them much earlier, and attended with less expense, than if returned through fifteen or twenty indorsers. It may not indeed be convenient for the first indorser to have funds or credit thus provided with London agents, in case of his indorsations being dishonoured, and with such persons, it would be better, were they to exchange any London paper, of a doubtful description, for their Banker*s drafts on London, leaving the 75 latter, either to re-sell this paper, with a refer- ence to London Bankers, in case of need, or to retain it until due. The London Bankers, at whose offices such bills are payable, being particularly careful to pay none in which they can discover any irre- gularities in the original form or subsequent indorsations, the safest acceptances may be re- turned unpaid for very slight causes ; and the multiplied law processes, respecting their ne- gotiation, are also disadvantages attending the circulation of mercantile bills, by persons not thoroughly versant in such matters ; to which may be added, the risks of forgeries, which are more likely to escape detection longer than if the forger was presenting them to a Banker, whose knowledge of signatures must be more extended and accurate, and other means of de- tection superior to those of the trading classes, through whose hands they may pass. The flasJi bills, so commonly found circulating in England, are evidence, that if any respectable person can be persuaded to receive them, through ignorance or oversight, the subsequent indorsers, who may perceive their actual nature and the intention of the original makers, have no scruple in prolonging the circulation of such 76 paper, if there is only some good name pre- viously upon it. Such flash bills being, how- ever, a sort of fraud on the ignorant or unwary, their original circulators ought certainly to be punished. The following specimens of their usual forms will shew, that in general, they are neither drafts, acceptances, nor promissory notes, and, therefore, not legally negotiable documents : (First Form.) . ^100. Birmingham, 10th Dec. 18ia Two months after date pay to the order of A. B. one hundred pounds, value re- ceived, as advised. (Signed) C. D. At Messrs Smith, Payne ^ Smiths, 7 Bankers, London. 3 The word At, before Smith & Co.'s address, being so indistinctly written, as either to escape notice altogether, or to be read by those not on their guard, as " To," that the document may pass, in either case, for a direct and bona Jide draft upon Smith & Co. 11 (Second Form.) ^100. Sheffield, 10th Dec. 1819. Two months after date I pay to the order of E. F. one hundred pounds, vahie re- ceived, which place to account, as advised. (Signed) G. H. Messrs Jones, Loyd ^' Co, 7 Bankers, London. \ The pronoun " I," before " pay,^' being so placed or written as to be readily overlooked, and the receiver induced to consider it, in con- sequence, as a regular and direct draft on Jones & Co. I have been insensibly led to extend these remarks on the circulating bills of England to their present length, and shall now notice a few more of the undesirable effects of the re- striction on provincial Banking partnerships. The discredit under which several of these Banks have laboured, has sometimes as effect- ually checked the circulation of their small notes, as the proposed prohibition of all pro- vincial issues under £5 could have done. Some of them are so sensible of the precarious credit they possess, and are so afraid of the " runs'' to which they may be liable, from the 78 more ignorant or timorous classes of the com- munity, that they do not attempt to issue any small notes whatever, contenting themselves with the benefits of circulating notes above £5, the holders of which may not be so suscepti- ble of sudden panic or distrust, and some of the zvealtkiest Bankers in England, from this. or other causes, actually issue no notes under £5, excepting those of the Bank of England. Still the lower orders are very unfond of Bank of England notes, from the numerous forger- ies committed upon them ; and unless, during the existence of a " rurC^ on their provincial Banks, generally prefer their paper, however doubtful they may suspect them to be, ulti- mately, in point of security. The prohibition of provincial issues under £5, would have greatly increased the forgeries on the Bank of England notes, which were to supersede them, and these forgeries are already sufficiently nu- merous, from the general currency of its paper, without giving it this immense additional exten- sion ; on the other hand, the circulation of each provincial Bank being confined, in a great mea- sure, to a comparatively small section ordivision of the country, any attempts to circulate forge- ries upon it, are almost immediately detected. 79 Besides, these Bankers are so sensibly alive to the injurious effects of a successful forgery on their notes, that they ferret out the forgers with the eagerness of men whose interests are deeply at stake ; and with so many local checks of this description, provincial forgeries are rarely attempted. When they do take place, the public is seldom allowed to lose much by them ; for the Banks find it more for their own interest, to receive, as genuine, two or three hundred pounds of forgeries, than to excite public alarm by refusing to do so, which might injure their circulation very materially, or even create such a reflux of their issues to be exchanged for coin, or the notes of other Banks not suspected to be so extensively forged upon, as might prove highly embarras- sing in the first instance, and most detrimen- tal to their interests ultimately. Every pound so paid for forgeries, communicates, if possible, additional energy to their exertions for detect- ing the criminals, and usually produces im- provements in the paper, water marks, engrav- ing, signatures, &c. of the notes of such Bank- ers, which render their imitation more difficult afterwards. From every inquiry, the loss sus- tained by the Banks, and the public, from 80 forgeries on Scots notes, betwixt 1815 and 1820, did not exceed ^500 in all, or ^6100 annually *. * There is apparently no good reason, why undoubtedly safe Banking Companies should not issue notes so low as 2s 6d in value j and if notes under £l tuere free from stamp duty, they could afford to render them so difficult of imitation, as to present no tempta- tion to any forger, to exercise the requisite skill and labour which could alone secure him a few half crowns at the risk of his life. Notes so low as 6d were formerly issued in Yorkshire ; and in America, Denmark, &c. a great circulation has existed of notes not exceeding a halfpenny or penny in amount. The power of obtaining payment by the public, on giving the issuers guarantys against the re-appearance of certain numbered or specified notes, in cases of fire, shipwreck, or other accidents, and the easier detec- tion of frauds, forgeries, &c. than where coins are used, would be felt equally beneficial in the circle now occupied by metallic cur- rency, as in that which at present maintains notes for larger sums in circulation. Under proper regulations, particularly as to the frequent renetuals of these small component parts of a paper currency, and the per- fect solvency of the issuers, many advantages might accrue from their more general adoption ; and notwithstanding the suppression of Bank notes under £\\n this country, the exaggerated accounts of their defects and consequences, and the misrepresentations re- garding American, and other foreign paper currencies, of such minute denominations, the public would find them more profit- able, and, in many instances, more convenient than our present silver coins. The Banking disasters in America were almost un- connected with the subdivisions of paper currency, and can be traced to defective regulations, and the liability of the issuers to pay in coin — a liability which augments any distress, arising from badness of seasons, or of markets, political events, &c. Dr Colquhoun's statements of the public losses, sustained by 81 So supine were the directors of the Bank of England on this point, that they not only dis- regarded all remonstrances respecting the execution of their notes until very lately, but also retained the forged notes presented to them, granting the holder merely what was termed an investigator's ticket, specifying the date, sum, and marks on the forgery ; so inef- fectual a method of enabling the holder to trace back through whose hands it had passed, that it looked rather like a bounty or protec- tion to forgers, and the forgery itself is there- fore nozv given back, marked at the Bank as forged, that the holder may avail himself of any peculiarities in the paper, engraving, sig- natures, endorsations, or marks thereon, to re- cover from preceding circulators, or detect the first issuer. But the interest which an indivi- dual feels in the case of a ^1 or £2 forgery, is seldom sufficiently powerful of itself, to lead to the detection of the makers ; and even when aided by the exertions of the Bank's law base coin, and the practices of clipping, sweating, or filing, what is genuine, shew that the loss in London alone, in 6 months, from these causes, has frequently exceeded the amount of all the forged notes under £1 throughout Britain, Jbr the last 15 years, which the parliamentary papers prove to have been less extensive than is generally imagined. 82 agents or officers, there must be fewer chancej^ of detection, than if the Bank's circulation was more local or smaller in amount, another rea- son why rival issuing Banks should be esta- blished in London. To return, however, after this long digression, to the state of English provincial Banking, it appears, that some persons liave taken out licences who were only sham Bankers ; in other words, per- sons who took all sums offered to them upon interest, used every artifice to displace the notes of more respectable issuers by their own, gave no discounts or banking accommodations to the public, and too often employed the funds, thus obtained, in ill-planned or worse conducted speculations, to the ultimate ruin of their defrauded creditors, amongst whom were frequently the workmen who had previously found temporary employment in their specula- tive manufacturing or mining undertakings. Others who may have had considerable capi- tals, originally, have got so entangled with trading concerns, as to render all their Bank- ing operations subservient thereto ; leaving their Bank creditors exposed to the fluctua- tions and insecurity, originating in the pecu- niary necessities or losses of their manufacturr 83 ing or mercantile connections or partnerships. Some Banks, again, of capital and respectabi- lity, have got into a practice of advancing very large sums to great mercantile or other esta- blishments, upon their single security^ from little or no other apparent inducement than the commission obtained on such advances and on the total of their current accounts, or mere- ly, perhaps, from an anxiety to compete w^ith rivals in trade, who were determined to push business at all hazards. It may be true that, on the average, such advances are repaid, but it is also true, that many English Banks have been obliged to pause when contingencies dis- abled their debtors from effecting re-payments at the expected periods ; and many others, both in the country and in London, have been ruined and rendered bankrupts by their over- confidence in one or two great houses, for whom they came under acceptances or advan- ces, j anking Companies, with numerous part- ^ ners, and manag:ers who dare not give way tp_ private Jeelings, are not so e asily dazzled by the temptatio ns, a dventurers o n a great sca le contrive tjQ_dirowJn_the way of more limited _ ^artnership4__aiid whilst they present every desirable facility to the enterprising and in- 84 dustrious of jilKlescriptions, the public jsjie^ ver subjected to the fears, disappointments, and losses, from their operations, which they have so often experienced by restricted part- nerships, thus hazarding their own fate and that of many of their connections, upon the stabi- lity of some overgrown trading firm. Instead of advancing on the single security of a customer, the Scots Banks, almost uni- 2^^Aersally, grant what are^termed cogA or c redit ^ ^v^ accounts, upon the bonds ^J^q principa l, and at le^istjo^o suretl^j and although Dr Adam Smith took some trouble in explaining their advantages, (see vol 2d, p. 37.) they still ap- pear to be little understood, or at least rarely adopted in England. Their effects have been likened, by some of our parliamentary orators, to those of Mr Law's proposed land banks ; but they appear to forget, that such credits merely give the option^ to the principal in the bond, of drawing out, upon interest, Bank notes, pay- able in Bank of England notes or specie, on. demand; and the books of the Scots Banks would prove, that a very great proportion of these credits is frequently unused, from the inability of the parties to employ the money projitably ; and large sums, on the contrary, at 85 the credit of their accounts, on an interest of 3 or 4 per cent. Whether the extent drawn out upon these credits varies with the apparent changes in the market rate of interest, I have no means of ascertaining, but it might natur- ally be supposed, that when the market rate of interest is under 5 per cent, there would be least drawn out on credit accounts, on which 5 per cent, interest is always charged by the Banks. The Bankers exercise due deliberation before granting a credit of this kind, and as it is gene- rally found to exist for a considerable number of years, it is onl}^ given upon such security as is likely to continue permanently gpod for the amount. The sureties to the bond will also weigh, of course, with similar deliberation, the probable steadiness or success of the principal ; and as they will be continually superintending his after-progress, that they may withdraw their guaranty, if he is mismanaging or im- prudent, cash credits may be productive of use- ful checks to rash or improvident conduct amongst the numerous classes of enterprising tradesmen, merchants, &c. to whom they may be granted. The Bank account of the princi- pal is always open to the inspection of the sure- ties ; and as they are also, to a certain extent, F S6 liable, when the credit is not fully used or drawn out by him, for bills with his name in the hands of that Bank, his current discounts and acceptances with it are also open to their inspection ; and as parties holding credit ac- counts, in general, confine their business chief- ly to one Bank, a great portion of their opera- tions is thus, at all times, exposed to the ob- servation of respectable persons interested in their welfare. In explanation of the liability alluded to, for the bills of the principal in the bond, I may observe, that if the credit was for ^1000, and the principal had become bank- rupt, and was only owing the Bank^ 300 upon it, the sureties would be bound, by the wording of the bond, to pay any losses the Bank might sustain by the bills of the principal, to the extent of ^700, being the balance undrawn on the cre- dit account. Amongst the numerous advanta- ges attending credit accounts, they enable many to enter upon useful undertakings, requiring outlay of capital for a considerable period, who might otherwise have been unable or afraid to do so. If a young man gets his sureties to sign a bill at 3 or 4 months date, instead of signing a bond for a credit account, he must be depend- ant on the caprice or convenience of the Banks 87 for its renewal for such periods as might be de- j sirable in any protracted operations he may I have embarked in, upon the faith of this credit by bills ; whereas, in the case of bonds, the j Banks almost never call them up, so long as \ the principal continues to keep an operative ac- count, or the sureties and himself remain good for the amount. At all events, it is provided for in the bond, that such warning shall be | given, before it is put in force, as may enable ' the parties to get a similar accommodation at *, some other Bank in the interval, or to dispose i of their property without the disadvantages of 1 more sudden or pressing demands for re-pay* 1 ment*. The weakness or discredit of many Banks in England, under the limitation as to | partners, may partly account for the want of \ cash credits there, as such Banks could not, with propriety, venture to grant permanent \ credits to any extent, on the faith of their cir- culation, or deposited money, remaining per- manently unaffected by " runs''' upon them by j the public ; and they would consequently prefer ' * Cash credits, since the Act of 33. Geo. III. c. 74-. have been &^^/^ frequently granted by the Scots Banks, on the security of ^^"^s, ^^^^ ^ houses, or other heritable property, and this practice might cer-^^^ ^/L^c tainly be extended with much benefit to the community. 88 keeping all their investments in the more tan-* gible shape of bills or government securities. Credit accounts are in some degree a check to, or substitute, for accommodation hills ; and al- though the latter are, no doubt, in pretty ex- tensive use amongst the agricultural classes, and a few of the manufacturers, &c. in some parts of Scotland, they appear to be still more general in England, partly, to appearance, from the want of credit accounts, and partly also from a mode, said to be very generally adopted by the English Banks, of advancing only a half or two thirds of the bills lodged with them, or of discounting bills on condition, that a cer- tain proportion of the proceeds is allowed to remain at the credit of the indorser's cur- rent account, either at a loxi)er rate of interest than is charged on the bills so discounted, or liable to a charge of commission when the ac- count comes to be settled. In this manner, the English Banks may have always large balances at the credit of their mer- cantile customers, — another reason why they should be perfectly safe themselves, at least as secure as the abolition of the restriction can make them ; but, as it may be asked how the retention of such balances, which is also 89 i common with some of the Scots Banks, en- | courages accommodation bills, I may remark, i that few traders can afford to have a half or | a third of their bona fide bills locked up ! in this way, and, consequently, many are tempted to get the command of their real j funds, by throwing into the Banks accommo- j dation paper, to the extent of the sums so re- tained, on bills lodged. I am no enemy to ac- < commodation bills betwixt parties, beyond the reach of common contingencies in trade, and consider it altogether impossible, that their multiplication could raise the price of all arti- ' cles by depreciating the currency, in the ab- j sence of metallic standards ; and, as to the at- tempted distinction betwixt bona fide and ac- commodation paper, which is said to guide the^_ _^^ discounts of the Bank of England and others,^ ^ I shall elsewhere endeavour to shew, that they ,,^/i.^t^ will best benefit society and themselves by dis- counting evert/ good bill offered to them, and, paradoxical as it may sound, that it would be better, perhaps, for society, if there v/eve fewer of what are termed " bona fide'' and ?nore ac- ' commodation bills presented to Banks for dis- count, provided that the makers of the latter were unquestionably safe for the amount. 90 But accommodation bills have been, and still are, generally manufactured by parties equally adventurous or speculative, and expose the drawer of one bill, who accepts another to the acceptor of the first, to be called on for pay- ment of both bills ; when the latter fails, or if they bothfaili their estates, in Scotland at least, are ranked on for both bills, greatly to the reduc- tion df their dividends, and to the amusement or employment of lawyers and accountants in tracing the variety of curious questions, and intricate accounts, originating in such rankings. The extent of these, and other ultimate risks, is not always duly appreciated by the makers amidst the complexity of accommodation bill transactions ; and even when all the parties are undoubtedly safe, it is a much more expensive and troublesome method of raising frequent or permanent supplies of capital, than by obtain- ing a credit account, as the Banking regulations require the renewal of such bills every two or three months. In noticing the retention of half or third of the amount of bills lodged or discounted by many Bankers in England, I might also have added, that many of them, instead of discounting every lawful day, do so comparatively seldom, there- 91 by exposing their customers to much inconve- nience, and to a charge of extra interest, by obliging them to discount a considerable time before they actually require the proceeds. The obstacles to commercial intercourse, and the numerous other inconveniencies attending the limitation of the credit of many English Banks to their own local circle, and the difficul- ty of passing their notes beyond it, whether in good or bad credit, are well known ; and, as pre- viously remarked, several in good credit have made their notes exclusively payable in Lori^ don, with the view of commanding a more ex- tended circulation ; but it is thought this plan has been adopted by some others, rather to evade the immediate effects of sudden " runs^'' upon themselves, as by the time any great number of their notes could be presented at their London agent's for payment, in cases of panic or distrust, the issuers would have an op- portunity of making provision to retire them. Besides, if such London agents, from the want of previously provided funds, chose to allow any portion to remain unretired, the issuers might endeavour to misrepresent or conceal, in their own neighbourhood, the real cause of their agents' refusal, so as to prevent this dishonour 92 of their notes producing the same alarm as if they had been protested for non-payment, at their own places of residence or business in the country. But as this practice may be followed by spe- culative or doubtful houses, to the ultimate in- jury of the public, all such notes made payable in London, ought to be payable also where these issuers reside ; for even where they are safe, it may not be always convenient for the holder to present them for payment in London, and he may find other provincial Banks, from ri- valry or other motives, refusing to take or ex- change them, because they are not also payable in the country. The proper remedy, however, for some of the numerous grounds of complaint against the English provincial currency would be, in imitation of the Scots provincial Bank- ers' exchanges in Edinburgh, the appointment of agents in London, by each Bank, who would retire such of its notes as were presented to them ; those notes bearing, at same time, to be payable at no other place than the head office of the issuers. The optional clause in some of the present provincial notes, might be so in- terpreted, perhaps, as to enable the issuers, supposing them capable of such conduct, tO| m evade the payment, until forced by the result of an action at law, as they could refer the holder, who asked payment from themselves, to their London agents, and the latter could send him back to the country, only to receive a similar reference to such agents, and thus be kept out of his payment betwixt them. The frequent partnership betwixt English pro- vincial Bankers and their agents in London, have sometimes produced most disastrous results; and during the continuance of the present limi- tation, as to the number of partners, precautionary regulations for such connections might be very desirable. The accepted drafts of provincial Banks upon their London agents, at 30, 40, or 60 days date, have been found, in too many instances, no better than the mere promissory notes of the drawers, who very often gave no- thing else than these drafts for the local bills they discounted ; and from the necessities or ig- norance of their customers, contrived to keep a large amount of them at all times afloat. The cupidity with which some small or restricted Banking Companies are apt to push their circulation and credit, is well known, and renders the restrictive law very incompa- •> tible with the security of the public, even 94 when they confine themselves to Banking; but when we have seen them establishing firms in London, and elsewhere, for the ex- press purpose of drawing and re-drawing on each other, as Bankers, stock-jobbers, mer- chants, &c., and persevering in a ruinous and unprincipled course of speculations, with the money of their unsuspecting creditors, we can only wonder that the almost indescribably per- nicious consequences have not long since roused the active and reflecting population of this free country, to demand the natural and proper remedy for evils so intolerable, either by the establishment of enlarged public or cor- porate Banks, or by the subjection of the pres- ent to proper inspection. With all this insecurity too, we have seen the traders, &c. of London lodging immense sums with such Bankers, without receiving a penny of interest, whereas, with solid and ex- tended public copartneries, interest could be afforded on these floating or temporary balan- ces, the same as on more permanent deposits*. • The interest on current accounts at most of the Scots Banks, is the same as on the more permanent deposits under the head of interest receipts. It was formerly, however, very usual to allow 1 per cent, less on current accounts than on receipts, and also 95 The frequent insecurity of deposited money with English Banks, must have kept most de- positors in continual anxiety ; an evil, only in- ferior to the actual losses sustained by Bank- ing failures. An accountant indeed may say, that only 1 out of 50 men, on an average, can lose so much, perhaps, as ^100 in 3 or 4 years by such failures, and that the depositors in general are over timorous, but they cannot be expected to make such nice calculations ; and when the enormous debts and miserable divi- dends, of the numerous insolvent Banking Companies in England, since 1785, are remem- bered, the fears and apprehensions with which the public must have been tortured, in addition to their real losses, will be considered as too well grounded, and a fruitful source of general inquietude and unhappiness. These anxieties and suspicions, before the adoption o£ Savings Banks, must have tended to render the lower orders, in particular, careless and improvident still more usual to allow 1 per cent, less on such receipts, if the money was uplifted within six months, after being deposited, than when permitted to remain longer uncalled for ; but one or two of the most popul^ Banks have never adopted this distinction, which indeed appears to be rather a tax on the depositor's necessities, and somewhat tantalising to those who are obliged to present their re- ceipts, only two or three days before the six months elapse. 