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 CC
 
 PRACTICAL TREATISE 
 
 BANKING. 
 
 BY 
 
 JAMES WILLIAM GILBART, F.R.S. 
 
 LATE GENERAL MANAGER OF THE LONDON AND WESTMINSTER BANK. 
 
 A NEW EDITION, WITH A 
 
 VIEW OF AMERICAN BANKING SYSTEMS AND STATISTICS TO 1860. 
 By J. SMITH HOMANS, 
 
 EDITOR OP "the banker's MAGAZINE," AND AUTHOR OF "CYCLOPEDIA OF COMMERCE." 
 
 TO WHICH IS ADDED, 
 "MONEY"-A LECTURE BY HENRY C. CAREY. 
 
 PHILADELPHIA: 
 HENRY CAREY BAIRD, 
 
 No. 406 WALNUT ST. 
 18 GO.
 
 COLLINS, PRINTER.
 
 i 
 
 
 TO 
 
 THE RIGUT UONOKABLE 
 
 LORD MONTEAGLE, F. R S., 
 
 COMPTROLLER GENERAL OF HER MAJESTY'S EXCHEQUER, ETC., ETC., ETC., 
 
 WHO, AS 
 
 4 DIRECTOR OF THE PROVINCIAL BANK OF IRELAND, 
 
 AS 
 
 CHANCELLOR OF THE EXCHEQUER, 
 
 AND A3 
 
 FRAMER OF THE REPORT OF THE COMMITTEE OF THE HOUSE OF LORDS, 
 
 APPOINTED TO INQUIRE INTO 
 
 THE CAUSES OF THE COMMERCIAL DISTRESS OF lSi7, 
 
 DISPLAYED A PROFOUND KNOWLEDGE OF THE PRINCIPLES 
 
 OP 
 
 PRACTICAL BANKING, 
 
 drill's Sife'odt 
 
 IS, WITH PERMISSION, RESPECTFULLY DEDICATED, 
 
 17 
 
 THE AUTHOR.
 
 PREFACE BY TIIEAUTHOE. 
 
 "The best security against mauagcment of banking affairs must ever be found in the capacity and 
 integrity of those who are intrusted with the administration of them, and in the caution and prudente 
 of the public; but no legislative regulation should be omitted which can increa.se and insure the sta- 
 bility of establishments upon whiuh commercial credit so much depends." — Speech from the Thront 
 in 1837. 
 
 In the preface to my " History and Principles of Banking," I made the follow- 
 ing remarks : — 
 
 "Banking is both an nrt and a science. As an art, it is a branch of trade iuti- 
 mately connected with every man's business ; as a science, it forms an important 
 portion of political economy. The knowledge of banking as an art, is acquired 
 like that of other arts, by serving an apprenticeship, or engaging practically iu 
 its operations. The knowledge of banking as a science, may be acquired, like 
 that of other sciences, by reading, observation, and reflection. These two 
 branches of knowledge do not ulways accompany each other. Some, who are 
 practically engaged in banking, do not study its principles ; while those who 
 have written upon its principles, have for the most part been political econo- 
 mists and statesmen, Avho were unacquainted with its practical details. This 
 publication will perhaps be thought worthy of some degree of attention upon 
 the ground that it professes to be a scientific work, written by a practical man." 
 
 The present work professes to treat of banking as an art. "Art is the appli- 
 cation of knowledge to a practical end."* The practical end of banking, as of 
 all other trades and professions, is to get money. This book treats of the means 
 by which that end is obtained, points out the rules to be followed, and the errors 
 to be avoided, shows how these rules are applied by various banking institutions, 
 and in different districts of the United Kingdom, exhibits the qualifications neces- 
 
 * Sir John Herschel.
 
 sarj to the party by whom these rules are administered, and describes those moral 
 virtues which are as indispensable as professional knowledge to the attainment of 
 success. 
 
 It may be supposed, that in discussing the " eifects of the Act of 1844," and 
 "the Laws of the Currency," I have wandered beyond the limits of practical 
 banking. But these matters are viewed only in their practical results. The prin- 
 ciples of banking are deductions from facts. The science of banking is a collec- 
 tion of these principles. It is of importance to have a correct notion of the nature 
 of this science. In the physical sciences, as in chemistry and electricity, we often 
 discover a principle, and then apply it to a practical end. But in banking, and in 
 political economy, generally, we first collect our facts, and then ascend from facts 
 to principles. Hence books, in which are described the practical operations of 
 banking, and the actual results of legislative enactments, furnish the materials 
 which enable us to arrive at sound principles. 
 
 There are several classes of persons to whom I think this book may be more 
 particularly useful. 
 
 The first class includes those public men who have occasion to write or to speak 
 upon our banking institutions. Statesmen, authors, and reviewers, however cor- 
 rect may be their knowledge of banking as a science, often fall into mistakes when 
 they attempt to desci-ibe its practical operations. Although it must be admitted 
 that the principles of banking may be well understood without any acquaintance 
 Avith details, yet it is equally true that if a public man have acquired a competent 
 degree of practical information, his opinions will carry greater weight, and he will 
 be less liable to fall into erroneous conclusions. They, especially, who are desirous 
 of altering the constitution of our banking establishments should be anxious not to 
 weaken the force of their recommendations by making misstatements as to matters 
 of fact. The public have a right to expect that they who attempt to improve a 
 system should be well acquainted with the system they attempt to improve. 
 
 The second class are those who are practically engaged in banking operations. 
 Those directors of our joint-stock banks, who may have been appointed chiefly on 
 account of their high character and local influence, may derive from this work 
 some practical information, which will assist them in the discharge of their official 
 duties. Young men, too, who occupy subordinate stations in our banking estab- 
 lishments, may here acquire those enlarged views that will qualify them for higher 
 appointments. One object of this work is, to aid the formation of good practical 
 bankers. Even to experienced bankers, books on banking are useful, not only from 
 the information they impart, but from the impressions they produce, and the recol- 
 lections they awaken. In banking, as in morals, we often go astray, more from, 
 want of firmness than from want of knowledge. We have all need to be reminded 
 of the importance of a steady adherence to sound principles. And the more
 
 BY J. vr. Gir-nART. i» 
 
 frequently the right path is pointed out to us, the less likely are we to wander into 
 those which are forbidden. 
 
 The shareholders in joint-stock banks are a class to whom the subject must be 
 of the deepest interest. Upon the wise administration of their respective banks 
 will depend the amount of their dividends and the safety of their capital. This 
 book professes to show in what way this wise administration may be secured. 
 Shareholders may here learn how to judge of the conduct of their directors, and 
 (what is of no less importance) how to regulate their own. 
 
 To all persons who " keep bankers," it must be useful to know by what rules 
 bankers manage their business. They will thus be able to conduct their account 
 so as to give satisfaction to their banker. And they will be able to judge how far 
 he may be disposed to grant them such assistance as they may occasionally require. 
 A large number of persons, especially in London, have not yet discovered the ad- 
 vantage of keeping a banker. They imagine that banks are merely places in which 
 the opulent deposit their superfluous riches. The perusal of this work will be suffi- 
 cient to show that the advantages of banking are not confined to the wealthy. 
 
 I do not know that I can promise much amusement, except to those who find 
 amusement in the pursuit of knowledge. Banking is considered a dry subject. 
 So are all subjects until they are understood. I think I may say, that neither in 
 the matter, nor in the style, will my readers find anything here which they cannot 
 understand. They who wish only for such a general acquaintance with banking, 
 as in the present day every man of education is expected to possess, may read the 
 first hundred and thirty pages, omitting the third, fifth, twelfth, thirteenth, and 
 fourteenth sections. They may then consult their own taste as to whether they 
 will read any other portions of the work. Should they do no more than this, they 
 will obtain as much knowledge of practical banking as they will probably require 
 for the purposes of general society, even in the company of bankers. 
 
 This book is designed to be useful to the public at large, by circulating that kind' 
 of information, which, as it becomes more widely diffused, will tend to prevent a 
 recurrence of those evils that have in too many instances resulted from the bad 
 administration of some of our banking institutions. To give useful information 
 to the public has been the aim of this and of all my other works. When this book 
 first appeared, there existed no other publication that described in detail the inte- 
 rior operations of a bank. I am happy to say, that since that period several valua- 
 ble works of a similar kind have been published. And we are now presented 
 monthly, in the "Bankers' Magazine," with excellent articles on practical banking, 
 written chiefly by practical bankers. 
 
 The first edition of this work was published in May, 1827 ; the second in January, 
 1828; the third in December, 1834; and the fourth in October, 1836. In the be- 
 ginning of the year 1847, I determined to publish a new edition; but before I had
 
 X PREFACE BY J. W. GILBART. 
 
 prepared it for publication the pressure came, and Parliamentary Committees were 
 appointed to inquire into the causes of the distress. My position required that I 
 should make myself acquainted with the evidence given before those committees. 
 I wrote out my reflections on some portions of this evidence, and have embodied 
 them in the present work. Hence one cause of the increased size of the book, and 
 of the delay which has attended its publication. This edition has the advantage 
 of an elaborate Index, the uses of which are pointed out in the last section of the 
 second part. 
 
 I have been so long known as a writer on banking, and my writings have met 
 with so much acceptance, that it is not necessary 1 should enumerate any claims I 
 may be supposed to have on public attention. But there is one claim that gathers 
 strength by time, that is, experience. And in publishing a new edition of a prac- 
 tical work, it may not be inappropriate to state, that it is now upwards of thirty- 
 six years since I first engaged in the business of banking, and I have been above 
 twenty two years a manager. I am thankful to acknowledge, that during those 
 twenty-two years I have not had one unsuccessful year. 
 
 J. W. G. 
 
 Lo.M'ON, Jidy bill, 1849.
 
 CONTENTS. 
 
 Part First.— OF PRACTICAL BANKING. 
 
 ■BonoR PAoa 
 
 I. The Nature of Banking 1 
 
 II. The Utility of Banking 2 
 
 TIL Banking Terms 8 
 
 V. The General Administration of a Bank . . ,2 
 V. The Administration of a Bank with regard to Pro- 
 ceedings ON Bills op Exchange .... 28 
 VI. The Administration of a Bank with regard to the 
 
 Employment of its Surplus Funds ... 41 
 11. The Administration of a Bank during a Season of 
 
 Pressure 52 
 
 VIII. The Administration of a Bank under the Act op 1844 61 
 IX. The Administration of the Banking Department of 
 
 the Bank of England 82 
 
 X. The Administration of Joint-Stock Banks, with an 
 
 Inquiry into the Causes of their Failures . . 99 
 
 XL The Administration of the Office . . , 12G 
 
 XII. Banking Book-Keeping 150 
 
 XIII. Banking Calculations 184 
 
 XIV. Banking Documents .,.;... 202
 
 Xll CONTENTS. 
 
 Part Second.— OF BAJ^KING INSTITUTIONS. 
 
 I. The Bank op England 233 
 
 II. The London Private Bankers .... 249 
 
 ITI. The Joint-Stock Banks in London . . . 259 
 
 IV. The Country Private Banks .... 284 
 
 V. The Country Joint-Stock Banks . . . 300 
 
 YI. The Banks of Scotland 311 
 
 VII. The Banks of Ireland ...... 352 
 
 VIII. The Moral and Religious Duties of Banking Compa- 
 nies 387 
 
 IX. Ten Minutes' Advice about keeping a Banker . 424 
 
 X. Index; Reading 431 
 
 APPENDIX. 
 
 The Bank of France 433 
 
 Banks of the United States 440 
 
 Index to Subjects in GtIlbart's Treatise .... 443 
 Banks and Banking in the United States . . . 459 
 Money. By Henry C. Carey .525
 
 A PRACTICAL TREATISE 
 
 ON 
 
 BANKING. 
 
 Part L — OF PRACTICAL BANKING. 
 
 Section I. — THE NATURE OF BANKING. 
 
 " What is it that we call a Banker ? There is in this city a company 
 or corporation called goldsmiths, and most of those called bankers are of 
 that corporation ; but so far as I know, there is not a company or corpo- 
 ration in England called bankers, nor has the business any definition or 
 description, either by common law or by statute. By custom, we call a 
 man a banker who has an open shop, with proper counters, servants, and 
 books, for receiving other people's money, in order to keep it safe, and 
 return it upon demand ; and when any man has opened such a shop we 
 call him a banker, without inquiring whether any man has given him 
 money to keep or no ; for this is a trade where no apprenticeship is re- 
 quired, it having never yet been supposed that a man who sets up the 
 trade of banking could be sued upon the statute of Queen Elizabeth, 
 which enacts, that none shall use any art or mystery then used, but such 
 as have served an apprenticeship in the same." (Speech, delivered in 
 the House of Commons, in 1746. See the London Magazine for that 
 year, p. 120.) 
 
 The term bank is derived from banco., the Italian word for bench, as 
 the Lombard Jews in Italy kept benches in the market-place, where they 
 exchanged money and bills. When a banker failed, his bench was bro- 
 ken by the populace ; and from this circumstance we have our term bank- 
 rupt. 
 
 A banker is a dealer in capital, or, more properly, a dealer in money. 
 He is an intermediate party between the borrower and the lender. He 
 borrows of one party and lends to another ; and the difierence between 
 the terms at which he borrows and those at which he lends, forms the 
 
 1
 
 A Treatise on Banking. 
 
 source of his profit. By this means he draws into active operation those 
 small sums of money which were previously unproductive in the hands of 
 private individuals ; and at the same time furnishes accommodation to 
 those who have need of additional capital to cany on their commercial 
 ti'ansactions. 
 
 Banks have been divided into private and public. A private bank is 
 that in which there are but few partners, and these attend personally to its 
 management. A public bank is that in which there fire numerous part- 
 ners, and they elect from their own body a certain number, who are in- 
 trusted with its management. The latter are usually called joint-stock 
 banks. 
 
 The business of banking consists chiefly in receiving deposits of money, 
 upon which interest may or may not be allowed ; in making advances 
 of money, principally in the way of discounting bills ; and in effecting 
 the transmission of money from one place to another. Private banks in 
 metropolitan cities are usually the agents of the banks in the provinces, 
 and charge a commission on their transactions. In making payments, 
 many country banks issue their own notes. 
 
 The disposable means of a bank consist of, First, the capital paid dow'n 
 by the partners, or shareholders. Secondly, the amount of money lodged 
 by their customers. Thirdly, the amount of notes they are able to keep 
 out in circulation. Fourthly, the amount of money in the course of trans- 
 mission, that is, money they have received, and are to repay, in some dis- 
 tant place, at a future time. 
 
 These disposable means are employed, First, in discounting bills. Sec- 
 ondly, in advances of money in the form of cash credits, loans, or over- 
 drawn accounts. Thirdly, in the purchase of government or other secu- 
 rities. Fourthly, a part is kept in the banker's till, to meet the current de- 
 mands. Of these four ways of employing the capital of a bank, three are 
 productive, and one is unproductive. The discounting of bills yields in- 
 terest ; the loans, and the cash credits, and the overdrawn accounts, yield 
 interest ; the government securities yield interest ; the money in the till 
 yields no interest. 
 
 The expenses of a bank may be classified thus : rent, taxes, and repairs 
 of the house in which the business is carried on ; salaries of the officers ; 
 stationer's bill for books, paper, notes, stamps, &c. ; incidental expenses, 
 as postages, coals, &c. 
 
 The profits of a bank are that portion of its total receipts, — including 
 discount, interest, dividends, and commission, — which exceeds the amount 
 of the expenses. 
 
 Section IL— THE UTILITY OF BANKING. 
 
 In the first place, banks are useful as places of security for the deposit 
 of money. The circumstance which gave rise to the business of banking 
 ji this country was a desire on the part of the merchants of London to 
 
 2
 
 The Ulility of Banking. 
 
 obtain a place where they might lodge their money in security. Every 
 one who has had the care of large sums of money knows the anxiety 
 which attends their custody. A person in this case must either take care 
 of his money himself or trust it to his servants. If he take care of it him- 
 self, he will often be put to inconvenience, and will have to deny himself 
 holidays and comforts, of which a man who is possessed of much money 
 would not like to be deprived. 
 
 If he intrust it to others, he must depend upon their honesty and their 
 ability. And although, in many important cases, a master is compelled 
 to do this, yet he does not feel the same satisfaction as if the money 
 was actually under his own care. Some instances of neglect or of dis- 
 honesty will necessarily occur, and these will occasion suspicion in ref- 
 erence to other parties against whom no suspicion ought to be enter- 
 tained. Besides, in both these cases the money is lodged under the own- 
 er's own roof, and is subject to thieves, to fire, and to other contingen- 
 cies, against which it is not always easy to guard. 
 
 All these evils are obviated by means of banking. The owner of 
 money need neither take the charge of it himself nor trust to his de- 
 pendants. He can place it in the hands of his bankers. They are 
 wealthy men, and are responsible to him for the amount. If they are 
 robbed, it is no loss to him ; they are pledged to restore to him the amount 
 of his deposit when he shall require it. Whenever he wants money he 
 has only to write an order or draft upon his banker, and the person to 
 whom he is indebted takes the draft to the bank, and, without any hesita- 
 tion or delay, receives the money. 
 
 2. The bankers allow interest for money placed in their hands. 
 
 By means of banking, the various small sums of money which would 
 have remained unproductive in the hands of individuals, are collected into 
 large amounts in the hands of the bankers, who employ it in grantinp- facil- 
 ities to trade and commerce. Thus banking increases the productive 
 capital of the nation. At the origin of banking, " the new-fashioned 
 bankers," as they were called, allowed a certain rate of mterest for 
 money placed in their hands. The banks of Scotland carrj^ this practice 
 to the greatest extent, as they receive upon interest so low an amount 
 as ten pounds ; and also allow interest on the balance of a running 
 account. Many of the country bankers in England allow interest on 
 the balance of a running account, and charge commission on the amount 
 of the money withdrawn. The London bankers generally do not allow 
 interest on d-eposits, but neither do they charge commission. All their 
 profits are derived from the use of their customers' money. The banks 
 of Scotland do not charge commission, although they allow interest on 
 deposits ; but then those banks have a profit by the issue of their notes. 
 The London bankers do not issue notes. 
 
 3. Another advantage conferred upon society by bankers is, that they 
 make advances to persons who want to borrow money. These advances 
 are made, by discounting bills, upon personal security, or upon the joint 
 security of the borrower and two or three of his friends, and sometimes 
 upon mortgage. Persons engaged in trade and commerce are thus en- 
 abled to augment their capital, and consequently their wealth. The in- 
 
 8
 
 A Treatise on Banking. 
 
 crease of money in circulation stimulates production. When bankers are 
 compelled to withhold their usual accommodation, both the commercial and 
 the agricultural interests are plunged into extreme distress. The great 
 advantage arising to a neighbourhood from the establishment of a bank, 
 is derived mainly from the additional supplies of money advanced in 
 the form of loans or discounts to the inhabitants of the place. This 
 principle is so well understood in Scotland, that branch banks are some- 
 times established in poor districts, with a view of obtaining a future profit 
 from the prosperity which the bank will introduce. (Evidence before 
 the Select Committee of the House of Commons upon the Abolition of 
 Small Notes, p. 43.) 
 
 4. Another benefit derived from bankers is, that they transmit money 
 from one part of the country to another. 
 
 There is scarcely a person in business who has not occasion sometimes 
 to send money to a distant town. But how is this to be done } He can- 
 not send a messenger with it on purpose ; that would be too expensive. 
 He cannot send it by post ; that would be too hazardous. Besides, the 
 sum may be some fraction of a pound, and then it cannot go by post. 
 The post, too, takes a considerable time, as three letters at least must pass 
 on the transaction. If he live in London he may obtain a bank post bill, 
 but he cannot obtain that in the country ; and he may not be able to ob- 
 tain it in London for the exact sum he wants. How, then, is the money 
 to be sent .'' 
 
 Every country banker opens an account with a London banker. If. 
 then, a person live at Penzance, and wants to send a sum of money to 
 Aberdeen, he will pay the money into the Penzance bank, and his friend 
 will receive it of the Aberdeen bank. The whole transaction is this. 
 The Penzance bank will direct their agent in London to pay the money 
 to the London agent of the Aberdeen bank, who will be duly advised of 
 the payment. A small commission charged by the Penzance bank, and 
 the postages, constitute all the expenses incurred, and there is not the 
 least risk of loss. 
 
 Commercial travellers, who are collecting money, derive great advan- 
 tage from the banks. Instead of carrying with them, throughout the 
 whole of their journey, all the money they have received, when perhaps 
 it may be wanted at home, they pay it into a bank, by whom it is remit- 
 ted with the greatest security and at little expense ; and they are thus de- 
 livered from an encumbrance which would have occasioned great care 
 and anxiety. 
 
 5. Wherever a bank is established, the public are able to obtain that 
 denomination of currency which is best adapted for carrying on the com- 
 mercial operations of the place. In a town which has no bank, a person 
 may have occasion to use small notes, and have none but large ones; and 
 at other times he may have need of large notes, and not be able to obtain 
 them. But where a bank is established there can be no difficulty of this 
 kind. The bank issues that description of notes which the receivers may 
 require, and are always ready to exchange them for others of a diflerent 
 denomination. Banks, too, usually supply their customers and the neigh- 
 bourhood with silver; and if, on the other hand, silver should be loo 
 
 4
 
 The Utility of Banking. 
 
 abundant, the banks will receive it, either as a deposit or in exchange for 
 tlieir notes. Hence, where banks are established, it*is easy to obtain 
 change. This is very convenient to those who have to pay large sums in 
 wages, or who purchase in small amounts the commodities in which they 
 trade. 
 
 6. By means of banking there is a great saving of time in making mon- 
 ey transactions. 
 
 How much longer does it take to count out a sum of money in pounds, 
 shillings, and pence, than it does to write a draft. And how much less 
 trouble is it to receive a draft in payment of a debt, and then to pay it into 
 the banker's, than it is to receive a sum of money in currency. What in- 
 conveniences would arise from the necessity of weighing sovereigns. 
 What a loss of time from disputes as to the goodness or badness of partic- 
 ular pieces of money. 
 
 Besides the loss of time that must necessarily occur on every transac- 
 tion, we must also reckon the loss which eveiy merchant or tradesman in 
 an extensive line of business would certainly sustain in the course of a 
 year, from receiving counterfeit or deficient coin, or forged notes. From 
 all this risk he is exempt by keeping a banker. If he receive payment 
 of a debt, it is in the form of a draft upon his customer's banker. He 
 pays it into his own banker's, and no coin or bank notes pass through his 
 hands. If he draw bills, those bills are presented by his banker ; and if 
 his banker take bad money it is his own loss. 
 
