IMAGE EVALUATION TEST TARGET {MT-3) /. {./ k y. c/. t 1.0 I.I 1.25 mi 123 1.4 22 1.6 V] <^ /a. ^>. # .%: ^ "W '/ photographic Sciences Corporation 33 WEST MAIN STREET WEBSTER, NY M580 (716) 872-4503 Ls ^^: CIHM/ICMH Microfiche Series. CIHIVI/ICIVIH Collection de microfiches. Canadian Institute for Historical Microreproductions Institut Canadian de microreproductions historiques 1980 Technical and Bibliographic Notes/Notes techniques et bibliographiques The Institute has attempted to obtain the best original copy available for filming. Features of this copy which may be bibliographically unique, which may alter any of the images in the reproduction, or which may significantly change the usual method of filming, are checked below. 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Maps, plates, charts, etc., may be filmed at different reduction ratios. Those too large to be entirely included in one exposure are filmed beginning in the upper left hand corner, left to right and top to bottom, as many frames as required. The following dia^Tams illustrate the method: Les cartes, planches, tableaux, etc., peuvent Atre filmAs A des taux de reduction diffdrents. Lorsque le document est trop grand pour Atre reproduit en un seui clichA, il est film6 A partir de Tangle supArieur gauche, de gauche A droite, et de haut en bas, en prenant le nombre d'images nAcessaire. Les diagrammes suivants illustrent la mAthode. 1 2 3 1 2 3 4 5 6 ^t::) T.T. *&.&«. /^iyu^-Aot 7^^ Ho. '■n REPLIES TO TBI (^m%\m$ of tbe S^Atti (Sommittei ii^' 0* BANKING AND CUBRENCT. BY JAMES FORMAN, Cashier of the Bank ov Nova Scotia. HALIFAX : PRINTED BY JAMES BOWES & SONS, 1869. In the following condensed replies, I have confined myseli solely to the questions of the Select Committee on Banking and Currency, withotit enlarging on a subject upon which many systematic and comprehensive works have been written. The views prevailing among the various writers on the theory and practice of Banking and Currency, are fre- quently conflicting and contradictory; but notwithstanding this, many salutary warnings and examples abound in their works, which it would be as well not to leave unheeded and forgotten. Those Mho may have suffered from a financial crisis, will be likely to retain a remembrance of it, and act thereafter with caution and prudence, dreading a recurrence; but unfortunately, when a few years have elapsed, and their places become occupied by another generation, what has passed away is forgotten and disregarded, and similar errors will probably eventuate in similar disasters. J. FORMAN. Halifax, 17th April, 1869. . 11EI»LIES. I I have no practical knowledge of the Banking system of the late Province of Canada. I have always understood that the i viles and principles, according to and upon which the Banks there are conducted, are similar to those which regulate ard govern the Banks of Nova Scotia. The system obtaining in Nova Scotia, has been eminently conducive to the develop- ment of the material interests of the Country. , I do not think that any system can or ought to be adopted and cannot therefore recommend any plan for the issue of Government notes as a circulating medium, either directly or by having circulation based upon public securities. I con- sider such a circulation absolutely unsound. Government bonds, and bonds of every description not available for gold en call, are in this respect virtually irredeemable ; and an issue of paper currency, professing to be based upon security in effect irredeemable, and not upon bullion is based u[)on no security at all. It is a fallacy. It is an imposition upon a community. The percentage of specie which ought to be retained, and in a knowledge of which the chief art of banking may be said to consist, depends on keeping a due proportion between actual coin and promises to pay, and this knowledge can be acquired only by experience and closely watching the various changes constantly occurring in Mercantile transactions and trade. My ideas with regord to the advantages and disadvan- tages of an issue of Government notes, are sufficiently indicated in my answer to No. 3 question, and I have onl . o repeat that I disapprove of it altogether. The National Bank system of the United States, origin- atcd in necessity. I can soc no reason whatever, for its iiitrofluction into tlie Dominion of Canada. Should it ever h' jidoptod, the result, I feel confident, would be the ruin and bankruptcy of the whole Dominion. 'J'ho evil and fatal effects of issuing irredeemable bond;} and i)romises to pay, will be apparent to any one taking the trouble to read th(! history of Law's Mississippi scheme, of the Ayr Hank in Scotland, the French Assignats, and of banking in the United States, during the period from 1834 to 1837. I may also here refer the Committee to the important events whii li occurred in the United States and Great Britain in 1857, involving the downfall of several Banks on both sides of the water ; when the City of Glasgow Bank, the Western Bank of Scotland, and the Borough Bank of Liverpool sus- pended, as well as to the discussions on the principles of Banking and Currency in the several periodicals of the day. Expansions and contractions may have been found neces- sary in the late Province of Canada, but they are by no means usual in Nova Scotia. Bank notes being restricted in amount to £•) or $20, the circulation is necessarily limited, and con- sequently a run upon the Banks never happens. Gold is not, and never has been refused in payment of its notes by any Bank in Nova Scotia, whether chartered or not, except for a short time during the years 1833 and 1834, when the two Banks then in existence were allowed by an act of the Legislature, to make their notes payable in " Gold, Silver* or Provincial Treasury Notes," but the disturbed state of trade, which was the immediate consequence, caused not only a repeal of the Act, but the passing of another which pro- hibited Bank notes being redeemed in any other way than with gold, and also limited the issue of any promises to pay to an amount not under five pounds. Promises to pay issued on the Security of Public Debentures, I have already said would be tantamount to an issue of irredeemable currency. An opinion, I am aware, n f^ :\ prevails with some that a l^uik of issue can afford sufficient sjcurity to the public by purchasiut? Governniont debentures, and depositing? theui with the C»overnmcnt to the extent of its issues. This is uncjucstionably Lawism, and in its most obnoxious forin. '* If the public funds," as has been remark- ed by a writer well (pialified to r Insti- tutions — and opportunities frequently occur to enable them to do so. I have understood that in the neighboring Union, i a Bank establislud in one State is not allowed to l.ave n Branch in another. The Directors themselves are the best judges with re- gard to the issue of eircidation. It must of course dejieiKl upon the average amount of deposits and specie in the Bank. The deposits in any of the Banks in this Province, are small with regard to their capital; and their circulation is also small, seldom exceeding three-fifths of their paid-up capital, and sometimes in less proportion than even that. I think the Banks might safely he allowed to issue In addition to a Five I'ound Note, one for Five Dollars, but not under, and not to a larger extent than would be required for the public convenience. I have not known any evils to result from Private^ ]Jank- ing Associations, or Copartnerships, issuing Notes, althougli I think the privikge should be confined to chartered institu- tions. I approve of the system of voting in the Bank with which I am connected. It varies in some of the other Banks, but not materially. The statements which the Banks are now required to give, contain I think all the information which the public interests require. They are much more full than those given in Great Britain. Competition in Banking, has to some extent, led to thf practice of paying interest on deposits. It is, however, only on deposits payable at short notice, and not, so far as I am aware, upon deposits at call, or on daily balances at any of the Banks. AV^ith us the rate of interest is fixed at 4 j)ei- ct. Wc have never suffered any inconvenience by being called upon to pay at short notice. I sec no want of safety i>i carrying on Banking operations on such deposits. I know of no means of investing monies in Canada, so as to be renumerative, and at the same time available at call or on short notice. f3