96 Those who did not hoard cohh had little temptation to submit to privations, for the purpose of becoming creditors of suspected Banking Companies; and, on the contrary, might more naturally be led to exchange, at once, the doubtful paper they received in wages, &c. for the usual articles of consumpt or enjoyment ; afraid, perhaps, that even before they could accomplish this object, the issuers might fail, and leave them in the distressing situation thousands of their fellow-labourers throughout England were yearly plunged into, from the same cause, and who, rather than run after commissioners, &c. for 12 or 18 months, for their 2s 6d, perhaps, of dividend, would generally be found selling their pound note for a shilling's worth of groceries, or spirits, to the wealthier or more speculative traders in their neighbourhood. On the other hand, the frugal and provident, but credulous labourer, has too often seen the savings of many year's unceasing toil, swept at once from his grasp, by the failure of the Bankers he had lodged his hard-won earnings with ; and often found himself jforcec?, after his honest, manly, and exhausting exertions had disabled him from retrieving this overwhelming calamity, to soli- 97 rit that charifyy he had once bestowed on others, with the sight, perhaps, of his starv- ing wife and children, to add to his anguish and despair. Will men, thus reduced to beg- gary, be more disposed, in consequence, to view the higher classes with affection or res- pect, when the profligacy, the extravagance, or the inexcusable speculations of Bankers, may have produced such wide spread misery ? or can those laws by which bankrupts were, or still are, enabled to transmit to their children, valuable and unattachahle estates, command the veneration of ruined creditors, or their fa- mishing families P It is little alleviation to these sufferings of the lower orders, to tell them, that they might have invested their savings of 10, 15, or ^20 in the purchase of government securities, bills of exchange, &c. — Such operations are out of their sphere; and, if they attempted them, they could only find inferior agents to take the trouble of conducting them. And how often the powers of attorney, or other autho- rities, to the agents of ignorant and poor men, would be abused, may be inferred from the numbers of rich and well-informed persons, who have been utterly ruined by the baseness 98 of agents, pretending to the very highest reS' pectabiliti/f and whose frequent and disgusting abuse of the confidence reposed in them, at last elicited the recent enactments, rendering it felony. The expenses too, of such invest- ments on small sums, would present still more serious obstacles than these risks of agents. But the lower classes are not the only sufferers by Banking failures ; thousands born to, and previously enjoying every comfort, luxury, and refinement, have, in a single hour, been reduced to poverty and want from this cause, the restriction under review having been preg^ nant, apparently, with excitements to decep- tion, fraud, and injustice of every descrip- tion, by its lowering the standard of Banking respectability, and thereby enabling many to attain, through artifice and disregard of ho- nourable principles, a temporary credit they were never deserving of. What a contrast to all this is exhibited in Scotland, where the most ignorant inhabitants of its remotest, or worst peopled districts, al- most universally prefer Bank notes to specie, and where the currency, which even at present is very partially metallic, would be almost en- tirely in paper, if government allowed the cir- 99 culation of notes under ^^l. In any calcula- tions of the individual or national loss which has attended the hoarding of specie in Eng- land, the compound interest on, or the re- productive powers of so much sunk capital, during the last 100 years, will be found to be immense ; and it might benefit those persons who despise all plans for the promotion of na- tional wealth, which do not strike them as magnificent or novel, if they patiently make up this progressive account of interest, even on the lowest sums of coin they may assume to be hoarded. Some people have advocated the propriety of the restriction, as to partners, on the ground that it promoted the formation of greater num- bers of Banks* — that the smaller each was, it would enter more keenly into rivalry with the others, and thereby present the public with every desirable accommodation, whilst their increased numbers afforded stronger checks against any of them over-trading, and, at same time, by so minute a division of the business, diminished the risk of loss to the public, when any of them chanced to fail. Without enter- * That effect is not to be found, at least in the non-existence of issuing Banks in Lancashire or in London. 100 ing into any formal or laboured examination of this theory, the fallacy of which has been exposed by undeniable facts, some of which are previously noticed, I may here remark, that instead of finding in several of the small towns in England, branches of some respect- able neighbouring Bank, we have seen two or tliree small Companies, keenly engaged in picking up each others notes, by various rep- rehensible methods, or endeavouring to excite a run on one of their number, which frequent- ly produced a run on them all; and although their operations might not actually terminate in bankruptcy, they could not ultimately be productive of material benefits to the public. In the larger towns again. Bankers require to be possessed of great individual wealth, to command full confidence amidst such extend- ed and important transactions ; and many of immense wealth are therefore to be found in such situations, but instead of holding out greater facilities to the public, than would be done by a Bank composed of a great number of individuals in more moderate circumstan- ces, the majority of these rich Bankers will ge- nerally do the reverse. In the receipt of princely incomes, they will, in most cases, feel 101 disinclined to take the trouble and risk of the smaller kinds of customers ; and although their junior partners or clerks may be most willing to do so, the independent fortune of the prin- cipals too often gives a tone of indifference or hauteur to the establishment, sufficiently re- pulsive to some of the humbler classes of tra- ders, &c. many of whom deserve every support and encouragement society can give them^ as part of its worthiest and most useful menibers. There are, no doubt, exceptions to all such general observations on the natural conse- quences of great individual wealth and influ- ence, but on the whole, I am perfectly convin- ced, from personal experience, that it is impossi- ble for the most liberal, intelligent, and wealthy of the restricted, and consequently more nume- rous English Banks, to do more for the public, with safety and profit to themselves, than is dpoe by the majority of the corporate and unchartered Banking Companies and Bank branches in Scotland. Those, of course, among the last mentioned Banks, who have the great- er portion of their partners engaged in active professions, are the most popular; and the old- est established, most liberal, wealthy, and ac- tive Companies, composed of only eight or ten 10^ partners, have been decidedly unable, in many respects, to compete successfully with some of the more recently established Companies, whose stock has been judiciously subdivided amongst several hundred partners, actively engaged in various pursuits, and residing in the different provincial towns. Each of these numerous partners may present a source of valuable in- formation to the executive or directory, and at same time, may open up to every industrious and deserving man, additional channels of in- troduction to, or communication with, these dispensers of the surplus or unemployed capital of society. In addition to the opportunities thus enjoyed, of procuring extensive and ac- curate information regarding the circumstan- ces and probable success of individuals, such Banks may safely accommodate, on the faith of his share in their stock, any person in the list of proprietors, whose circumstances, &c. they are less minutely acquainted with, these shares being preferably applicable to the payment of the Bank's claims, in terms of its articles of co- partnery. Without particularising the objec- tions to this liability of each partner's stock, for the Bank's claims on him, which could easily be answered on general grounds of ex- I lOS pediency, it gives many industrious people Banking facilities they could not have other- wise commanded ; and while it renders them more independent of Bankers than the same classes in England, few persons of a more speculative or doubtful class, will find their de- signs much promoted, in general, by perma- nent or even temporary investments in Bank stock, their circumstances will not warrant. It must be always kept in view, that if there are any real advantages attending limited Bank- ing partnerships, such Companies are not sup- pressed by a repeal of the present restriction ; and, on the contrary, would be left at full li- berty to employ their utmost activity, intelli- gence, wealth, or credit, in opposition to the more extended Banking associations here re- commended. But as a proof that the latter are neither defective in activity, nor that pliability which varies their operations, as circumstances dictate, I may observe, that, with every leg^l power to establish agencies, none of the Eng- lish or Irish Banks ever tried to do so in Scotland, whilst some of the Scottish Banking Companies, on a large scale, have pushed their business and circulation in Carlisle, Newcastle, Berwick, Appleby, Alnwick, &c. in the North lOi of England, and in Belfast, &c. in Ireland,— although the restriction prevented their doing so more directly, — ^without neglecting, at same time, any corner of their own country, likely to yield them any profitable business or circu- lation, as appears from the large sums trans- mitted at considerable expense and risk, to and from the Orkney and Shetland islands ; in which last, their operations appear to have sti- mulated the inhabitants to the rjBcent formation of the Shetland Bank, The operations of these larger Banks, too, in the funds have been conducted with a de- gree of discrimination, decision, and ability, very agreeably indicated to the partners by the large dividends and bonuses declared in consequence ; and although, in a few instan- ces, some of them have curtailed their discounts, rather improperly, from large funded invest- ments, their rivals were always on the alert to secure any customers, disposed to change their Bankers from this or other causes ; — and when wc consider the ease with which advances could be at all times obtained in London by respectable Scots Banks, either on their go- vernment stock, or on their own security alone, such occasional curtailments of dis- 105 counts by any of their number, must have been merely to save the expense of commissions , &c. attending the obtainment of these advances; and, on the whole, the public appear to have had very seldom any real or general complaints against the Banks, collectively, on this score. As formerly noticed, I am not unmindful, that the money disengaged by a transaction in the government funds, is always equal, of course, to the sum then locked up or invested, and that the sellers may give the purchasers back their own money in the shape of the above- mentioned advances on stock ; and in disap- proving, therefore, of the stock operations of some of the English Banks, I only meant that they might be more frequently conducted un- der the influence of sanguine notions, and the bold and dashing keenness of men, bent on realising rapid fortunes, than those of public Banks free from the same influences, and un- der the necessity of always attending to tlie wants and opinions of a considerable body of proprietors. Smaller concerns, subject only to the control of one or two partners, may be apt to disregard the local calls on them for ac- commodation ; and to plunge into funding speculations, to an extent unauthorised by 106 their means or credit, and the more limited these are, the greater difficulties will they af- terwards experience in procuring advances on such investments, to the extent they might wish. In the meantime^ the local wants of their neighbourhood, as to discounts, &c. must be supplied by the circuitous or expensive me- thods already hinted at ; and uncertainty, and fluctuation, must therefore accompany the ope- rations of such Banks, whether they prove ul- timately solvent or not. The superior activity, and keener rivalry, which are alleged by their advocates to be the characteristics of restricted Banking Compa- nies, are sometimes displayed in attempts to depress any manufacturing or mining establish- ment, for instance, which they may imagine likely to interfere with similar concerns they themselves are partners of, and to the support of which, however speculative or hazardous, some of them have so frequently sacrificed, rashly or remorselessly, the funds obtained in their Banking capacity. Bankers in this situation, instead of dis- pensing with steadiness and stjict impartiality, the public funds they have the command of, 107 and thereby encouraging a wholesome rivalship amongst the traders, &c. who do, and those who do not require Banking accommodation, are only anxious to prop or extend some mo- nopolising, mercantile, or manufacturing esta- blishment of their own. The consequence is, that when a run on the Bank takes place, (and this is more likely where they are so connect- ed) their great manufacturing or other con- cern is deprived of its former support, and becoming embarassed, heightens the pubHc alarm about the Bank, until one or both, per- haps, fail, leaving a wide scene of bankruptcy, distrust, misery, and idleness, to succeed, for a time, the temporary stimulus, trade, credit, and labour, had experienced from their previ- ous operations *. To add to the distress of the Bank creditors, in instances of its becoming bankrupt, in con- * The Board of Agriculture estimated, that in one English county alone, the local currency was reduced three millions in 1815 and 1816, by Banking failures; and, though this reduction appears greatly over-rated, and more likely to have been only three liundred thousand, Mr Horner, and others, declared in the House of Commons, " that the universality of misery, produced from this cause, was hardly exceeded by that which followed the Mississippi scheme in France." But, as before remarked, none of these gen tlemcn appear to have recommended any proper preventive against a recurrence of such disasters: 108 necHon or partnership with such trading con* cerns, government have often issued writs of extent for duties, &c. due by the manufactur- ing or trading company, against their shares or funds in the Bank, thereby greatly diminish- ing its composition or dividend *, and this re- sult has been still oftener experienced, per*- haps, where the partners were collectors of taxes, and had misapplied or not accounted for their collections. The whole demands and supplies of any district, down to the smallest articles of consumpt, are instantly and very permanently affected by any shock to credit^ ac- companying the temporary suspension of pay- ments, or the ultimate failure of its Bank or Banks. Other districts immediately feel the effects, and, as they may be more or less con- nected with it, re-act with more or less pres- sure on the previously suffering district, by the failures they also experience within themselves; and these re-actions are perpetuated in a circle daily becoming more extended and more dis- tressed, until matters reach a deplorable mini'' mum. It is easy to conceive, that under such a defective system, the failures of one or two considerable Banks may create runs on most of the others throughout the country, ending 109 in the bankruptcy of many of tlicm and their connections, and producing, from an originally slight or local cause, effects of the most disas- trously national importance. Any natural and general fall of prices, occasioned by favourable seasons, political events, &c. is greatly aug- mented, when it exposes Bankers to losses they cannot stand, or are even suspected to be una- ble to meet ; and that fall in agricultural and other products, which produced, in 1815 and beginning of 1816, so many failures amongst various classes, before many of the Banks began to give way, became still greater, as each agri- cultural, mercantile, or Banking failure, acce- lerated otJiei'S ; and the irremediable insolvency of thousands, at that period, who could have easily stood out against the mere natural fall of prices, under secure Banking arrangements, ought to have awakened government, and the nation at large, to the dangers of delaying their adoption*. It would be uncandid, in this place, to over- * It is fortunate for our Colonies^ that they have been per- mitted to form joint Stock Banking Companies, without limitation as to the number of partners, but rather surprising, that tlie others have been so backward in imitating the paper currencies of the Banks in Canada, the East Indies^ and New South Wales. ♦ 110 lookan objectionablefeature in the past manage- ment and control of some of the Scots Banking Companies' branches, and which assimilated them, in some degree, to the weakest or unstea- diest of the English Banks. They got men for a small salary, not exceeding, perhaps, two, three, or four hundred pounds, and varying little with the inequalities in the risk or extent of local transactions, to take the trouble of conducting agencies, and to guaranty all bills discounted thereat, and all advances to individuals, except- ing upon credit accounts granted at the risk of the Bank, besides becoming responsible in other respects, such as misconduct of clerks, &c. These agents were usually men of some address ; and, whether in good or bad cir- cumstances, were obliged to find approved sureties to the Bank, for their intromissions or agency operations, to the extent of 5 or ^10,000. Whether partly prompted by va- nity, or a design of rendering their Banking influence and opportunities subservient to the promotion of their own or their connexions' political or commercial aggrandizement, it is clear, the salary alone, could seldom have in- duced them to guaranty bills, &c. to the amount of hundreds of thousands sterling, annu- Ill * ally. Some lawyers and land-factors, who took all these risks for the sake of gaining business in their respective professions, got involved with their clients or the landed proprietors they acted for; others who became Bank agents to carry on trading or manufacturing concerns, they were directly or indirectly engaged in, had, gene- nerally, " too many irons in the fire." Some carried their political friends through thick and thin ; and almost all of them got into emba- rassments, were dismissed, or became bank- rupts, to the great loss of their sureties, and frequently of their employers, whose funds they were, unfortunately, too often led to mis- apply ^ amidst temptations gradually acquiring strength with the continuance of their first er- rors, or with every fresh deviation from the le- gitimate, prudent, and impartial exercise of their agency duties. It cannot escape obser- vation, that continual vacillations must have characterised the movements of such men 5 and that, whilst some of his nominal friends seduced the agent into delusive and extra- vagant speculations, or were themselves indu- ced to engage in them, from his misplaced li- berality, the more deserving customers of the Bank were, perhaps, neglected, and their wants » 112 laughed at, until the misrule and partiality of the agent attracted the notice of his employ- drs, and forced him to assume a temporary ap- pearance of better behaviour, — ^sometimes the prelude to exhibitions of capricious, selfish, do- mineering or revengeful feelings, still more dis- gusting and distressing to the majority of those around him. These results were, generally, more observable where the agents were limited to a certain weekly or monthly sum of discounts, in which case, those not immediately connected with them, had frequently little chance of ob- taining any reasonable share of accommodation. But, on the other hand, so many mixed motives unite to render an agent over liberal, that few men have really firmness to resist them, even when sinister or personal pecuniary gains are entirely out of the question ; and the prevailing fault of the Scots Bank agents, has, therefore, been an indiscriminate compliance xvith the ap- plications they x(oere assailed with. Under obli- gations to their sureties, the latter have not been always very delicate in urging their claim to a reciprocation