 7. A merchant or tradesman who keeps a banker, saves the trouble and 
 expense of presenting those bills or drafts which he may dravv upon his 
 customers, or which he may receive in exchange for his goods. He pays 
 these into the hands of his banker, and has no further trouble. He has 
 now no care about the custody of his bills ; no anxiety about their being 
 stolen ; no danger of forgetting them until they are overdue, and thus ex- 
 onerating the indorsers ; no trouble of sending to a distance in order to 
 demand payment. He has nothing more to do than to see the amount 
 entered to his credit in his banker's books. If a bill be not paid, it is 
 brought back to him on the day after it falls due, properly noted. The 
 banker's clerk and the notary's clerk are witnesses ready to come forward 
 to prove that the bill has been duly presented, and the notary's ticket at- 
 tached to the bill assigns the reason why it is not paid. But if any in- 
 dorser of the bill has given a reference in case of need, that is, if any in- 
 dorser has written on the back of the bill that some other party will pay it 
 in case the accepter does not, then the notary takes the bill to the referee, 
 and procures the money from him. 
 
 This circumstance alone must cause an immense saving of expense, to 
 a mercantile house in the course of a year. Let us suppose that a mer- 
 chant has only two bills due each day. These bills may be payable in 
 distant parts of the town, so that it may take a clerk half a day to present 
 them. And in large mercantile establishments it would take up the whole 
 time of one or two clerks to present the due bills and the drafts. The 
 salaries of these clerks are therefore saved by keeping an account at a 
 banker's. Besides the saving of expense, it is also reasonable to suppose 
 that losses upon bills would sometimes occur from mistakes or over- 
 
 5
 
 A Treatise on Banking. 
 
 sights, from miscalculation as to the time a bill would become due, from 
 errors in marking' it up, from forgetfulness to present it, or from present- 
 ing it at the wrong house. In these cases, the indorsers and the draw- 
 ers are exonerated ; and if the accepter do not pay the bill, the amount is 
 lost. In a banking-house such mistakes are not so likely to occur, though 
 they do occur sometimes ; but the loss falls upon the banker, and not upon 
 his customer. 
 
 8. Another advantage from keeping a banker in London is, that by 
 this means you have a continual referee as to your respectability. If a 
 mercantile house in the countiy write to their agent, to ascertain the re- 
 spectability of a firm in London, the first inquiry is. Who is their banker ? 
 And when this is ascertained, the banker is applied to through the proper 
 channel, and he gives his testimony as to the respectability of his custom- 
 er. When a trader gives his bill, it circulates through the hands of many 
 individuals to whom he is personally unknown ; but if the bill is made 
 payable at a banking-house, it bears on its face a reference to a party to 
 whom the accepter is known, and who must have some knowledge of his 
 character as a tradesman. This may be an immense advantage to a man 
 in business, as a means of inci'easing his credit ; and credit, Dr. Franklin 
 says, is money. 
 
 9. The keeping an account at a banking-house, enables a trader not 
 only to give a constant reference as to his own respectability, but it also 
 enables him to ascertain the respectability of other persons who keep 
 bankers. There are numerous cases in which a trader may wish to know 
 this. A stranger may bring him a bill, and want goods in exchange ; or 
 he may have drawn a bill upon a customer, and wishes to ascertain if this 
 bill would be paid before he gave him any further credit. If this bill is 
 not made payable at a banking-house, he can obtain no information. But 
 suppose the bill is made payable at a banking-house ; even then he can 
 obtain no information, unless he himself has a banker. If he take the bill 
 to the banker's, at whose house it is made payable, and say, " Gentlemen, 
 I will thank you to inform me if the accepter of this bill be a respectable 
 man. May I safely give goods or money in exchange for it.''" They 
 will reply, " Sir, we never answer such questions to strangers." But if 
 the holder of this bill keep an account at a banker's, he has only to ask 
 his banker to make the inquiry for him, and he will easily obtain the most 
 ample information. Among nearly all the bankers in London, the prac- 
 tice is established of giving information to each other as to the respecta- 
 bility of their customers. For as the bankers themselves are the greatest 
 discounters of bills, it is their interest to follow this practice ; and indeed 
 the interest of tlieir customers also, of those at least who are respectable. 
 
 10. By means of banking, people are able to preserve an authentic rec- 
 ord of their annual expenditure. If a person pays into his banker all the 
 money he receives in the course of a year, and makes all his payments by 
 checks, then by looking over his bank-book at the end of the year he will 
 readily see the total amount of his receipts, and the various items of his 
 expenditure. This is very useful to persons who have not habits of busi- 
 ness, and who may therefore be in danger of living beyond their means. 
 It is useless to advise such persons to keep an account of their expenses, 
 
 6
 
 The Utility of Banking. 
 
 they will do no such thing ; but when short of money at Christmas, to pay 
 their tradesmen's bills, they may take the trouble of looking over their 
 bank-book, and noticing how many checks were drawn for the purchase 
 of unnecessary articles. A bank account is useful, also, in case of disput- 
 ed payments. People do not always take receipts for money they pay to 
 their tradesmen, and when they do, the receipts may become lost or mis- 
 laid. In case of death, or of omission to enter the amount in the credit- 
 or's books, the money may be demanded again. Should the payment 
 have been made in bank notes or sovereigns, the payer can ofler no legal 
 pi'oof of having setded the account ; but if the account was discharged by 
 a check on a banker, the check can be produced, and the payment proved 
 by the officers of the bank, who can be subpcEnaed for that purpose. 
 
 11. Another advantage resulting from keeping a banker in London is, 
 that the party has a secure place of deposit for any deeds, papers, or other 
 property that may require peculiar care. Any customer who pleases may 
 have a tin box, which he may leave with his banker in the evening, and 
 call for it in the morning. In this box he might place his will, the lease 
 of his house, policies of insurance, or any other documents he wished to 
 preserve against fire. Stock-brokers and others, who have offices in the 
 city and live out of town, have such boxes, which they leave over night 
 with their banker, for the sake of security, in preference to leaving them 
 in their own office. If a party were going to the country, he might send 
 his plate or jewellery to his banker, who will lock it up in his strong room, 
 and thus it will be preserved from fire and thieves until his return. So- 
 licitors and others, who have deeds or other writings of importance left in 
 their custody, can send them to the bank during the night, and thus avoid 
 the danger of fire. 
 
 12. By keeping a banker, people have a ready channel of obtaining 
 much information that will be useful to them in the way of their business. 
 They will know the way in which bankers keep their accounts ; they will 
 learn many of the laws and customs relating to bills of exchange. By 
 asking the banker, or any of the clerks, they may know which is the 
 readiest way of remitting any money they have to send to any part 
 of the country or to the continent. If they have to buy or sell any stock 
 in the public funds, the banker can give them the name of a respectable 
 broker who can manage the business ; or should they be about to travel, 
 and wish to know the best way of receiving money abroad, or be appoint- 
 ed executors to a will, and have to settle some money matters, the banker 
 will in these and many other cases be able to give them the necessary in- 
 formation. 
 
 13. Banking also exercises a powerful influence upon the morals of so- 
 ciety. It tends to produce honesty and punctuality in pecuniary engage- 
 ments. Bankers, for their own interest, always have a regard to the 
 moral character of the party, with whom they deal ; they inquire whether 
 he be honest or tricky, industrious or idle, prudent or speculative, thrifty 
 or prodigal, and they will more readily make advances to a man of moder- 
 ate property and good morals, than to a man of large property but of in- 
 ferior reputation. Thus the establishment of a bank in any place imme- 
 diately advances the pecuniary value of a good moral character. There 
 
 B 7
 
 A Treatise on Banking. 
 
 are numerous instances of persons having arisen from obscurity to wealth, 
 only by means of their moral character, and the confidence which that 
 character produced in the mind of their banker. It is not merely by way 
 of loan or discount that a banker serves such a person. He also speaks 
 well of him to those persons who may make inquiries respecting him ; and 
 the banker's good opinion will be the means of procuring him a higher 
 degree of credit with the parties with whom he trades. These effects are 
 easily perceivable in country towns ; and even in London, if a house be 
 known to have engaged in gambling or smuggling transactions, or in any 
 other way to have acted discreditably, their bills will be taken by the 
 bankers less readily than those of an honorable house of inferior property. 
 It is thus that bankers perform the functions of public conservators of 
 the commercial virtues. From motives of private interest they encourage 
 the industrious, the prudent, the punctual, and the honest, while they dis- 
 countenance the spendthrift and the gambler, the liar and the knave. 
 They hold out inducements to uprightness, which are not disregarded by 
 even the most abandoned. There is many a man who would be deterred 
 from dishonesty by the frown of a banker, though he might care but little 
 for the admonitions of a bishop. 
 
 Section III.— BANKING TERMS. 
 
 Query I. — Is the word Bank a singular or a plural noun ? 
 
 The word Bank, being a noun of multitude, may have verbs and pro- 
 nouns agreeing with it in either the singular or the plural number, yet not 
 without regard to the import of the term as conveying unity or plurality 
 of idea. In the use of this term the following rules are usually ob- 
 served : — 
 
 1. When any operation or feeling of the mind is ascribed to a bank, 
 the verbs and pronouns are placed in the plural ; as, " The bank were 
 anxious to meet the wishes of the public." " The bank have concurred 
 in the measure proposed." " Are you one of the persons who tried the 
 question with the Bank of Ireland, whether they conceived themselves 
 bound to pay in gold at their branches .'' " " The Bank of England pe- 
 titioned against this bill, and loere heard by their counsel ; but their rep- 
 resentations produced no effect, and the bill having passed through both 
 Houses, received the Royal assent." The following examples, wherein 
 mental operations are ascribed to a neuter pronoun, are violations of this 
 rule : — " The bank alloivs the party having the cash credit, to liquidate 
 any portion of his debt to the bank at any time that may suit his conve- 
 nience, and reserves to itself the power of cancelling, whenever it shall 
 think Jit, the credit granted." " It is usual for the bank when it gives a 
 cash credit to keep a watchful eye over the person having that cash 
 credit." 
 
 2. When a reference is made to a bank merely as an institution, the 
 term is considered to belong to the singular ; as, " The Bank of Scotland 
 
 6
 
 Banking Terms. 
 
 continued the only bank from the date of its establishment, in 1695, to 
 the year 1727. In that year a charter of incorporation was granted to 
 certain individuals named therein for carrying on the business of banking, 
 under the name of the Royal Bank ; and subsequent charters were grant- 
 ed to this establishment, enlarging its capital, which now amounts to one 
 million and a half." " The National Bank of Scotland has 1,238 part- 
 ners." " If this measure be carried into effect, the Provincial Bank must 
 instantly be deprived of any sufficient means of reimbursing itself for the 
 heavy expense to which it has been subject." " Has your bank an es- 
 tablishment at Kirkcudbright ? " " The Bank of England has the control 
 of its issues entirely within itself.'''' 
 
 3. When we notice the rules or habitual acts of a bank, the word be- 
 longs to the singular ; as, " The Provincial Bank allows interest at the 
 rate of two per cent." " The bank draws bills upon London at twenty- 
 one days after date." " The bank discounts bills at the rate of four per 
 cent." " The bank issues notes payable in gold at the place of issue." 
 " The London and Westminster grants interest upon deposits ; it does 
 not allow its officers to receive Christmas presents from its customers." 
 In reference to cases^ that fall under this rule, there is, however, some 
 contrariety of practice : — " Do the Provincial Bank issue post bills ? 
 They do not." " Have the Bank of Ireland, at their branch in Cork, 
 been in the habit of receiving gold to any amount in payments ? " 
 " Have the Bank of Ireland any deposits at the Cork branch ? Do you 
 know how their notes get into circulation .'' Do they pay any interest on 
 their deposits ? They have a great quantity of notes in circulation, — 
 have they not ? " 
 
 4. When the word bank is connected with a past participle by means 
 of the neuter verb to be, it usually belongs to the singular ; as, " I am a 
 director of the Bank of Scotland, which is established by act of Parlia- 
 ment ; it does not hold a charter from the Crown, but, in common lan- 
 
 . guage, it is called a chartered bank." " Suppose a bank was enabled to 
 take six per cent, on a cash credit, instead of four." " The Falkirk 
 Union Banking Company has been returned to this house as sequestrated 
 in the month of October, 1816." "A new bank was constituted as a 
 fund upon which the sum of <£ 2,564,000 should be raised, and it was 
 called the Land Bank because established on land securities." 
 
 5. When the word bank is preceded by the indefinite article, a, an^ — 
 by the demonstrative pronoun, this, that, — or by the words each, any, 
 every, one, it belongs to the singular ; as, " Do you not think that a bank 
 that is possessed of a capital of one million may and will do more busi- 
 ness than a bank that is only possessed of half a million ^ " " In a mo- 
 ment of pressure, an emergency like the present, that bank would get 
 into great disrepute who called up any one of its cash credits." " What is 
 the amount of the small note circulation in that bank as connected with 
 its whole circulation .'' " " Each bank has an interest to issue as much 
 of the small note circulation as it can .'' — Certainly it has, provided the 
 small notes can be kept out; but, as every bank makes an exchange at 
 Glasgow twice every week, and the exchanges of each bank come back 
 upon itself, and the balance is paid by a draft on Edinburgh at sight," 
 
 9
 
 A Treatise on Banking. 
 
 &c. " I believe almost every bank in Scotland has an agent in Glasgow.* 
 •' Suppose one bank in Scotland made its notes payable in Scotland, at 
 the place where the notes were issued." " Is there any bank in Cork 
 now that issues notes ? " 
 
 6. When the word bank is introduced in either the singular or the 
 plural number, the same number should be preserved throughout the sen- 
 tence. Hence, the following sentence of Smollett's is inaccurate : — 
 " By the same acts the bank was required to advance a sum not exceed- 
 ing c£ 2,500,000 towards discharging the national debt, if wanted, on con- 
 dition that they should have £ 5 per cent, for as much as they might ad- 
 vance, redeemed by Parliament." 
 
 7. When the word bank is used in the singular number, it is consid- 
 ered as a substantive of the neuter gender, and hence is associated with 
 the relative pronoun lohich ; but when used in the plural number it im- 
 plies the idea of persons, and has accordingly the personal relative who ; 
 as, " The bank with which he kept his account has stopped payment " ; 
 or, " The bank with whom he kept his account have stopped payment." 
 " The bank whose interests are affected by the measure have petitioned 
 against it." " The bank upon lohom the cheque wjis drawn have refused 
 to honor it." The following sentence is not in accordance with this rule : 
 — " In a moment of pressure, an emergency like the present, that bank 
 would get into great disrepute loho called up any of its cash credits." 
 
 I have not observed that any English writer, except Mr. McCuUoch, 
 considered a bank to be a lady ; and this is only in the case of an Irish 
 bank. Under the article " Banking," in his Commercial Dictionary, he 
 says, — " The Bank of Ireland draws on London at twenty days' date. 
 She neither grants cash credits nor allows any interest on deposits ; she 
 discounts at the rate of .£5 per cent." This mode of expression is, how- 
 ever, very common with American writers.* 
 
 II. Should we write accepter or acceptor of a bill of exchange .-' The 
 name of the agent to any verb is usually formed, in our language, by tho 
 addition of r or er to the verb ; as, indorser, talker, walker, speaker. 
 What reason, then, can be assigned why, in the present case, we should 
 depart from the analogy of the language .'' We do not say, the drawer, 
 the holder, the payor of a bill ; why, then, should we say the acceptor ? 
 When we speak of the accepter of a bill, why should we not spell the 
 word in the same way as when we speak of the accepter of a present, or 
 of a fee .'' Yet all our English legal authors write acceptor : — "A person 
 who accepts for honor, is only liable if the original drawee do not pay ; 
 and, to charge such acceptor, there must be a presentment for payment 
 to such original drawee." — Bayley. " A foreign bill is binding in this 
 country on the acceptor, though he accepted by parol, or by writing un- 
 connected with the instrument." — Chitty. " Where the acceptor of a 
 forged bill pays it, and is guilty of any negligence or want of due caution 
 in making such payment, he cannot recover the money so paid, from the 
 innocent party to whom he paid it." — Roscoe. Scotch authors, however, 
 
 * It has now become more common with English writers, especially with reference 
 to the Bank of England. 1849.
 
 Banking Terms. 
 
 write accepter. " An English inland bill has generally three parties to it, 
 the drawer, accepter, and payee ; whereas, in Scotland most of the inland 
 bills have, at first, but two parties, the drawer and the accepter ; and they 
 are made payable to the drawer or his order," (See Glen, On the Law 
 of Bills of Exchange in Scotland.) 
 
 III. Shoald we write indorse or endorse 7 Indorse is derived direct 
 from the Latin, in dorsum, on the back. Endorse is derived from the 
 Latin, through the French, endosser. In such cases, most writers adopt 
 the Latin mode of spelling, in preference to the French, as indorse, in- 
 quire, intire ; not endorse, enquire, entire. All legal authors write in- 
 dorse. " A promise to indorse, though on sufficient consideration, cannot 
 be treated as an actual indorsement.'''' — Bayle.y. "The liability of the 
 indorser is discharged by want of notice, as in the case of the drawer." 
 — Roscoe. " A person who draws or indorses a bill, or indorses a note 
 for the accommodation of the acceptor, or maker, or payee, or prior in- 
 dorsers, has, on paying the instrument, a remedy over thereon against the 
 acceptor, or maker, or prior party." — Chitty. " A drawer or indorser 
 cannot, in the character of indorsee, maintain an action against the ac- 
 cepter, where the indorsement is after the refusal of payment." — Glen. 
 
 IV. Should we say indorsement or indorsation ? In England we al- 
 ways use the word indorsement. " No particular words are essential to 
 an indorsement ; the mere signature of the indorser is, in general, suffi- 
 cient." — Bayley. " The indorsement may be upon the face, or at the 
 back of the bill." — Chitty. " An attesting witness to an indorsement is 
 necessary, when the bill is for a less sum than £ 5." — Chitty. In Scot- 
 land the term more generally used is indorsation. " If a bill or note be 
 granted to a woman while single, and she afterwards marry, the right to 
 transfer it by indorsation would vest in the husband." " After a bill has 
 been paid, no indorsation can take place, so as to affect the accepter, or 
 any of the parties who would otherwise be discharged." — Glen. The 
 word indorsement is also used in Scotland, though more rarely. Both 
 words appear to have precisely the same meaning. An indorsation is 
 made, either by the indorser's writing, and subscribing an order to pay 
 the contents of the bill to some particular person mentioned by name, 
 which is styled Q.full indorsement, or by merely signing his name on the 
 bill, and delivering it to the indorsee, or person to whom it is indorsed, 
 which is termed a blank indorsation.'''' — Glen. " A fictitious indorse- 
 ment to a bill is forgery ; such indorsation is clearly giving it a false 
 credit." — - Glen. 
 
 V. Should we say the presentment or the presentation of a bill of ex- 
 change ? All writers agree in using presentment. " If upon the present- 
 ment of the bill for acceptance to the drawee, he refuse or neglect to ac- 
 cept it, the drawer is immediately responsible to the holder, although the 
 bill has not become due according to its tenor." — Chitty. " If the bill 
 be payable after sight, and the drawee detain it some days without declar- 
 ing his intention to accept, and afterwards incline to do so, the acceptance 
 must be from the date of the first presentment.'''' — Glen. " Presentment 
 for payment must be made by tlie holder of the bill, or by an agent com- 
 petent to give a legal receipt for the money." — Glen. " Upon a present- 
 
 11
 
 A Treatise on Banking. 
 
 ment for acceptance, the bill should be left with the drawee twenty-four 
 hours, unless in the interim he either accept, or declare a resolution not to 
 accept. But a bill or note must not be left (unless it be paid) on a pre- 
 sentment for payment ; if it be, the presentment is not considered as made 
 until the money is called for." — Bayley. 
 
 VI. Should we write draught or draft 7 This word is Derived from 
 the verb to draiv, and probably was originally written and pronounced 
 drawght. But custom, which is the law of language, has changed both 
 the pronunciation and the spelling to draft. In the former editions of this 
 work, I mentioned that Mr. Justice Bayley had always spelled this word 
 draught ; but in a recent edition of his work, since published, I find that 
 draught has been changed to draft. 
 
 VII. Should we write check or cheque ? This word is derived from the 
 French, echecs, chess. The chequers placed at the doors of public-houses 
 are intended to represent chess-boards, and originally denoted that the 
 game of chess was played in those houses. Similar tables were employed 
 in reckoning money, and hence came the expression, to check an account ; 
 and the government office, where the public accounts were kept, was 
 called the Exchequer. It probably obtained this name from the French 
 echiquier, a chess-board ; though Blackstone states that this court was 
 called the exchequer, from the chequered cloth which covered the table. 
 Of the two forms of writing this word, check and cheque, the latter seems 
 preferable, as it is free from ambiguity, and is analogous to ex-chequer, 
 the public treasury. It is also used by the Bank of England, " Cheque- 
 Office." In Bayley both forms are employed. " A cheque upon a 
 banker was lost, and paid to a stranger the day before it bore date ; the 
 banker was obliged to repay the money to the loser," " By the usage of 
 trade, a banker in London will not render himself responsible by retaining 
 a check drawn on him, provided he return it at any time before five o'clock 
 on the evening of the day in which it was drawn." 
 
 Section IV. — THE GENERAL ADMINISTRATION OF A BANK. 
 
 To be a good banker requires some intellectual and some moral qual- 
 ifications. A banker need not be a man of talent, but he should be a man 
 of wisdom. Talent, in the sense in which the word is ordinarily used, im- 
 plies a strong development of some one faculty of the mind. Wisdom 
 implies the due proportion of all the faculties. A banker need not be a 
 poet or a philosopher, a man of science or of literature, an orator or a 
 statesman. He need not possess any one remarkable quality by which he 
 is distinguished from the rest of mankind. He will possibly be a better 
 banker without any of these distinctions. It is only necessary that he 
 should possess a large portion of that practical quality which is called com- 
 mon sense. Banking talent (using the word talent here in the sense of 
 adaptation of character to any particular pursuit) consists more in the 
 union of a number of qualities, not in themselves individually of a striking 
 
 12
 
 Administration of a Bank. 
 
 character, but rare only in their combination in the same person. It is a 
 mistake to suppose that banking is such a routine employment that it re- 
 quires neither knowledge nor skill. The number of banks that have failed 
 within the last fifty yeai's are sufficient to show that to be a good banker 
 requires qualities as rare and as important as those which are necessary 
 to attain eminence in any other pursuit. The dealer in money exercises 
 intellectual faculties of a high order, and of great value to the community. 
 His profession has a powerful bearing on the practical happiness of man- 
 kind. 
 
 " The philosophy whifh affects to teach us a contempt of money, does not run very 
 deep; for, indeed, it ought to be still more clear to the philosopher than it is to the or- 
 dinary man, that there are few things in the world of greater importance. And so 
 manifold are the bearings of money upon the lives and characters of mankind, that an 
 insight which should search out the life of a man in his pecuniary relations, would pen- 
 etrate into almost every cranny of his nature. He who knows, like St. Paul, both how 
 to spare and how to abound, has a great knowledge : for if we take account of all the 
 virtues with which money is mixed up, — honesty, justice, generosity, charity, frugal- 
 ity, forethought, self-sacrifice, — and of their correlative vices, it is a knowledge which 
 goes near to cover the length and breadth of humanity : and a right measure and man- 
 ner in getting, saving, spending, giving, taking, lending, borrowing, and bequeathing, 
 would almost argue a perfect man." ( Taylor's Notes on Life.) 
 