of favours ; and the appa* rently sincere attentions paid them in public, and still more flatteringly in private, all tend to disarm persons, in this situation, of their natu- lis ral caution, and, for a time, to lull them into the belief, that every man they meet with is as safe, honest, and as much their friend as he ap- pears; and this impression, uniting with the pleasure of relieving so many wants, and doing so much apparent good toothers, has too often betrayed Bank agents, of upright and philan" throjncal principles, into irretrievable ruin. But the practice of Bank agents guarantying discounts, to the extent of millions annually, who were never, perhaps, worth 5, 10, or «gl5,000, is the most striking circumstance, certainly, in this system, and appears so incon- sistent with common calculation, and common sense, that it is not to be wondered at, if the Banks are now altering it ; and the only ground for surprise is, that they did not do so many years sooner. I believe it is now partially the custom to render the salaries of agents depend- ant on their success in avoiding bad debts, the proper risk of which the Bank, in such cases^ takes upon itself; whilst the agent has thus every inducement to render it as little as pos- sible, to secure a proportionate remuneration for his labour. In other instances, the agent guaranties such a portion only of the dis- counts, cStc. as may, on the average calculations 114 of bad debts, be fairly authorised by his rate of salary ; and in one or two instances, the agent is relieved from this risk, and being paid ac- cordingly, acts with the advice of local direc- tors. Either of these methods, but particularly the last, appears preferable to the plan of render- ing the agents alone responsible ; and might, if considered desirable, be combined with the ' principle heretofore followed in many cases, of remunerating the agent in proportion to the extent of certain items in his transactions, which may be supposed the best indicators of the value or profits of the agency to the Bank. By throwing the wJiole risk of discounts on its agents, a Bank has often felt less entitled to interfere with their proceedings, however de- sirous of correcting the abuses sometimes ori- ginating in the great individual influence, and the accompanying errors, self-will and contu- macy of these agents, many of whom they were afraid, indeed, to quarrel with, notwithstanding all their imperfections, from the difficulty of ob- taining more suitable persons, able and willing to take the same risks, and possessing equal local knowledge and ascendancy. With all these, and other disadvantages however, the Bank branches 115 have be6n decidedly beneficial to Scotland, and will certainly be still more so in future, under improved regulations. From whatever motives the agents took the risk of discounts, &c. on such disproportionate allowances of sa- laries or commission, it must be admitted, that some of them have displayed great firmness, judgment, and ability in avoiding loses, whilst they afforded every reasonable accommodation to the public. The very lowness of the agent's salary, and the prospect of deriving so?ne profit, at little or no risk to themselves, no doubt, in- duced the Banks to establish branches, in vari- ous instances, in situations originally too un- promising for a more expensive class of Bank- ing operations ; and two or three branches are frequently seen in places, or districts, unequal to the formation or employment of a local Bank, with sufficient capital, to insure gene- ral credit. From this competition of Bank branches, the poorer, or less important dis- tricts, are placed in the possession of all the Banking facilities enjoyed by the richer, or more populous portions of the country, whose surplus, or unemployed funds, are thus fre- quently and most beneficially transferred to IIG the points most in want of them * ; and even where the branch has more deposited money and circulation, than the amount of its own current discounts, or otlier advances to the public, the parent office, or some other branch, will always present sufficient opportunities of employing such overplus usefully. By the reciprocal interchange of information, the of- fice-bearers or directors at head quarters, have a very general and correct knowledge of the provincial traders, &c, through their own agents and partners, diffused over the face of the country ; and the latter, of course, acquire, at same time, a similar knowledge of person? carrying on business at a distance from their own positions — thus enlarging the circles of individual credit, and presenting many induce- ments to the cultivation of commercial intern- course, betwixt individuals and places the most remote from each other. A person whose bu- siness is principally in the provincial towns, and who is considered safe at the head office * The Commercial Banking Company of Scotland, amongst many other agencies, have branches at Thurso and Annan, 380 miles distant from each other, and have thus an opportunity of dis- posing, for instance, of the London paper purchased at the latter, to the customers of the former branch, or of forming similar com- binations, in other respects, in the course of their operations. 117 of some of the Edinburgh Banks, finds himself a welcome customer alongst their line of branches, and thereby derives a variety of ad- vantages in the prosecution of his own aiFairs — such as the friendly advice or hints of the directors or agents, in the selection of his mercantile connections, and the superior ease of communicating with, or transmitting money, bills, &c. from one to another of their offices, in addition to other accommodations already noticed, or sufficiently obvious. Local Banks, whose partners reside princi- pally in one place, and whose trade is chiefly amongst manufacturers of, or dealers in some staple article, are liable to be affected by the vicissitudes of that locality ; and unless posses- sed of unquestionable capital, and managed with skill, are apt to rise or fall corresponding- ly, in their own credit with the public ; and are, therefore, sometimes obliged, in conse- quence, to restrict their discounts and advances, at the very moment their customers stand most in need of them : on the other hand, branches of Banks, whose partners are scatter- ed over various districts, and whose business is not confined to one or two towns, or to one or two classes of persons, experience little or no H 118 iluctiiation of credit from the cause alluded to. Tlie changes which may depress one description of customers may render others prosperous ; and j the diminished application for discounts, or in- i creased deposits and circulation of the latter,, enable the Bank to give additional discounts to,, or counter-balance the diminished deposits and circulation of, the former. A well ar- ranged chain of branches, in short, is calculat- \ ed to strengthen each of the component links ; | an extension of business at any one of them, | whether in deposits or circulation, having a ten- \ dency to promote similar effects at all the others*; as every person knows, who has expe- | rienced how strikingly one class of a Bank's ' connections impress their own ideas of its ere- : dit,. or general respectability, on others at some distance, amidst the numerous ramifications of | commercial intercourse. Besides the disadvan- tages already alluded to, which either prevent the formation of local Banks, or expose some of them to occasional discredit, many people ; in small towns, and particularly where the ma- ^ jority are embarked in the same branch of trade, \ feel rather averse to submit their bills, and i * In the absence, of course, of such local fluctuations in trade as ^ these just alluded to. j 119 money transactions, to the decision or in- spection of rivals, who happen, at the mo- ment, to be also Bank directors, and would, therefore, prefer transacting with any Bank branch, conducted by a neutral person, where their operations would be scrutinized by fewer and less inquisitive eyes. Whether this jeaU ousy is, in most cases, well or ill founded, or whether it will probably wear off, as all par- ties become more enlightened and liberal, it will no doubt be kept in v'lezv, in the arrange- ment of new Banking Companies in England, if the speedy repeal of the present prohibitory law, should sanction the desirable union of a greater number of individuals in such partner- ships. It is probable, that branches will gra- dually spread from the Banks, in the more cen- tral or wealthy, to the smaller towns, as better adapted, on the whole, to their wants and cir- cumstances, than local Banks of their own; and such agencies, under the control of one or two active and prudent local directors, not deeply engaged in the staple business of the place, might present more advantages, and excite less of the jealousy alluded to, than independent local establishments. Many even of the present English Banking Companies, have numerous branches, and they would, therefore, no doubt, 120 become still more general under a system which would afford, to a vast number of indi- viduals, an opportunity of becoming partners in more extensive Banks ; and in which each of these individuals would find his own inte- rest as a stock-holder, more or less promoted by every transaction he or his friends might have with the head offices or branches of the institution. The agents for such Banks might enjoy the same facilities and security as are possessed by those in Scotland, whose transactions, with the partners of the concern, are rendered safer, by the liability of their stock for all claims, by the Bank or its agents ; and at same time, the practice almost universally followed by the Scots Banks, of granting their partners credit accounts, to be operated on, either at the head or agency offices, on the security of their shares, to the extent of one half or three-fourths of the sum paid up thereon, would present powerful inducements to persons in business becoming share-holders. In thus rendering its capital operative on excellent security, the Bank is enabled, not onl}*^ to offer to the public the guaranty of a much greater number, perhaps, of well known or respectable people in busi- ness than it otherwise could do, but makes 121 sure of correspondingly numerous friends and connections, — having also the power, when re- quired, of recalling these credits, — thougli, at same time, it may be remarked, that, as in the case of the Scots Banks, the high credit, and consequent deposits and circulation of esta- blishments so constituted, could hardly ever render this measure necessary. The arrangements under which the original formation and subsequent operations of such institutions might be conducted, will, of course, be susceptible of every variety of modifications, dictated by local considerations or circum- stances ; but those will best promote the inte- rests of the establishment, and of the public, which tend to secure activity, strict attention, and unremitting perseverance on the part of the directors and executive, with an extensive participation of profits by a numerous pro- prietary. A wide field for the exercise of- ingenuity is here presented ; and when we daily meet with the most incessant appli- cation of great intellectual powers, to im- provements of little or no moment to the mass of society, there can be no doubt, that when the attention of this " thinking people" is fairly directed to the important subjects 122 connected with Banking and pecuniary opera- tions, that rapid and essential improvements will be introduced therein ; especially, as every individual, from the throne to the cottage, is more or less interested in their effects or re- sult. The Scots Banks have various excellent regulations* ; but many may be of opinion, that it might be frequently desirable to vary from these, in future Banking concerns, — for in- stance, some might prefer, that the partners were individually limited to very small shares of stock, so as to give the utmost possible encour- agement to the union of numbers, and a mi^ nute subdivision of profits, under the idea, that whilst such Companies could venture on even more extensive and comprehensive plans of operation, than three or four persons posses- sing the same capital, this extension of part- ners would, of itself, most powerfully diminish the risk of those runs which have often become so distressing to, or subversive of respectable but restricted copartneries, solely from the want of a numerous body of proprietors, each * Printed copies of their articles of copartnery can easily be ob- tained, and might furnish a good ground-work for future incorpo- rated or similarly extensive Banks in England, keeping in view, of course, the differences betwixt English and Scots law. 12B of whom, by his influence or activity, could have contributed to check any panic in its very commencement. To this individual influence and exertion of their share-holders, may be ascribed the slight and temporary description of those runs, from which, even their subscrib- ed capitals, and the extensive properties of their aumerous partners, could not, altogether, protect the larger Banking Companies of Scot- land in less enlightened times. The prejudices which may, for some time, survive the abolition of Banking restraints in England, will therefore command a preference for arrangements founded on the above and si- milar considerations. For instance, if a com- pany was formed at Manchester or Birming- ham, with a capital equal to the largest of the Scots unchartered Banks, instead of allowing its stock to be exposed to the chance of being principally engrossed by a few capitalists, they might provide against any individual holding- more than otie share, classing these shares into divisions similar to the following : — 124 200 of ^200 dK40,000. 100 of 300 30,000. 100 of 400 40,000. 100 of 500 50,000. 100 of 800 80,000. 100 of 1000 100,000. 50 of 2000 100,000. 20 of 2500 50,000. 20 of 3000 60,000. 10 of 5000 50,000. 800 Shares, Total ^600,000. In the formation of such a copartnery, a vast variety of circumstances, both of a general and local nature, would, of course, require to be at- tended to, and the above is merely an oif-hand sketch of the classified divisions of stock, and by no means proposed for exact imitation. It may serve, however, to elucidate the follow- ing remarks : Supposing a fair opening for such a concern, the first question is, how and by whom is it to be consolidated ? Some may prefer, that the persons who are disposed to take ^5000 shares should have the power of naming those who are to hold shares of ^3000 ; that these two classes should appoint the third, 125 and as each additional division was incorpo- rated, that tlie whole should thus go on, ap- pointing the next in gradation, until the low- est was completed, and the subscription closed. Others might prefer the reverse method of procedure ; conceiving that it might present stronirer checks a^jjainst designino; and ambi- tious men, projecting a Bank from improper motives. Supposing the latter method to be followed, each of the 6 lowest divisions could delegate ten share-holders, the 1th eight, and the 8^/i, 9th, and \Oth, four each ; the whole forming a committee of eighty, for the purpose of electing twelve directors, either openly or by ballot — say three out of each of the four highest classes of share-holders ; that is, hold- ers of shares above ^1000 *. Four of these di- rectors might go out annually, and be disqua- lified for re-election during one or two years thereafter; they, and the committee, either acting under an official oath of fidelity, &c. or not, as might be deemed requisite. The committee of eighty could receive a * The six lowest classes would, of course, be particularly careful in the selection of the higher share-holders, exigible for the ollicc of director, and look more to their character and connections, than their nacre ability to purchase a share. 126 monthJy or quarterly report from the directors, on the Company's affairs, and might delegate ten of their number, being one from each class of share-holders, as a sub-committee, to vouch for the accuracy of this report, after full in- spection of the Company's books, papers, &c. If one half or three-fourths of the committee disapproved of any material part of the direc- tors' proceedings, various degrees of corrective authority might be entrusted to them. Forty of this committee might annually retire, and their places be supplied previous to the com- mittee filling up the annual vacancies in the directory. Whether all the members of the committee, without regard to the class of share-holders they represent, should have only single votes might, of course, deserve consideration. Full and ac- curate jmnted statements of the Company's af- fairs, specifying, free of any sort of disguise, the respective heads under which they were more minutely particularised inthebooks, duly vouch- ed by the directors and sub-committee, might be distributed at the half yearly or annual ge- neral meetings of the proprietors ; or the lat- ter might rest satisfied, perhaps, with a solemn declaration by four-fifths, at least, of the whole 127 coinmiltcc and directors, as lo llie actual pre- mium or discount at which shares ought then to be sold — the total profit or loss during the preceding year — and the corresponding addi- tion to, or deduction from, the sinking fund, if the profits were not always divided as they were realized. It might serve various good purposes to provide against the disposal of any class of shares, at a different rate of premium or discount from the other classes ; and to maintain the observance of this rule, by suffi- cient penalties, payable to the Company. To secure also the business and support of those who are the best customers of a Bank, and the .most active and persevering promoters of any undertakings they embark in, it might be consi- dered necessary to prohibit all persons from holding shares, who were not engaged in some profession in which they had opportunities of essentially forwarding the interests of the esta- blishment. To prevent collusions at the outset, or any subsequent diminutions in the nu7nbers of those- actually interested in the promotion of the Company's welfare, it might be proper to in- sert a declaration, in all deeds of adherence to the contract, signed by new partners, that they 128 did not purchase the share for behoof of any previous share-holder ; this rule, of course, to commence with the second signature adhibited to the contract itself, originally. With the same view, no purchases of shares, for behoof of the Company, might be permit- ted J and to guard against shares getting into the hands of disreputable or inefficient part- ners, no transfers passed without the sanction of nine directors. To protect buyers and sellers of shares from any sort of misconception or misrepresentation as to their value, a statement of the price last paid, and what the directors and committee conscientiously considered them worth at the^ moment, could be daily exhibited at the princi- pal office of the Company ; no person, as before noticed, being allowed to hold more than one share. It is only fair to remark, that with all their superiority of credit, &c. over some of the English Banking Companies, the unrestricted Banks of Scotland have not always steered clear of the close borough system j and either from the very unequal distribution of their stock, or from other causes, the directors ap- pear, in some instances, to have considered 129 self-election in the light of a valuable and high- ly proper privilege. It is true, the form of calling general meetings for such elections, was of necessity complied with ; but it is well known, those directors who went out in rota- tion had previously nominated or approved of their successors; appointments the general meetings appear to have wanted the spirit or ability to dispute the propriety of, and the consequence was, that the management of the concern, with the accompanying patronage or influence, fell into the hands of a dozen or fif- teen persons, eight or nine of whom, after all, were disqualified by age, ignorance of trade, tion-residence, habitual non-attendance, or by their interest in rival concerns, from dischar^xe- ing their directorial duties, with credit to themselves, or beneficially, for the institution and the public. Notwithstanding that the most beneficent or comprehensive plans, the more energetic and patriotic members of this ill-selected body entertained, for the simulta- neous promotion of national and institutional interests, were frequently thwarted or greatly curtailed by the various defects of their col- leagues, they still merited the warmest thanks of their countrymen and copartners ; and to 130 such men, almost every public spirited under- taking in Scotland, during the last century, has been deeply indebted for support and en- couragement. The defective conformation, or subsequent management of these Banks, ap- pears, however, on the M^hole, to have greatly accelerated the formation of those rival Com- panies vv^hich the augmented trade of the coun- try would eventually have called into exist- ence ; and they appear to have allov^^ed these younger and more popular establishments to obtain as great a share of business, in ten or fifteen years, as they now retain, with all the advantages of a hundred years pre-occupation of that field, in which, it is probable, their now awakened ox future efforts will never re-establish their former predominance. If, therefore, ill-re- gulated Companies, on a large scale, could be- come lethargic for a time, notwithstanding the competition of such active and respectable, but less extensive Banks, as were opposed to those just alluded to, we have here the most convinc- ing proof, that this lethargy will only hasten the commencement of equally enlarged partner- ships, betwixt whom, and the consequently re- animated establishments of longer duration, a most beneficial rivah-y will subsequently be waged. J] lit even tlic more recently formed extensive Banking Companies of Scotland, owing, perhaps, to the very unequal extent of stock, held by individuals, are not apparently conducted under regulations sufficiently popu- lar, nor even such as to secure the partners against the j^ossihility of the directors or office- bearers taking an undue advantage of their official information in the purchase or sale of shares. The respectability of the gentlemen who are, or have been, in these situations, should, no doubt, screen them from the slight- est breath of suspicion ; but no man can confi- dently affirm, that their successors, in all time coming, will be equally honourable and disin- terested. At present, little or no information is afforded, in some instances, to their fellow- partners, by the directors, respecting the pro- gress of the Company's affiiirs, nor any mate- rial change made from the practices of the older Banks already noticed, in the re-elections- of the directors for a long series of years, from a limited circle of 18 or 20 partners, three or four of whom replace in succession an equal number going out, so as always to maintan a dozen or more of this self-selected or elected l>ody in office. Now, allhough it may be said. 132 that the rule wliich obliges sellers of shares to offer them to the directors for behoof of the Company, and to obtain their refusal before they can sell them at a lower price to the pub- lic, affords a criterion of their real value ; still it appears desirable and practicable to obtain some corroborative criteria on this point. The seller, in ignorance of the real state of the Bank's concerns, may offer shares to the di- rectors at too low a price ; and, it is needless to allege, that he could guard against this, by taking some trouble to ascertain the last price obtained ; for, independent of intervening oc- currences, affecting their real value, the pre- ceding sellers, in all probability, would be equally ignorant of this value as himself; and it might be easy for directors, with this op- tional power of rejection, to create a depres- sion in the market price of shares, that they or their friends might purchase in, and, by sub- sequent acceptances of shares, for behoof of the Company/, at a higher rate, be enabled to re-sell with a profit. In communicating a rising tendency to the price of stock, in this view of re-sales, it is pos- sible they could raise the market price far above the real value, saddling the Company, 133 liuring this progressive rise, with large sums of stock at an artificial price ; and conclude, by leaving it, or some unfortunate dupe, in the lurch, with shares they themselves had been thus buying and re-selling in the names of their private friends or associates. But, suppos- ing the Company/ to be kept uninjured amidst such artificial depressions and exaltations of stock, many individuals, who bought and sold in ignorance of these sinister movements, might be most materially injured, even by those transfers which were not directly connected with the actual purchases and sales of the frau- dulent parties, but necessarily regulated by them as to ter7ns. It is in vain to urge, that the present directors of Banking Companies have been, are, and always will be absolutely incapable of harbouring the most distant idea of such unjust and selfish schemes ; for, with- out calling all this in question, we have the strongest examples in this and every other age or country, to warn us against placing even the most upright men in situations of great temp- tation. Many in higher stations, and with still more important trusts reposed in them, have in all periods swerved from the paths of honour and strict integrity, seduced by neces- I 134 sity, ambition, or contaminating associations ; and as the affairs of great Banking Companies, in past times, have been sometimes only mi- nutely or thoroughly known to, or correctly appreciated by one or two of their directors or managers ; so in future, it would be easy for two or three clever unprincipled men to pro- duce such favourable or unfavourable impres- sions of the value of stock, on the minds of their honester but less watchful colleagues in office, as might best suit their own views of jobbing therein. Many other and better methods than those previously suggested for the prevention of such malpractices in existing or future con- cerns of this kind, will readily occur to per- sons with greater leisure for reflection on these points; and that some precautions are desir- able against other descriptions, at least, of di rectorial jobbing, of a less flagrant nature, but more hurtful to the interests and harmony of the partners, is well known to every person ac- quainted with the direct or indirect losses sus- tained by some of the older Scots Banks, by improper accommodations to speculative or needy directors and their connections, in the absence of a vigorous and constant control, by 135 committees or otherwise, over all the branches of the executive, on the part of the proprie- tors. Even some of the wealthiest persons in Scotland were alleged to have rendered their official opportunities as Bank directors rather inexcusably subservient to their own private speculations, to the injury of the Bank, as ap- pears from Mr Allan's pamphlet or letter on the subject, some years ago.* It is not so much on account of wealth or influence, as upon a reputation for high and well-tried purity of principle, that directors should be chosen by the partners of a Com- pany, whose stock may be subdivided some- what similarly to the outline previously given : At same time, the less exposed such men may be to pecuniary necessities, so much the better, and no person should fill that situation who could not conveniently pay up his stock, or who was previously unable to get his own Banking business effected with facility. In short, the directors of such a Company ought to be men unquestionably possessed, at least, of considerable property, if not of great for- tunes, and totally unsuspected of improper or interested designs in accepting of office ; men of accurate business-habits, and, if possible, Set Note D. 130 tlioroughly conversant in tlie details of the va- rious branches of trade, manufactures, &c. in which their customers are engaged, with an ex- tensive knowledge of individuals, and their connections, circumstances, &c. Such men will be able to take comprehensive and just views of every thing which can generally or partially affect the establishment, or any of those connected with it ; and the more deeply they have studied the practical parts of politi- cal economy, — above all, human nature, and the diversified appearances it presents amidst the variety of objects and passions which interest or agitate it, — the more enabled will they find themselves to discharge their duties benefi- cially for their constituents and for society. Few situations, indeed, afford such scope for the exercise of all the higher virtues, or can yield a man of expanded, yet discriminating philanthropy, so much real pleasure as that of a leading conductor of enlarged Banking ope- rations, wherein the finest combinations of ar- rangements, and most refined calculations, for the benefit of the copartnery, are so imme- diately dependent on, or so eminently condu- cive to the general welfare of the community. The keenest merchants and Bank directors 137 who had risen, by incessant toil and privation, to consequence and independence, have often shown themselves most enthusiastic participa- tors in the promotion of every rational project for general or local ameliorations, devoting, with noble disinterestedness, to the service of the public, or of individuals, that time, influ- ence, and ability, their success in life proved they could appreciate the value of in their own affairs. There can never, therefore, in this country, be any difficulty of procuring persons fully qualified and willing to encounter the drud- gery of a persevering and rigid attention to Banking management, gratuitously, or at least with a comparatively indirect remuneration, in the possible effect, thereby produced, in the returns of their stock. The numerous sources of pleasure present- ed in such a situation, to persons of enlarged, exalted, or liberal views, will be obvious to every reflecting mind ; and men who combine energetic business-powers, with a leaning to enthusiasm, in their notions of the progress of mankind, will, of course, be the best calculated to undergo the labours and anxieties of their official stations. Such persons generally de- 138 rive intense gratification, either in correcting what is wrong, or in keeping matters, at least, from going wrong ; and, with these requisites for the promotion or preservation of the co- partnery interests, will generally be found combating all difficulties in promoting those of the community, and overlooking all the partial displays they meet with of human in- gratitude or worthlessness, under a lively sense of the better moral qualities they discover, or think they discover, in the majority of those around them, and a still stronger feeling, per- haps, of their own real or probable utility in aid- ing the march of human improvement. There will be always sufficient alloy in the " men-of- the-worW^ coadjutors, of such liberal-minded Bank directors, to quiet the fears of those who may weakly imagine that caution and calcula- tion are incompatible with obliging or generous dispositions; and the total inefficacy of the maxim, " that Bankers ought to suppress all their sympathies" in promoting even the self- ish views oVii^ follower^, is distinctly visible in the heartier or more general support given to, and the immense gains realized by those Banks who have despised such short-sighted policy. The best conducted Scots Banks obtain the 139 gratuitous services of their directors; and the few experiments made in others to secure bet- ter attendance or stricter attention, by holding out pecuniary rewards, have been rather unpro- Jitahle to the payers. In future establishments, however, of this kind, it might be desirable that the proprietors, the committee, or his fel- low-directors, should have the power of ap- pointing another director in room of any one who had been absent, while in good health and on the spot, from one-fourth or one-half of the directors' meetings during the preceding six months ; and many other regulations could be enforced to procure due attention and vigi- lance. This, however, will be best attained by a proper selection, in the first instance, of persons duly qualified for the situation by residence, leisure, or a lively interest in the concern. * * It is, perhaps, owing to a want of proper selection in the for- mation of some of the Scots Banks alluded to, that the directors have adopted the self-election system, if not in form, at least in substance; as it may be difficult for the partners to maintain a desirable rotation or change amongst the directors, out of the small number of proprietors fully qualified for the office. It may be said, indeed, that, by the present system, these di- rectors acquire greater Banking experience and tact, than if sel- domcr in the direction ; but, if three or four persons were annually elected to that trust, who had never undertaken it previously, they 140 It may be almost superfluous to observe, that the success of such establishments must materially depend on the assiduity, ability, and integrity of the office-bearers, such as manager, cashier, secretary, and accountant, according, of course, to the necessity for all or part of these official distinctions or divisions. These persons, being acquainted with the whole minutise of the Bank's affairs, should be uniformly applied to by the directors for every information connect- therewith ;* — for their opinions of customers, and of all important matters of business, where- in it may be presumed their general or official knowledge may be useful ; particularly, from the more continuous or unbroken nature of their in- tercourse with the customers, and of those trains of thought and calculation their constant su- perintendance of the Bank's affairs must neces- sarily give rise to. The parties filling such si- tuations in the executive should be possessed would be less likely to enter into any possible collusions or impro- per schemes of the others, who had been some time directors ; and, as the latter would still form the majority/, their experience could be usefully combined with the vigour of some, or the timidity of others, of their new colleagues. * In some of the Scots Banks the manager and secretary con- stantly attend the meetings of the directors — the manager voting as a director. 141 of almost every good quality, to be able to do full justice to their opportunities of benefiting their employers and the public ; and, in addi- tion to those already noticed, should unite un- tiring affability and readiness to oblige, and be able, by their address, activity, and good tem- per, not only to gain the esteem of the public and Bank proprietors, but also to act as pio- neers or harbingers to the directors, in all pro- jects or plans for extending the business, &c. — harmonizing their jarring opinions thereon, at the moment they may be skilfully and unos- tentatiously supplying any defects of temper or information displayed at the Board. It is mi- serable policy, when persons, uniting all these and other requisites for such situations, are daily to be found, to fill their places with mere, and perhaps much worse, book-keepers or note- counters ; and still worse policy, when able men are accidentally fallen upon, to stint them to a paltry salary, and either to exact dispro- portionate, and, consequently, less ardent ex- ertions on their part, or to allow their abilities, through personal jealousy or niggardliness, to remain in a great degree useless to themselves and others. It is unnatural to expect that men will perform these laborious and highly 142 important and confidential duties in the most satisfactory manner^ unless correspondingly re- warded, (as the remarks on some of the Scots Bank agencies may partly illustrate) ; and, whilst they were made sure of a tolerably libe- ral salary, their employers might find their own profit in exciting and maintaining their utmost exertions, by allowing them such a small per centage on the profits, or on certain items in the operations, as would not, with the salary, be any over-payment for their labours. Establishments resting on so broad a basis as those here recommended, with a numerous, well-selected proprietary, possessed of sufficient property and influence to protect the Bank from runs, and to secure for it a great share of bu- siness, should, under able and zealous manage- ment, become signal examples of what can be accomplished with proper arrangements, by men true to their own and each other's inte- rests. Such establishments are also entitled, upon other grounds, to the encouragement of every wellwisher of his country. If composed of partners actively engaged in some branch of employment, the profits of Banking, now realized by a few men, some of them with overgrown fortunes, will be diffused 143 amongst a great number of the most produc- tive and useful members of the community ; — and the exclusion of annuitants from the copart- nery is not only justifiable, from their inability to benefit the Bank so effectually as those in business, but might stimulate them to become active labourers also, either to regain the re- venue now yielded by their shares in Banks, or, if not losers in this respect, to preserve, at least, their relative consequence amidst the in- creasing wealth of the industrious classes. I may afterwards attempt to trace the va- rious good effects of a political, moral, and commercial nature, which entitle associations of this description to every possible sup- port ; and, in the meantime, beg to remark, if they should not meet with very universal patronage at first, owing to public prejudices, or the interested opposition of existing inter- ests, that they, in a great measure, combine all the requisites for eventual success within them- selves, and that opposition should only infuse fresh vigour, vigilance, and unanimity of pur- pose, into every member of the copartnery. Some of the older Banks of Scotland, with an illibcrality and short-sightedness disgraceful to business-meu of the nineteenth century, 144 used every arlifice and exertion to prevent the obtainment of a charter by the British Linen Company, and, in the same spirit, endeavoured to crush other rival estabhshments in their very commencement. Indignant at these pi- tiful displays of antiquated narrow-mindedness, the partners of the new Companies exhibited astonishing activity in the acquisition of depo- sits and the extension of their circulation ; and, having the good wishes and zealous co-opera- tion of every man possessing correct notions of individual rights, or the freedom of trade, they succeeded in almost displacing the notes of the older establishments alluded to, in that very circle where the latter had vainly hoped to prevent these new Companies obtaining the slightest credit or circulation by their own persevering rejection of their paper in every transaction — a persecution in which they had the influence to procure the assistance of most of the government offices in Scotland*. Not- withstanding that these Companies started • It is generally understood, that after this hostility terminated, the circulation of the persecuted parties experienced a material de- clension ; a result extremely probable from the relaxed exertions of their partners and friends, on the ultimate acceptance of their notes, by those who had thus previously discredited them. 145 amidst unprecedented commercial embarrass- ments, and were consequently burdened by the necessities of a great number of their part- ners who had either become shareholders from the sudden and impolitic refusal of dis- counts previously at the older Banks, or who were cut off from all such accommodations after they were known to be proprietors of the new concerns, still the latter not only relieved most of these individuals from their difficulties, but, by liberal and judicious aid to a great many others, and well-timed efforts to maintain cre- dit generally, they averted the otherwise una- voidable failures of many ultimately solvent and respectable persons, and speedily brought some of the older Banks to discount more freely, in the fear of losing all their mercantile connections. In the face of these and other obstacles, the stock of one of the most extensive of the new Companies shortly rose to ^^150, from the original cost of ^100, their dividend on the latter sum being £,S per annum, for some years after it commenced ; and at this advance their stock still continues, notwishstanding the fiiilurcs amongst speculators in land, farmers, manufacturers, and merchants, which have 146 been unfortunately so numerous in all parts of Scotland since 1813. The managers of such establishments may have been deterred by the spirit of rival hosti- lity, displayed at their commencement, from affording more particular explanations to their partners regarding the Company's affairs, in the dread of thereby presenting their antago- nists with materials for their misrepresentations; but they will, no doubt, relax from this secrecy, whenever they consider the injurious effects which could by any possibility attend franker disclosures, to be inferior to those which they must be aware are produced by their present reserve. The same reasons, however, for di- rectors withholding from their fellow-partners that information they are rationally and le- gally entitled to, cannot operate with equal force in the unrestricted Banks which may be formed in England, as the pre-existing Com- panies there could not present an equally for- midable opposition, either in the numbers, credit, or influence of the parties connected with them. If they even attempted to do their worst, the greater population, and the consequently more general diffusion of wealth, and more numerous instances of individuals in 147 easy circumstances, aided by the manly inde- pendence of thought and action which may be partly the cause or effect of their greater political liberty, would stimulate the English public to afford any new Banking Companies, of a more popular nature, a still higher degree of encouragement, if possible, than even the recent Companies experienced in Scotland. The prejudices alluded to, as tending to ope- rate, at first, against local issuing Banks, in some parts of England where none are yet esta- blished, could not, of course, repress the fa- vourable feelings with which the public, in other quarters, have been just supposed likely to hail the substitution of unfettered Banking Companies for some of the existing concerns. But even these prejudices inust speedily vanish before the influence and exertions of numerous respectable partners, in establishments so or- ganized as to command a great trade among their own proprietors, until their prudent and successful management could dispel the fears and doubts of the most timorous or sceptical per- sons not so immediately connected with them. No calculating man, indeed, could doubt the ultimate solvency of an institution with a capi- tal ol' 5, (3, or 8 luuuhod thousand pounds, 148 backed by the private fortunes of its partners, equal, at least, in all probability, to 5, 6 or 8 millions more; and he could hardly feel any great want of confidence in the guidance of the concern in the meantime, — if intrusted to men of well known ability and judgment, — particularly with the successful examples of the Bank of England, and Scots Banks, in his re^- collection. With the view of obviating the possibility of any permanent prejudices among the better-informed classes, the smallest share in the previous pro /orma division of the stock of such a company is 5^200,* — to secure part- ners of some property, even in its lowest com- ponent parts ; and it is to be presumed, per- sons of greater wealth would not be deterred from taking a £3000 or -£5000 share, merely because one for ^20,000 was unobtainable. Most people know, and others may be of the same opinion who have perused the preced- ing remarks, that the prosperity of a Bank is not, in general, dependent on a large paid up capital, but on the numbers and respectability of those interested in its welfare, from their * Smaller shares, however, would be found very useful in many cases, particularly if transfers were practicable with little expense and formality. 