 But though wisdom, — or, in other words, a high degree of common 
 sense, — does not imply the possession of any remarkable talent (the un- 
 due development of any one faculty), it always implies the absence of 
 any remarkable defect. One great defect in a banker is a want of de- 
 cision. A banker ought to know how to balance the evidence on each 
 side of a question, and to arrive speedily at a just conclusion. 
 
 " Indecisiveness will he, ceteris paribus, most pernicious in affairs which require se- 
 crecy. 1st. Because the greatest aid to secrecy is celerity. 2d. Because the imde- 
 cided man, seeking after various counsel, necessarily multiplies confidences. The pre- 
 text for indecisiveness is commonly mature deliberation ; but, in reality, indecisive men 
 occupy themselves less in deliberation than others; for, to him who fears to decide, de- 
 liberation (which has a foretaste of that fear) soon becomes intolerably irksome, and 
 the mind escapes from the anxiety of it into alien themes. Or, if that seems too open 
 a dereliction of its task, it gives itself to inventing reasons of postponement. And the 
 man who has confirmed habits of indecisiveness, will come in time to look upon post- 
 ponement as the first object in all cases, and wherever it seems to be practicable, will 
 bend all his faculties to accomplish it." * 
 
 Another defect is a want of firmness. A banker having, after a mature 
 consideration, made up his mind, should be capable of a strict adherence 
 to his previous determination ; he should know when to say, No ; and 
 having once said No, he should adhere to it. 
 
 Another defect is a hasty or impetuous temper. 
 
 " He that answereth a matter before he heareth it, it is folly and shame unto him." 
 " He that is slow to wrath is of great understanding, but he that is hasty of spirit ex- 
 alteth folly." " A wise man will hear, and will increase learning; and a man of un- 
 derstanding shall attain unto wise counsels." {Proverbs of Solomon.) 
 
 Another defect is that of being swayed by any personal or constitutional 
 prepossession. Almost every man, — not excepting even the banker, — 
 
 • Taylor^s Statesman. I would advise all bankers, and all other persons at the head 
 of large establishments, to read this little work. 
 
 13
 
 A Treatise on Banking. 
 
 has a sin by which he is most easily beset ; a constitutional defect, against 
 which it is necessaiy he should be upon his guard. 
 
 It is a great advantage to a banker, and indeed to every one else, to 
 know himself. He should know wherein he excels, and wherein he is de- 
 ficient. He ought to know whether he is disposed from his temperament 
 to be excessively cautious or excessively liberal ; whether his manners are 
 courteous or abrupt ; whether he is apt to view matters on their gloomy 
 or on their.bright side ; whether social intercourse renders him more or 
 less fit for his official engagements ; whether the presents and civilities he 
 receives from his customers do, or do not, affect his transactions witk 
 them in matters of business. When he has made a loss, he should ex- 
 amine whether the loss was occasioned by the ordinary operation of events, 
 or produced by any little weaknesses of his own character. He should 
 record all those instances in which he has shown a want of firmness, of 
 discretion, of discrimination, or of perseverance ; and should guard in fu- 
 ture against the exhibition of any similar defect : — 
 
 "Man, know thyself; all wisdom centres there." 
 
 But while a banker should make himself acquainted with his own de- 
 fects, he ought not to let his customers become acquainted with them. 
 All wise men know their own defects ; none but fools publish them. 
 Crafty men, who often have occasion to borrow money, are quick in per- 
 ceiving the weaknesses of their banker. And if they find that by coaxing, 
 or flattering, or gossiping, or bribing, or threatening, they can influence 
 his conduct, he will always be at their mercy. On this account it is, per- 
 haps, advisable that a banker should not have too much social intercourse 
 with those of his customers who have occasion to ask him for any large 
 amount of accommodation. 
 
 Wisdom implies prudence and discretion, and these should regulate the 
 whole conduct of a banker, not merely when engaged in banking transac- 
 tions, but at all other times. We may apply to a banker the language we 
 have elsewhere applied to a merchant : — 
 
 " The amusements of a merchant should correspond with his character. He should 
 never enga<;e in those recreations which partake of the nature of gambling, and but 
 seldom in those of a frivolous description. A judge is not always on the bench, a 
 clergyman is not alwaj-^ in the pulpit, nor is a merchant always on 'change ; but each 
 is expected at all times to abstain from any amusements wliich are not consistent with 
 his professional ('haracter. The credit of a merchant depends not merely on liis wealth, 
 but also upon the opinion generally entertained of his personal qualities ; and he 
 should cultivate a reputation for prudence and propriety of conduct, as part of his stock 
 in trade." {Lectures on the History and Principles of Ancient Commerce, by J. W. 
 Gilbart). 
 
 A banker should have a talent for selecting suitable instruments. He 
 ought not only to know himself; he ought also to have a capacity for 
 knowing others. He should know how to choose proper clerks for the 
 discharge of the duties of the office. He should know also what parties 
 to employ to procure him confidential information as to the character and 
 circumstances of commercial houses, or of individuals. He should know 
 how to choose his partners or coadjutors, and should endeavour to select 
 those who possess qualifications in which he is himself deficient. In all 
 
 14
 
 Administration of a Bank. 
 
 cases when he has any object to effect, he should know how to make use 
 of other men. We may here, as in some other cases, apply to a banker 
 the observations Mr. Taylor applies to a statesman : — 
 
 " The most important qualification of one who is high in the service of the State is his 
 fitness for acting through others, since the operations vicariously effected ouglit, if he 
 knows how to make use of his power, to predominate greatly over the importance 
 wiiicli can attach to any man's direct and individual activity. The discovery and use 
 of instruments implies indeed activity, as well as judgment ; hecause it imj)lie3 that 
 judgment which only activity in affairs can give. But it is a snare into which active 
 statesmen arc apt to fall, to lose, in the importance which they attach to the immediate 
 and direct effects of their activity, the sense of that much greater importance which 
 they might impart to it if they applied themselves to make their powers operate 
 through the most effective and the widest instrumentality. The vanity of a statesman 
 is more flattered in the contemplation of what he does than of what he causes to be 
 done ; although any man whose civil station is high ought to know that his causative 
 might be beyond all calculation wider than his active sphei'e, and more important." 
 (Taylor's Statesman.) 
 
 A neglect of this rule has occurred in the history of some joint-stock 
 banks, where tlie manager has impaired his own health, and damaged his 
 bank, by taking upon himself a vast variety of duties which should have 
 been assigned to others ; forgetful that in large establishments the chief 
 officer should confine his personal attention to those duties which are in- 
 tellectual, or which are of the chief importance ; while the duties which 
 are of a mere manual, or less important character, should be performed 
 through the instrumentality of assistants. We shall illustrate the principle 
 of working through others by a Scriptural example : — 
 
 " And it came to pass tliat Moses sat to judge the people ; and the people stood by 
 Moses from the morning unto the evening. And Moses' father-in-law said unto him, 
 The thing that thou doest is not good. Thou wilt surely wear away, both thou and 
 this people that is with thee : for this thing is too heavy for thee ; thou art not able to 
 perform it thyself alone. Hearken now unto my voice, and I will give thee counsel. 
 Thou shalt provide out of all the people able men ; and place such over them, to be 
 rulers of thousands, and rulers of hundreds, rulers of fifties, and rulers of tens. And 
 let them judge the people at all seasons : and it shall be that every great matter they 
 shall bring unto thee, but every small matter they shall judge ; so shall it be easier for 
 thyself, and they shall bear the burden with thee. So Moses hearkened to the voice 
 of his father-in-law, and did all tiiat he had said." (Exodus xviii. 13-22.) 
 
 '■ And Moses said, I am not eloquent, but I am slow of speech and of a slow 
 tongue." — " Is not Aaron the Levite thy brother? I know that he can speak well. 
 Thou shalt speak unto him, and put words into his mouth; and he shall be thy 
 spokesman unto the people." (Exodus iv. 10-16.) 
 
 A banker should know how to economize his own time. One mode ol 
 doing this will be, as we have intimated, to assign inferior duties to 
 others. His accountant should keep his books and make his calculations 
 His secretary should write his letters (except those of a private or confi- 
 dential nature), and he should only sign them. His chief clerk should 
 attend to the discipline of the office. A banker at the head of a large 
 establishment should not only be acquainted with the art of banking ; he 
 ought also to be acquainted with the art of government. He ought to put 
 a clever man at the head of each department, and reserve to himself only 
 the duty of general superintendence. He should give these parties a 
 pretty wide discretion, and not encourage them to ask his instructions 
 about matters of comparatively trifling importance. If he does this, they 
 
 15
 
 A Treatise on Banking. 
 
 will never learn to think for themselves, — never feel that wholesome 
 anxiety wliieli results from a sense of responsibility, — and never acquire 
 that decision of mind which arises from the necessity of forming an inde- 
 pendent judgment. Consequently, they will be less useful to him in their 
 present position, and never become qualified for higher offices. 
 
 Another mode of economizing time is to observe a principle of order. 
 A banker should come to the bank every day at the same hour ; attend 
 to his affairs, one by one, in the same order ; and leave the bank at his 
 usual time. By observing this routine, he will not only save much fime, 
 but he will avoid tumultuous feelings, and maintain a calmness of mind 
 and of manner, that will be useful in all his afiliirs. He will also acquire 
 from habit, a coolness of investigation and a promptness of decision, and 
 he will get through a great deal of work without ever appearing to be in 
 a hurry. 
 
 Another mode of economizing time is, to make his interviews with his 
 customers, or with other parties, as short as he can. He should not en- 
 courage conversation upon any other topic than that wdiich is the occasion 
 of the interview. He had better receive his customers standing ; as in 
 that case they will stand too, and are not likely to remain so long as if 
 ihey were to sit down. And the furniture of the room should be so ar- 
 ranged that the customer, if he sit down, should sit near the door, so that 
 he may depart whenever disposed. He is not likely to remain so long as 
 if seated comfortably by the fireside. It is also desirable that his room 
 should be so placed, with reference to the other parts of the building, that 
 while it has one door open to the public, it should have another door 
 opening into the office ; so that he may easily pass into the office, to as- 
 certain the state of a customer's account, or to consult with himself or an- 
 other person, in doubtful cases, as to the course to be adopted. It is not 
 advisable that the customer who applies, for instance, to have a heavy bill 
 discounted, should witness the hesitation or the deliberation of the banker. 
 Hence it is better, when it can be done, to establish the practice of the 
 customer giving the bills to a clerk, who shall bring them into the bank- 
 er's room, and take back his reply. 
 
 A banker will take means for obtaining and recording information. He 
 should not, as we have said, keep any books himself; but he ought al- 
 ways to have in his room, ready for immediate reference, if necessary, 
 the " General Balance Book," containing the weekly balances of the gen- 
 eral ledger, which will show the weekly progress of his business for sev- 
 eral years past ; the " Daily Balance Book," showing the daily balance to 
 the credit of each of his customers in the current-account ledger ; the 
 " W^eekly Discount Balance Book," showing the amount of discounts, loans, 
 or other advances which each customer has every Saturday night ; the 
 " Inspection Book," showing the amount of bills bearing the names of 
 houses who do not keep an account with him ; the " Information Book," 
 containing the character of all the houses about whom he has had occa- 
 sion to make inquiries ; and, finally, a " Private Memorandum Book," in 
 wliich is entered any special agreements that he has made with his cus- 
 tomers. It is also useful to a banker to have a list of his customers, clas- 
 sified according to their trades or professions ; such as corn merchants, 
 
 16
 
 Administration of a Bank. 
 
 leatner factors, grocers, solicitors, &c., &c. The banker would thus see 
 at a glance among what classes of society his connections are. When 
 any public event was likely to affect any class, — such, for instance, as 
 the corn merchants, — he would see how many of his customers are likely 
 to be affected. By thus, too, bearing in mind the trade or profession of 
 his customers, he would be able to judge more readily whether the bills 
 they brought him for discount had arisen out of their business trans- 
 actions. 
 
 Of these books, one of the most important is the " Information Book." 
 There is no doubt that a banker of great experience, and of a strong 
 memory, may always bear in his mind a very correct estimate of the 
 standing and character of all the houses that usually come under his 
 notice. But this docs not supersede the necessity for recording his in- 
 formation in a book. His memory may foil, and that too on important 
 occasions ; and certainly if he leave the bank for a short time, as he must 
 sometimes have occasion to do, he will carry his memory with him. But 
 if the Information Book be closely kept up, he' will record his knowledge 
 for the use of those who will have to take his place. It is no valid objec- 
 tion to the keeping of such a book, to say that the position of houses is 
 perpetually changing. Those changes should be recorded, so that their 
 actual standing should always be readily referred to. If a banker is re- 
 quested by a customer to make inquiry about a house, he should record 
 the information he gets for his own guidance, in case any bills on that 
 house should afterwards be offered him for discount. 
 
 A banker will get information about parties from inquiry at their 
 banker's, as we have mentioned at page 6. This information may be 
 defective in two ways. In the first place, their banker may judge of 
 them from the account they keep, — that is, from the balance to their 
 credit, — and thus he may give too good an account of them; or, sec- 
 ondly, their banker may have an interest in keeping up their credit, and 
 under this bias he may not give them so bad a character as they actually 
 deserve. Another source of information is from parties in the same trade. 
 Houses in the same trade know pretty well the standing of one another. 
 Wholesale houses are well acquainted with the retail shopkeepers who 
 buy of them. Most bankers have among their own customers some 
 houses in almost every trade, who can give them any information re- 
 specting other houses which they may require. The bills that pass through 
 his hands will also often give him some useful hints respecting the parties 
 whose names are upon them. 
 
 It is of great importance to a banker to have an ample knowledge of 
 the means and transactions of his customers. The customer, when he 
 opens his account, will give him some information on this subject. The 
 banker will afterwards get information from his own books. The amount 
 of transactions that his customer passes through his current account will 
 show the extent of his business. The amount of his daily balance will 
 show if he has much ready cash. The extent and character of the bills 
 he offers for discount, will show if he trust large amounts to individual 
 houses, and if these ai'e respectable. On the other hand, the bills hia 
 customer may accept to other parties, and his payments, will show the 
 
 17
 
 A Treatise on Banking. 
 
 class of people with whom he deals, or who are in the habit of giving him 
 credit. But one main source of information is to see tlie man. This, 
 like other means of information, will sometimes fail ; but, generally speak- 
 ing, the appearance and manners of a man will show his character. Some 
 people always send their clerk to the banker with bills for discount, «Stc. 
 This is all very well, if they want no extraordinary accommodation ; but if 
 they ask for any thing out of the usual way, the banker had better say that 
 he wishes to see the principal. And if he had a doubt whether his cus- 
 tomer was tricky or honest, speculative or prudent, let him be guided by 
 his first impression, — we mean the impression produced by the first in- 
 terview. In nine cases out of ten the first impression will be found to be 
 correct. It is not necessary to study physiognomy or phrenology to be 
 able to judge of the character of men with whom we converse upon mat- 
 ters of business. 
 
 A country banker has greater facilities than a London banker of ascer- 
 taining the character and circumstances of other parties. In a country 
 town every thing is known about every body, — a man's parentage and 
 connecfions, his family and associates, the property he has already received, 
 and what he may expect to receive from his relations, and, above all, his 
 personal habits and disposition. Upon the last point we will make a short 
 extract from an excellent series of " Letters to a Branch Manager," now 
 in course of publication in the " Bankers' Magazine," under the signature 
 of " Thomas Bullion." 
 
 " Next in importance to a study of his accounts, the habits and character of a client 
 are deserving of your attcntive'consideration. If a man's style of living, for example, 
 becomes extravagant, and he gives himself over to excess, you cannot too promptly 
 apply the curb, however regular the transactions upon his account may seem ; because 
 years may elapse before mere irregularity of living will make any impression on his 
 banking account ; whereas irregularity in business will exhibit itself immediately, and 
 for this reason, — that whereas improvident habits of living involve a continuous waste 
 in small sums, spreading over tolerably long periods, improvidence in business may 
 involve in one fell swoop the loss, perhaps, of thousands. I hold, then, that you are 
 not warranted in all cases in feeling satisfied of a man's perfect responsibility until his 
 banking account exhibits indubitable evidence to the contrary." — Bankers' Magazine, 
 December, 1848. 
 
 A banker should always have general principles ; that is, he should 
 have fixed rules for the government of his bank. He should know before- 
 hand whether he will or will not advance money on mortgage, or upon 
 deeds, or upon bills of lading, or warrants ; or whether he will discount 
 bills based upon uncommercial transactions, or having more than three 
 months to run. These are only a few of the cases in which a banker will 
 find it useful to store his mind with general principles. 
 
 One advantage of this adoption of general principles is, that it saves 
 time. If a banker can say, in reply to a customer, " It is contrary to the 
 rules of our bank to advance money upon bills of lading," the reply is 
 conclusive. But if he had not previously adopted any rule upon the sub- 
 ject, the reply would have taken up much more time. Another advantage 
 is, that it gives decision of mind, and saves the banker from being " talked 
 over " by any of his customers who may possess fluency of speech, or 
 dexterity in debate. In this case, the banker whose mind is stored with 
 
 18
 
 Adiniiiislralion of a Bank. 
 
 general principles, thougli he may listen patiently to uU his customer shall 
 advance, will give the same reply which he would have given, had the ap- 
 plication been made in fewer words. 
 
 But although a banker ought to have a large stock of general princi- 
 ples, — and this stock will increase as his experience increases, — yet it 
 may not be always wise to explain these principles to his customer. It is 
 generally best, when a banker gives a refusal, to give no reasons for that 
 refusal. Banking science is so little understood that the public generally 
 are unable to appreciate its princi{)lcs. Besides, a man who wants to 
 borrow money can never be convinced by reasoning that his banker is 
 right in refusing to lend it to him ; nor, in fact, did the banker himself ac- 
 quire his knowledge of banking by reasoning. He acquired it, not by 
 i-easoning, but by experience ; and he must not expect that his customers, 
 who have had no experience, will, by reasoning alone, readily acquiesce 
 in the banking principles he may propound to them. In most cases, 
 therefore, he had better keep his reasons to himself. 
 
 But while we contend that every banker should have general principles, 
 we do not say that in no possible case should he depart from them. But 
 he should not look for such cases ; they are rare, and when they do occur 
 they will force themselves upon his attention. If under shelter of the 
 truism, " all rules have their exceptions," he departs from his general 
 principles whenever he finds it convenient or profitable to do so, he may 
 as well have no general principles at all. 
 
 It seems desirable that a banker in a large city should mark out for 
 himself one or two main branches of business, rather than attempt to 
 carry on banking in all its branches. We see this line of conduct adopted 
 by some of the most eminent London bankers. A west end banker will 
 not discount a bill ; a city banker will not lend money on mortgage. 
 Different kinds of banking exist in dilTercnt parts of the country, accord- 
 ing to the character and circumstances of the district. And in London 
 there are numerous classes of people, and it may be both proper and ad- 
 vantageous for a banker to adapt his mode of business chiefly to the re- 
 quirements of some one particular class. Different banks may thus pur- 
 sue different courses, and all be equally successful. 
 
 A banker will exercise due caution in taking new accounts. He will 
 expect the new customer to be introduced by some person to whom he is 
 personally known. The more respectable the introducer, the higher 
 opinion will the banker entertain of the party introduced. If a party ap- 
 ply to open an account without such an introduction, he is asked to give 
 references to some well-known houses. He is expected to state to the 
 banker the kind of business in which he is engaged, and the extent of ac- 
 commodation, if any, that he is likely to require. He will state the kind 
 and character of the bills he will have to offer to discount, and mention 
 any peculiarity in his business or circumstances that may occasionally re- 
 quire especial consideration. It is a great folly in a party opening an ac- 
 count to make any representation that will not afterwards turn out to be 
 correct. Every banker is anxious to avoid taking shabby accounts ; and 
 especially such as are opened for the purposes of fraud, or to obtain a fic- 
 titious credit, or to get undue accommodation. It is considered to be not 
 
 19
 
 A Trcalise on Banking. 
 
 advisable to lake the account of a party who has another banker, especi- 
 ally if he open the account for the purpose of getting additional discount. 
 The object of a party keeping two bankers is, usually, to get as much ac- 
 commodation as he can from each. If an account is brought from another 
 bank, the reason of the removal should be distinctly stated, and the banker 
 will accept or reject it, according to circumstances. It is bad policy in a 
 Hanker to attempt to draw away the connections of another bank, by 
 offering them greater accommodation. It is also usually bad policy to 
 take the accounts of parties residing at a distance, as their transactions do 
 not come under the notice of the banker ; and the fact of their passing by 
 the banks in their neighbourhood to go elsewhere, is one that should ex- 
 cite suspicion. It is not advisable for London bankers to take the ac- 
 counts of private individuals who reside in the country. They should be 
 referred to the bankers in their own districts. 
 
 A small banker should not attempt to take large accounts. Banks, 
 otherwise well administered, have been ruined by one large account. If 
 this account requires accommodation, it will absorb the banker's funds, so 
 that he will be compelled to stint his other customers, or to have recourse 
 to re-discount, or other modes of raising money. Even if it be only a 
 deposit account, it may produce inconveniences. A small banker cannot 
 so readily employ this large deposit profitably, and yet have it at com- 
 mand whenever required ; and the additional amount he must keep in his 
 till will be proportionably greater than would be kept by a large banker. 
 Thus, if £ 100,000 be placed in a bank that has already ^2,000,000 of 
 deposits, the additional sum kept in the till to meet daily demands may 
 not be much increased ; but should it be lodged with a bunker whose de- 
 posits are only £ 300,000, the increase of notes to be kept in his till will 
 be very considerable. This shows that large deposits are not so profitable 
 to small banks as to large ones. There is also a danger that a small 
 banker will employ his large deposits in such a way as shall render him 
 less ready to repay them punctually. Instances have occurred of small 
 banks being greatly inconvenienced by the repayment of large deposits, 
 which had been placed in their hands by railway companies. It is pru- 
 dent, therefore, in a banker to apportion the amount of his transactions to 
 the extent of his business. 
 
 A very important part of the business of a banker consists in the dis- 
 counting of bills. The bills presented to a bank for discount, may gener- 
 ally be divided into the following classes : — 
 
 " 1st. Bills drawn by producers or manufacturers upon wholesale 
 dealers. 
 
 " 2dly. Bills drawn by wholesale dealers upon retail dealers. 
 
 " 3dly. Bills drawn by retail dealers upon consumers. 
 
 " Ithly. Bills not arising out of trade, but yet drawn against value, as 
 rent, &c. 
 
 " 5thly. Kites, or accommodation bills. 
 
 " The first two classes of bills are the best, and are fair legitimate bills 
 for bankers to discount. 
 
 " The third class ought not to be too much encouraged ; they are for 
 comparatively small amounts, and arc drawn by shopkeepers and trades- 
 
 20
 
 Ad minis L ml ion of a Bank. 
 
 men upon their customers. To discount these bills freely would encour- 
 age extravagance in the accepters, and ultimately prove injurious to the 
 drawers. When a man accepts bills to his butcher, baker, tailor, uphol- 
 sterer, &;c., he may fairly be suspected of living beyond his income. 
 Solvent and regular people pay their tradesmen's accounts with ready 
 money. 
 