149 individual liability for its engagements. The poorest districts in Scotland generally yield the Banks or Bank branches more deposits and circulation than their amount of local dis- counts or other advances ; and they are there- fore enabled to conduct extensive operations, either upon a small portion of the subscribed capital being paid up, or after the repayment of a considerable part of it in the shape of cre- dit accounts on stock ; maintaining, at the same time, large investments in the government funds, exchequer bills, Bank of England, Royal Bank, Bank of Scotland stock, &c. Consider- ing, therefore, the vast sums which would be deposited with well-regulated unrestricted com- panies in England, there would be little neces- sity for calling up the whole sum subscribed, where they were on an extensive scale. Or, if considered prudent that the full subscription should, in the first instance, be realized, credit- accounts or repayments thereon could be ob- tained by the proprietors, when circumstances authorized. The districts in which prejudices are strongest against local paper currency, and which are, consequently, without any at pre- sent, will, no doubt, be found with Banks of the greatest capital and most numerous pro- K 150 prietaiy, whenever uncurtailed companies are tolerated in England, as they present fewer obstacles to the formation of powerful copart- nerships than those parts of the country which are already overstocked with small, or possess- ed of a tolerable number of respectable Bank- ing Companies. The field being so open, however, on the whole, for the establishment of Banks in Eng- land, on the broadest and most popular ba- sis, will, no doubt, be ultimately occupied by associations of the most solid and lasting description ; as three or four persons will not surely be permitted to derive an immense re- venue, as the middle-men betwixt the holders of minute portions of capital and the borrow- ers thereof, or to engross the whole benefits of supplying the traders or inhabitants of any dis- trict with a circulating medium, if the latter can perform all these functions more safely and productively for themselves and the public. The shares of such institutions might, in- deed, be most beneficially allotted, in part, to the lower classes of the population, in sums, perhaps, of 20, 30, or ^^50 ; and, being justly entitled to a participation of Banking profits as the principal contributors thereto, they will, in 151 all probability, form an important portion of fu- ture associations, when the successful progress of the first unrestricted Banks shall have obli- terated all existing misconceptions or preju- dices respecting paper currency. Independent- ly of many other good consequences which may result from the ultimately minuter subdi- vision of the shares, the middling or lower ranks of people will feel still more interested in the preservation of good order and industry in so- ciety, and will experience the strongest stimu- lus to accumulation, correctness of conduct, and the improvement of their mental powers, in the powerful ties attending an intercom- munity of Banking interests with the higher orders, and which would afford them an opportunity of distinguishing themselves in their intercourse with their fellow-partners. In- stead of following the barbarous and disorfja- nizing system of metallic currencies, or of pa- per currency convertible into coins or ingots, the day, perhaps, is not distant, when an un- mixed currency, in the paper of great public companies, will circulate in Britain, and the present theories of the bullionists be laughed at, even by themselves. However plausible the reasons may appear, 152 and which many persons will, no doubt, urge for a. greater or less degree of concealment, in regard to the affairs of future free and exten- sive copartneries, it will, most probably, be found the best policy to give them the utmost publicity. The Bank of France, and some other similar institutions, have never made a secret of their matters, and have had no cause to regret ttieir candour and openness. The numerous Shipping, Canal, and Fire and Life Insurance Companies of Britain, are, in general, equally explicit in their statements ; and why Banking associations should form an exception, is not so very generally apparent as some Bankers may imagine. If companies with large capitals, and numerous proprietors, should meet with any losses, the frank avowal of such disasters might rather promote than injure their interests. It would prevent those misstate- ments and exaggerations by their enemies, which usually accompany concealment; and as the public would, of course, be satisfied that the security of the concern was still unexcep- tionable, its credit would remain undiminished. The directors and partners might also feel, if possible, still stronger inducements to exertion, 153 in retrieving those or similar disasters, by tiiis exposure of them to public animadversion, than where the knowledge of such circum- stances was confined to managers, ashamed or unwilling to acknowledge them, and more likely to incur fresh losses by injudicious or over-anxious attempts to conceal or retrieve the first, if they were even free from that in- difference and self-complacency so apt to over- take men whose directorial errors or misfor- tunes are only known to themselves. On the other hand, a candid acknowledg- ment both of profits and losses would stimu- late the conductors to greater exertions, from that love of approbation or vanity which would be gratified in the public admiration of their dexterity in realizing the one or avoiding the other. The constituent members of Compa- nies whose stock was classified or subdivided in the manner previously recommended, could scarcely feel their sense of individual interest so strongly as to render them reluctant to ac- knowledge profits, in the dread of thereby aug- menting Banking rivalry ; and they njay be assured that successful or effectual conceal- ment, on this or other points, is very rare, even with private, and hardly practicable for 154 very long periods, with enlarged and public copartneries. The comprehensive nature of the copartnership will present the best secu- rity against any rivalry which may be embar- rassing or very injurious to it, or undesirable on other grounds ; and if the public was pro- perly accommodated by one Bank in a town, little encouragement would be given to the projectors of another. One Bank, fully ade- quate to every desirable purpose, would, of course, maintain a smaller reserve of specie, or Bank of England paper, and would be at less ex- pense in stamps, paper, &c, of notes — in salan ries — rents of offices, &c., than would be incur- red by two or more companies dividing the same business amongst them; and its circulation and other sources of profit being greater, rela- tively, to its capital, than if so divided with ri- vals, would enable it to do business on easier or more liberal terms. In short, the juster appreciation of their true interests is daily be- coming more general among all classes, and will prevent any unprofitable or unnecessary rivalry in these or similar establishments. The same cause and the rapid extension of educa- tion will gradually enlarge the numbers and objects of economical societies, whose success. 155 hitherto, among the lower orders, has been fre- quently thwarted or retarded, from their defi- ciency in arrangements, and inability to con- duct matters upon sound calculations or busi- ness-principles and methods. Many articles of home consumpt, in particular, might be ad- vantageously manufactured or retailed by these associations of consumers ; and, by the selec- tion of active, well-informed, and economical managers, might be as profitable, in propor- tion to each of their members, as the unli- mited Banking partnerships in Scotland, and fully as able to compete successfully with individuals in the same line. But, even in Scotland, Banking institutions are evidently defective in the unequal distribution of their shares, and, as the augmenting population and trade call future Banks into existence, they will, no doubt, be differently constituted in this and various other respects ; and the field for their successful operations would certainly be very extensive, should the present thinly- peopled districts ever become sufficiently po- pulous to afford encouragement for the esta- blishment of Banks or Bank branches there- in. The counties of Peebles, Linlithgow, Dumbarton, Kinross, Kincardine, Cromarty, 156 Sutherland, Nairn, and Orkney, being near- ly one-tJiird of Scotland, have no Banks or Bank branches. The shires of Inverness, Ross, and Caithness, with an area of 7922 square miles, forming very nearly another third, have, in all, only one local Bank, with 2 or 3 partners, and six Bank branches, 3 of which are in the town of Inverness. By far the greatest portions of the counties of Aber- deen, Perth, Argyll, Moray, and Banff, are 15 or 20 miles distant from the Banking stations they respectively possess ; and, with the excep- tion of a very limited kind of agency at In- veraray, there is not a Bank or Bank agent be- twixt Greenock and Thurso, a distance of, at least, 320 miles in a straight line, — ^the small agencies at Rothsay and Campbeltown being considerably in the opposite direction. A person, following all the curvatures of the coast betwixt Greenock and Thurso, would travel about 2000 to 2500 miles, from the number- less indentations of lochs and bays along its whole extent. In addition to this vast interval on the mainland, we may add all the Hebri<- dean islands, whose increasing importance, in a commercial view, is particularly visible in the Clyde shipping lists. The Scots Bankers are 157 well aware of the advanta<:jes which mif][ht w/- timately reward the first adventurers on these wide unoccupied fields for enterprise ; but, un- til a still stronger disposition is manifested, amongst the mercantile or manufacturing class- es, to avail themselves of the natural capabi- lities of these extensive districts, it is probable tliey will not hazard the expense and risk of agency establishment^ therein, which would certainly be considerable at present from the difficulty of finding proper agents, and of com- munication with the remoter parts of the mainland and islands during winter. Al- though^'therefore, some of these Bankers have for some years past been anxiously watching the gradual developement of the resources of these hyperborean regions with feelings of self-interest, not altogether unmixed, perhaps, with patriotic anticipations, they are likely to confine their assistance in the present less di- rect channels which convey to the inhabitants of the interior Highlands, and of the north west coast and Hebrides, the powerful stimu- lus of Banking credit and currency. These cliannels are to be found in the present Bank- ing positions near the border of the Highland boundary. Greenock, Glasgow, Campbeltown, 158 llothsay, and Inveraray, facilitate the opera- tions connected with the extensive fisheries to the north and west of Clyde, and also of the farmers and' graziers for an immense distance in these directions. As the fishing vessels are principally fitted out from Clyde, or places south of it, or from Ireland, and as these are also the markets for their cargoes, there* is less occasion for branches at such stations as Oban, Fort Wil- liam, Tobermory, Ullapool, Stornoway, or other seats of the customhouses where such vessels are cleared out to obtain their tonnage and barrel-bounty certificates. The same re- mark is partly applicable to the farming or grazing districts, as the farmers, and exporters of their cattle and sheep, are generally under the necessity of frequent visits to the fairs or towns in the South, where they have opportu- nities of making their pecuniary arrangements at the Banking positions already noticed, or at Falkirk, Stirling, Callender, Crieff*, Perth, Dunkeld, Cupar Angus, Kirriemuir, Forfar, Brechin, Aberdeen, Huntly, Keith, Banff*, Elgin, and Forres, being the other Bank sta- tions near to, or upon the Highland boundary. These stations certainly afford great accom- 159 modations to the Highland districts ; and if the existing spirit and energy, so visible amongst many of their inhabitants, are not checked by some unforeseen cause, this inter- esting portion of Scotland must inevitably continue in a progressive state of advance- ment ; and, however instrumental the late protracted war may have been, in introducing or augmenting this energetic tendency by the high prices it occasioned for Highland pro- duce, it is probable improvements will be more rapid and permanent during a profound peace of half the duration, now that the sti- mulus has been fairly communicated. Amongst many other grounds for this supposition, the reduction in the army and navy, and the con- tinual influx of retiring wealthy men of all professions, desirous of enjoying their retire- ment in their native districts, must rapidly ameliorate the condition of various parts of Scotland in every respect, and, by the expe- riments they may probably venture upon in the extension of mining, fishing, manufactur- ing, or agricultural operations, may induce Bankers to supply the existing deficiency of branches in the counties or places previously noticed, particularly as the rapid fall in the 160 rate of interest since the peace appears to in- dicate a difficulty of employing, in the richer and more densely-peopled counties, the funds they have at their disposal. The system of entails may present some obstacles to these anticipated results ; but still, such a tolerably minute subdivision of property may in general be obtainable as to encourage the experiments alluded to, especially as the various canal, sea, and land conveyances for travellers and goods are in a course of astonishing improvement and extension, and a thinly-scattered poorly- employed population of 200 or 300 thousand persons only waiting the opportunity of bet- tering their condition by those habits of in- dustry and economy for which they are distin- guished when employed in the South. The fisheries could be pushed to a much greater extent ; roads and canals could be multiplied, at comparatively small expense, across the nu- merous narrow necks of land which there divide the finest bays and lakes in Britain, facilitating the transmission of cattle, sheep, wool, fish, kelp, timber, copper, lead, iron, marble, gra- nite, freestone, slate, or the other natural pro- ducts of the country ; also of lime, marl, sea- weed, and all kinds of manure. And, if the 161 seams of coal on the Argyllshire or north- western coast, liitherto so little explored, were ultimately found too few or unproductive, such improvements would still further reduce the cost, in the interior, of coal brought coast- ways from Ayrshire and Clyde, which is al- ready very moderate, should the forests and mosses present any future deficiency of fuel. The woollen, cotton, thread, linen, soap, and glass manufactures might obtain that footing which the cheapness of labour, the numberless waterfalls for machinery, and the easy obtain- ment of the raw materials should authorise : the commercial intercourse with many parts of Scotland, England, and Ireland, might be greatly extended ; and, whilst a great portion of the coast and islands in question is admira- bly situated for the American trade, the fish- eries could maintain a still greater connection with the Baltic and Mediterranean countries of Europe, and with Hamburgh, Bremen, &c. enlarging, in return for this and other exports, the imports of cotton, hemp, flax, flax-seed, grain, ashes, timber, wines, brandies, tobacco, &c. Banking operations would speedily rouse the dormant or languishing activity of thou- sands in those parts of Scotland whose abili- 162 ties and labour are so imperfectly exercised at present in drawing forth the resources and energies of their country, merely from the greater limitation of individual credit and scarcity of the requisite circulating medium attending their distance from Banking sta- tions. A considerable part of the middle and southern divisions of Scotland is in a similar situation ; and the woollen manufactures, in particular, of the latter would certainly assume a degree of activity and importance, hitherto unknown, were Bankers and other capitalists to enable the manufacturers to introduce all those profitable combinations of machinery and divisions of labour which are so general in England. Wherever, in short, borrowers can be found able and willing to pay interest, the lenders must, of course, be promoting the general good of society, in thus consulting their own, even were annual interest, gene- rally reduced to one shilling per cent, and these apparently digressive minutiae have only been entered into from a desire to draw the attention of capitalists still more strongly, if possible, to those probable openings for the employment of their funds at the Jiighest rate of interest, and, consequently, with the 163 greatest benefit to themselves and the commu- nity. To return, however, to the more im- mediate subjects connected with Banking de- tails, it may be deserving of notice, after the remarks on the mode of settling imports and exports at Liverpool, &c. iii London, that the foreign trade of Scotland is subjected to a simi- lar charge of commissions, pars, postages, &c., by local and London Bankers, in effecting the settlement of its imports and exports ; and, for the same reasons, direct foreign exchanges with Glasgow and Edinburgh, at least, might be very desirable. The importers, in other parts of the country, could accept payable in either of these cities, and the exporters could purchase, of course, these drafts on the im- porters on the foreign exchanges. The Scots traders have only to come to an understanding among themselves, to secure a more direct mode of settlement. A person abroad, who might find no demand, by direct remitters to Scotland, for his drafts for exports to it, could still sell them at very little less than if drawn payable in London. When the ^rst of a fo- reign bill of exchange reaches this country, the holder in London or elsewhere incurs the trouble and expense of sending it to the draw- 164 er for acceptance, or of -employing an agent to get it accepted and returned to London, where it usually remains with some mercantile firm, until the second of exchange, which is gene- rally circulated or indorsed away by the draw- er, is presented to this firm, in consequence of their name appearing on the second, as the parties who will deliver to the holder thereof the previously accepted first of exchange, that he may thereafter obtain the cash in this coun- try, by the re-delivery, both of the accepted and unaccepted drafts, to the discounter or payer. The agents in London for the Scots Banks could easily negotiate any foreign drafts on Scotland which had not been purchased abroad by persons desirous of effecting direct remittances to Scotland ; or these drafts might be exposed for sale on the London Exchange, &c., where parties, who were debtors to others in Scotland, might purchase them at a dis- count, perhaps, of f or \ per cent., and secure this profit to themselves, by remitting them to their creditors in Scotland, who would prefer this mode of settlement to drawing on their debtors in London, as they could get no pre- mium on London paper, from Scots Bankers, 165 to indemnify them for the stamps of such drafts, or the postages getting them accepted ; and might also find it easier to get a foreign draft, with various indorsations, on an importer residing, and accepting it payable, in Scotland, discounted by these Bankers, than their own accepted or unaccepted drafts on their debtors in London. An obstacle to such economical arrangements may be found, in the dislike of exposing their transactions to each other, which has been previously alluded to as ac- counting for the few bills of exchange circulat- ing in Scotland, even when their circulation would be profitable to the parties, and unat- tended with any of the objections which have been urged against certain descriptions of mer- cantile bills so circulated in England. But, sup- posing this feeling to wear off, it might still be necessary to hold out stronger inducements to importers, for instance, in Dundee, Aberdeen, &c accepting foreign drafts, made payable, as proposed, in Edinburgh or Glasgow, instead of the present practice of domiciling them in London, by reducing the expenses of retiring such acceptances in Edinburgh or Glasgow ; for, although the latter can at present be cheaper retired than if payable in London, 166 still, in the example given (page 52) ol' a Perth merchant purchasing goods in Leith, they appear to be rather too high.* Should persons residing in London, debtors to others in Scotland, or Bankers there, who are agents for Scots Banks, neglect to avail themselves of the profit, which we have seen could be made by purchasing drafts made payable in Scotland, the Scots Banks, themselves, might find it their interest to do so, through their agents in London : for instance, any of them who had sold out of the funds, and could not sell a sufficientquantity of their own drafts on London, at the usual par or premium charged by Bank- ers, could in this way realize, in Scotland, the proceeds of such sales of stock or other funds they had in London, with the profit of, perhaps, I" or J per cent, on the amount, or of any other rate ofdiscomitat which Scots paper might sell in London. These Banks could thus compensate any diminution in their present commissions for retiring acceptances of their customers made payable in London ; or, if the holders of Scots paper could not get it easily negotiated in Lon- ♦ The numerous Branches of the Edinburgh Banks should ena- ble them to retire the acceptances of their provincial connexions, thus domiciled in Edinburgh, at a very moderate expense. 167 don, they might still send it to the Banks in Scotland best acquainted with the names there- on, who could order the proceeds, free of com- mission if payable in the same place, to be paid to the discounter's order, by their London agents, less 20 days interest, being the par against Scotland. The practice of importers, in fixing credits with London houses on whom the shippers abroad pass drafts in payment of shipments to Scotland, will, no doubt, still continue to cur- tail the extent of direct drafts on Scots traders by foreign merchants. This practice originates in the greater connexion of the latter with mercantile establishments in London, as part- ners or otherwise, and from the extended credit of such English houses, in other countries, ena- bling the holder of bills on them to circulate the same with consequently superior facility. It would not be difficult, however, for such importers, who could find no mercantile estab- lishment in Glasgow, Edinburgh, or other towns in Scotland, sufficiently known abroad, to fix credits with the Scots Banks, on whom direct drafts could be passed for their imports, instead of their present mode of fixing credits with the London agents of such Banks, or with 168 some well-known mercantile firm there. This plan is, indeed, partly beginning to be adopted j and I have recently seen various acceptances by Scots Bankers, payable at their own offices, for the importations of their customers. But this is only a revival of an old custom, before the " Continental system" threw the manage- ment of imports and exports, and the negotia- tion of foreign transactions, so much into the hands of a few London houses, who, from partnerships with foreigners or other causes, were then best enabled to carry on the system of simulated papers, &c. or the general evasion of hostile decrees. Sir Wm. Forbes and Company, long established and respectable Bankers in Edinburgh, and, I believe, several other Banks there, were even in the practice, formerly, of granting drafts upon Amsterdam, Philadelphia, SfC, a practice, which, it is pro- bable, they or others will again resume. The Dutch merchants, having always studied economy in their movements, are now not only in direct correspondence with every dealer in, or retailer of, their produce, in Scotland, (whether residing near to or distant from the coast) who is in credit for Ji20 or upwards, but actually transmit the drafts for imports, to 169 the nearest Banking office to the acceptor's re- sidence, for acceptance and payment ; and, as the Banks are generally desirous of selling London paper, they take all this trouble, and advance two-thirds or the whole amount of the drafts before they are due, free of commission^ by remitting to their Dutch correspondents bills on London, at 20, or at most 30 days' date. On the whole, it appears probable, that the present difference of 1 or 2 per cent, in the value of Scots and London paper, on the ex- changes abroad, might be reduced to |, J, or, at most, J per cent. ; and, were the Scots Banks at liberty to save, in part, the commis- sions paid to their present London agents, and to avoid various other disadvantages, by the establishment of unrestricted agencies for their own behoof in London, this result would be still more certain. At present, the Scots Banks make very small profits, in general, by the transactions which appear in their current accounts with London agents or Bankers, from the high commissions charged by the latter, or the non-allowance of interest on cash-balances. They could not be prevented, however, from coalescing in the 170 appointment of five or six active respectable men, who, for a moderate salary, or a small commission, might effect their purchases and sales of government stock, exchequer bills, &c. ; obtain payment of their bills payable in, and retire their own drafts upon London, and discount Scots paper, &c. for their behoof. * These agents, would, of course, give their con- stituents security proportioned to the important trust confided to them ; and, being respectively bound for each other, neglect or malversation could hardly occur in the discharge of it, parti- cularly if they were selected from among the con- fidential clerks or managers of English or Scots Banking Companies, and of proved integrity and ability. The high credit and unquestionable so- lidity of the Scots Banks who could be safely admitted to a participation in the benefits of such a coalition, would place the holders of their drafts on London beyond the possibility of risk therewith, and would secure the general circu- lation of such paper, whilst, at same time, no * Messrs Maberly and Company, who have opened offices in four or five of the principal towns in Scotland, charge the public only the London brokers' commission on the purchase and sale of stock : the Scots Banks have to pay both this and their London Bankers' commission on such operations. 171 unfavourable impression could be produced by any arts or insinuations some of the pri- vate Bankers in London might possibly resort to, in consequence of part of tlieir present business being then conducted by men less distinguished for their individual wealth than previous good character and the respectability of their employers. If the Scots Banks, who entered into this oi* any similar arrangement, were afraid of improper bias, for or against any of their constituents, being collectively or individually felt by the members of such an agency establishment, they might be solemnly bound to secrecy, conjointly and severally, res- pecting each Bank's operations in their com- munications with the others, and the latter could also bind themselves to do nothing di- rectly or indirectly tending to the infringe- ment of this obligation. The respective Banks could either arrange amongst themselves their proportional parts of the salary to such agents, or be left to set- tle this or the rate of commission directly with the agents, according to the differences in the extent or nature of their transactions. The mere saving in commissions, &c. would not be the only advantage of this plan. Tlic 172 agents, being strictly limited to the business of these Scots Banks, and consequently depend- ant on them, would feel the strongest interest in securing their approbation and continued patronage, by promptitude, caution, and fidel- ity, in every operation. As a great extent of transactions in which the customers of their constituents were concerned would necessa- rily come under the observation of these agents, they would be enabled to afford supe- rior information on such points, and would have, at least, equal opportunities with any of the present agency firms, of acquiring the most early and accurate intelligence in every other respect, and might be more sincere or zealous in giving their employers the benefits of their activity, research, or discrimination, than Banking houses with fewer incitements to do so, greatly absorbed with, or, perhaps, unduly biassed by their own operations, and possibly, in some instances, very defective in manage- ment or ultimate safety. Some of the Banks might be desirous of making up, in part, the defects of their local positions in remoteness from London, * by intrusting the agency-house * Not long since, a projected Edinburgh Company, with nume- rous shareholders, whose funds were to be employed, principally, 173 with a discretionary power to buy or sell go- vernment securities, &c. on their account ; and, if prohibited from all direct or indirect con- nexion with such transactions, whether col- lectively or separately, the agents could be more depended on, perhaps, either for advice or the uprightness of their dealings, than great Banking firms deeply engaged in fund- ing speculations themselves. Each Banking Company would, of course, have the option of granting such a discretionary power, or of re- gulating its description and pecuniary extent according to their wishes. A per centage on the profits realized in the exercise of this discretionary power, for the purchase and sale of stock, would ensure every attention to their constituents' interests ; and, at same time, a committee of respectable per- sons resident in London, either partners of, or in correspondence with, the Scots Banks, in speculations on government securities, &c., was almost on the eve of commencing in this line, and as stock-brokers or agents for others ; but further reflection on local disadvantages, and the in- fluence of the Banks, appear to have prevented the experiment being made. If Branches from the Stock offices of the Bank of England, or of government, were to be established in Dublin, Edinburgh, &c., where transfers could at once be effected of go- vernment securities, they would present many advantages to these parts of the empire. 174 could be appointed to superintend the opera- tions of the agents, under a similar obligation to secrecy ; and various other checks will readily occur to persons acquainted with busi- ness. It is very usual for merchants and others in Scotland to transact with two, three, or four different Banks. This may partly arise from their dislike, in so narrow a field, to expose all their money-operations to one set of Bank directors, who might either make an improper use of their official information — ^be disin- clined to give them all the accommodation they required — or likely to do so at one time, and at another to shake them off capri- ciously, after leading them into a more confi- dential intercourse with, and consequently ex- clusive dependence on themselves for dis- counts or advances. To do the Bankers justice, these fears are nowy at least, very seldom well founded ; and this practice of dealing with so many different Banks, appears to be more owing to the pre- viously-noticed enterprising and speculative turn of the Scots traders, &c. generally out- stripping their means, or the credit they could reasonably expect, if confining their business 175 to any one Bank of ordinary prudence and discrimination. The general success, how- ever, of the Scots Banks proves that, although occasionally deceived, no very general over- trading can take place from this practice, even amongst the most speculative classes, and, on the whole, it may present advantages as well" as disadvantages, when local peculiarities are duly weighed. At same time, it would cer- tainly save the Bankers a great deal of trouble and expense in the counting and cost of notes, if their customers were more generally to follow the London practice of domiciling all their acceptances at a Bank ; a plan which not only gives the latter greater insight in- to its customers' transactions, and saves the trouble of presentation at the acceptors' resi- dences, but also operates as a check to their entering into such speculative or extensive undertakings as would diminish their Bank- ing credit. As formerly observed, there is some approximation to the econom}'^ and dis- patch of the London system of money-settle- ments in the larger transactions of Glasgow, Edinburgh, &c. But a much greater amount of bills are presented to the acceptors, who draw the money from the Bank in the morn- 176 ing, in ignorance of the holders, and repay it to the same or some other Bank when the bill appears — adding to the tear and wear of notes, and of clerks' and porters' salaries for collectinty bills and efFectino; the mutual Bank- ing exchanges — to say nothing of the trouble and risk incurred by the acceptors themselves in these continual drawings and repayments of Bank notes, in preference to accepting bills payable at, or the greater use of cheques upon, Banking offices. The Scots Banks, from the prevalent cus- tom of transacting only a ^;ar^ of their cus- tomers' business, are more upon an equality in point of information respecting such indi- viduals than if they transacted solely with one Bank ; and the limitation of the mercantile circle, and inferior numbers of those engaged in it, enable the Banks in Scotland, by direct inquiries or through their partners, to main- tain tolerably correct ideas of the mercantile progress of their own, or the general credit of the customers of other Banks, without that interchange of information which is so general amongst the Bankers in London. From this want of mutual communication, however, they are apt to be occasionally un- 177 informed as to the methods frequently resort-* ed to by some of their customers, of drawing and re-drawing on London — the most con- cealed, but by far the most expensive way of conducting accommodation transactions in Scotland. The parties pass drafts through a particular Bank on their London connexions, and, before they fall due, pass similar drafts on the same drawees, through another Bank, whose notes they exchange at a third Bank, for bills on London, which are remitted to retire the drafts falling due ; maintaining, in this manner, with the two first Banks, the ap- pearance of regular exporters to London, or to persons abroad who have fixed credits in their favour with the drawees, and to the third Bank the appearance of regular import- ers remitting to London houses, either as their direct creditors for imports, or as agents for the shippers in foreign places. This prac- tice would, of course, be more visible at the proposed agency establishment in London, for 10 or 20, perhaps, of the Scots Banks, than at present where they employ possibly 10 or 20 different agents, as the accommodation drafts, the remittances to retire them, and the pro- longed renewals of these drafts, might all ap- 178 pear at the same momc7it on the desk of any agency-liouse, so generally employed by the Scots Banking Companies. The latter, there- fore, in asking their agent's opinion of the drawees in London, could be informed that an accommodation connexion was apparent, without such particulars being given as might form any exposure to one Bank of the other's operations. This proposed agency-house, if considered desirable or prudent, might be prohibited from coming under acceptance to any Bank, without holding ample funds, and full authority, if the same consisted of government-securities or bills^ to dispose of them when such accept- ances were due, if the cash-balance at the cre- dit of the drawers was insufficient to retire the latter, so as always to keep the agents free of advance ; or they might be authorised to ac- cept to a certain extent for each Bank, when necessary, in the understanding that it would remit, against the term of payment, bills at sight or securities instantly convertible into cash. They might, perhaps, be permitted to make cash-advances within specific limits, for each Bank, on securities lodged by it, provided the total cash-balances in their 179 hands enabled them to cmploj-, in this man- ner, the surphis funds of some of the Scots Banks in advances to the others ; — such a pro- portion of the cash-balance at the credit of each Bank bearing interest at 5 per cent, as the whole of its cash-balance might bear to the aggregate sum employed by the agents at that rate, and, in like manner, with the other rates yielded by their advances or investments : thus, if 10 Banks had a total of 2 millions at their credit in cash-account with the agents, one million of which was employed at 5 per cent, and another at 4 per cent, any one of them, with a£ 100,000 of cash-balance at its credit, would receive 5 per cent on ^50,000, and 4 per cent, on the other half of this bal- ance. When the total of creditor cash-bal- ances could not enable the af^ents to grant csish-adva7ices to the total extent previously fixed upon, they would, of course, divide the same in proportion to the previously specified allotment for each Bank ; in other words, if the aggregate balances in their hands were only one million, and three millions of cash advances applied for, they would only give such a sum to each applicant as, with what was previously owing, might form one-lhird of 180 its specified credit. In this case, the agents might convert such a proportion of the bills lodged by a particular Bank, into cash, as might make up for the inadequacy of the joint cash-balances in their hands to afford it the full amount of its previously defined ad- vances ; and if this Bank could safely employ money at 5 per cent,, while its agents were, perhaps, only paying 3 or 4 per cent, in thus obtaining cash for its indorsations of London paper, a new and additional source of profit would be thereby presented by the agency-es- tablishment. Some of these results might no doubt be equally obtainable by the Banks in ques- tion running mutual current accounts, wherein, as might be convenient for all parties, one Bank might be alternately debtor and creditor to the others, instead of allowing London Bankers of inferior stability, perhaps, to themselves, to reap the profits of intermediation betwixt them, by granting to some only 2 or 3 per cent, on the very sums they re-lend to others of their number, at 5 per cent, interest, with a charge of commission on the accounts of both classes, and with an expense of stamps, postages, &c. on the drafts on London agents they are all constantly giving and receiving for 181 their mutual balances of daily or weekly ex- changes in Scotland. Considerable advan- tages in this respect, in addition to vari- ous others attending the appointment of an agency-ho,use in London exclusively for them- selves, might still be derivable by the Scots Banks, whose rival jealousy might prevent so direct an intercourse with each other as that just alluded to ; and such arrangements would, of course, be equally advantageous to provin- cial Banks in England, similarly situated or disposed. The Scots Banks, who had for- merly a considerable circulation of notes made payable in London^ and who were forced, from the high par, and heavy charges of agency commission, to abandon this useful descrip- tion of currency,* would feel encouraged to resume it, with agencies in London of the de- * It was particularly calculated to extend their circulation in the northern counties of England, or in Ireland, and very convenient for persons travelling from Scotland to London, who are now pre- viously obliged to procure Bank of England notes or specie, under a considerable risk of forgeries. These notes, payable in London, being paid away by shipmasters, Sec, on their arrival there, to la- bourers, «S:c. on the wharfs, occasionally continued to circulate in London for some weeks ; and if the holders did not present them to the agents of the issuers for payment, they always found the persons connected with the Scots Shipping Companies preferring to carry them to Scotland instead of Bank of England notes or gold. M 182 scription here submitted to their considera- tion, particularly, as the par is now reduced from 40 to 20 days. The cause of this reduc- tion is explained in Note E ; and when an English house has actually opened so many offices in Scotland, almost solely dependant, apparently, on the business of drawing on Lon- don, at a few days less than the regular Banks, the voluntary or forced economy of traders, &c., which is thereby implied, should certain- ly excuse any suggestion here brought for- ward with the object of promoting much more important savings by individuals, and the ulti- mately national benefits which must flow from them ; especially when connected with the concomitant advantages of superior facilities and safety in pecuniary transactions. These remarks having extended to a greater length than was anticipated, leave only room for a few miscellaneous and concluding obser- vations. The difficulty experienced within these 4 or 5 years, of employing their funds in discount- ing bills, not exceeding 3, or at most 4 months currency, has induced many of the Scots Banks to discount bills having 5, 6, 8, and in some instances 12 months to run. A clamour 183 has been raised against this extension of the discountable date, as tending to encourage dangerous speculations, by the remoteness of the term of payment tempting many to em- bark in enterprises disproportioned to their capitals or capability of conducting with proper effect This evil, however, if real, will soon cure it- self, both from the mercantile and Banking losses attending itj and, on tlie whole, any fixed rule for discountable dates appears to be productive of more injurious consequences than the want of it. It may have been found convenient, indeed, for some Banks to have their funds more at command in short-dated bills ; and others may have discouraged the longer dated paper, from an idea that the oftener they turned over their capital or funds in discounting, the cir- culation of their own notes was correspond- ingly promoted. Various descriptions of mer- chants, manufacturers, &c. give or receive 6, 9, and 12 months' credit; and, if a Bank ob- tains the whole circulation which the disburse- ments of such customers can promote, the Bank loses in compound interest, and the cus- tomers in stamps, trouble, and time, if, instead 184 of discounting 07ie bill at IS months, four at S months are discounted, — three of them merely renewals. If such renexvals are not allowed, considerable capitalists can alone enter into the particular branches of trade alluded to ; and, if they cannot get bills at 9 months dis- counted, until the expiry of two-thirds of that currency, they will charge the acceptors more than 6 months' interest, at 5 per cent, as the difference of price betwixt 3 and 9 months' credit on goods, thereby raising the price also to the consumen In other words, a merchant or manufacturer will generally allow even the most undoubtedly safe buyers, from 7^ to 10 per cent, discount, if, instead of granting a bill at 12 months' date, they pay in cash, merely because they cannot get such long- dated paper so easily discounted, and value the use of their funds at more than 5 per cent, interest. But, if bills at 9 and 12 months' date were as readily discounted as those at 3 or 4 months, the difference of price, to 'perfectly safe f>urchasersy betwixt goods sold for 3 and for 12 months' credit, would be little more than 9 months' interest ; that is, the additional inter- est charged by the Banks in discounting the latter. It will be, perhaps, admitted by impar- 185 tial inquirers, that comparatively few bad debts are made in sales at 9 or 12 months' credit ; and, although it may be alleged that this is because the sellers must have considerable capitals to preserve, who can thus retain bills for 6 or 9 months, until their currency is re- duced to the discountable date of 3 months, and that the extension of the discounting date, by Banks, would throw such branches of trade partly into the hands of inferior capitalists, less fastidious in their credit — still, it should be remembered that the Banks would be far more guarded in discounting such long-dated paper than bills having only a third or fourth of their currency, and would seldom venture to dis- count the former on the credit of parties who were not really able to meet all the possible in- tervening fluctuations in the prices of the goods they represented, which might arise from peculiarities of seasons, revolutions in public opinion or taste, political events, scientific discoveries or improvements, changes in the regulations for international barter, or other probable causes. On the other hand it might be argued, that this very limitation of the dis- countable date to 3 or 4 months, is apt to lead both the drawers and discounters of such 1S6 bills to under-rate the risk attending them, and to encourage a pernicious set of speculators in trade, who either tempt the cupidity of sellers, by offering high prices for short credits, or re- main on the watch for the necessitous moments of a better class of dealers, occasionally obliged, from the shortness of credit they have obtained themselves from importers or foreign mer- chants, to resell their goods to any of these speculators whose bill, at a short date, is likely to pass at the Banks, instead of selling at such a long date as the regular traders in, or re- retailers of these goods will alone accept at when the market is over-stocked or dull, and no immediate prospect of their effecting re- sales to consumers, &c. This intermediate class of speculators or traders, who are thus applied to by other classes desirous of raising money on their short-dated acceptances, may contribute, by their own resales, to the increase of an inferior class of retail dealers unable to obtain credit from the more respectable whole- sale merchants, &c., from whom the better kind of retailers exclusively purchase. (See Note F.) Without, however, wishing to enter on so lengthened a discussion as this import- ant subject would demand, or pretending to 187 decide how far these arguments are well- founded, any fixed rule for the date beyond which Bankers should not discount, appears to be at least of very doubtful propriety ; and their deviations from it may be safely left to be re- gulated by the constantly operating principle of self-interest amongst all concerned. In the unlimited Banking partnerships which may be established in England, a division of the directorial duties will be found highly use- ful. One or two directors might more parti- cularly superintend and check the books, ac- counts, vouchers, cash-balances, &c. ; others, the correspondence, and matters immediately connected therewith ; a third party, the local discounts, credit-accounts, &c. ; a fourth, the business of the branches, &c. &c. Each direc- tor miffht go through these various divisions or departments of the business in rotation, so as al- ways to preserve, in each division, some person thoroughly acquainted with the whole affairs of the concern. After the committee for local discounts or advances had decided on applica- tions, they could also obtain the sanction of the whole directors, either at their meeting the same or next day, before communicating the result to the applicants. And, in like manner. 