 " The fourth class of bills, though sometimes proper, ought not to be 
 too much encouraged. Persons out of trade have no business with bills. 
 
 " The last class of bills should always be rejected. To an experienced 
 banker, who knows the parties, the discovery of accommodation bills is 
 by no means difficult. They are usually drawn for even amounts, for 
 the largest sum that the stamp will bear, and for the longest term that the 
 bank will discount, and are presented for discount soon after they are 
 drawn. The parties are often relations, friends, or parties who, from 
 their avocations, can have no dealings with each other. 
 
 " Not only the parties and the amounts of bills are matters of consider- 
 ation to a banker, but also the time they have to run before they fall due. 
 A bill drawn for a long term after date, is usually styled, not perhaps very 
 properly, ' a long dated bill.' A bill drawn at a short term, is styled, ' a 
 short dated bill.'" [History and Principles of Banking., p. 167.) 
 
 In doubtful cases, the banker, before discounting a bill, will probably 
 look through his books, and satisfy himself with regard to the following 
 inquiries : — 
 
 What is the character of the customer .'' This inquiry will be answered 
 from the Information Book. What is the usual balance of his cash ac- 
 counts ? This will be answered by the Daily Balance Book. What 
 amount has he now under discount .'' This will be answered from the 
 Discount Ledger, and will suggest other inquiries. Is that amount greater 
 or less than usual .'' What proportion does that amount bear to the aver- 
 age amount of his cash balance ? Is the amount chiefly upon {e\v parties, 
 or is it divided among a number } Have their bills been discounted 
 chiefly upon the strength of the customer, or upon the strength of other 
 parties .'* Are his bills generally paid } He will then proceed to inquire 
 about the other parties to the bill. What is the character of the accepter 
 in the Information Book ^ What is the nature of the transactions between 
 the customer and the accepter, as far as can be ascertained } Has he 
 had any bills upon him before, and have they been punctually paid } 
 Are there any bills upon him now running, and how soon will they be- 
 come due } 
 
 In the discount of bills it is necessary to guard against forgeries. It 
 has happened that parties carrying on a great business in London, have 
 presented to their banker, for discount, bills drawn upon all parts of the 
 country; which bills, upon inquiry, have turned out to be purely "fictitious. 
 This is an additional reason for bankers making inquiry about the accep- 
 ters of the bills they discount, even when they think they have reason to 
 be satisfied with the drawers. Even this is no protection against forgeiy. 
 Sometimes the name of a most respectable house in a provincial town has 
 been forged. Where the amount is large, therefore, it seems advisable to 
 send the bill down to some banker in the town, and ask his opinion as to 
 
 21
 
 A Treatise on Banking. 
 
 the genuineness of the signature. Of course in these, and many other 
 cases in whicli a banker is Uable to be cheated, much must depend upon 
 personal discretion ; no rules can be given for all cases. 
 
 To facilitate the detection of forged cheques, it is advisable that the 
 banker should h.ave a printed number placed on every cheque, in every 
 cheque book, and keep a record of the name of the customer to whom 
 each book is given. \Vben a cheque with a forged signature appears, the 
 banker can then turn to this registry, and see to which of his customers 
 he had given out tliis cheque. This ])lan has been found useful in tracing 
 forgeries that have been perpetrated by the clerks or servants of the party 
 keeping the account. Some bankers, moreover, place on their cheque 
 books a printed label, requesting the customer will at all times keep the 
 book under his own lock and key. 
 
 To guard against forgery in the case of deeds or bonds, all these docu- 
 ments should be witnessed by an officer of the bank. And when a letter 
 of guarantee is given by a third party, it should not be taken by the 
 banker from the party in whose favor it is given, but the letter should be 
 signed at the bank, and the signature witnessed by one of the clerks. 
 
 A banker is also liable to loss from the alteration of cheques. The 
 words six, seven, eight, and nine, can easily be changed by the addition 
 of y, or ty, into sixty, seventy, eighty, or ninety. Sometimes, too, when 
 cheques are drawn for less than £ 10, if a space be left open before the 
 word, another word may be introduced. Thus, a short time ago a cheque 
 was drawn on a banker for £ 3, and the party who obtained it wrote the 
 word sixty before the word three, and thus cheated the banker out of 
 £ 60. Letters of credit, as well as cheques, have heretofore been altered, 
 by the original sum being taken out, and a larger sum being substituted. 
 This is now prevented by staining the paper with a chemical preparation. 
 Country banks also stamp upon their drafts the words " under ten pounds," 
 " under twenty pounds," and so on, to prevent an alteration to any sum 
 beyond those amounts. 
 
 The re-discounting of bills of exchange is an operation of much im- 
 portance, and has a great influence on the monetary operations of the 
 country. We quote from a former work of our own upon this subject : — 
 
 " Banks situated in agricultural districts have usually more money than they can 
 employ. Independently of the paid-up capital of the hank, the sums raised by circula- 
 tion and deposits arc usually more than the amount of their loans and discounts. 
 Banks, on the other hand, that are situated in manufacturing districts, can usually cm- 
 ploy more money than they can raise. Hence, the hank that has a superabundance of 
 money, sends it to London, to he employed by the bill-brokers, usually receiving, in re- 
 turn, bills of exchange. The bank that wants money sends its bills of exchange to 
 London, to be re-discounted. These banks thus supply each other's wants, through 
 the medium of the London bill-brokers." (T/ie Uistory of Banking in America, by 
 J. W. Gilbart.; 
 
 But this principle of the re-discount of bills has been, in some cases, 
 grossly abused, by being employed to give a sort of vitality to dead loans. 
 A country banker lends upon mills and manufactories a larger amount of 
 money than he can conveniently spare ; then he asks the manufacturer to 
 accept a bill for the amount, which the banker gets discounted in London 
 or elsewhere. This bill, when due, is renewed, and the renewal is again 
 
 22
 
 Administration of a Bank. 
 
 replaced by another, and so the game goes on. As long as money is 
 abundant all parties are pleased ; the manufacturer gets his advance, the 
 banker gets his commission, and the London bill-broker gets employment 
 for his funds. But a pressure comes. The London bill-broker can dis- 
 count no more, because the funds placed in his hands by his depositors 
 have been withdrawn. The banker cannot get the new bills discounted 
 elsewhere, and is unable to take up the old bills that are returned to him 
 with his indorsement. The manufacturer, of course, cannot pay the 
 money ; the banker stops payment, and the manufacturer is ruined. 
 The places at which this system has been chiefly carried on, are Man- 
 chester and Newcastle-upon-Tyne; and it is in these places that the 
 greatest failures have taken place among the joint-stock banks. In fact, 
 I believe it must be confessed, that the joint-stock banks have carried on 
 this practice to a much greater extent than it was ever carried on by the 
 private bankers. This has arisen from the greater credit which they pos- 
 sessed : it is one of the forms of the abuse of credit. 
 
 A London banker is always anxious to avoid dead loans. Loans are 
 usually specific advances for specified times, either with or without 
 security. In London, advances are • generally made by loans; in the 
 country, by overdrafts. The difference arises from the diflferent modes 
 of conducting an account. In London, the banker is paid by the balance 
 standing to the credit of the account. A customer who wants an ad- 
 vance, takes a loan of such an amount as shall not require him to keep 
 less than his usual balance. The loan is placed to the credit of his cur- 
 rent account, until the time arrives for its. repayment, and then he is 
 debited for the principal and the interest. The country banker is paid 
 by a commission, and hence the advance to a customer is made by his 
 overdrawing the account, and he is charged interest only on the amount 
 overdrawn. 
 
 Loans are divided into short loans and dead loans. Short loans are 
 usually the practice of the London bankers: a time is fixed for their n- 
 payment. Dead loans are those for the payment of which there is no 
 specified time ; or where the party has failed to make the repayment at 
 the time agreed upon. In this case, too, the loan has usually been made 
 upon dead, — that is, upon inconvertible, security. Without great caution 
 on the part of the banker, short loans are very apt to become dead loans. 
 A loan is first made for two or three months ; the time arrives, and the 
 customer cannot pay ; then the loan is renewed, and renewed, and re- 
 newed, and ultimately the customer fails, and the banker has to fall back 
 upon his securities. The difference between short loans and dead loans 
 may be illustrated by a reference to Liverpool and Manchester. The 
 Liverpool bankers make large advances by way of. loan, but usually on 
 the security of cotton. The cotton is sold in a few months, and the 
 banker is paid. At Manchester, the banker advances his loans on the 
 security of mills and manufactories ; he cannot get repaid ; and after 
 awhile the customer fails, and the mill or manufactory, when sold, may 
 not produce half the amount of the loan. 
 
 Dead loans are sometimes produced by lending money to rich men. 
 A man of moderate means will be anxious not to borrow of his banker a 
 C '^3
 
 A Treatise on Banking. 
 
 loan which he will not be able punctually to repay, as the good opinion 
 of his banker is necessary to his credit. But a man of property has no 
 scruples of the kind ; he has to build a house, to improve his estate, or to 
 extend his manufactory' ; and he is unreasonable enough to expect that his 
 banker will supply him with the necessary funds. He believes it will be 
 only a temporary advance, as he will shordy be in possession of ample 
 means. The banker lends the sum at first desired ; more money is want- 
 ed ; the expected supplies do not arrive, and the advance becomes a dead 
 lock-up of capital. The loan may be very safe, and yield a good rate of 
 interest, but the banker would rather have the money under his own con- 
 trol. 
 
 Dead loans are sometimes produced by lending money to parties to buy 
 shares in public companies. There was too much business of this kind 
 transacted by some bankers a few years ago. The party did not at first, 
 perchance, apply to his banker to enable him to purchase the shares ; but 
 the calls were heavy, and his ready money was gone ; he fell assured, 
 however, that in a short time he should be able to sell his shares at a high 
 profit ; he persuaded his banker to pay the calls, taking the shares as se- 
 curity. Other calls were made, which the banker had to pay. .The 
 market fell, and the shares, if sold, w^ould not pay the banker's advances. 
 The sale, too, would have caused an enormous loss to the customer. The 
 advances became a dead loan, and the banker had to wait till a favorable 
 opportunity occurred for realizing his security. 
 
 In this, and in other ways, a banker has often much difficulty with cus- 
 tomers of a speculative character. If he refuse what they ask, they re- 
 move their account, and give him a bad name ; if he grant them their de- 
 sires, they engage in speculations by which they are ruined, and probably 
 the banker sustains loss. The point for the banker to decide is, whether., 
 he will lose them or ruin them. It is best, in this case, for the banker to 
 fix upon what advance he should make them, supposing they conduct 
 their affairs prudently ; and if they are dissatisfied with this, he had better 
 let them go ; after they have become bankrupts he will get credit for his 
 sagacity. 
 
 The discounting of bills is an ordinary matter of business, and the 
 banker has only to see that he has good names to his bill ; but in regard 
 to loans, a banker would do well to follow the advice which Mr. Taylor 
 gives to individuals, and not make a loan, unless he knows the purpose for 
 which it is borrowed, and to form his own judgment as to the wisdom of 
 the party who borrows, and as to the probability of his having the means 
 of repayment at the time agreed upon. 
 
 " Never lend money to a friend, unless you arc satisfied that he does wisely and well 
 in borrowing it. Borrowing is one of the most ordinary ways in which weak men 
 sacrifice tlie future to the present ; and tlicncc it is that the gratitude for a loan is so 
 proverbially evanescent; for the future, hccoining present in its turn, will not be well 
 pleased with those who have assisted in doing it an injury. By conspiring with your 
 friend to defraud his future self, you naturally incur his future displciisure. To with- 
 stand solicitations for loans is often a great trial of firmness ; the more especially as 
 the pleas and pretexts alleged are generally made plausible at the expense of truth ; 
 for nothing breaks down a man's truthfulness more surely than pecuniary embarrass- 
 ment, — 
 
 24
 
 Administration of a Bank. 
 
 'An untbrift was a liar from all time; 
 Never was debtor tbat was not deceiver.' 
 
 The refusal which is at once the most safe from vacillation, and perhaps as little apt 
 to give offence as any, is the point blank refusal, without reasons assigned. Acquies- 
 cence is more easily given in the decisions of a strong will than in reasons, which weak 
 men, under the bias of self-love, will always imagine themselves competent to contro- 
 vert." {Notes on Life, by John Taylor.) 
 
 Sometimes, when an advance of money is wanted for two or three 
 months, the party gives a note of hand. This is better than a mere loan, 
 as it fixes the time of payment, and keeps the transaction fresh in the rec- 
 ollection of the borrower. But care must be taken that the note, by re- 
 peated renewals, does not in fact become a dead loan. Hence, when a 
 renewal cannot be avoided, attempts should be made to reduce the amount. 
 When public companies, of only a short standing, and not fully constituted, 
 wish to borrow money of their banker, it is sometimes expedient to take 
 the joint and several promissory note of the directors. By this means the 
 banker avoids all knotty questions connected with the law of partnership ; 
 and the directors will, for their own sakes, see that the funds of the com- 
 pany shall, in due time, be rendered available for the repayment of the 
 loan. 
 
 We have said that dead loans are usually advanced upon inconvertible 
 security. Sometimes that security consists of a deposit of deeds relating 
 to leasehold or freehold property. In London, however, this kind of se- 
 curity is not considered desirable, and the following rules are usually ob- 
 served. 
 
 No advances are made upon the security of deeds alone ; they are 
 taken only as collateral security, and then only to cover business transac- 
 ' tions, and in cases where the parties are supposed to be safe independently 
 of deeds. 
 
 The value of the property should be much higher than the sum it is in- 
 tended to guarantee. When this is the case, and the parties fail, their 
 creditors may take the deeds and pay the debt due to the bank. The 
 main use of taking deeds is to have something to fall back upon in this 
 way. A customer should never receive more accommodation from hav- 
 ing deposited his deeds than that to which he is legitimately entitled. No 
 banker takes deeds if there is the slightest probability of his being com- 
 pelled to realize the property, as the legal difficulties are very great. 
 
 In all cases in which deeds are taken, they are submitted to the inspec- 
 tion of the banker's solicitor, who makes a written report upon the value 
 of the property, as far as it can be discovered by the deeds, and upon its 
 legal validity as a security to the bank. 
 
 The rule of a banker is, never to make any advances, directly or indi- 
 rectly, upon deeds, or any other dead security. But this rule, like all other 
 general rules, must have exceptions, and when it is proper to make an ex- 
 ception is a matter that must be left to the discretion of the banker. He 
 should, however, exercise this discretion with caution and prudence, and 
 not deviate from the rule without a special reason to justify such devia- 
 tion. 
 
 Among country bankers, in agricultural districts, advances upon deeds 
 
 25
 
 A Treatise on Banking. 
 
 are not considered so objectionable as in London. A landed proprietor 
 who wants a temporary advance places bis deeds in the hands of hi3 
 banker, and takes what he requires. The banker thinks he can have no 
 better security ; but the loan is usually for only a moderate amount, and 
 is paid off within a reasonable time. In the country the character and cir- 
 cumstances of every man is known. A landlord who wants an advance 
 to meet immediate demands, until his rents come in, seems fairly entitled 
 to assistance from his banker. But should a landlord who is living be- 
 yond his income ask for an advance almost equal to the value of his 
 deeds, he would not be likely to obtain it. Every banker is aware that 
 when deeds are lodged as security for loans, or discounts of any kind, in- 
 terest upon the advance cannot be charged at a higher rate than five per 
 cent. 
 
 Another kind of security is bills of lading, and dock warrants. Ad- 
 vances upon securities such as these must be considered as beyond the 
 rules which prudent bankers lay down for their own government ; they 
 can only be justified by the special circumstances of each case. In ad- 
 vancing upon bills of lading, the banker must see that he has all the hills 
 of the set ; for if he has not all, the holder of the absent bill may get pos- 
 session of the property. It is also necessary that he have the policy 
 of insurance, that, in case the ship be lost, he may claim the value from 
 the insurers. In advances upon dock warrants, the banker should know 
 that the value of the goods is equal to his advances, and will also give 
 him a margin, as a security against any fall in the market price. But, in 
 truth, no banker should readily make advances upon such securities. 
 Now and then he may take them as collateral security, for an advance 
 to a customer who is otherwise respectable ; but if a customer requires 
 such advances frequently, not to say constantly, it show* that he is con- 
 ducting his business in a way that will not ultimately be either for his own 
 advantage or that of his banker. 
 
 A banker should never make any advances upon life policies. They 
 may become void, should the party commit suicide, or die by the hand of 
 justice, or in a duel ; or if he go without permission to certain foreign 
 countries. The payment may be disputed, upon the ground that some 
 deception or concealment was practised when the policy was obtained. 
 And, in all cases, they are dependent upon the continued payment of the 
 premiums. The value of a policy, too, is also often overrated. The in- 
 sured fancies that his policy increases in value in exact proportion to the 
 number of premiums he has paid ; but if he offers it to the company, he 
 will find that he gets much less than he expected. The policy is valued 
 in a way that remunerates the office for the risk they have run during the 
 years that are past ; and the valuation has a reference only to the future. 
 Thus, if a man at twenty years of age insures his life, the expectation, or 
 probability of life, as it is called, that is, the number of years he is likely 
 to live upon the general average, is, according to the Northampton tables, 
 thirty-three. If he wishes his representatives to receive £ 1,000 at his 
 death he will pay a proportionate annual premium. When forty years of 
 age, he will have paid twenty premiums, and he may fancy that his pol- 
 icy is worth the total amount of the premiums. But the policy is valued, 
 
 26
 
 Administration of a Bank. 
 
 not with reference to the past, but with reference to the future. At forty 
 years of age his " expectation of hfe " is not thirteen, but twonty-three 
 years. It is then calculated that twenty-three years hence the policy will 
 be entitled to £ 1,000 ; but that the annual premiums must be paid in the 
 mean time. The value of the policy, therefore, is the present value of 
 this £ 1,000, less the present value of all these annual payments. Should 
 he wish to sell his policy when he is sixty years of age, he will find that 
 it is proportionably less valuable, for his expectation of life will still be 
 thirteen years. A short rule for ascertaining the expectation of life, ac- 
 cording to the Northampton tables, is to take the age from the number 
 eighty-six, and then divide by two. The value of a policy is generally 
 about one third of the amount of all the premiums that have been paid. 
 
 There are certain signs of approaching failure, which a banker must 
 observe with reference to his customers. Thus, if he keep a worse ac- 
 count than heretofore, and yet wants larger discounts, — if the bills of- 
 fered for discount are drawn upon an inferior class of people, — if, when 
 his bills are unpaid, he does not take them up promptly, — if he pays in 
 money late in the day, just in time to prevent his bills or cheques being 
 returned through the clearing ; but, above all, if he is found cross-firing, 
 that is, drawing bills upon parties who at the same time draw bills upon 
 him ; as soon as a banker detects a customer in fair credit engaged in 
 this practice, he should quietly give him reason for removing his account. 
 
 Sometimes two parties, who keep different bankers, will adopt a prac- 
 tice of exchanging cheques. Their cheques are paid into the banks too 
 late to be cleared on the same day ; and hence the parties' accounts ap- 
 pear better the next day than they otherwise would be. Some failing 
 parties, too, have recourse to forged or fictitious bills, which they put into 
 circulation to a large amount. The best way for a banker to guard 
 against loss from this practice is, to inquire in all cases about the accept- 
 ers of the bills that he discounts, not only when his customers are doubt- 
 ful, but even when they are deemed respectable. Indeed, it is only peo- 
 ple in good credit that can pass fictitious bills. 
 
 The banker's rule is, that they who have discounts must keep a propor- 
 tionate balance ; this is useful, as the amount of balance kept is an indi- 
 cation of the circumstances of the party. When a customer has heavy 
 discounts, and keep but a small balance, it may usually be inferred that 
 he is either embarrassed in his affairs, or he is trading beyond his capital. 
 
 The operation which is called '• nursing an account," sometimes re- 
 quires considerable prudence, tact, and perseverance. A banker, having 
 made considerable advances to a customer, suddenly discovers that the 
 party is not worthy of the confidence he has placed in him. If these ad- 
 vances should be called up or discontinued, the customer will break, and 
 the banker sustain loss. The banker must be governed by the circum- 
 stances of each case. It is sometimes best to continue to discount the 
 good bills, and refuse thbse of a different character ; and thus gradually 
 weed the account of all the inferior securities. Sometimes he may get 
 the customer to stipulate that he will diminish his advances by certain 
 fixed amounts, at certain periods ; and thus, by alternately refusing and 
 complying, the banker may at length place himself in a state of security 
 
 27
 
 A Treatise on Banking. 
 
 At other times, the banker may ofier to make still further advances, on 
 condition of receiving good security also for what has been already ad- 
 vanced. This plan is advisable when the additional advance is not pro- 
 portionately large, and the security is not inconvertible, otherwise the 
 plan is somtimes a hazardous one. It requires some courage to look a 
 loss in the face. And it has occurred that a banker, rather than sustain a 
 small loss, will consent to make a further large advance upon incon- 
 vertible security ; and the locking up of this large advance for an indefi- 
 nite period has proved the greater evil of the two. In fact, some of the 
 largest losses of fallen banks have been made in this way. They have, 
 in the first instance, made an imprudent advance ; rather than sustain this 
 loss at once, they have made a further advance, with a view to prevent it. 
 The advance has at last become so large, that if the customer falls the 
 bank must fall too. For the sake of self-existence, further advances are 
 then made ; these, too, are found ineffectual, and ultimately the customer 
 and the bank fall together. 
 
 Section V. — THE ADMINISTRATION OF A BANK WITH RE 
 GARD TO PROCEEDINGS ON BILLS OF EXCHANGE. 
 
 When a banker has discounted a bill, it is handed to the accountant, 
 who will see that it is drawn on a right stamp. The accountant will read 
 vt through, and see that it is properly drawn, and will observe that the sum 
 in writing corresponds with the sum expressed in figures, and that no 
 alteration has taken place in the amount, the date, the term, or the place 
 at which it is made payable ; for these are material alterations, and would 
 affect the validity of the bill. He will then calculate the time at which it 
 falls due, and place this date upon the bill, or, if it was there before, he 
 will check it, and see that it is right. He will then turn it over and see 
 that it is indorsed by the party in whose favor it is drawn, and also that 
 the subsequent indorsements are regular and properly spelled ; for if there 
 be a variation of a single letter in the spelling of a name, the payment of 
 the bill could not be legally enforced. He will also observe that the bill 
 is indorsed by the party for whom it is discounted. He will then pass the 
 bill through the books (these books are described in the section on Bank- 
 ing Book-keeping), and at the close of the day deliver it with the others 
 to the banker. The banker will, on the following morning, put these bills 
 away in his bill-case according to the dates at which they fall due. This 
 point should be recollected by persons who have to get bills from a banker 
 before they are due ; for, after they have given the amount and the names, 
 the next question asked them will be, " When is it due ? " for, among a 
 multitude of bills, the only way of readily finding any individual bill is to 
 turn to those that fall due on the same day. Every day the banker looks 
 out the bills that fall due on the following day, and hands them to the 
 chief clerk (or, in some cases, the chief clerk himself has the charge of 
 the bills), who, after checking them against the books, distributes them 
 
 28
 
 Bills of Exchange. 
 
 among the clerks who are to collect them. If the bill be not paid, it is 
 noted on the same evening, and on the following morning returned to the 
 customer for whom it was discounted, and his account is debited for the 
 amount. But if the party has not the sum to his credit, and the banker 
 does not like to trust him, he merely receives notice of its dishonor ; and 
 notice is also given to every other party to the bill, with a demand for 
 immediate payment. I'he bill has now become that hated object, a 
 "• past due bill " ; and after a while, if the parties are supposed to be 
 " worth powder and shot," it is handed to the bank's solicitor. 
 
 I shall give a short description of Bills of Exchange, and notice a few 
 of those points of law and of business which are of most importance to 
 practical bankers. 
 
 A bill of exchange is a written order from one person to another, direct- 
 ing him to pay a sum of money either to the drawer or to a third person 
 at a future time. This is usually a certain number of days, weeks, or 
 months, either after the date of the bill, or after sight ; that is, after the 
 person on whom it is drawn shall have seen it, and shall have written on 
 the bill his willingness to pay it. The party expresses this willingness by 
 writing on the bill the word " accepted," and his name. If the bill be 
 drawn after sight, he also writes the date of the acceptance. 
 
 If the party in whose favor the bill is drawn wishes to transfer it, he 
 writes his name on the back. This is called an indorsement ; and may 
 be either special or general. A special indorsement is made to a par- 
 ticular party ; as, " Pay to Messrs. John Doe & Co. or order." A general, 
 or blank indorsement, is when the person merely writes his name. It 
 is held by the lawyers (see Chitty on Bills of Exchange, p. 103) that a 
 special indorsement cannot /oZ/ow a general indorsement, and that in such 
 a case the holder may sustain an action for the amount, though the bill be 
 not indorsed by the party to whom it is thus specially assigned. In prac- 
 tice, however, this is very common ; and bankers always refuse to pay 
 bills not properly indorsed, even though previous indorsements may be 
 general. But, in regard to post bills, the Bank of England pays no regard 
 to any special indorsement that may follow a general indorsement. 
 
 The following is the form of a Bill of E.xchange : — 
 
 £ 1,000. London, \st of May, 1827. 
 
 Tioo months after date, pay to the order of Messrs. Quick, Active, ^ Co. (or 
 me or my order) the sum of One Thousand Pounds, for value received. 
 
 Hearty, Jolly, Sf Co. 
 
 Accepted, payable at 
 To Messrs. John Careful Sf Co.., Messrs. Steady Sf Co., Bankers. 
 
 Southtcark. John Careful ^ Co. 
 
 A Promissory Note is as follows : — 
 
 £ 1,000. London, 1st of May, 1827. 
 
 Two months after date, we promise to pay Messrs. Hearty, Jolly, Sf Co., or their 
 order, the sum of One Thousand Pounds, for value received. 
 
 ' John Careful ^ Co. 
 
 At Messrs. Steady ^ Co., Bankers, 
 Lombard Street. 
 
 The acceptance is usually written across a bill, but should always be on 
 
 29
 
 A Treatise on Banking. 
 
 the front, not on the back of the bill. An indorsement, as the name im- 
 plies, should be placed on the back. 
 
 The person wlio draws a bill is called the drawer ; the person on whom 
 it is drawn is called the drawee ; after the bill is accepted the drawee is 
 called the accepter. The person who indorses a bill is called the indorser ; 
 the person to whom it is indorsed is the indorsee. The person who pays 
 a bill is the payer ; the person to whom it is paid is the payee. These and 
 similar terms may be illustrated by a circumstance said to have occurred 
 on the cross-examination of a witness, on a trial respecting a mortgage. 
 Counsellor., " Now, Sir, you arc a witness in this case ; pray do you 
 know the difference between the mortgager and the mortgagee ?" Wit- 
 ness., " To be sure I do. For instance, now suppose I nod at you, I am 
 the nod-er, and you are the nod-ee." The word discountee, denoting the 
 person for whom a bill is discounted, is not used in England, but I observe 
 in the parliamentary evidence that it was employed by some of the wit- 
 nesses from Scotland 
 
 All bills, except those payable on demand or at sight, are allowed three 
 days' grace. Thus, a bill drawn at two months from the 1st of May will 
 fall due on the 4th of July ; but, if that day be a Sunday or a public holi- 
 day, the bill will be due on the day before. Some bills, instead of being 
 drawn after date or sight, state the time of payment, as " On the first of 
 August pay, &c." These bills are allowed the usual three days of grace. 
 Such a bill would fall due on the 4th of August. 
 
 To remove all doubts upon this subject, an act of Parliament was passed 
 (7th and 8th Geo. IV, ch. 5), which enacts, " that from and after the tenth 
 day of April, one thousand eight hundred and twenty-seven. Good Friday, 
 and Christmas-day, and every day of fast or thanksgiving appointed by 
 his Majesty, is and shall for all purposes whatever, as regards bills of ex- 
 change and promissory notes, be treated and considered as the Lord''s- 
 day, commonly called Sunday." This act does not extend to Scotland, 
 but it has since been extended to Ireland. This act does not vitiate a bill 
 dated on a Sunday. 
 
 Some parties, when they indorse a bill, write at bottom, " In case of 
 need apply to Messrs. C. D. & Co." That is, if the bill be not paid when 
 due, Messrs. C. D. & Co. will, on the day after it is due, pay it for the 
 honor of the indorsers. The notaries always observe the " cases of need" 
 upon the bills that come into their hands, and apply to the proper parties. 
 The advantage of placing a case of need upon a bill is, that the party in- 
 dorsing it receives it back sooner in case of non-payment. It also makes 
 the bill more respectable, and secures its circulation. 
 
 Were it not for the space it occupies, it would be very desirable that 
 the indorser of a bill of exchange should be compelled to state also his ad- 
 dress. This would prevent forged and fictitious indorsements, and give a 
 banker who discounts a bill a better opportunity of ascertaining the re- 
 spectability of the parties. In case, too, the bill was unpaid, he might 
 immediately apply to all the indorsers, whereas now he has to find them 
 out in the best way he can. The indorsers and drawer of a bill would 
 have earlier notice of its non-payment, and have a better opportunity of 
 obtaining their money from the antecedent parties. 
 
 30
 
 Bills of Exchange. 
 
 Bills are divided into Inland and Foreign. Inland bills are those in 
 which both the drawer and the accepter reside in England. Bills drawn 
 from Scotland or Ireland are considered as foreign bills. If a foreign bill 
 be refused acceptance or payment, it should be immediately protested and 
 returned. An inland bill is only noted, and then only when refused pay- 
 ment. A foreign bill may be accepted verbally, or by letter ; but no ac- 
 ceptance of an inland bill is valid, unless written upon the bill itself. 
 
 When a merchant in one country draws bills upon a merchant residing 
 in another country, he usually draws them in sets ; that is, he draws two, 
 three, or more bills of the same tenor and date. These bills are sent to 
 his correspondent by different ships. Thus, he secures the swiftest con- 
 veyance, and his remittances will not be delayed by any accident that 
 may happen to an individual ship. In drawing these bills, it is always ex- 
 pressly stated whether each bill be thd first, second, or third of a set ; as, 
 " Pay this my frst of exchange (the second and third not being paid)." 
 On the payment of any one bill, the others are of no value. If a mer- 
 chant, say at Paris, has a set of bills drawn on a merchant at London, he 
 will sometimes send over the first bill to his correspondent in London, to 
 get it accepted, and to retain it until claimed by the holder of the second. 
 The merchant at Paris will then write on the second bill, that the first lies 
 accepted at such a house in London. He will then sell it, or pay it away. 
 By this means, he is sure that the bill he negotiates will not be returned 
 to him, and greater value is given to his bill, not only as it has the addi- 
 tional security of the accepter's name, but, if it be drawn after sight, it 
 will become due so much the sooner. When the second bill arrives in 
 London, the holder takes it to the house where the first is deposited, and 
 it is immediately given up to him. 
 
 Foreign bills are often drawn at a " usance " after date. A usance 
 from Amsterdam, Rotterdam, Hamburgh, or any place in Germany, is 
 one month ; from France, thirty days ; from Spain and Portugal two 
 months ; from Sweden, seventy-five days ; from Italy, three months. 
 Where it is necessary to divide a month upon a half usance, which is the 
 case when the usance is either one month or three, the half month is al- 
 ways fifteen days. Bills drawn from Russia are dated according to the 
 old style, and twelve days must be added to the date in order to ascertain 
 at what time they fall due. 
 
 A bill is sometimes accepted for the honor of the drawer, or of one of 
 the indorsers. Thus, if a bill from Hamburgh be drawn upon a person 
 in London, who refuses to accept it, another party, knowing the drawer 
 or one of the indorsers to be a respectable man, may accept the bill him- 
 self, for the honor of the party with whom he is acquainted. By this 
 means, he prevents the bill being returned, with expenses. This kind of 
 acceptance renders him liable to pay the bill on the day after it is due, 
 but he can afterwards recover the amount from the party for whose honor 
 he has accepted it, and, of course, from all preceding parties. But, to 
 secure himself, he must not accept the bill until after it has been protested 
 for non-acceptance, and he must write, " Accepted for the honor of A. 
 B. & Co." upon the face of the bill. And when the bill is due, he must 
 not pay it until it has been presented for payment to the drawee. 
 
 31
 
 A Treatise on Banking. 
 
 Bills accepted, and made payable at a banking-house, in tne usual 
 manner, without the addition of the word only, may be presented either at 
 the banking-house, or at the residence of the accepter. In either case, it is 
 a legal presentment (1 & 2 Geo. IV. ch. 78), as far as regards the accepter. 
 In practice, however, bills are always presented at the place where they 
 are made payable. If a bill be addressed to a banking-house or any other 
 place ONLY, the payment cannot be enforced until it has been presented 
 at that place. If any particular place of payment be mentioned in the 
 body of a promissory note, it must be presented there. 
 
 W'hen bankers receive any unaccepted bills, they send tlicm out for 
 acceptance, if they have four days to run. They are left at the house of 
 the drawee, and are called for on the following day. On the day the bills 
 are due, the tellers present them in the morning at the place where they 
 are made payable. If not paid when presented, they leave a printed no 
 tice or direction, of which the following is a copy : — 
 
 Bill for £ 
 Drawn by Mr. 
 On Mr. 
 Lies due at Messrs. Steady ^ Co- 
 
 No. Lombard Street. 
 
 Please call between Two and Four o'clock. 
 
 If not paid by five o'clock, the bill is sent to the notary's. It is brought to 
 the banking-house the following morning, with the notary's ticket attached 
 to it, stating the reason why it is not paid. The bill is then returned. If 
 it be a foreign bill, that is, drawn from any foreign land, it must be pro- 
 tested. Foreign bills are also protested for non-acceptance ; but inland 
 bills are not, nor even noted, but the party who remitted the bill to the 
 banking-house is advised of the circumstance. 
 
 Bills under the value of 40s. are not subject to the stamp duty ; nor are 
 drafts upon bankers payable to bearer on demand, provided the drafts are 
 drawn within fifteen miles of the banking-house, and they specify such 
 place, and bear date on or before the day on which they are issued. A 
 person drawing a cheque beyond this distance, is subject to a penalty of 
 £ 100 ; the person knowingly receiving it, to a penalty of ^ 20 ; and the 
 banker paying it is liable to a penalty of £ 100. The post-dating of 
 cheques to make them serve the purpose of bills of exchange is subject to 
 the same penalties. (55 Geo. III. ch. 184, 812, 813.) 
 
 The following is the form of a Draft or Cheque : — 
 
 No. 457. London, May 1, 1827. 
 
 Messrs. Hope, Rick, ^ Co., Lombard Street. 
 Pay John Doe, Esq., or bearer, the sum of One Hundred Pounds. 
 £ 100 Peter Thrifty ^ Co. 
 
 The words " or bearer" are essentially necessary, or the draft must be 
 drawn on a stamp, and indorsed by the party who receives it. 
 
 Bills fur 20.f. and under £ 5 must specify the name and residence of 
 the payee ; they must be payable within twenty-one days after date, and 
 be attested by one subscribing witness. Every indorsement must be at- 
 
 32
 
 Bills of Exchange. 
 
 tested by a witness ; and must specify the name and residence of the 
 indorsee. All bills drawn for a less sum than 20s. are illegal. 
 
 A bill given for an illegal consideration cannot be enforced by the 
 drawer, but it may be enforced by an innocent holder who had no knowl- 
 edge of the illegal consideration, and who received the bill before it was 
 due. The principal illegal considerations are those arising from usuiy, 
 gambling, and smuggling. Bills drawn at not more than twelve months 
 after date, ai'e exempt from the operation of the laws against usury. 
 
 The following is the Table of Stamp Duties upon Bills of Exchange : — 
 
 Not exceeding 
 2 mouths after 
 dale, or 60 daya 
 si^ht. 
 
 Exceeding 2 
 
 months after 
 
 date, or 60 days 
 
 sight. 
 
 £ s. 
 
 £ s. 
 
 Amounting to 2 and not exceeding 5 5 
 
 5 5 
 
 20 
 
 30 
 
 50 
 
 100 
 
 200 
 
 300 
 
 500 
 
 1000 
 
 2000 
 
 3000 
 
 20 
 
 30 
 
 50 
 
 100 
 
 200 
 
 300 
 
 500 
 
 1000 
 
 2000 
 
 3000 
 
 £ s. 
 
 1 
 
 1 
 
 2 
 
 2 
 
 3 
 
 4 
 
 5 
 
 6 
 8 
 12 
 
 15 
 
 1 5 
 
 12 6 
 
 15 
 15 
 
 1 10 
 
 Foreign Bills drawn in sets : — 
 
 Not exceeding £ 100 
 
 Exceeding £ 100 not exceeding 200 
 
 s. d. 
 
 200 
 
 500 
 
 500 ' 
 
 1000 
 
 1000 ' 
 
 2000 
 
 2000 ' 
 
 3000 
 
 3000 ' 
 
 
 1 
 
 3 
 
 4 
 
 5 
 
 7 
 
 10 
 15 
 
 6 each bill. 
 " 
 
 « 
 
 " 
 
 6 « 
 
 Foreign bills (those drawn from foreign parts) are not required to bear 
 an English stamp, nor indeed any stamp at all. But bills dated from any 
 place abroad, but actually drawn in England, on unstamped paper, are 
 invalid. No action can be sustained to enforce payment, nor can they be 
 proved in the Court of Bankruptcy against the estate of even the accepter. 
 A banker should therefore use caution in taking bills where the drawers 
 and the accepters are the same firm, — one branch of the house residing 
 in England, and the other branch residing abroad. Such bills may be 
 fabricated in London for the purpose of raising the wind. 
 
 if a woman accepts a bill, and is married before it becomes due, her 
 husband may be sued for the amount, but she cannot. If a bill be in- 
 dorsed to a woman, who afterwards marries, her husband must indorse 
 the bill, unless she indorses it as the agent and by the authority of her 
 husband. Should she have occasion to sue any of the antecedent parties 
 to a bill, the action must be brought in the name of the husband, or else 
 in the joint names of the husband and the wife. If a woman who is actu- 
 ally married accept a bill by and with the authority of her husband, the 
 acceptance is binding on the husband ; but if she accept a bill without 
 
 33
 
 A Treatise on Banking. 
 
 his authority, he cannot be legally compelled to pay it, unless it were 
 given for articles necessary to her support. 
 
 A person under twenty-one years of age, whether accepter, drawer, or 
 mdorser of a bill of exchange, cannot be sued at law, except the bill be 
 drawn upon him for necessaries ; but if he draw a bill and transfer it to a 
 third person, the third party may sue the accepter. The term " neces- 
 saries " is generally considered to include, not only those things which are 
 essential to existence, but those also which are suitable to the rank of the 
 party. Many articles are considered necessary to the son of a nobleman, 
 which would not be necessary to a man of an inferior station in society. 
 
 If the drawee refuse to accept a bill, the holder may immediately bring 
 an action for the amount against all the other parties, without waiting un- 
 til the bill becomes due. And should the word "at" be written before 
 the name of the drawee, it makes no difference, especially if it be written 
 in such a manner as if designed to escape observation. But it is the prac- 
 tice of the London bankers to hold bills refused acceptance, and merely 
 give notice of the circumstance to the party who sent it to the bank. If, 
 however, it be an inland bill, drawn after sight, the bill is noted for non- 
 acceptance. If it be a foreign bill, it is protested, and the protest sent to 
 the last indorser. If the bill be not paid when due, it is then protested for 
 non-payment, and, with the second protest, returned to the last indorser. 
 When a bill is drawn after sight, the day on which it is noted or protest- 
 ed for non-acceptance, is regarded as the day on which the drawee has 
 seen it, and the time on which it will become due is calculated accord- 
 ingly. 
 
 If the accepter, drawer, and all the indorsers to a bill become bank- 
 rupts, the holder may prove for the full amount under each commission, 
 and receive a dividend under each, provided he do not receive altogether 
 more than 20s. in the pound. But if he receive a dividend under one 
 commission before proving under the others, he can only prove for the 
 balance. 
 
 If a bill be lost, immediate notice should be given to the accepter, and 
 to the bankers or other parties at whose house it may be made payable. 
 If, after such notice, they pay the bill to any person who had not given value 
 for it, they are accountable to the loser. But a person who had given 
 value for a lost or stolen bill to a thief or to a finder, can recover the 
 amount from all the parties in the same way as though he had received it, 
 in the course of business, from the last indorser, provided the bill was not 
 specially indorsed. But if it was specially indorsed, and the thief or find- 
 er should have forged the indorsement, the holder cannot recover the 
 amount, even though he may have given value for the bill, but he must 
 sustain the loss. 
 
 If a lost bill should have been specially indorsed, or if the loser can 
 prove that the bill has been destroyed, he can bring an action against the 
 accepter for the amount. But if he cannot prove that the bill is actually 
 destroyed, and it was indorsed in blank, he cannot recover from the ac- 
 cepter. For it is possible that a finder may pass it for a valuable con- 
 sideration to another party, who would thus be a bona fide holder, and 
 might compel the accepter to pay him the amount. In this case, there-, 
 
 34
 
 Bills of Exchange. 
 
 fore, the loser has no redress in law, but he may apply to a court of 
 equity, and might obtain an order upon the accepter to pay the amount of 
 the lost bill upon receiving a satisfactory indemnity. The loser of a bill 
 should cause payment to be demanded from the accepter the day it falls 
 due, and give notice of dishonor to the drawer and indorsers, in the same 
 way as though he had the bill in his possession. 
 
 A country banker gave change for a Bank of England note for £ 100 
 which had been stolen. It was done at the time of the races, and im- 
 mediately on opening the bank. The party who brought it stated he 
 had some bets to pay at the race-course, and gave a fictitious address, 
 which was written on the note. The loser of the note brought an action 
 against the banker, and recovered the amount. The judge who tried the 
 cause, stated that, in his opinion, there had been laches, i. e. neglect on 
 the part of the bankers in not making further inquiry, and under his di 
 rection the jury returned a verdict for the plaintiff. 
 
 Any material alteration of a bill of exchange vitiates the bill, and it 
 cannot be legally enforced against any of the parties, unless the alteration 
 be made before the bill be accepted, and also before it has passed out of 
 the hands of the drawer. 
 
 Thus, if a bill be left for acceptance by the drawer, and the drawee 
 alter the date, time, or amount of the bill, and then accept it, the altera- 
 tion does not affect the validity of the bill ; but if the bill be left for accept- 
 ance by a third party, and the drawee then alters and accepts the bill, the 
 bill is vitiated. Any alteration in the date, sum, time, name of drawer or 
 payee, or appointing a new place of payment, is a material alteration, and 
 requires a new stamp. But any alteration made only with a view of cor- 
 recting a mistake does not vitiate a bill, provided it be made with the con- 
 currence of all the parties. If a drawee accepts a bill, and before he 
 gives the bill out of his possession cancels his acceptance, he cannot be 
 compelled to pay it. 
 
 A bill must be presented in reasonable time. But what is a reasonable 
 time is a question of consideration for the jury, and the decision has varied 
 according to circumstances. If a bill be presented at a banker's after the 
 hour of business, the presentment is not in reasonable time ; nevertheless 
 such a presentment is a legal presentment, if the banker or any per- 
 son on his behalf should be there to give an answer to the party pre- 
 senting it. 
 
 Cheques, and notes payable on demand, should also be presented for 
 payment within a reasonable time after they are received. It has been 
 held that a person who receives a cheque is not bound to present it at the 
 banker's till the next morning ; and if the bank was at a distance he was 
 not bound to put the cheque into the post-office until the next day. But, 
 perhaps, it would not be safe to rely upon these decisions. No general 
 rule can be given ; for the time which may be reasonable in one case 
 may be unreasonable in another. 
 
 If a banker receive a bill or note by post, he is not required to present 
 it until the next day. 
 
 " A man taking a bill or note payable on demand, or a cheque, is not bound, laymg 
 •aside all other business, to present or transmit it for payment the very first opportu- 
 
 35
 
 A Treatise on Banking. 
 
 nity. It has long since been decided, in numerous cases, that, though the party by 
 whom the bill or note is to be paid live in the same place, it is not necessary to present 
 the instrument for payment till the morning next after the day on which it was re- 
 ceived. And later cases have established, tliat the holder of a cheque has the whole 
 of the banking hours of the next day within which to present it for payment." 
 (Byles's Laiv oj' Bills of Exchange, p. 123.) 
 
 In the following case it was decided that the presentment of a bill of 
 exchange at the clearing-house is a legal presentment. 
 
 " On the 11th of September, between one and two o'clock, the defendants gave the 
 phiintiffs a cheque upon Bloxam & Co., then bankers, in payment for goods. The 
 plaintiff's lodged the cheque with Messrs. Harrison, their bankers, a few minutes after 
 four; and they presented it between five and six to Bloxam & Co., who marked it as 
 good. It was' proved to be the usage among London bankers not to pay any cheque 
 presented by or on behalf of another banker after four o'clock, but merely to mark it if 
 good, and pay it next day at the clearing-house. On the 12th, at noon, Harrisons' clerk 
 took this cheque to the clearing-house, but no person attended for Bloxam & Co., who 
 stopped payment at nine on that morning, and the cheque was therefore treated as 
 dishonored. The plaintiffs, in going with tlie cheque to Harrisons', passed Bloxams' 
 house. On a case stating these facts, the court held that there had been no laches in 
 the plaintiffs in not presenting the cheque to Bloxam & Co. on the 11th for payment, 
 or in his bankers in not presenting it at the banking-house, but merely at the clearing- 
 house, and therefore gave judgment for the plaintifi'." (Bayley On Bills of Ex- 
 change.) 
 