188 the other sub-committees could consult this daily general meeting of directors on the busi- ness of their respective departments. In this way, the decision of the directors for local dis- counts, for instance, would be modified by any information materially affecting the parties to the bills which the other directors had ac- quired officially or otherwise ; and, as it would only be on such occasions that the latter would interfere, each division would get more smoothly through with its duties, and with less discussion and confusion at the subsequent general meetings than have been often exhib- ited among the directors of extensive Banking Companies, in the absence of sub-commit- tees. Amidst an overwhelming and heteroge- neous mass of business, the want of some such previous classifications has frequently led to serious omissions or hasty decisions, and to the consequent loss of money, by taking bad, or of customers, by rejecting good bills. It may be proper to notice, although the Royal Bank of Scotland commenced its opera- tions by a run on the Bank of Scotland, which led to the use of optional notes, payable at sight, or 6 months after sight, with interest, and notwithstanding the more recent opposition of 189 the old Banks to the establishment of new ri- val companies, that I'lms upon each other have been, subsequently, unpractised or unattempt- ed amongst any of these Banks ; and, if cor- porate or enlarged concerns of this nature should be foolishly led into any temporary displays of such impolitic rivalry, the public may be assured a juster sense of interest will soon produce a lasting pacification. The exemption of the larger Scots Banks from runs by the public may have been partly owing to their issues of large sums of notes at their branch offices, where the distance of the holders from the head office, at which they were alone made payable, deterred them from taking the trouble of presentation for pay- ment ; and, as false rumours propagated in the country were so soon contradicted and allayed, it became gradually more difficult for design- ing or timorous characters to spread any gene- ral alarm or distrust. In pointing out, however, the advantage of branches in this respect to Banks of undoubted solidity or capital, the disadvantages to which the holders of doubtful or bad currency are ex- posed, who are distant from the place of pay- ment, should not be overlooked ; as the small- 190 ness of the dividends, by those Banks who have been ultimately bankrupts, after stopping pay- ment, has been sometimes owing, in a great measure, to their having previously exhausted or pledged their funds to meet the demands of creditors in their own vicinity. For ex- ample, if a Bank was owing ^100,000, with only £50,000 to pay it, and gave away ^40,000, in endeavours to stem a run by local creditors, it would only leave £10,000 to be divided among the more distant creditors, with claims for £60,000, who would thus only obtain 3s. 4d. per pound, instead of the dividend of 10s. they would have received, if the Bank had stopt without this previous reduction of its debts. Branches, indeed, on the present system of limitations on English provincial Banks, are not only hazardous in this respect, but have been too often established with sinister intentions, and to keep up a fictitious credit at head quarters, by a distant circulation of notes, and of branch drafts upon the issuers or their own house in London ; and, as the agents could sometimes attempt such operations with a better grace or chance of success than the principals themselves, they have been fre- 191 quently seen at fairs, markets, &c. with nu- merous signed or unsigned drafts on London, to be filled up to the order of those ignorant or rash persons who were induced to invest their cash on this security, from the persuasive orations of the distributors on its utility and convenience. Since the preceding sheets were printed, I have obtained a perusal of Mr Maryatt's pamphlet, published in 1811, re- commending the formation of another public Bank in London upon a great scale. * In • Mr Maryatt seems to have been prompted to recommend this measure, from the activity of some Bank directors in patronising the project for a third Marme Insurance Company in London. He has not, however, said one word in defence of the two insu- rance monopoHes. They are, if possible, still less defensible than that he was attacking. Scotland enjoys the only regular exception, in Britain, to the control of their charters, in the Sea Insurance Company established in Edinburgh some years ago, in the face of many doubts as to its legality. The Whitby Association of Shipowners and others, who have followed its example in Eng- land, are only evasions of these charters, and present a very imper- fect remedy indeed for the injurious effects of the London monopo- lies, particularly, as they seldom insure goods. Many enterprising and industrious shipowners, who have sailed their own vessels for years without a farthing of claim on the underwriters they had been all along paying heavy premiums to, have found themselves, when at last overtaken by misfortunes at sea or shipwreck, thrown helpless upon the world, or reduced to abject poverty, from the inability of the underwriters to fulfil their engagements. Is this the reward a great maritime state should hold out to the survivors 19'2 page 10 he says, " the directors are bound by the constitution of its charter to lay a state- ment of the profits of the Bank of England before the proprietors, at general courts ; but this regulation has been constantly evaded." The speeches of Mr Gundry and others at the meeting of Bank of England proprietors, held within these few days, are highly deserving of the most serious attention ; and prove that, with many other defects, the directors pertina- ciously adhere to the inexcusable system of concealment so justly censured 10 years ago by Mr Maryatt. A significant hint from a Bank of England director could make the for- tune of any of his favourites engaged in the pur- chase and sale of its stock ; and if no such hints have ever been given respecting the arcana of its affairs, or the government secrets the di- rectors were intrusted with, during the inces- sant fluctuations in Bank of England stock and of storms and shipwrecks ? The reply that they ought to have in- sured with the monopohsts is insufHcient, both because a thousand circumstances may have prevented them or their brokers from so doing, and also because these monopolies are equally impolitic and unjust in a commercial country, where every class of persons ought to enjoy the fullest liberty of employing their capitals and credit, either individually or conjointly, in whatever channels they may prefer. 193 in the funds, they are, and have been, certainly, a more exemplary class of men, than Mr M. ima- gines, even supposing them too disinterested to speculate jfbr themselves on official information. In pages 13, 14, and 15, Mr Maryatt explains various profits the Bank derives from its con- nexion with government. In page IS, he no- tices a gross breach of contract by the directors, so far back, however, as 1720 ; but, in page 19, their more recent concealment and appropria- tion of the unclaimed dividends on sovern- ment securities are sufficient proofs that the directors he alludes to could do worse than break a contract, if it suited their own inter- ests. In page 33, he observes that the Bank allows no interest on deposits, and, in page 77, that their undivided profits were then estimated at 5 millions, Mr Maryatt, in page 80, shows the political dangers of this and similar Banking monopo- lies, and also the chances of injustice to rival traders, who can apply to no other proper ri- val Company, if the Bank of England direct- ors, individually in the same branches of trade, choose to gratify their private pique or jealousy in their official capacities. As before intimated, I shall take an carlv 194 opportunity of tracing the injurious conse- quences of the fluctuating mode of conducting business by the Bank of England, and fre- quent disregard of first principles in the course of their operations. Within these few days I have learnt the intention of the Bank of Eng- land directors to withdraw its 1 and £9, notes from circulation. Their average amount in 1815 and 1816 exceeded 9 milHons. The or- dinary profits of trade may be about double the market-rate of interest in general ; and if we estimate the annual loss at 10 per cent, which may possibly be sustained by locking up 9 millions of the national capital in the coins which may circulate, instead of the notes so withdrawn, we shall still have to add to this large annual loss of ^^9,000,000, the immense national expense of preserving so much me- tallic currency of full value or weight — to say nothing of the vast sums which will be im- morally gained and spent by the forgers and venders of base gold and silver coins under this uncalled for restoration of an anti-social and impoverishing system of currency. Let every man peruse the seventh chapter of Dr Colquhoun's Treatise on the Police of the Metropolis, before he ventures to congratulate 195 the country on this probable increase of coin- age, from a step which appears to be as un- sanctioned by parliament as many others the Bank of England have ventured to adopt. It is not enough that the Bank proprietors have resolved, like pettish or sulky children, to sacri- fice the profit of supplying the nation with their notes under £5, because an outcry, ap- parently too well founded, has at last been heard against the defective execution of these notes or the inadequate vigilance and precau- tions of the directors in the suppression of for- geries. The legislature, certainly, never contem- plated the total withdrawal of the Bank's notes under 5 pounds, when they recommended in- gots, in the first instance, or coins more re- cently, as the standard of our currency ; and the public, at least, appear to have understood that, in giving the holders of such notes the power of exchanging them for sovereigns at the Bank, the holders of sovereigns, or of other British coins, were also to be entitled to de- mand small notes there, in exchange for them. Persons wishing to make remittances, either by sea or land conveyances, might prefer send- 196 ing Bank of England small notes to specie ; because, by taking the numbers of the former, or by sending one parcel containing the halves of each of these notes, and another parcel with the other parts thereof, they could avoid the expense and risk of transmitting coins. As the Bank has never re-issued its notes, in consequence of paying only a trifling compro- mise for the stamp duty, this bisection of their notes, and subsequent re-union of the se- parately transmitted portions gave them no concern, whilst it afforded various advantages to the public, for whose convenience and accom- modation their charter and immunities must ostensibly have been obtained. It is said they are calling in their small notes under an intimation that the makers and venders of forgeries on their notes, under 5 pounds, will not be prosecuted after this date, — another proof of their disregard for the morals or inter- est of the public. This abandonment of 1 and £^ notes, after so many years' experience of their utility, cannot be excused merely be- cause the directors could not render them in- imitable ; and they were at least bound to show that their arrangements for the preven- 197 tion, detection, and prosecution of forgeries were neai'ly 'perfect^ and that the best execut- ed notes they could possibly obtain were still so extensively forged upon as to render their circulation unadvisable, before taking so im- portant a step. The measure, however, is only another reason for discontinuing their charter ; to preserve which, the curtailment of their currency, to the extent of coins or pro- vincial paper circulated instead of their small notes, should render them less solicitous than formerly, or, at least, less tenacious in any ne- gotiation for the indemnity they may be allow- ed in consideration of individual purchases of stock, on the faith that the charter could not, or would not be discontinued, at the very soonest, before 1833. A periodical print, whose essays on many subjects are of the highest excellence, in an- nouncing this resolution, by the Bank direc- tors, to withdraw their notes under ^5, la- ments so unnecessary a restoration of coins,f al- • The strongest evidence can be brought forward to prove the glar- ing defects of their arrangements for the prevention of forgery ; par- ticularly, in regard to the forgeries circulated in the provincial towns. \ It would have preferred that the Bank of England notes of 1 and €2, had thoy been better executed, should have sup[)lied the N 198 though decidedly in favour of the ingot-stand- ard of currency ; but, at same time, strongly urges, since coins are thus resorted to, that all provincial issues under £5 should be prohibited, assigning, as the reason for this extraordinary suggestion, that runs on the provincial Banks would be much more serious, if obliged to give gold for their small notes, from the want of Bank of England notes under £5, and that runs, formerly, were greatly moderated by the holders of provincial paper discovering that, in exchanging it for Bank of England notes, they were only getting one piece of paper for another.* place of prohibited provincial issues under £5 ; and that Bank of England notes alone had been convertible into gold, in ingots or bars. * One would imagine the runs should rather liave been in- creased (unless from the fear of Jbrgeries) by the holders of pro- vincial notes getting Bank of England paper, instead of specie, for them, as the larger Bank of England notes bear a premium, in most provincial towns, in exchange for notes payable therein, like other bills on London at sight ; whereas specie bears no pre- mium whatever, owing to its inferior advantages and greater ex- pense when remittances are to be effected. This author, however, asserts that the provincial notes become of less value when made payable in London, and zealously calls on government to prohi- bit the growing practice of domiciling them there, as a "gross abuse, which may soon give us a currency composed of notes bear- ing two or three hundred different values." Now, the fact is, large 199 This discovery, however, does not appear to have prevented the immense number of pro- vincial Bank failm'es, the enumeration of which accompanies this very suggestion to prohibit provincial notes under £5. The essayist ap- pears to have also forgot, that such runs were not so generally confined to the holders mere- ly of 1 and £2 notes, and that each note un- der £5 was not presented by a different per- son. An individual, even in a humble station, might often have five provincial £l notes, and would consequently accept a £5 Bank of England note from tlie issuers, in exchange, as readily as five Bank of England notes of ^1. Even if the Bank persists in not issuing 1 and provincial notes, payable in or exchangeable in London, are not only more valuable than if payable in the country towns, but, like Bank of England notes, would bear a premium of 10, 15, or 20 days in exchange for the notes payable in such towns, according to their respective pars with London. Even the smaller Bank of England notes occasionally bear such a premium ; and, conse- quently, in such cases, the small notes of provincial Banks domi- ciled in London, would do so likewise, if thought equally secure — the possible inconveniencies to which the holders of small provin- cial notes so domiciled might be exposed (alluded to p. 92,) aris- ing from the other provincial Banks making excuses for not taking or exchanging them, " because they are not also payable in the country;" and such pretexts would be very rare with respectable unrestricted Banks. 200 ^2 notes, the reserves of the country Banks will probably be composed of Bank of Eng- land notes, for £5 and upwards, or of silver^ with which latter article they are generally overstocked — the large Bank of England notes being preferable in transmissibility, &c. to gold, and the silver better calculated, per- haps, than gold for those holders of provincial 1 and £2 notes, who, during runs, cannot pre- sent £5 thereof, either of their own or by clubbing with their neighbours, to be ex- changed for Bank of England £5 notes. * * To encourage the country Bankers to keep their reserves in Bank of England notes in place of gold, the Bank might, perhaps, be induced to allow these Bankers an allowance of interest on a part of their reserves, by issuing what might be termed reserve notes, bearing interest from their date, until issued by the Bankers in exchange for their own notes — the date of such issue to be marked on the reserve notes, that the interest might be thereafter disallow- ed, if subsequently circulated by the public. Some plan of this kind might diminish the national loss by the use of coins, and might en- courage the maintenance of the largest desirable reserves by pro- vincial Banks, whose credit has been frequently shaken, of late years, from their defective provision against sudden demands. Were it not for existing prejudices, exchequer bills might be issued in suflBciently small sums to answer the same purposes. To cur- tail the use of gold — the liability to pay which, for their notes un- der £5, instead of Bank of England notes, is said to augment the runs on provincial Banks — those issuers, who were considered safe by government or parliamentary commissioners, might, per- haps, be licensed to insert clauses in their 1 and £2 notes, that 201 The recommendation alluded to is unaccom- panied with the slightest notice of the restric- tion on the numbers of partners in English provincial Banks, or with any exception in favour of the Scots Banking Companies, which is, perhaps, still more extraordinary than the recommendation itself, particularly as the writer must be thoroughly acquaint- ed with the constitution and undoubted cre- dit of the Scots Banks. But such sugges- tions, from such a quarter, are only additional proofs how imperfectly the subject of cur- rency is yet studied, and how thoughtlessly the most ruinous fluctuations have been, and are still likely to be, introduced in this im- portant and universally interesting portion of the commercial machinery of civilized socie- ties. The prohibition of provincial issues un- der £5 will be only necessary after every possible experiment to render that currency as secure in England as in Scotland has j^roved abortive. To prohibit it just now would be nearly as rational as to recommend the ampu- gold could not be legally insisted upon in exchange for thcni, dur- ing the non-existence of 1 and £2 Bank of England notes ; and that for all claims of £5 or upivards, the provincial Banks should have the option of payuig cither gold or Bank of England notes. 202 tation of the arm when a thorn appears in and is easily extractable from the finger. Such short-sighted projectors would be better em- ployed in devising plans for confining the circu- lation of metals, by every practicable division in the values of notes both above and under L,lf or in effecting such improvements in the inter- mediate scale of values betwixt jL.1 and I/.IOOO as might economize the paper, stamps, &c. of notes, and the expenses of their transmission by post or otherwise.* When writing this, I am informed the Bank of England intends withdrawing its L,5 notes also from circulation. Their average amount betwixt 1815 and 1819 * The article alluded to must certainly have proceeded from some less experienced pen than that of the reputed author of many able articles on political economy in the same publication {The Scotsman), and also in the Edinburgh Review ; but, if Adam Smith himself had recommended such a project — and he also had voy incorrect notions of the causes of, and the remedies for, the de- fects in provincial currency — every man who is not led by mere name would decide upon it according to his own sense of its in- trinsic merits. Whoever the author of it is, he should rejoice to see his project examined, if personal considerations do not render him forgetful that the public good, which is of infinitely greater moment, is ultimately promoted by this collision of opinions. Ex- amination is most usefully and fairly exei'cised on any plans or ideas emanating, or supposed to emanate, from writers, whose previous celebrity and influence may have predisposed the public to adopt their views rather too passively, even when correct, and very inju- riously for its own interests when they are erroneous. 203 exceeded 3 millions ; and the previous re- marks on the apparent irregularity and impro- priety of withdrawing their 1 and Z/.2 notes will be still more applicable to tJiis measure, if actually determined upon. It is fortunate, however, that those who have proposed the suppression of provincial notes under L.5 must overturn most of their own arguments for the prohibition, before they can venture to extend it now to L.5 notes also ; or will they contend that run& for specie are now more like- ly to be made by the holders o^ large provincial notes, because, instead of getting L,5 Bank of England notes in exchange for them, they can only get notes of JL.IO or upwards ? The Bank of England directors appear re- solved to surfeit the nation with metallic cur- rency, in revenge for all the taunts they and their issues have met with since 1797, and to be takiner cent. Bonus in Navy 5 percerjts. on £11,612,400 is 291,060 In October, 1804, 5 per cent. Bonus in Cash on £11,642,400 is 582,120 la October, 1805, 5 per cent. Bonus in Cash on £11,642,400 is 582,120 tn October, 1806, 5 per cent. Bonus in Cash on £11,642,400 is 682,120 From April 1807, to April 1819, both incluHve : Increase of Dividend at the rate of 3 per cent, per annum on £11,642,400 is 12^ years, or £37 : 10 per cent < ; 4,365,900 in June 1816: Increase of Capital, at £25 per ceht. is 2,910,600 From October. 1816, to April, 1819, both inclusive : Ijividend at the rate of £10 per cent, per annum on £2,910,600, increased ca- pital, is three years' dividends, or £30 per cent, on £2,910,600 is 873, l«r Aggregate amount of the whole £11,933,460 Annual Dividend payable on Bank Stock, in 1797, on a Capital of £1 1 ,642,400, at the rate of £7 per cent, per annum, 814,968 Annual Dividend payable since June, 1816, and at present, on a Capital of £14,553,000, at the rate of £10 per cent, per annum, 1,455,800 The undivided profits are not stated, but are supposed to amount to several millions. An Account of the Price of Bank Stock, on the 1st of March, 1st of June, 1st of September, and 1st of November, in each Year, from 1807 to 1819, or on the subsequent days on tvhich there was a Price. 232 . 238 250 1807 2d March 225 2d 1808 1st ... .... 231 1st 245 1st 1810 2d 274 1st 18111 1812 1813 243 6th 1st .... 219 1st 1st ... 261 2(1 1815 1816 1st 256 1st 1st .. 851 5th 1817' 1st ... 246 2d 1818' 1819 1st 2d ... 261 1st Septembei 235 1 1st 239 287 1st 256 238 5th 225 217 1st 1st 253 1st 255 . 216 . 279 3d 1st 1st . 268 3d November 224 2d , 52ey draw on Lon- don at a shorter date than the regular Banks — that they iahe in as much money at 4 per cent, interest, as the public pleases, upon security equal to that of any Bank in Scotland, with- out a syllable about giving any out as Bankers — that they buy and sell government stock for the London stock brokers' commission of \ per cent, producing his certificates as to the prices paid and received, whenever required to do so ; and fin- ally, expecting, " from these and various other accommodations, to be favoured with public support and patronage." When they commenced in this line, the Edinburgh Banks allowed 20 days' interest on all the London bills they purchased or discounted not exceeding 100 days' currency, and gave, in exchange for their own or other Scots notes, their drafts on London, at 40 days' date for sums above ^£200, at 45 days' date for sums be- twixt 100 and £200, and at 50 days' date for sums under £lOO; none of them charging the stamps except one or two of the older Banks. As the stamps fall heaviest on sums under £200, the additional charge of 5 or 10 days' interest on such drafts was not an equivalent, and the Banks, therefore, were better with 5 or 1 days* less on larger sums. INI. & Co. began by drawing on London at 20 days' date, with a charge for stamps, never speci- fied in their advertisements. The Banks shortly afterwards re- duced the date of their drafts to 20 days also ; but, as they at sam.e time discontinued their former allowance of 20 days' inter- est on the London paper they discounted, they neither gained nor lost by the change, excepting those who had not previously made any charge for stamps, which have been charged by all the Banks since this alteration of the par. The Banks, in now draw- ing for suras under £200, at 20 days, arc better paid than when 242 tliey drew for such sums at 45 or 50 days, without charging the stamps; and, on sums above :L'20O they are gainers, by the change, to the extent of the stamp duty, which, on the average of drafts above £200, is equal to an additional week to the par. This is the great public benefit derived from the operations of M. & Co., whom The Scotsman newspaper has eulogized as " the reformers of the Scots Banks." Without entering into a lengthened examination of the real grounds the mercantile remitters or purchasers of London paper may have for their rejoicings at the reduction of the par, or into the regrets of the sellers, now deprived of the former allowance there- on by Bankers and merchants, I may merely remind the for- mer, that, in now paying 20 days' interest, and 4s. 6d. for stamp, on a Banker's draft on London for £110 at sight, they might as well take it at 35 days' date ; and that, if such a small difference betwixt this and the former par for £l 10 exhilirates them so highly, it is strange they do not advise M. & Co. to " re- form the Post-office also," by drawing on sheets of paper, which would save another shilling ! on each draft, and guard against the abstraction of drafts from letters, by letter-carriers, &c. Annu- itants, or persons drawing dividends on government-stock, or for government-pay, &c., may no doubt repine at the loss of the for- mer premium on their drafts ; but the importers and exporters of goods must enjoy their former profits or the current rate of pro- fits on trade, amidst all such changes in the par, so long as the Bankers profits on the purchase and sale of London paper are not thereby altered. I am humbly of opinion there is no neces- sity for the transmission of Bank of England notes or specie be- twixt England and Scotland, and that the balances of exchange betwixt all countries can at all times be easily effected, without the use of a single ounce of metal, unless as a mere commod- ity or portion of exportable produce. With this impression, I would consider it no great improvement if the cost of transmit- ting metals from one place