 Bills may be negotiated after they are due, but the party receiving an 
 over-due bill cannot acquire a claim which the party holding the bill did 
 not possess. For instance, one party may draw an accommodation bill 
 upon another. As in this case no value had been given, the drawer 
 could not sue the accepter for the amount. But if the drawer had passed 
 this bill /or value to a third party before it became due, that party could 
 sue the accepter. But if the drawer passed it to a third party even for 
 value after it became due, the third party could not sue the accepter, but 
 would stand in the same situation as the drawer. 
 
 If a party lodged bills with a banker for the purpose of being collected, 
 and the amount when received to be placed to his credit, and the banker 
 gets them discounted, and applies the money to his own use, the customer 
 has no redress except against the banker. The party who has given value 
 for the bills to the banker can enforce payment of them. 
 
 As the giving notice of the dishonor of a bill or cheque is of consider- 
 able practical importance, I shall make a few extracts upon the subject 
 from Mr. Justice Bayley's Treatise on Bills of Exchange. 
 
 " Though no prescribed form be necessary for notice of the dishonor of a bill or 
 note, it ought to import that the person to whom it is given is considered liable, and 
 that payment from him is expected. 
 
 " And the notice ought to import that the bill or note has been dishonored. A 
 mere demand of payment and threat of law proceedings, in case of non-payment, is 
 not sufficient. 
 
 " Especially if such demand be made on the day the bill or note becomes due. 
 
 " Notice must be given of a failure in the attempt to procure an acceptance, though 
 the application for such acceptance might have been unnecessary; otherwise the per- 
 son guilty of the neglect may lose bis remedy upon the bill. 
 
 '• The notice must come from the holder, or from some party entitled to call for 
 payment or reimbursement. 
 
 " A notice from the holder or any other party will enure to the benefit of every 
 >ther party who stands between the person giving the notice and the person to whom 
 
 36
 
 Bills of Exchange. 
 
 it is given. Therefore a notice from the last indorsee to the drawer will operate as a 
 notice from each inrlorsce. 
 
 " It is, nevertheless, prudent in each party who receives a notice, to pive immediate 
 notice to those parties against whom he may have right to claim ; for the holder may 
 have omitted notice to some of them, and that will be no protection ; or there may be 
 difficulties in proving such notice. 
 
 '• A notice the day the bill or note becomes due is not too soon ; for though payment 
 may still be made within the day, non-payment on presentment is a dishonor. 
 
 " To such of the parties as reside in the place where the presentment was made, the 
 notice must be given, at the forthest, by the expiration of the day following the refusal ; 
 to those who reside elsewhere, by the post of that or the next post day. Each party 
 has a day for giving notice, and he is entitled to the whole day ; at least, eight or nine 
 o'clock at night is not too late. He will be entitled to the whole day, though the post 
 by which he is to send it goes out within the day. 
 
 " And though there be no post the succeeding day for the place to^ which he is to 
 send ; therefore, where the notice is to be sent by the post, it will be sufficient if it be 
 sent by the post of the following day ; or, if there be no post the following day, the 
 day after. 
 
 " Where a party receives notice on a Sunday, he is in the same situation as if it did 
 not reach him till the Monday ; he is not bound to pay it any attention till the Mon- 
 day, and has the whole of Monday for the purpose. So, if the day on which notice 
 ought thus to be given be a day of public rest, as Christmas-day or Good Friday, or 
 any day appointed by proclamation for a solemn fast or thanksgiving, the notice need 
 not be given until the following day. 
 
 " And it has been held that where a man is of a religion which gives to any other 
 day of the week the sanctity of Sunday, as in the case of the Jews, he is entitled to 
 the same indulgence as on that day. 
 
 " Where Christmas-day, or such day of fast or thanksgiving, shall be on a Monday, 
 notice of the dishonor of bills or notes due or payable the Saturday preceding need not 
 be given until the Tuesday following. 
 
 "And Good Friday, Christmas-day, and any day of fast or thanksgiving, shall, from 
 10th April, 1827, as far as regards bills or notes, be treated and considered as Sunday. 
 
 " But these provisions do not apply to Scotland. 
 
 " If the holder of a bill or note place it in the hands of his banker, the banker is only 
 bound to give notice of its dishonor to his customer, in like manner as if the banker 
 were himself the holder, and his customer were the party next entitled to notice. 
 
 " And the customer has the like time to communicate such notice, as if he had re- 
 ceived it from a holder. 
 
 " And therefore by thus placing a bill or note in a banker's hands, the number of 
 persons from whom notice must pass is increased by one. 
 
 " Thus notice sent by a London banker to a London customer the day after the dis- 
 honor is in time ; and if the customer communicate that notice the day following, that 
 will be in time also. 
 
 " It is no excuse for not giving notice the next day after a party receives one, that 
 he received his notice earlier than the preceding parties were bound to give it, and that 
 he gave notice within what would have been proper time if each preceding party had 
 taken all the time the law allowed him. The time is to be calculated according to the 
 period when the party in fact received his notice. Nor is it any excuse that there are 
 several interv'ening parties between him who gives the notice, and defendant to whom 
 it is given ; and that if the notice had been communicated through these intervening 
 parties, and each had taken the time the law allows, the defendant would not have 
 had the notice sooner. 
 
 " Sending a verbal notice to a merchant's counting-house in the ordinary hours of 
 business, at a time when he or some of his people might reasonably be expected to be 
 there, is sufficient ; it is not necessary to leave or to send a written notice, or to send 
 to the house where he lives. Sending notice by the post is sufficient, though it be not 
 received ; and where there is no post, it is sufficient to send by the ordinary mode of 
 conveyance. 
 
 " And it is not essential the notice should be sent by the post where there is one ; 
 sending to an agent by a private conveyance, that he may give the notice, is sufficient, 
 if the agent give the notice, or take due steps for the purpose, without delay 
 
 " Notice to one of several partners is notice to all : and when a bill has been drawn 
 
 37 
 
 ^rz
 
 A Treatise on Banking. 
 
 by a firm upon one of the partners, and by him accepted and dishonored, it is un- 
 necessary to give notice of such dislionor to the firm ; for this must necessarily be 
 known to one of tiiem, and the knowledge of one is tlie knowledge of all. 
 
 " Upon an acceptance payable at a banker's, notice of non-payment need not be 
 given to the acce])ter ; for he makes the bankers his agents ; presentment to them is 
 presentment to him. 
 
 " A person wlio lias been once discharged by laches from his liability on a bill or 
 note is always discharged. And, therefore, where two or more parties to a bill or 
 note have been so discharged, but one of them, not knowing of the laches, pays it; he 
 pays it in his own wrong, and cannot recover the money from another of such 
 parties." 
 
 As many bills drawn in foreign languages pass through the hands of a 
 London banlvcr, it may be useful to give a list of some of those words 
 which express the amount and the time, the two main points in a bill 
 of exchanse : — 
 
 English, . 
 
 German, 
 
 Dutch, 
 
 French, . , 
 
 Italian, 
 Spanish, 
 PoTtuguese, 
 Swedish, 
 Danish, , 
 
 English, 
 German, . 
 Dutch, . 
 French, , 
 
 Italian, 
 
 Spanish, , 
 
 Portuguese, 
 Swedish, . 
 Danish, 
 
 One 
 Ein 
 
 Een 
 
 Un 
 
 Uno 
 
 Uno 
 
 Hum 
 
 En 
 
 Een 
 
 Two 
 Zwei 
 Twee 
 
 Three 
 
 Drei 
 
 Drie 
 
 Deux Trois 
 
 Due 
 
 Dos 
 Dous 
 Twa 
 To 
 
 Tre 
 
 Tres 
 
 Tres 
 
 Tre 
 
 Tre 
 
 Sixty 
 Sechzig 
 
 Zestig . 
 
 Soixante 
 
 Sessanta 
 
 Sesenta 
 
 Secenta 
 
 Sexti 
 
 Tredsindstyve 
 
 ■\ 
 
 Two months after date. 
 Zwei monate nach dato. 
 Twee maanden na dato. 
 A deux mois de date. 
 
 A due mesi dopo data. 
 
 A dos meses de la fecha. 
 A dos meses data. 
 A dous mezes de data. 
 Twa manander ifran dato. 
 To maancder eftcr dato. 
 
 Ninety. 
 
 Neunzig. 
 
 Negentig. 
 ( Quatre-vingt-dix, or 
 I Nonante. 
 
 Nonanta, or Novanta. 
 
 Noventa. 
 
 Noventa. 
 
 Nitti. 
 
 Halvfemtesindstyve. 
 
 Three days after sight. 
 
 Drei tage nach sicht. 
 
 Drie dagen na zigt. 
 
 A trois jours de vue. 
 ( A tre giorni vista. 
 ( A tre giorni dopo vista. 
 
 A tres dias vista. 
 
 A tres dias vista. 
 Tre dagar efter sigt. 
 Tre dage efter sigt. 
 
 In all the above languages, " at sight" is usually expressed by a vista, 
 except the French, which expresses it by d vue. " At usance " is ex- 
 pressed by a uso or ad tiso. The names of the months so nearly re- 
 semble the English, that a mistake can but rarely occur. 
 
 The following are forms of bills in each of the above languages : — 
 
 FiiENcn. 
 
 Lille, le 2S Septem!rre,\S4S . Bon pour £iri8 9 Sterlings. 
 
 Au virigt-cinq Decembre prochain, U vous plaira payer par ce mandat d. Pordre de nous- 
 
 mcmes la somme de cent cinfjuante-huit livres sterlings 9 slicllings valeur en nous-mCmes et 
 
 que passerez suivant Vavis de 
 
 A Messieurs 
 
 A Londres. 
 
 German. 
 
 NUmberg, den 28 October, 1848. Pro £ 100 Sterling. 
 
 Zwei monate nach dato zahlcn Sie gegen dicsen Prima Wechsel an die Ordre des Ilerrn 
 
 __: Ein Ilundek P/und Sterling den Werth erhalten. Sie bringen 
 
 sokhe au/Rechnung laut Bericht von 
 
 Ilerren 
 
 London. 
 
 38
 
 Bills of Exchange. 
 
 DCTCU. 
 
 Grouw, den 1st November, 1848. FborX 59 17 6 
 
 Twee maanden na data Relieve UEd te betcden voor dezen onzen prima WisseWrief de se- 
 
 cunda niet betaald zyvde aan de ordre van de Heeren neijen Sf 
 
 vyjlig Ponden zeventien schelling en zespences sterling, de waarde in rekening UEd steile het 
 op rekening met of zander advys van 
 
 de Heer 
 
 te London. 
 
 Italiak. 
 Livomo, le 25 SettcmJbre, 1848. Per £500 Sterline. 
 
 A 2Ve mesi data pagate per questa prima de Cambio (una sol volta) aW ordine 
 
 , la somma di Lire cinque cento sterline valuta camhiala, e ponete 
 
 m conto M. S. secondo Vavviso Addio 
 
 Al 
 
 Londra. 
 
 Spanish. 
 Malaga, d 20 de Setb" de 1848. -Son £ 300. 
 
 A noventa diasfecha se serviran V' mandar pagar por esta primera de cambio d la orden 
 
 de los S''" Tres cientas libras Esterlinas en oro o plata valor red- 
 
 hido de dhos S''" que anotaran ixilor en cuenta segun aviso de 
 
 A los iS"-" 
 
 Londres. 
 
 Portuguese. 
 
 £ 600 Esterlinas. Lisbon, aos 8 de Dezembro de 1848. 
 
 A Sessenta dias de vista precizos pagar d V por esta nossa unica 
 
 via de Letra Segura, a nos ou h nossa Ordem a quantia acima de Seis Centas Livras Es- 
 terlinas valor de nos recebido em Fazendas, que passera em Comla segundo o aviso de 
 
 Ao SeW 
 
 Londres. 
 
 Swedish. 
 Bjomeberg, den 23 September, 1848. For £ Sterl. 100. 
 
 Nittio Dagar efter dato behagade H. H. emot denna prima Wexd (secundo obetald) betala 
 
 till Herr elle ordres Etthundra Fund Sterling som stalles i rakning 
 
 enligt avis. 
 
 Herrar 
 
 London. 
 
 Danish. 
 
 Kjobenhavn, 9 December, 1848. Rbae 4,000. 
 
 Tre maaneder ejler dato behager de at betale denne Prima Vexd, secunda ikke, til Herr 
 
 . eller ordre med Fire Tusinde Rigsbank Daler, Valutta modtaget 
 
 og stilles i Regning i/dlge advis. 
 
 Herrer 
 
 London. 
 
 Bills of exchange form a large proportion of the circulating medium of 
 Lancashire, and supply the place of country notes. The following ac- 
 count is given by J. Gladstone, Esq., M. P. : — 
 
 " We sell our goods, not for payments in cash, such as are usual in otlier places, bat 
 penerally at credits from ten days to three months, to be then paid for m bills on Lon- 
 don at two or three months' date. Those bills we pay to our bankers, and receive 
 from them bills or cash, when we have occasion for either, to make our payment*. 
 The bank-notes or gold we require for our ordinary purposes and charges of merchan- 
 dise of every description. The account is kept floating. The interest on both sides is 
 calculated at the same rate, at present five per c^nt. Last year the rate was reduced to 
 four ; and the banker charges a commission of a quarter per cent, oa the amount of 
 D 39
 
 A Treatise on Banking. 
 
 one side of the account. That charsre is his remuneration, and that of his bankers in 
 London, for paying our acceptance there, both inhind and foreign. The account fluc- 
 tuates, depending on the confidence tlie banier may have in his customers ; if that 
 confidence is entire, the customer is occasionally in his banker's debt, but more fre- 
 quently the balance is in his favor. 
 
 '•Does that extend to the whole of Lancashire ? — I believe the system at Manches- 
 ter, Preston, and the other principal towTis, is similar; I am not aware of any other. 
 There are .some small country bankers in the neighbourhood of Manchester who issue 
 promissory notes, but I do not know any thing of their practice ; none of the more re- 
 spectable banks in Lancashire do issue them." (Lords, 216, Gladstone.) 
 
 " If 1 sell a thousand ]>ounds' worth of goods to a wholesale grocer, or any other per- 
 son who again distributes them to his customers in the country, when he comes to pay 
 me the .£1,000 he will do .so in bills, running from £ 10 to any other sum ; tlie .£ 1,000 
 maybe paid in twenty or thirty bills of exchange, drawn on London, and generally at 
 two and sometimes three months' date." (Lords, 227, Gladstone.) 
 
 Mr. Lewis Loyd, of the firm of Messrs. Jones, Loyd, & Co., estimated, 
 in 1826, that the circulation of Manchester consists of nine 'parts bills of 
 exchange, and the tenth part gold and Bank of England notes. Others 
 think the proportion is as high as twenty to one, or even fifty to one. 
 (See Evidence of Lends Loyd, Esq., and of Mr. Henry Burgess, before 
 the Committee of the House of Lords, pp. 294, 298.) Mr. Loyd stated 
 he had seen bills of £ 10 with a hundred and twenty indorsements 
 upon them ; and when the stamp duties were lower, bills were drawn of 
 a less amount. He gives the following criteria of accommodation bills : 
 — " Bills that are issued for speculation generally travel to London very 
 rapidly, with very few indorsements upon them ; they are wanted to be 
 converted into bank-notes immediately, and come quite clean, and with- 
 out any marks of negotiation upon them ; and, besides that, we know the 
 parties upon them pretty well." In Scotland an accommodation bill is 
 called a wind bill. 
 
 It may be mentioned, that after the establishment of branches of the 
 Bank of England at Manchester and Liverpool, the bill circulation of 
 Lancashire was considerably diminished. Most of the banks made agree- 
 ments with the branch bank, stipulating that in consideration of having a 
 certain amount of discount, at a reduced rate of interest, \.\\v.y would not 
 issue for local circulation any bills they had discounted for their custom- 
 ers. These agreements have been modified since the act of 1844 ; but 
 still the main circulation of Lancashire consists of Bank of England 
 notes. It would not now be possible to find a bill with a hundred and 
 twenty indorsements. 
 
 The late Mr. Leatham attempted to calculate tlie amount of bills in cir- 
 culation, or, more properly speaking, in existence, during each year. 
 He, through Lord Morpeth, obtained a return of the number of stamps 
 issued from 1835 to 1839 inclusive, and based his calculations on the sup- 
 position that each bill was circulated for half the amount which the stamps 
 would cover, which was considerably under the amount. From the ex- 
 perience of his own bank, compared with that of the princi[)al discount 
 offices in London, he found that the average date of bills, including for- 
 eign and inland, was three months. He then took the whole stamps for 
 a year and divided them by four, which gave the amount circulating at 
 one time. By a similar induction, he estimated foreign bills at one sixth 
 of the English, though the proportion was rather greater; and he took the 
 
 40
 
 Surplus Funds. 
 
 same average for Irish bills in the years where no official returns had 
 been made. Mr. Leatham's statement is as follows : — 
 
 Bill CircuUuion of Great Britain and Ireland, during the years undermentioned. 
 
 1815. 1824. 1825. 1826-27. 
 
 £ £ £ £ 
 
 BiU bt&mpe for Great Britain, creating the sum, 477,493,100 232,429,800 260,379,400 207,317,400 
 
 Estimated Irish Bills, 79,582,183 38,738,300 43,396,566 31,.'5.';7,8Ci3 
 
 Foreign BilU, 92,345,880 45,194, 6S3 50,629,327 40,317,072 
 
 Total, 649,921,163 316,362,783 ;V>4,405.293 282,222,305 
 
 Average circulation, 162,480,290 79,090,695 88,601,323 70,555,576 
 
 The following is a similar return for the years 1835 to 1839. 
 
 1835. 1836. 1837. 1833. 1839. 
 
 £ £ £ £ £ 
 
 British Bills, ... . . . 294,775,269 355,^8,900 333,263,600 541,947,400 394,203,000 
 
 Irish Bills, .*.... 51,109,061 59,155,607 54,179,165 54,359,464 55,615,722 
 
 Estimated amount of Foreign Bills, 57,914,721 69,420,406 65,012,080 66,500,577 75,479,120 
 Bills created by bankers compound- 
 ing for Sumps, .... 1,604,000 2,078,560 2,6^4,600 2,696,600 3,196,000 
 
 Total, . . 4O5,403,ft31 485,943,473 455,084,445 465,504,041 528,493,842' 
 
 Average circulation, . . . 101,350,762 121,485,868 113,771,111 116,376,010 132,123,460 
 
 There are some knotty questions connected with bills of exchange ; 
 such as, Ought bills of exchange to be regarded as currency } Have bills 
 of exchange any effect on the prices of commodities .'' In what way do 
 bills of exchange adjust the foreign exchanges .-* We have discussed these 
 questions elsewhere ; but, as they more appropriately belong to the sci- 
 ence than to the practice of banking, we do not introduce them into the 
 present work. 
 
 Section VI. — THE ADMINISTRATION OF A BANK WITH 
 REGARD TO THE EMPLOYMENT OF ITS SURPLUS FUNDS. 
 
 The means of a London banker consist mainly of his capital and his 
 deposits. A certain portion of this sum is kept in the till, to meet daily 
 demands ; another portion is advanced in the way of discounts or loans to 
 his customers. The remainder forms his surplus fund ; of which a part 
 will probably be invested in government securities ; loans to bill brokers, 
 payable on demand ; in short, loans on the stock exchange, or in firstrate 
 bills obtained through the bill brokers, and hence styled brokers' bills. The 
 government securities are the more permanent of these investments. The 
 amount will seldom vary. It is not deemed creditable for a bank to spec- 
 ulate in the funds, or to buy and sell stock frequently, with a view of 
 making a profit by the difference of price ; hence a banker sells his gov- 
 ernment securities only in a season of pressure, as a means of precaution, 
 or in order to meet urgent demands. On other occasions, he will, when 
 necessary, reduce his short loans or brokers' bills. These form his flue 
 tuating investments. In seasons when money is abundant his deposits 
 will increase, and perchance, at the same time, the demand of his cus- 
 
 41
 
 A Treatise on Banking. 
 
 tomers for loans or discounts will diminish. His surplus funds will thus 
 increase. But these temporary surplus funds he will on no account in- 
 vest in government securities, as his deposits will be certainly, and per 
 haps suddenly, reduced, and he might have to realize his government se 
 curities at a loss. lie will in this case increase his loans to brokers, and 
 his brokers' bills. Arid though he will get as much interest as he can, he 
 will take a very low interest rather than keep the money unproductive in 
 his till, or invest it in a more permanent form. We will now take a 
 short review of the different kinds of investment we have mentioned, 
 The three grand points for consideration are, convertibility, exemption 
 from loss, and a good rate of interest. But first we will notice those cir- 
 cumstances which regulate the amount of cash, to be kept in the till. 
 
 The amount of money which a banker will keep in his till depends 
 upon circumstances. First, the amount of his deposits. It is natural to 
 suppose that when his deposits are large he will keep more money to 
 meet them than when his deposits are small. Secondly, the amount of 
 his daily payments. These will not at all times correspond with the 
 amount of the deposits, for some accounts are more operative than others. 
 On commercial accounts, for instance, the payments will be much heavier 
 in proportion to the average balance, than on accounts which are not 
 commercial. The city bankers pay much larger sums every day, in 
 proportion to the amount of their deposits, than the bankers at the West 
 end. Thirdly, if a banker issues notes, he will keep a less amount of 
 other money in his till. The popular opinion is, that he keeps more, as 
 he has to provide payment for his notes as well as his deposits. This is 
 true in seasons of pressure. But in ordinary times he keeps less, as he pays 
 the cheques drawn on account of his deposits with his notes, and these 
 notes often get into the hands of another banker, with whom he settles by a 
 draft on London. His reserve to meet his notes is kept, not in his own 
 till, but in London, where it probably yields him interest. Indeed, when 
 his deposits are withdrawn in large amounts, they are more usually with- 
 drawn by a draft on London than in any other way. Fourthly, the num- 
 ber of the branches. If a bank has many branches, the total amount of 
 cash kept in the tills of the head office and all the branches put together, 
 will be considerably more than would be required if the whole of the busi- 
 ness were collected into one place. In the case of a run, the difference is 
 considerable, as every point open to attack must be well fortified. The 
 stoppage of one branch, even for a short time, would bring discredit upon 
 the whole establishment. Fifthly, in London the amount of notes to be 
 kept in the till will be effected by the privilege of clearing. Those bank- 
 ers that " clear," can pay bills and cheques upon them by the bills and 
 cheques they have upon other bankers. Those banks that do not clear, 
 must pay all the bills and cheques upon them in bank-notes, before they 
 receive payment of the bills and cheques they have upon other bankers. 
 Hence they must lock up every night with a larger amount of cash in their 
 vaults. 
 
 We need hardly say, that with every banker the amount in the till will 
 fluctuate from day to day. Though a banker has a certain average 
 amount in his own mind, below or above which he does not swerve very 
 
 42
 
 Surplus Funds. 
 
 widely, yet the cash-book will seldom be exactly this amount. Sometimes 
 he will strengthen his till, in the prospect of large payments that may 
 come upon him suddenly. At other times he will run his till low for a 
 day or two, in expectation of large sums that will shortly be due to him. 
 During the day, too, either the receipts or the payments may be heavier 
 than he expected, and hence, now and then, the cashier reports to the 
 chief clerk, or to the banker, the state of the till, in order that, if neces- 
 sary, it may be replenished. The temperament of a banker, too, has 
 some effect in this case. Some bankers are so cautious that they will 
 " lock up " with a large amount of cash ; others are so anxious to make 
 profit, that they will keep their cash very low. The state of the money 
 market will also influence the tills of the bankers. When money is abun- 
 dant, a banker will lock up with more money than he wants, because he 
 cannot employ his funds. When money is so scarce as to betoken a 
 pressure, he will also lock up strong, so as to be prepared for any emer- 
 gency. In fact, there can be no general rule for regulating the amount 
 of the till. Every banker must be guided by the experience of his own 
 bank. The directors of the bank of England consider that their reserve 
 in bank-notes and gold should be equal to about one third of their depos- 
 its. From the accounts published by some of the London joint-stock 
 banks, it would appear that the " cash in hand " is equal to about one 
 fifth or one sixth of their liabilities. Even this, we conjecture, is a higher 
 proportion than that which is generally kept by London bankers, espe- 
 cially by those who settle their accounts with each other at the clearing 
 house. 
 
 To resume : After a banker has furnished his till, and supplied his cus- 
 tomers with such loans and discounts as they may require, he has a sur- 
 plus of cash. This surplus may be considered as being divided into 
 two parts, — though it is never actually so divided, — the permanent sur- 
 plus, which the banker is not likely to require, except in seasons of ex- 
 treme pressure, and the temporary surplus arising from fluctuations in the 
 deposits. We shall now notice those modes of investment to which we 
 have referred. 
 
 With regard to government securities, we have high authority from the 
 testimony of practical bankers. The following are quotations given be- 
 fore the Joint-stock Bank Committee, in the year 1836, by the late Vin- 
 cent Stuckey, Esq., the founder of Stuckey's Banking Company, in Som- 
 ersetshire, and James Marshall, Esq., the retired secretary of the Provin- 
 cial Bank of Ireland. 
 
 Mr. V. Stuckey : — 
 
 " What is your reason for keepinf^ so large a sum in Government stock ? — I have 
 always found from my experience, except two days in my life, that I could get money 
 more easily upon those securities than any other. 
 
 " Is it easier, in times of emergency, to obtain money on government stock than OQ 
 good mercantile bills ? — I have always found it so. 
 
 " You do not concur with any witnesses who state that they have found good ne- 
 gotiable bills mere easy to obtain money upon than government stock 1 — No ; I 
 have never found that with a good bill ; even of the house of Baring, I could get 
 money more easily than on government stock. 
 
 " Do you consider that, generally speaking, in London the rate of interest at which 
 you borrow money on exchequer bills and stock is notoriously lower than that at 
 
 43
 
 A Treatise on Banking. 
 
 which you borrow on bills of exchange ? — Yes, it is lower, and for that reason we 
 
 generally adopt it." 
 
 Mr. James Marshall : — 
 
 " Will you inform the Committee whether it is the usage of the Provincial Bank to 
 invest any portion of its funds in the public securities 1 — It has been its uniform prac- 
 tice so to do. 
 
 " By jiuhlic securities, what do you understand? — The Consols, for instance; there 
 are various kinds of government stock; exchequer bills and Bank of England stock 
 are generally considered as a public sort of security. 
 
 " Do you hold stock in London only, or in Dublin as well as in London ? — In Dub- 
 lin, but U) a limited amount, because it is not easily convertible there. 
 
 •' On what ground is it that it is not easily convertible in Dublin ? — From the lim- 
 ited nature of the market as compared with London ; we could not sell even an imma- 
 terial sum without lowering considerably the price. 
 
 " Have there not been at various times, from various causes, runs on the Provincial 
 Bank, which rendered it necessary to supply large amounts of specie to that country i 
 — There have repeatedly. 
 
 " Do you consider, from your experience, that it woidd have been competent to the 
 bank to have maintained its full security, with satisfaction to the directors, if they had 
 not been possessed of very considerable funded property in this country 1 — Certainly 
 not ; speaking of the last run that happened especially, I must say that that ditfered 
 from any former run in this respect. 
 
 " You were conversant with the management of the Scotch banks prior to your con- 
 nection with the Provincial Bank ■? — Yes. 
 
 " Is it not the usage of all the Scotch banks in like manner to maintain a very consid- 
 erable portion of their funds as invested in the government securities ? — I believe the 
 practice with all is generally so, but I can speak particularly to that of the three oldest 
 banks, — as they are commonly called, the three chartered banks. The Bank of Scot- 
 land was erected by act of Parliament, the Royal Bank of Scotland and the British 
 Linen Company are erected by charter, but have been recognized in the same way, so 
 that there are three public banks in distinction to any of the subsequently-formed 
 l)anks. I can state, from personal knowledge, that these banks have had always a 
 very large sum indeed invested in the funded property of the kingdom. 
 
 " Do yon consider it woidd be a safe system of banking, if the capital of the bank 
 was altogether invested in commercial bills'? — Certainly not." 
 
 Of the various kinds of government stock, consols are the best, as there 
 is a more ready market for this kind of stock, and money can usually be 
 borrowed on them until the ne.xt account day ; so that, if a banker has only 
 a temporary demand for money, he may thus obtain it at a moderate in- 
 terest, when, by selling his stock at that time, he might sustain loss. The 
 Bank of England has recourse, sometimes, to this mode of strengthening 
 her reserve. Sometimes, too, a banker may make a profit by lending his 
 consols. At the monthly settlings, among the brokers, stock is some- 
 times in demand, and money may be obtained upon consols, until the 
 next settling, without paying any interest ; and the banker may employ 
 the iTioney in the mean time. As, however, the rate of interest is usually 
 low in such seasons, his profit will rarely be great. 
 
 It is not advisable, however, that all the stock a banker holds should 
 consist of consols. For a month before the payment of the dividends in 
 January and July, this stock is shut, and during those times he can 
 neither sell his stock nor borrow money upon it. This may be inconve- 
 nient, and he can only avoid this inconvenience by selling or lending his 
 consols, just before the shutting, on the best terms ho can. To avoid 
 either of these alternatives, it is better he should divide his stock, and hold 
 half the amount in consols, and half in reduced 3, or in the 3^ per cents. 
 
 44
 
 Surplus Funds. 
 
 The dividends on these latter stocks are payable in April and October, so 
 that by this means the banker will always hold an open stock : when con- 
 sols are shut, the reduced 3 and the 3^ per cents, are open, and vice 
 versa. There arc no time bargains in the reduced 3 per cents., or in the 
 3.^ per cents ; but in ordinary times money can be borrowed upon them 
 at the market rate of interest. In seasons of pressure these are not so 
 salable as consols. Bank stock, India stock, and long annuities, not be- 
 ing readily convertible, are not generally good investments for bankers. 
 
 Some bankers avoid all government stock, and give a preference to 
 exchequer bills. They have some advantages. As the government must 
 pay the amount demanded in March or June, when they become due, there 
 can be no loss beyond the amount of the premium at which they were 
 purchased. A banker, too, can borrow money upon them quietly and 
 secretly. A transfer of stock is always known, and, if for a large 
 amount, will, when money is scarce, excite notice, and give the impres- 
 sion that the banker is compelled to realize some of his securities, to meet 
 demands made upon him by his depositors. But a banker can hand his 
 exchequer bills to a stock-broker, who will bring him the money, and the 
 party who has granted the loan will know nothing about the party for 
 whom it was required. On the other hand, there are some disadvantages. 
 Almost every change in the market value of money affects the price of 
 exchequer bills, and whenever money becomes abundant, the government 
 are very apt to reduce the rate of interest much below that which can 
 be obtained from consols. But a greater objection is, that, even in or- 
 dinary times, they are hardly salable in large amounts. There are not 
 now so many exchequer-bill jobbers as formerly, and hence these bills 
 are not so readily salable. On this account, the Bank of England, who 
 were formerly large holders of exchequer bills, have changed their system, 
 and are now holders of stock. The city bankers, too, prefer placing 
 their money with the bill-brokers, to investing it in exchequer bills. But 
 they are still a favorite mode of investment with bankers at the West end. 
 
 East India bonds yield a higher interest than exchequer bills, and the 
 interest cannot be reduced till after twelve months' notice from the East 
 India Company. But they are by no means so salable. Money, how- 
 ever, may generally be borrowed upon them ; and the loans of the Bank 
 of England are always announced to be granted on " exchequer bills, 
 India bonds, and other approved securities." 
 
 Bonds of corporations, or of public companies, are by no means proper 
 investments for a banker, except to a very moderate amount, and when 
 they have a short time to run. They may, however, be taken as security 
 for temporary advances to respectable customers. 
 
 Good commercial bills, of short dates, have this advantage over govern- 
 ment stock or exchequer bills, that a banker is sure to receive back the 
 same amount of money which he advanced. He can calculate, too, upon 
 the time the money will be received, and make his arrangements accord- 
 ingly. And if, unexpectedly, he should want the money sooner, the bills 
 can, in ordinary times, be re-discounted in the money market. Another 
 advantage is, that he is able to avail himself of any advance in the current 
 rate of interest. He will get no higher dividend from his investment in 
 
 45
 
 A Treatise on Banking. 
 
 government stock, should money afterwards become ever so valuable. 
 But with regard to bills, as they fall due he will receive a higher rate of 
 discount with the new bills he may take, and thus, as the market rate of 
 interest advances, his profits will increase. 
 
 The bankers of Lancashire usually keep the whole of their reserves in 
 bills of exchange. If they have a " good bill case," that is, a large 
 amount of good bills in their case, they think themselves prepared to meet 
 any emergency. Their objection to government securities is founded, 
 first, upon the low rate of interest which they yield ; and, secondly, the 
 possibility of loss, from fluctuations in price. They contend, too, that 
 good hills of exchange are more convertible than even exchequer bills ; 
 and, even if not convertible, the money comes back as the bills fall due, 
 and thus the reserve is constantly replenished. The following evidence 
 was given before the Committee on Banks of Issue, in the year 1S41, by 
 Mr. Paul Moon James, the Manager of the Manchester and Salford 
 Bank : — 
 
 " Do you mean to say that no portion of the capital of your hank is invested in any 
 other security than bills of exchange ? — At the present time it is not. In the office, 
 at all times, we have a larger amount than the liaijilities of the bank in good bills of 
 exchange. They are coming due every day, and are therefore considered a very eligi- 
 ble investment. It is advantageous to a bank when it is in a position to get that 
 kind of bills. 
 
 " Do you consider that bills of exchange may safely be relied iipon, as affording the 
 means by which to obtain money whenever you want it 'i — After a very long expe- 
 rience, I consider that they may be safely relied upon ; they have never failed. 
 
 " Did you never know them to fail ? — I have known exchequer bills to fail, but I 
 have never known bills of exchange to fivil. I am alluding to the panic of 1825. I 
 could not sell exchequer bills for several hours at that time. 
 
 " You could discount bills ? — At that time money was obtained upon bills on the 
 same day on which I could not get money for exchequer bills ; and having paid a high 
 premium for exchequer bills, and met with great loss, I have rather an objection to 
 hold them. 
 
 " Do you mean to say, that you recollect a day upon which you could obtain money 
 upon bills of exchange, and could not obtain money upon exchquer bills 1 — I do." 
 
 Some of the Scotch bankers, too, seem to be favorable to investments 
 in commercial bills. Mr. Anderson, the general manager of the Union 
 Bank of Scotland, gave the following evidence before the Committee on 
 Banks of Issue, in 1841 : — 
 
 " Do you consider, in fact, that the holding of a reserve in government securities, 
 gold, and Bank of England notes, independently of the ordinary daily operations of 
 your business, is, or is not essential to the perfect safety of a bank? — I do not think 
 that it is quite essential that they should be government securities. Available securi- 
 ties I should think cjuite essential ; but then comes the question, What is available ? 
 
 " Are you of opinion that bills of exchange are a proper description of reserve, to be 
 held independently of the other species of reserves that have been mentioned ? — I 
 should think so. 
 
 " You think that bills of exchange may safely be relied upon at all times ? — We 
 have Mr. Gurncy's authority for saying so. 
 
 "Is there no essential diil'crcnce between keeping exchequer bills and stock, and 
 keeping bills of exchange as reserves ? — If the bills of exchange are perfectly well se- 
 cured, I should think not, so far as .the safety of the bank is concerned." 
 
 The authority of Mr. Samuel Gurney, from his high standing in the 
 city, is so constantly referred to upon this subject, that we copy his cvi- 
 
 46
 
 Surplus Funds. 
 
 dence. It was given before the Committee on Joint-stock Banks, in 
 the year 1836 ; previous, of course, to the passing of the act of 
 1844. 
 
 " Would not the result from that opinion be, that a properly conducted establish- 
 ment, whether a private or a joint-stock bank, sliould have some government securities 
 or exchequer bills on which always to rely as a resource in a moment of such emer- 
 gency ? — Experience has shown that it is not needful ; bills of exchange are quite as 
 good a security to hold in time of difficulty as exchequer bills or stock ; in most re- 
 spects very much better. 
 
 " Cannot you conceive a state of things in the money market — a state of mercantile 
 discredit, for instance — when it might be possible to procure money on government 
 securities, when it could not be procured on private security in the shape of bills ? — 
 Such difficulty may possibly exist under very peculiar circumstances ; but I repeat my 
 opinion, that bills of exchange have proved themselves to be a better investment for 
 bankers than stock or exchequer bills. 
 
 " It is quite intelligible why, in ordinary times, bills of exchange should be a prefer- 
 able investment for money, inasmuch as there is no risk of loss by variation of pre- 
 mium in the purchase and resale ; but M'ould you wish the committee to suppose that 
 in the case supposed by the question, of a great degree of mercantile discredit and 
 doubt, an amoixnt of exchequer bills would not be a more certain security on which to 
 raise money than the bills of private merchants 1 — That is a difficult question to an- 
 swer; I doubt it. 
 
 " Supposing a period of difficulty to arise, and two country bankers came up to 
 London, one who could exhibit government stock to the extent of £ 25,000, and 
 .£25,000 in bills of exchange, and the other banker exhibiting ^50.000 in bills of ex- 
 change only, which do you think would have the best means of procuring accommoda- 
 tion in the London market to pay his engagement ? — My apprehension is, that they 
 would both get their supplies upon any particular emergency ; it is my judgment, that 
 to a banker a good supply of bills of exchange of first-rate character is a better invest- 
 ment for his funds, for which he is liable to be called upon on demand, than exchequer 
 bills or any government security." 
 
 A London banker never considers as a part of his reserve the bills he 
 has discounted for his customers. Nothing could damage his credit more 
 than any attempt to rediscount these bills. During the war, the London 
 bankers had discount accounts with the Bank of England ; and during 
 the panic of 1825, it is well known they discounted largely with that es- 
 tablishment. But since that period they have not done so, and their in- 
 dorsements are never seen in the money market. The practice is now 
 more general of lodging money at call with the large money dealers. 
 And it is in this way that the London bankers make provision for any 
 sudden demand. It is rarely, however, that any large demand comes so 
 suddenly as to occasion any inconvenience. And it may be observed, 
 that such bankers as are members of the Clearing-house have the whole 
 day to make preparation, — one of the circumstances which enables them 
 to lock up at night with a smaller amount of cash. 
 
 In the morning the banker looks at his " Cash-book," and observes the 
 amount with which he " locked up " the preceding night. He then looks 
 at the " Diary," which contains his receipts and payments for tliat day, as 
 far as he is then advised. He then opens the letters, and notices the re- 
 mittances they contain, and the payments he is instructed to make. He 
 will learn from these items whether he " wants money," or has " money 
 to spare." If he wants money, he will " take in " any loans that may be 
 falling due that day, or he may " call in " any loans he may have out on 
 demand, or he may go further, and borrow money for a few days on 
 
 47
 
 A Treatise on Banking. 
 
 stock or exchequer bills. Should he have money to spare, he will, per 
 adventure, discount brokers' bills, or lodge money on demand with thf; 
 bill-brokers, or lend it for fixed periods upon stock or exchequer bills. 
 There are some bill-brokers who usually make their rounds every morn- 
 ing, first calling on the parties who supply them with bills, and then call- 
 ing on the bankers who supply them with money. The stockbrokers, 
 too, will call after " the market is open," to inform the banker how 
 " things are going" on the Stock Exchange, what operations are taking 
 place, and whether money is abundant or scarce " in the house " ; also 
 what rumors are afloat that are likely to afTect the price of the funds. 
 It is thus that a banker regulates his investments, and finds employment 
 for his surplus funds. 
 
 In our opinion, it is best for a banker not to adopt exclusively any one 
 of the investments we have noticed, but to distribute his funds among 
 them all. We have seen that practical bankers of high standing have 
 been in favor of government securities, as being at all times convertible. 
 The objection on the part of others has been, that the value of these secu- 
 rities very much fluctuates, and as their realization will be required only in 
 seasons of pressure when the funds are low, it is sure to be attended with 
 loss. On the other hand, it may be stated, with regard to " loans on de- 
 mand," that the recent failures of bill-brokers have shown that the " de- 
 mand " may not always be readily met. And with regard to " brokers' 
 bills," the numerous failures among houses of the first standing have proved 
 that great losses and most inconvenient " locks-up " may occasionally 
 take place from such securities. Without condemning other modes of in- 
 vestment, we are strongly inclined to favor government securities, though 
 fully conscious of the losses they may occasionally produce. There is 
 one consideration that must be taken into account : a bank that has 
 large surplus funds, if it makes no investments in government securities, 
 will be strongly tempted to invest their funds elsewhere in other securi- 
 ties that may not be so convertible. It is true that more interest may for 
 a time be obtained, but ultimately the bank may, though in a state of per- 
 fect solvency, be compelled to stop payment from being unable to realize 
 its investments. 
 
 Another advantage of a large investment in government securities 
 is, that the bank, by the publication of its balance-sheet, has always the 
 means of showing to its depositors that a large portion of its deposits is at 
 all times amply secured. The Bank of England states the amount of 
 their " government securities " distinct from the " other securities." It 
 may so be that the " other securities" are as good as the government se- 
 curities, and perhaps more profitable, but the public do not know that to 
 be the case ; and were all the investments in " other securities," they 
 might not feel the same degree of confidence as to the prompt repayment 
 of their deposits. The same principle applies to other banks. And it 
 may reasonably be supposed that between two banks in similar circum- 
 stances as to other respects, depositors would rather lodge their money in 
 a bank which had a large amount of government securities, than in one 
 which had none. 
 
 As we have referred in this section to some of tlie operations of the 
 
 48
 
 The Stock Exchange. 
 
 Stock Exchange, this may be a proper place to discuss the nature of 
 these transactions, so far at least as concerns bankers. 
 
 The reader is of course aware that the " Stocks," or the " Funds," or 
 by whatever other name they may be called, are debts due from the na- 
 tion to those persons whose names are entered on the bank books. The 
 man who holds £ 100 consols is a creditor to the nation for £ 100, for 
 which he receives £ 3 per annum ; and the price of consols is the amount 
 of the money for which he is willing to transfer this debt from himself to 
 another person. Now, if this man knows another who is willing to give 
 him, say <£90 for this £ 100 consols, they can go to the bank, and the 
 seller, being properly identified, will transfer this £ 100 consols into the 
 name of the person to whom he has sold it. His account is then closed 
 in the bank books, and a new account is open in the name of the buyer ; 
 for every holder of stock has an account in the bank ledger, in the same 
 way as bankers and merchants open ledger accounts for their customers. 
 The seller of the stock will also give a receipt to the buyer for the money 
 in the following form : — 
 
 Consolidated £ 3 per Cent. Annuities 
 
 Dividends due 
 
 Jan. 5th, 
 
 July 5ih, 
 
 and are usually 
 
 paid a few days 
 
 after. 
 
 Transfer Days, 
 
 Tuesday, 
 
 Wednesday, 
 
 Thursday, 
 
 Friday. 
 
 Holidays 
 excepted. 
 
 Received this day of 
 
 184 of 
 
 the sum of 
 
 being the Consideration for 
 
 Interest or Share in the Joint Stock of Tliree per 
 Cent. Annuities, erected by an Act of Parliament 
 of the 25th Year of the Reign of King GEORGE 
 II., entitled, An Act for converting the several An- 
 nuities therein mentioned, into several Joint Stocks 
 of Annuities, transferable at the BANK of ENG- 
 LAND, to he charged on the Sinking Fund; and 
 by several subsequent Acts, together with the Pro- 
 portional Annuity at £3 per Cent, per Annum, at- 
 tending the same, by this day 
 transferred to the said 
 
 B3=- The Proprie- 
 tors, to protect them- 
 selves from FRAUD, 
 are recommended to 
 ACCEPT by them- 
 selves or their Attor- 
 nies, all TRANSFERS 
 made to them. 
 
 Witness 
 
 Hand 
 
 Witness 
 
 J 
 
 But parties do not usually treat with each other in this way. A broker 
 is employed either to buy or to sell, as the case may be. The stock- 
 brokers are an association consisting of about si.x hundred persons, who 
 meet together in a building in Capel Court, Bartholomew Lane, close to 
 the Bank. Each broker before admission must find three securities for 
 
 49
 
 A Treatise on Banking. 
 
 ^300 each, which sum is applied to meet any claims the other members 
 of the " House " may have upon him during the first two years. The 
 suretyship then ceases. The subscription paid by each member is ten 
 guineas per annum. The House is governed by a committee of thirty 
 persons chosen from the members. 
 
 But aUhough all the "members of the House" are called stock- 
 brokers by the public, yet within the House they are divided into two 
 classes, brokers and jobbers. A broker, as the name implies, is an agent 
 who buys or sells for his customers out of the House, and he charges 
 them a commission upon the amount of the stock. A stock-jobber is a 
 stock merchant ; but he does not deal with the public ; he deals only with 
 the brokers ; and he is at all times ready either to buy or to sell. The 
 price at which he sells is ^ more than the price at which he buys. If 
 one broker has an order from his customer to buy £ 100 consols, and 
 another broker has an order to sell <£ 100 consols, these two brokers do 
 not deal together, but both go to a jobber. One will sell his consols to 
 the jobber, say at 90, and the other will buy his consols from the jobber at 
 90 J. Hence the difference between the buying and the seUing price of 
 consols is always ^, and thus in the newspapers the price is quoted in this 
 way, 90 to 90J. 
 
 A banker is, of course, one of the public, and when he wants to buy or 
 to sell stock, he gives instructions to his broker, and the process is as we 
 have now described. 
 