or country to another was reduced to half its present amount, and that the great object should be a reduction in the charges of bill-transactions, and in the expense 243 ol" transmitting that mass of commodities, the imports and ex» ports of whicli, being necessarily of equal value, require no spe- cie to aid their adjustment. M. & Co., so far as national inter- ests are concerned, have rather increased than diminished the expenses of international bill transactions. One method of avoid- ing the present Banking charges, in part, has been found in the practice of merchants directly buying and selling bills on Lon- don, &c. amongst themselves, applying only to Bankers for the small balances or odd sums left unadjusted by such mercantile bills being occasionally unobtainable for the exact amount re- quired to be remitted ; and, if this practice could be generally or beneficially adopted in Scotland, merchants or others have al- ways opportunities of purchasing bills on London from each other, without paying any premium whatever, instead of taking M. &: Co.'s drafts at 10 days* sight, the still <* further reduced rate" they now draw at. Consistently with their non-advertise- ment of their charge for stamps, M. & Co. leave the readers of newspapers to discover elsewhere, that, in advertising drafts on London " ail days" they mean drafts at 10 days' sight, — which, allowing for the 3 or 4 days before they can be got accepted by some person in London, who must take the trouble of leaving the drafts one day and calling for them at the drawee's the next, are, in reality, worse than drafts at li or 15 days' date. It is easy to see that, with moderate agency charges in London, M. & Co. can perfectly afford to draw on London at 10 days' sight, with little or no loss to themselves ; and, instead of being under the necessity of advancing a single penny of capital, that such drafts may give them the use of the payee's money, (that is, of the sums for which they can keep them afloat), by giving the draw- ees security over the government stock, for instance, they may purchase therewith. They never grant drafts, it is said, unless for specie, or the notes of the Bank of England or Scots Banks, the latter being almost always the medium of payment. M. & Co. instantly carry these to the issuers, if their head-office is at any of the five towns where the former grant drafts, or to the agents there for the issuers; from ihc first they demand Bank of 244 England notes or gold, and from the last the notes of some Bank in the same place, from whom they can exact this legal descrip- tion of payment. They have it, therefore, always in their power to lodge the funds with their London agents before the drafts are accepted ; and although M. & Co. may be as rich as is reported, it is evident this trade could be conducted by any poor man who could persuade the public that he would not divert the money from the purpose for which it was put into his hands, viz. to lodge it with some respectable London firm regularly as he granted drafts on them for it. M. & Co. have it in their power, if they do not wish to make daily remittances to London, to lodge their money in other names with the Scots Banks, upon current accounts, or deposit receipts, bearing 3 or 4 per cent, interest, until they find it more agreeable or necessary to remit the Bank of England notes or specie obtained when these deposits are uplifted, having vari- ous opportunities for eluding the attempts of the Scots Banks to detect the accessaries to such possible schemes or the purchasers of their drafts. A person in indifferent credit, or, at least, unen- titled to confidence, frequently has the address, by exciting sym- pathy, by flattery, or by misrepresentation, to obtain considerable Banking accommodations upon the same terms as others of un- questionable safety — the Bankers having no practice, like that of merchants, in occasionally proportioning their charges to the ap- parent risk with each debtor. Yet such a person, after fawning upon and importuning Bankers out of their money, will frequently be seen slipping away with it to purchase M. & Co.'s drafts, forget- ful of all protestations of gratitude, &c. either with the paltry desire of saving two or three days' interest, at a much greater expense to those who were supporting his credit, or eager, perhaps, to de- ceive his Bankers still more seriously from the facility thus pre- sented by M. & Co. to his secretly obtaining drafts on London to meet the accommodation-bills he had passed off on the former, as bona fide bills for goods sold and made payable in London, aware that, in purchasing from them, he runs still less risk of his own Banker's hearing thereof, than if he bought drafts from some of the regular and more public Banks with which his Bankers 245 might be in communication. In short, the mean-spirited pur- chasers of M. & Co. 's drafts pocket a trifling gain by methods which the more Hberal and respectable part of the community despise to imitate. If we examine the benefits M. & Co.'s " de- posit Banks" confer on tlie depositors, we shall find them of a still more negative description than those of their " exchange" de- partment. They do not allow more interest than can be obtain- ed from some of the securest Banks in Scotland. They ofier to repay such deposits by their own notes, Wjic/t fevi people luill take owing to the Banks refusing to receive them ; and, as these notes are payable in London, the depositor must either have oc- casion to remit them to England, when he uplifts his money, or discover some person who has occasion to do so, willing to take them off his hands. Failing in this, he must be at the expense and risk of forwarding them to London, and of drawing on his agent there for the amount, or avail himself of M. & Co.'s alterna tive to repay a depositor by their drafts on London at one day's sight, on his paying 10 days' interest at 5 per cent, and the stamps, or at 10 days' sight, and also paying for the stamps. The depositor, therefore, who had no occasion for London paper, on withdrawing a lodgment of £120, which had lain a week, month, or year, would receive 7 or 8s. less by M. & Co.'s mode of repayment, than if he had kept it with some of the regular Banks alluded to, from whom, if demanded, he could either have got Bank of England notes, still more suitable for effecting any of his remittances than M. & Co.'s notes payable in London, or have got Bank notes universally cur- rent over Scotland, and convertible even into M. & Co.'s 10 days' sight drafts, should he subsequently wish them. M. & Co.'s notes do not exceed £l, and contain an abridgement of their newspaper advertisements, intimating, that the holder of /en or more of these notes will be entitled to their drafts on London on the terms specified, and trusting " that these accommodations will be found extremely beneficial to persons taking this paper." Extremely beneficial, certainly, to the unfortunate holder offnver than ten of their notes, who must buy articles from sonic avari- cious shopkeeper at an extra price to bribe him to take (Iicm, or 246 must retain them until he meets with some friendly person going to London who will take the trouble of presenting them there for payment. The profits of the Scots Banks, however great they may have appeared for the last 30 or 40 years, are not higher than those which have been realized, during the same period, by individuals or companies with equal capital and industry in other branches of employment ; and the only apparent benefit M. & Co.'s es- tablishments hold out to the public, is in the rc^duced rates of their commission in the purchase and sale of government-secur- ities. At same time, one or two of the regular Banks appear to conduct these operations on equally low terms. The only other interesting results of their labours " to reform the Scots Banks," are the prosecution they were threatened with for exercising the scissors too freely on their notes, and the ac- tion raised by themselves against one or more of these Banks for refusing to give them, even on a guarantee, twenty shillings for every one of several hundred halves or quarters of jGl notes they had lost or mislaid the other portions of-,-M. & Co. being apparently forgetful, in thus " cutting uj" their notes, that the Scots Banks enjoyed none of the Bank of England's advantages in compromising the stamp duty, to enable them to imitate its example by never re-issuing the same notes. It is surprising the regular Banks do not also reduce their rate of drawing on London to 10 days' sight, which would at once place M. & Co. hors de combat. On the average, these drafts would not be pre- sented for acceptance for 6, 7, or 8 days, which would render them payable about the same time as drafts at 17 or 18 days' date ; or these Banks could pay away ivith their indorsations, the bills on London they purchased, which would not only enable them to reduce the par to 10 days' sight, but would also be a con- siderable saving of London agency-commission and other charges attending their present mode of granting drafts. M. & Co. are generally understood to be persons of large property, and to have originally adopted the system here noticed, principally out of pique to one or tivo, merely, of the Scots Banks ; but, from what- 247 ever motives it is pursued, I have considered it worthy of remark, solely on public grounds, as a most injurious precedent for more general imitation, and as an additional i^roof of the necessity for the various Banking changes previously discussed. NOTE F — Referred to Page 180. A considerable part of the rise which took place in the prices of many articles during the late war may possibly be ascribable to the increased number of hands through which they passed in their progress to the consumer — the fluctuations of prices giving rise to a speculative disposition amongst all classes, and particu- larly to a class of traders who " played at commerce" as they would have done with the dice. The traders of real capital must have imposed such additional prices on the articles they dealt in as would counterbalance the frequent losses attending the insolvency of their debtors, whose expenditure being generally extravagant, and their operations actually in a great measure nugatory in fa- cilitating the production of goods, or expediting the proper course of trade, operated as a heavy tax on consumers. Every gra- dation of dealers was over-run with such characters ; and, instead of reducing prices by competition, ten warehousemen or shop- keepers, transacting the same extent of real business with the consumers which had been previously done by only Jive, laid the rents of ten instead of five shops or warehouses, the wages of more numerous servants, and their own domestic or proper ex- penses, upon the very same extent of articles previously sold. Every trader, too, being eager to maintain the largest possible stock of goods, in the chance of reselling with a profit, during some of the incessant alterations then experienced in prices, created an artificial demand for most articles by their con- stantly increasing stocks ; and, even where an individual, who had formerly sold 100 of any article in a week, found his sales reduced to 50, by additional retailers in the same line, this hope of profiting by fluctuations, and the necessity for retain- ing customers by displaying at least his former stock of goods. 248 prevented the otherwise desirable diminution therein. No tax, in reality, presses more heavily on the people than that which they voluntarily incur by their fondness for Jine and well-stocked shops and warehouses, and by that indolence which fills every street with shops of all kinds, where a few paces of healthful walk- ing could carry them to a smaller number of central depots, each possessing a still cheaper and more extensive selection of goods than can be presented by any one of the present class, owing to the causes already alluded to, or others equally obvious. This, however, being a voluntary tax, still leaves every individual to do as he thinks best. But there are other and more serious causes for the overtrading, or rather the unproductive occupations of superfluous middlemen betwixt the grower or manufacturer and the consumer of articles, in the defective enactments of our banhrupt-laijos which, under the amiable appearance of solicitude for individual liberty and the encouragement of enterprise, have fostered a system of commercial gambling and fraud, suflScient, with the effects of our revenue-laivs, to demoralize the whole trad- ing community ; and, instead of the open, generous and manly character of British merchants, in the " olden times," to render a strictly honest trader nearly as great a rarity, or, at least, as great a butt as he would be in a den of thieves. Every unnatural restriction or regulation, when its effects can be fully traced, will be found productive of almost numberless evils ; and, if 50 or 100 persons, with the requisite industry and ability, would carefully follow out the moral and physical conse- quences of our various legal enactments, and, more particularly, our 2000 or 3000 commercial laws, each according to his peculiar acquired or natural capabilities for the task, society anight ** des- cant on its own deformity," and yet feel amazed that its natural tendency to virtue had preserved it from becoming a still more odious and corrupt mass of rapacious selfishness and roguery. Accum's history of petty tricks would sink into insignificance be- fore the enormities of such an exposee. S g c 2* 3 " " S g ^ . %^^ 1 || G-?i |» ""^ g- H. (M ?r o I g .. I? 2, 5- g- S § 3 § 3 o S- o S P- I g. s? r S ^ P " C n ^ ^ ^ > s> g 2, ^ " a S „ < jL 3 o. I ^" 1^ -^ ^ i - !^ - <=- " o »• S P W s "I »• "^ TO ^ • 2. So "^ O ^ > ^ " S- -, § H k; t o S '-' S 3 ^ c S- OP " 5f (n 3 « ^ ff eg «0 ° tik 5- r» ? I " § 5- o 5: - f 2 r I :- 1 -i. S ^ i i - S- ? o ~ " & 3 S- t S -.1-1 ■< o »- o o 3- - ^ 5 S- 3 -. - 2 p 5 jB 2. s 2. " 3 c o S g-'S 3 r o 2^ - i 5 g" £ "s s. s ^ ^ r i. B3 3 ?■ s > a -III i B) 3 ^ ~> M ^ lilll ° •n O ,. O w So &« p g. n 35 §,3 3 c.|e , lllilf^Hliili 2- WO>rfkto~J-J~ikOW Cn»o«;»."-itkOtnCnO»(0>^<0(004^>U M~jaswi04kto»o 0"-0i — U0000O<£>-IO«nl0 I It III ^ 's- w r f g, B- ?i I o ^ ": Fl 3 « ??S=?22srrrg ^^s'i§^ B ?• e ^ H 3 § S S s :: 5 g- s. § i flii g 3- h: s: 2 § p . tJ o o 3- I ■= > g- -^w 5 » S S. ? K- " i' O „ a S =^ " 2 g" n » a 5 ss 2. - = i^ r § S "^ ^ » " s. o ~. S- o ca ^ a S „ a 5- g- o g' ? 3 C- ^ <^ "■ s g. s" I g- ^ g'*2 3 :: o m oi S-" cr ■^ 5. re g P I ^ o i 5- 5-- ? a Is "I- ^S § I" s' i g 5 w, K- ?- S 3 = i i 1 i? litis -p S 3 £i S-S-^t; = g.5.i,3|B oa 2 Et s i,S 1^ S p S a •-5 a. a ii ^^ ■ g3:5;gcg-?5-g-s.g' a- i 5- S- 3 £■ S"3:"' a a- 3 ;nMifk(n>^totoOu >-'0>-OOO>-M00l0>— I I tn-JrfiCnrfk00CT)^C0^t0Otntol O) I Olj^»0U)Ol>-» 05lO>-'tO| >-'iaK)COK)to*-*.t.ijij:.co tOO> o^o>toitoas;oK)4^«oc»o 1 5; Oaiooo;ocOJk tn M H- o -J M O) tn K) Oi '-' I - - _. -. .. , „ „ _ I CnC>U>^caOl>(^l -I A o ►- • lOJ»Ci— 'lOWCriOfO 1- to (O ►- 1- K) W O>^cc;>0'-'0oooii oii--feo Oao~101-J>-O0a>01tn< (O^noiwwiooooo tn^-l COtO(0000«)OOi^<»l to CD hi ^ CO 1-0 to>>-WtOOOOtO-J-JOitnO ^OtolUll wwwoitoi otocotowcnol Oito «3t0O-aO05-J>t>tnk04^ 5cn00t0(O!J»^n°5«>«'' O) to Ol O CO Oi ^ Cji Ol CO 10 (O 4^ 01 o ta CO 05 to to ►- -J -J 4i to O C3 to -4 4> to O I Cn * (0 Ox ■ ra lis cr r3 '^ o <^ W 2^ I p3 en re 2 o o 3 ^ f3 W s- Cfi -^ " GO ►> p- tn crq o' 3" An ACCOUNT of the Number of BANKS taken out in each Year, from 1811 to IS in the Banks of each County. COUNTIES. 1811 to 181. No. of Partners No.f BanU 1. Edinburgh ... 2. Aberdeen 3. Argylc C Head Offices of Banks i Agencies of Banks ... j Head Offices of Banks \ Agencies of Banks ... Agencies of Banks ... C Head Offices of Banks i Agencies of Banks ... Agencies of Banks ... Agencies of Banks ... Agencies of Banks ... / Head Offices of Banks 1 Agencies of Banks ... Agencies of Banks ... / Head Offices of Banks (Agencies of Banks ... Agencies of Banks ... f Head Offices of Banks \ Agencies of Banks ... ( Head Offices of Banks 1 Agencies of Banks ... j Head Offices of Banks Agencies of Banks ... Agencies of Banks .. Agencies of Banks ... Agencies of Banks ... C Head Offices of Banks t Agencies of Banks ... "Head Offices of Banks Agencies of Banks ... Agencies of Banks ... (Head Offices of Banks 1 Agencies of Banks ... f Head Offices of Banks \ Agencies of Banks ... Agencies of Banks ... Agencies of Banks ... Agencies of Banks ... ( Head Offices of Banks \ Agencies of Banks ... Agencies of Banks ... lanks in each Year 'artners ., 617 120 14 47 183 44 4 29 267 2S 21 1 1 j 4. Ayr 5. Banff 6. Berwick 7. Bute 8. Caithness , 9. Clackmanan ... 10. Dumfries 11. Elgin 12. Fife 13. Forfar ,.. 14. Haddington ... 15. Inverness 16. Kincardine 17. Kinross 18. Kirkcudbright Stc-jcartry ... 19. Lanark 20. Linlithgow ... 21. Perth 11 3 2 22. Renfrew 23. Ross 10 4 2 24. Roxburgh 25. Selkirk 2 26. Stirling 3 27. Wigton Number of Number of 3 3 1,374 137 Stamp Office, Ei ailh April, 1 inburgh, 319. The abo\ An ACCOUNT of the Number of BANKS in SCOTLAND, for which LICENCES to issue PROMISSORY NOTES have been taken out in each Year, from 1811 to 1818, and distinguishing the Number in each County, and the number of Partners concerned in the Banks of each County. I. Edinburgh 3. Aberdeen .. 3. Argyle 4. Ayr Berwick Bute Caithness ... Clackmanan 10. Dumfries ... Elgin 12. Fife 13. Forfar 14. Haddington 5. Inverness 16. Kincardine .... 17. Kinross 18. Kirkcudbright Stcwartry .. 1. Lanark 20. Linlithgow .. 21. Perth 23. Ross 24. Roxburgh 25. Selkirk ... 26. Stirling ... 27. Wigton ... C Head Offices of Banks i Agencies of Banks {Head Offices of Banks Agencies of Banks Agencies of Banks C Head Offices of Banks X Agencies of Banks Agencies of Banks Agencies of Banks Agencies of Banks f Head Offices of Banks ( Agencies of Banks Agencies of Banks f Head Offices of Banks \ Agencies of Banks Agencies of Banks f Head Offices of Banks ( Agencies of Banks ( Head Offices of Banks J Agencies of Banks I Head Offices of Banks ( Agencies of Banks .. Agencies of Banks . Agencies of Banks .. Agencies of Banks .. C Head Offices of Banks i Agencies of Banks .. j Head Offices of Bank ( Agencies of Banks .. Agencies of Banks .. /Head Offices of Banks 1 Agencies of Banks I Head Offices of Banks ( Agencies of Banks ... Agencies of Banks ... Agencies of Banks ... Agencies of Banks ... {Head Offices of Banks Agencies of Banks ... Agencies of Banks ... Number of Banks in each Year.... Number of Partners .« 1811 to 1812. 1812 to 1813. 1813 to 1814. 1814 to 1815. 1815 to 1816. 1816 to 1817. 1817 to 1818. 1818 to 1819. No. of No. of No. of No. of No. of No. of No. of No. of No. of No. of No. of No. of No. of No. of Partners Banks. Partners. Banks. Partners. Banks. Partners. Banks. Partners. Banks. Partners. Banks. Partners. Banks. Partners. B.inks. 617 7 669 7 689 7 753 6 776 6 756 6 735 6 715 6 7 _- 6 __ 5 __ 4 __ 4 __ 5 5 __ 6 120 2 118 2 118 118 2 99 100 3 94 3 98 3 — 4 — 5 — 6 — 6 6 — 6 6 — 6 _ 2 -_ 2 __ 2 ^ 2 __ 2 ^ 2 __ 2 __ 2 14 2 13 2 13 2 13 2 13 2 13 2 14 2 14 9 — & — 5 6 _ 6 — 6 6 _ 6 6 — 3 — 3 — 3 — 4 — 4 — S _ 3 — 3 — 2 — 2 2 __ 2 — 1 1 __ 1 — 1 — 2 — 2 2 2 2 ^- 2 _ 2 2 — — 3 1 3 1 3 1 3 1 3 1 3 1 2 1 — — — 2 _ 2 2 2 _ 2 __ 2 2 — 2 — 3 — 2 — 2 — 2 — 2 — 1 — 1 _ 4 _ 3 __ 4 _ 4 _ 4 4 _ 4 _ 4 _ 8 — 3 — 3 — 3 — 3 __ 3 — 3 — 3 47 1 47 1 47 1 47 1 48 1 48 1 47 I 50 I — 12 — 12 _ 11 11 — 10 9 — 9 — 9 183 3 174 3 280 4 280 4 254 4 260 4 262 4 242 4 15 13 __ 13 12 — 13 11 — 11 — 12 44 58 1 58 1 58 1 57 1 57 1 44 1 49 1 _ 3 3 _ 3 3 3 3 — 3 — 3 _ 2 _ 2 _ 2 _ 3 — 3 — 3 — 3 — 3 — 1 — 1 — 1 — 1 — 1 — — — — — — _ __ _ — , __ — — — — — — — — — — 4 1 4 1 4 1 4 1 4 1 4 1 4 1 5 1 __ 2 __ 1 _ 1 __ 1 — • 1 _ 1 ^ 1 — 1 29 3 30 3 30 S 30 3 29 3 29 3 31 3 38 3 11 __ 12 10 _ 10 .— 9 — 8 .— 8 — 10 _, 3 __ 2 __ _ __ _ _— __ .— ^ .— — — — 267 2 269 2 269 2 269 2 251 2 251 2 258 2 229 2 10 _ U __ 10 10 — . 10 — 9 — 10 — 2S 4 28 4 28 4 23 4 25 4 25 4 25 4 25 4 2 2 3 3 .— 3 — 3 — 2 — 3 3 3 3 — 2 — 2 — 2 — 2 _ 2 2 __ 2 2 — 3 — 3 — 3 — 3 _ 2 2 2 2 — 2 — 1 — 1 — ' 21 3 20 3 20 3 20 3 17 3 11 2 11 2 11 __ 3 __ 3 _ 2 ^ 2 2 ' __ 2 — 2 — - — 3 — 3 — 3 — 2 132 — 4 — 4 — 3 ~" _ 137 _ 138 _ 134 _ _ _ 132 _ _ 125 _ - 123 - - 128 1.374 1,433 1,559 _ _ 1.623 1,576 _ - 1,557 - - 1,528 - - — Stamp Office, Edinburgh, 24th April, 1819. THOMAS PENDER, Comptroller. The above does not include the Partners in the three chartered Banks. LIST of BANKS in SCO NAMES OF BANKS, 1. The Bank of Scotland 2. The Royal Bank of Scotland 3. The British Linen Company 4. Sir William Forbes and Company. 5. The Commercial Banking Com- pany of Scotland 6. The LeithBank '. 7. The Commercial Banking Com- pany Aberdeen 8. The Aberdeen Banking Company 9. John Maberly and Company 10. The Ayr Bank 11. The Kilmarnock Bank 12. The Caithness Bank 13. The Fife Banking Company 14. The Dundee New Bank 15. The Dundee Union Banking Com- pany 16. The Dundee Banking Company... 17. The Montrose Bank 18. The East Lothian Bank ' 19. The Galloway Bank 20. Carrick, Brown and Company ...... 21. The Glasgow Bank 22. The Thistle Bank 23. The Perth Banking Company 24. The Perth Union Bank 25. The Greenock Bank 26. The Paisley Bank Company 27. The Paisley Union Bank 28. The Renfrewshire Banking Com- 7 pany 5 29. The Falkirk Bank ^0. The Stirling Bank Total Banks „ Propriei Stamp Office, Edinburgh, 25th April, 1819. Since the above date, the Kilmarnock is found to exist in many aingle English C Bank branches. LIST of BANKS in SCOTLAND that had Current Licences to issue PROMISSORY NOTES, from 1818 to 1819; showing the Number, Banks, and Agencies in each County, and the Number of Proprietors in each Bank. XAMES OF BANKS. Head Office! at COUNTIES. 1 ; I i 1 1 1 i 1 1 . i 1 i £ 1 1 1 1 j 1 ! f i J 1 f 1 1 1 1 i i Edinburgh ... Ditto Ditto Ditto 1 1 id 1 3 i s 1 1 1 1 1 i 1 1 1 1 1 £ 1 & 2 1 1 1 1 1 ! 1 i 1 i 1 1 J 1 1 J 1 1 1 j 1 1 85 9 15 2 3 3 ;;; 19 78 1 ... 2 4 2 ... 9 5 1 1 3 1 1 3 ::: 1 "2 ... 1 2 ::: 1 1 2 1 50 3 2 "2 "5 as 50 101 2 "i 2 4 s 2 49 1 2 !!! ::: ::: E "5 ::: 5 25 8 1 1 1 1 "i 2 1 1 ::: 149 80 "i 2 2 !!! 4 3 "s 5 6 2 3 "i 2 ... ... 1 5 6 1 1 "2 18 15 2 1 2. The Rojal Bank of ScoUand 3. The British Linen Company 4. Sir WiUiam Forbes and Company... 5. The Commercial Banking Com-? panyofScothmd i 7. The Commercial Banking ComO ., ,„„ pany Aberdeen ^Aberdeen 8. The Aberdeen Banking Company... Ditto 9. John Maberly and Company IDitto 10. The Ayr Bank lAyr 11. The Kilmarnock Bank |Kilmamock ... 12. The Caithness Bank IWick IS. The Fife Banking Company Cupar 14. The Dundee Xew Bank Dundee 15. The Dundee Union Banking Com-jip.jj^ 16. The Dundee Banking Company 'Ditto 18. The East Lothian Bank Dunbar Castle Douglas Glasgow Ditto Ditto Perth Ditto Greenock F^'isley Ditto Greenock Falkirk StirUng 20. Carrick, Brown and Company 21. The Glasgow Bank 22. The ThUtle Bank 2s. The Perth Banking Company 24. The Perth Union Bank ■25. The Greenock Bank 26. The Paisley Bank Company 27. The Paisley Union Bank 28. The Renfrewshire Banking Com- 7 pany 5 29. The Falkirk Bank ■iO. The Stirling Bank Total Banks .. Proprietors 715 :.' ... 98 9 2 14 ..' ..! .!. 2 2 3 > 4 3 SO 10 242 16 49 4 3 "s 2 38 IS ::: 229 13 25 IS 2 3 ■.In 4 » 128 St«np Office. Edinburgh, No List of Proprietors received from the Bank of Scotland, or the Royal Bank of Scotland. 2Sth April, 1819. THOMAS PENDEH, Comptioner. Sine* the abore date, the Kilmarnock and Castle Douglas Banks have been wound up, and the Shetland Bank established ; thereby reducing the total number of Banks in Scotland to 29, (exclusive of Branches, which have been rather increased latelyV is foond to exist in many single English Counties. It may be proper to observe, that the above two Banks were underttood to have withdrawu ftom no previous disaster, but solely for private reasons amongst the pattneis; and that their place has been fc , UNIVEHSITY OF ILLINOIS URBANA V, 3 0112 062406801 ' y\ . ...-c.'^'\. ■; -4 "'* >--.