 Were there no jobbers, a broker would not easily find at all times another 
 broker who had occasion to sell the same amount of stock which he wished 
 to buy, and he would have a difficulty in buying or selling small amounts. 
 But there is no difficulty with the jobbers. The jobbers will not only buy 
 and sell stock on the same day, but they will buy stock on one day, and 
 agree to sell it at a future day, or vice versa. These future days are 
 called the settling days, being the days on which the members of the 
 House settle their accounts. They are fixed by the Committee of the 
 Stock Exchange, and they now occur about once a month. Now, if a 
 banker wants a sum of money for a short time, either to pay off a deposit 
 or to make an advance to a customer, he will direct his stock-broker to 
 sell, say £ 50,000 consols " for money," and buy them " for time," that 
 is, against the next " settling day," or, as it is sometimes called, the 
 next "account day." On the other hand, if a banker has money he 
 wishes to employ for a short time, he will reverse the operation, and de- 
 sire his broker to buy consols for money and sell them for time. He 
 thus gets interest for his money, according to the difference of price be- 
 tween consols for time and consols for money. Generally, the price for 
 time is higher than the price for money ; and the difference between 
 these two prices is called the " Continuation." Supposing that the next 
 settling day is a month distant, and the continuation is one eighth per 
 cent., that amounts to twelve eighths, or three per cent, per annum. The 
 continuation will vary according to the near approach of the settling day, 
 according to the abundance of money and the market rate of interest, and 
 according to the abundance or scarcity of stock. The last cause is not so 
 readily understood by the public, and we will therefore explain it. The 
 
 50
 
 Public Debt. 
 
 stock-jobbers, as we have said, are stock merchants. Of course they are 
 large holders of stock ; it is their capital, on which they trade. But how- 
 ever large may be the sum they hold, they often agree to sell on the next 
 settling day a much larger sum, expecting that in the mean time they 
 shall buy a large sum, and thus be able to set off one against the other. 
 But sometimes, as the settling day approaches, they find this is not 
 the case, and they are consequently under an engagement to " deliver," 
 that is, sell, more stock than they hold. What can they do now ? They 
 will try to get stock from those who have it, by agreeing to buy it of them 
 now, and selling it at the ensuing account day, a month hence, at the 
 same price ; thus abolishing the " continuation." When that is the case, 
 a banker's broker will go to the banker and say, " If you like to lend 
 your consols, you can get money for nothing till the next account day." 
 The banker replies, " Well, I don't know that I can make much interest 
 of the money just now ; but, as I can lose nothing, you may lend them." 
 Thus the jobbers get their stock, and complete their engagements. But 
 sometimes the jobbers are obliged to go further, and even to offer a pre- 
 mium to parties who will lend their consols. This premium is called 
 " Backadation " ; it is just the reverse of " continuation," and implies 
 that the time price of stock is less than the money price. 
 
 We have thus described the legitimate operations of the Stock Ex- 
 change, so far as it may be necessary to explain the transactions of bank- 
 ers in the employment of their surplus funds. Those operations called 
 " Gambling in the Funds," and the mode in which the brokers and job- 
 bers settle their accounts, we shall endeavour to describe when we come to 
 speak of the Clearing-house. We will only add here the name and 
 amount of each of the government stocks and annuities, as they stood on 
 the 5th of January, 1848. 
 
 Capital Stock of the Unredeemed Debt of the United Kingdom, on 5th January, 1848. 
 
 Great Britain. 
 
 Debt due to the South Sea Company, at 3 per cent., 
 
 Old South Sea Annuities, ditto, 
 
 New South Sea Annuities, ditto, 
 
 South Sea Annuities, 1751, ditto, 
 
 Debt due to the Bank of England, ditto, 
 
 Bank Annuities, 1726, ditto, 
 
 Consolidated Annuities, ditto, 
 
 Reduced Annuities, ditto, 
 
 Annuities at 3:^ per cent.. 
 New 5 per cent. Annuities, 
 
 Total at 3 per cent., 
 
 £ 
 
 s. 
 
 d. 
 
 3,662,784 
 
 8 
 
 6i 
 
 3,195,160 
 
 17 
 
 9 
 
 2,195,867 
 
 16 
 
 9 
 
 500,780 
 
 11 
 
 9 
 
 11,015,100 
 
 
 
 
 
 750,404 
 
 18 
 
 6 
 
 371,824,981 
 
 15 
 
 m 
 
 121,924,219 
 
 8 
 
 7 
 
 Total, Great Britain, 
 
 Ireland. 
 
 Irish Consolidated Annuities, at 3 per cent., 
 Irish Reduced Annuities, ditto, 
 
 Annuities at 3^ per cent., 
 
 Debt due to the Bank of Ireland, at 3J per cent., 
 New 5 per cent. Annuities, . . . . 
 
 Total, United Kingdom, 
 51 
 
 515,069,299 17 9| 
 
 215,700,1549 5 1 
 
 430,076 3 2 
 
 731,199,925 6 0| 
 
 . 6,194,874 15 2 
 
 128,295 16 9 
 
 . 32.244,312 10 9 
 
 2,630,769 4 8 
 
 3,673 11 2 
 
 £772,401,851 4 6|
 
 A Treatise on Banking. 
 
 The Annual Chahge on the National Debt was then as follows : — 
 
 Great Britain. Ireland. 
 
 Interest on unredeemed debt, 
 Annuities of all kinds falling due, 
 
 Management, . 
 Total, .... 
 
 Grand Total, . . X27,753,663 10 Hi 
 
 This is exclusive of £71,971 2s. 9|(/., the annual charge on stock and annuities of 
 various kinds, standing in the names of the Commi.'Jsioners, on account of stock un- 
 claimed for ten years and upwards, and of unclaimed dividends, and also on account 
 of donations and bequests, but which sum is not paid or provided for. 
 
 £ s. 
 
 22.483,850 13 
 3,685,696 6 
 
 (I. 
 
 H 
 5 
 
 6i 
 10 
 
 £ s. 
 
 1.329.895 17 
 
 160,394 2 
 
 d. 
 6 
 1 
 
 26,169,546 19 
 93,826 11 
 
 1,490,289 19 
 
 7 
 
 26,263,373 11 
 
 H 
 
 1,490,289 19 
 
 7 
 
 Section VII. — THE ADMINISTRATION OF A BANK DURING 
 A SEASON OF PRESSURE. 
 
 A PRESSTTKE on the money market may be defined a difficulty of getting 
 money in the London market, eitlier by way of discounting bills, or of 
 loans upon government securities. This difficulty is usually accompanied 
 by an unfavorable course of exchange, a contraction of the circulation of 
 the Bank of England, and a high rate of interest. These three circum- 
 stances have the relation to each other of cause and effect. The unfavor- 
 able course of exchange induces the Bank of England to contract her cir- 
 culation ; and the contraction of the circulation, by rendering money 
 more scarce, increases its value, and leads to an advanced rate of interest. 
 The removal of the pressure is in the same order, — the foreign ex- 
 changes become favorable, the Bank of England then extends her circu- 
 lation, money becomes more abundant, and the rate of interest falls. 
 The degree to which the exchanges are unfavorable is indicated by the 
 stock of gold in the Bank of England ; and when this is at its lowest 
 amount the pressure may be considered to have attained its extreme 
 point ; for as the amount of gold increases, the bank will extend her cir- 
 culation, and the pressure will subside. (An Inquiry into the Causes of 
 the Pressure on the Money Market during the year 1839, by J. W. 
 Gilbart.) 
 
 If we take a review of all the recent pressures on the money market, 
 we shall find they have always been preceded by the following circum- 
 .stances. First, by abundance of money ; secondly, by a low rate of in- 
 terest ; thirdly, by some species of speculative investments. The prin- 
 cipal pressures that have occurred of late years, have been those of 
 1>25, 1836, 1839, and 1847. 
 
 The following is Mr. Hoi-sley Palmer's opinion of the causes of the 
 pressure of 1825, as stated to the Bank Committee of 1832 : — 
 
 " Will you state to the committee what, in your opinion, was the nature and the 
 oiar'h of the crisis in 1825 ? — I have always considered that the first step towards the 
 
 "52
 
 Season of Pressure. 
 
 excitement was the reduction of the interest upon the {government sccuritiea. The 
 first movement in that respect was, I thinli, upon £ 135,000,000 of five per cents., 
 which took place in 1823. In the subsc<iaent year, 1824, followed the reduction of 
 £80.000.000 of four per cents. I have always considered that reduction of interests, 
 one fifth in one case and one eighth in the other, to have created the feverish feeling in 
 the minds of the public at large, which prompted almost every body to entertain any 
 proposition for investment, however absurd, which was tendered. The excitement of 
 that period was further promoted by the acknowledgment of South American repu!)lics 
 by this country, and the inducements held out for engaging in mining operations, and 
 loans to those governments, in which all classes of the community in England seem to 
 have partaken almost simultaneously. With those speculations arose general specu- 
 lation in commercial produce, which had an effect of disturbing the relative values be- 
 tween this and other countries, and creating an unfavorable foreign exchange, which 
 continued from October, 1824, to November, 1825, causing a very considerable export 
 of bullion from the bank, — about seven millions and a half. Commercial specula- 
 tions had induced some bankers, one particularly, to invest money in securities not 
 strictly convertible, to a larger extent than was prudent ; they were also largely con- 
 nected with country bankers. I allude to the house of Messrs. Pole & Co. ; a house 
 originally possessed of very great property, in the persons of the partners, but which 
 fell with the circumstances of the times. The failure of that banking-house was tlie 
 first decisive check to commercial and banking credit, and brought at once a vast 
 number of country bankers, which were in correspondence with it, into difficulties 
 That discredit was followed by a general discredit throughout London and the in 
 terior." — p. 47. 
 
 With regard to the pressure of 1836, there was in the beginning of 
 that year no appearance of distress ; but, on the contrary, every symptom 
 of prosperity, attended by its usual concomitant, a readiness to engage in 
 speculative undertakings. 
 
 The following description of this period is taken from the speech of 
 Mr. Clay, on introducing his motion respecting Joint-stock Banks, May 
 12, 1836 : — 
 
 " To what extent the operations of the joint-stock banks may have contributed to 
 create the present state of excitement in the commercial world, must, of course, be 
 mere matter of conjecture. That they have had some considerable influence is proba- 
 ble, from the fact that the excitement and rage for speculation is greatest in those parts 
 of the kingdom where the operations of those establishments have been most active. 
 London has been comparatively unmoved, but Liverpool and Manchester have wit- 
 nessed a mushroom growth of schemes, not exceeded by the memorable year 1825. I 
 hold in my hand a list of seventy contemplated companies for every species of under- 
 taking, which have appeared in the Liverpool and Manchester papers within the last 
 three months. This list was made a fortnight or three weeks since, and might prob- 
 ably now be considerably extended. It is impossible also, I think, not to suspect 
 that the fiicility of credit, and consequent encouragement to speculation, to which I 
 have alluded, cannot have been without its effect in producing the great increase of 
 price in almost all the chief articles of consumption and raw materials of our manu- 
 factures. That increase has been enormous, — not less than from twenty to fifty, and 
 even one himdred per cent, in many of tlie chief articles of produce, of consumption, 
 and materials of our manufactures." 
 
 These appearances continued with little alteration until the month of 
 July, when the Bank of England raised the rate of discount to four and a 
 half per cent. It then became known that there had been a demand upon 
 the bank for gold from the preceding April, and this measure was adopt- 
 ed by the bank as a means of rendering the foreign exchanges more fa- 
 vorable. This being found ineffectual, the bank in September raised the 
 rate of discount to five per cent. Besides raising the rate of interest, the 
 bank adopted other measures of increasing the value of money. A large 
 
 53
 
 A Treatise on Banking. 
 
 amount of American bills upon first-rate houses had been offered for dis- 
 count and rejected. A high degree of alarm was immediately spread 
 throughout the community. The dread of a panic similar to that of 1825 
 almost universally prevailed. Those who had money were unwilling to 
 part with it ; trade became suddenly stagnant ; the prices of all commod- 
 ities fell considerably ; and numbers of commercial houses, chiefly of the 
 second class, suspended payment. Many railway and other projects now 
 fell into oblivion. 
 
 The alarm that existed was kept up by the monthly accounts of the 
 bullion in the Bank of England. The public returns showed a gradual 
 decline from April, 1836, to February, 1837. It was therefore supposed, 
 that the Bank of England would be under the necessity, for her own 
 safety, of still further contracting her issues, and thus increasing the ex- 
 isting pressure. This apprehension caused all persons who had money 
 to retain it in their possession, and bankers and others withheld accom- 
 modation they would otherwise have been disposed to grant. 
 
 This state of alarm was considerably augmented by the publication of 
 the Report of the Secret Committee of the House of Commons upon Joint- 
 stock Banks. This committee had been appointed on the motion of Mr. 
 Clay, the Member for the Tower Hamlets, whose speech on the occasion 
 might be termed a bill of indictment. The joint-stock banks had rapidly 
 increased ; they had issued small shares ; they had large nominal capitals ; 
 they had circulated an excessive amount of notes ; they had promoted 
 speculation. These were the charges brought against them ; and they 
 had greater weight, from being advanced by a member who was known to 
 be friendly to joint-stock banking. The report of the committee appeared 
 to sustain all Mr. Clay's accusations. This report was highly creditable 
 to the talents and industry of the committee, but marked by a decided 
 hostility of tone. While it enumerated all the actual or possible imper- 
 fections of the joint-stock banks, it ascribed to them scarcely a single ex- 
 cellence. At the same time, the committee deferred to the succeeding 
 session the proposal of any measures for their improvement ; thus the 
 public were led to suppose, that in the following session some astringent 
 measures would be adopted with reference to joint-stock banks, but what 
 they would be none could conjecture. 
 
 Had the report appeared at any other period it might possibly have 
 done good ; but as its appearance was contemporaneous with a pressure 
 on the money market, and a high state of alarm, it unquestionably tended 
 to weaken public confidence at a time when it required to be strengthened. 
 Persons who were unfriendly to joint-stock banks seized the opportunity 
 of dispraising them, and believed, or pretended to believe, that the banks 
 were unsound, and would certainly stop payment. Others, who were 
 friendly, were apprehensive that the banks, being still in their infancy, 
 would be found too weak to withstand the storm now raised against them. 
 But though this alarm began with respect to joint-stock banks it did not 
 end there. It was soon foreseen that if a few joint-stock banks were to 
 stop payment, the private banks in their neighbourhood would be put to a 
 severe trial ; and if the banks should even be compelled to withhold their 
 usual advances to their customers, the credit of individuals must suffer. 
 
 54
 
 Season of Pressure. 
 
 Hence the private bankers and the merchants, as well as the joint-stock 
 banks, made preparations to meet any event that might occur, and by thus 
 increasing the pressure on the London money market occasioned still fur- 
 ther apprehensions. 
 
 The alarm was augmented by the stoppage of the Agricultural and 
 Commercial Bank of Ireland in the month of November, and the demand 
 for gold which that stoppage occasioned in Ireland. The joint-stock 
 banks of England now became subject to increased suspicions ; the ac- 
 commodation they had been accustomed to obtain by the rediscount of 
 their bills in the London market was considerably restricted ; and in the 
 beginning of December, the Northern and Central Bank at Manchester, a 
 bank having a paid-up capital of ,£800,000, with above 1,200 partners, 
 and forty branches, applied for assistance to the Bank of England. This 
 was afforded upon condition, in the first instance, that they should wind 
 up all their branches except that at Liverpool ; and afterwards further as- 
 sistance was granted, upon condition they should discontinue business after 
 February, 1837. Soon afterwards, the old and respectable London bank- 
 ing-house of Messrs. Esdaile & Co. received assistance upon similar 
 terms. 
 
 The pressure which existed in England rapidly extended to America. 
 A large amount of American securities, consisting chiefly of bonds of the 
 respective States, had been remitted to the agency houses in England. 
 This circumstance, in connection with the exportation of gold to America, 
 attracted the notice of the Bank of England. A large amount of bills 
 drawn from America upon first-rate London houses was rejected. In 
 America the pressure became severe ; money was wanted to remit to 
 England to meet the drafts that had been drawn upon England, either 
 upon credit or against securities that could not now be sold. The rate 
 of discount at New York rose to two, and even to three per cent, per 
 month. 
 
 From the pressure upon the money market, and from the great fall in 
 the price of American produce, the cotton and other commodities sent 
 from America to meet drafts upon the English agents could not be sold 
 except at a ruinous loss. And other remittances not having arrived, sev- 
 eral houses in the American trade, who were said to have given extensive 
 credit to parties in America, applied for assistance to the Bank of Eng- 
 land. ( The History of Banking in America ; with an Inquiry how far 
 the Banking Institutions of America are adapted to this Country ; with a 
 Review of the Causes of the recent Pressure on the Money Market. By 
 J. VV. Gilbart. 1837.) 
 
 Such was the character of the pressure of 1836. We next proceed to 
 the pressure of 1839. The pressure of 1836 may be said to have com- 
 menced from the month of May in that year. From that month the stock 
 of gold in the bank gradually and uniformly declined until Februaiy, 
 1837, when it reached its lowest point of depression. From this point it 
 uniformly advanced : the lowest point of the circulation was in Decem- 
 ber, 1836, though even then it was not lower than it had been in the pre- 
 ceding January. The bank raised the rate of interest from four to four 
 and a half per cent, in July, and to five per cent, in the following Sep- 
 E 55
 
 A Treatise on Banking. 
 
 lember. During the whole of the year 1837, the amount of gold in the 
 Bank of England continued to increase ; the bank extended her circula- 
 tion, and after the payment of the July dividends, money became very 
 abundant, and the market rate of interest experienced a considerable fall. 
 The foreign exchanges continued to be favorable during the early part of 
 1838, and gold accumulated in the coffers of the Bank of England. In 
 the spring of that year the directors of the Bank of England sent nearly a 
 million of gold to America. Money became increasingly abundant, and 
 the rate of interest fell. In February the bank reduced their rate of dis- 
 count to four per cent., and the interest on the loans granted during the 
 shutting of the funds was reduced in March to three and a half per cent. 
 The low rate of interest caused large sums of money to be invested in 
 American securities. Bonds of all kinds issued by the Bank of the United 
 States, by the various States in the Union, and by numerous private un- 
 dertakings, were poured upon the English market, and found eager pur- 
 chasers. Several of the directors of the Bank of England, in their indi- 
 vidual character as merchants, became agents for the distribution of these 
 securities. About July the exchanges became unfavorable, and in the 
 latter part of the year some symptoms of uneasiness were apparent in the 
 money market ; but as the stock of bullion in the Bank of England was 
 considerable, and the directors granted their usual loans in December at 
 three and a half per cent., public confidence was not shaken. In the be- 
 ginning of the year 1839 the exchanges became increasingly unfavorable, 
 and the monthly returns of the bank showed a gradual diminution in the 
 stock of gold. The price of corn rose so high as to admit of foreign 
 wheat at the lowest rate of duty. This occasioned a further demand for 
 gold to be exported. The stock of gold in the Bank of England rapidly 
 declined, until, in the month of October, it was no more than £ 2,52.5,000, 
 while the liabilities of the bank upon notes amounted to £ 17,6 12,000, and 
 upon deposits to £ 6,734,000. The bank directors were very anxious to 
 stop this demand for gold. With this view they raised the rate of interest 
 on May 16th to five per cent., on June 20th to five and a half per cent., 
 and on August 1st to six per cent. ; and they charged the same rate upon 
 their short loans. They are supposed to have sold large amounts of gov- 
 ernment stock and exchequer bills, and on July 13th they announced that 
 they were ready to receive projjosals for the sale of the dead weight. 
 None of the oflers, however, met their approbation. Finding these meas- 
 ures not speedily effective, an arrangement was made with the Bank of 
 France for a loan of .£2,500,000. Messrs. Baring & Co drew bills on 
 account of the Bank of England upon houses in Paris for this amount, 
 which the Bank of France undertook to discount. The directors also de- 
 termined to refuse to discount any bills drawn or indorsed by any private 
 or joint-stock bank of issue. Notwithstanding these measures, the stock 
 of gold in the bank continued to decrease until the 18th of October, when 
 it reached the lowest point of depression. F^rom this point it continued to 
 advance, and the pressure began gradually, but slowly, to subside. 
 
 It may be useful to notice the dilferences between the pressure of 1836 
 and that of 1839. If we measure the intensity of the pressure by the 
 difference between the largest and the lowest stock of gold in the 
 
 56
 
 Season of Pressure. 
 
 Bank of England, the former pressure will range from .£7,801,000 to 
 .£ 4,03-2,000, and the latter from .£ 10,126,000 to .£2,525,000. In the 
 pressure of 1836, one joint-stock bank, a London private bank, two coun- 
 try private banks, three large American agency houses, and a great many 
 respectable merchants, stopped payment. In the pressure of 1839, there 
 was scarcely a failure until the month of December, and then only among 
 the second class of traders. In the pressure of 1836, the prices of nearly 
 all commodities fell considerably, and almost immediately. In the pres- 
 sure of 1839, the prices of most commodities remained for a length of 
 time nearly the same. In 1836, the Bank of England did not raise their 
 rate of interest above five per cent. In 1839, the rate of interest upon 
 both discounts and loans was raised to six per cent. In 1839, the bank 
 gave notice that they were willing to sell the dead weight, and they made 
 arrangements for borrowing £ 2,500,000 sterling from the Bank of France. 
 In 1836, the bank adopted neither of these measures. In 1836, the Bank 
 of England rejected all bills drawn or indorsed by joint-stock banks of 
 issue. In 1839, they rejected also all bills drawn and indorsed by private 
 banks of issue. {An Inquiry into the Causes of the Pressure of 1839.) 
 
 The consideration of the pressure of the year 1847 we shall postpone 
 to the next section of our work. 
 
 From the statements we have made, it would appear that a season of 
 pressure is always preceded by one of speculation ; and hence it follows 
 that a banker who wishes to be easy in a time of pressure must act wisely 
 in the previous season of speculation. It requires no ordinary firmness to 
 do this. To act wisely in a season of speculation is far more difficult 
 than to act wisely in one of pressure. But unless a banker act wisely in 
 the previous time of speculation, his wisdom will probably be of little 
 avail when the pressure arrives. 
 
 While, therefore, money is still abundant, the public funds high, and 
 other bankers liberal in accommodation, he should be doubly cautious 
 against taking bills of a doubtful character, or making advances upon 
 irregular securities. He should not suffer the desire of employing his 
 funds, or the fear of offending his customers, to induce him to deviate 
 from sound banking principles. He should also take this opportunity of 
 calling up all dead or doubtful loans, and of getting rid of all weak cus- 
 tomers. He should also, under any circumstances, avoid making ad- 
 vances for any length of time, and investments in securities that are not 
 at all times convertible, or the price of which is likely to sustain a great 
 fall on the occurrence of a pressure. The discount of first-rate commer- 
 cial bills having a short time to run, or short loans on stock or other unde- 
 niable security, however low the interest received, seem to be the most 
 safe and advantageous transactions. 
 
 When the aspect of affairs seems to threaten that money will be still 
 more in demand, and the failure of a number of merchants and traders 
 may consequently be apprehended, it behoves him to prepare for ap- 
 proaching events by avoiding all discounts of bills of an inferior class, and 
 by keeping his funds in an available state. With a view to these objects, 
 he will review all his loan and discount accounts, call up his loans of long 
 standing, where it can be done without injury to the interest or reputation 
 
 57
 
 A Treatise on Banking. 
 
 of his bank, avoid all overdrawn accounts, and reduce the amount of dis 
 counts on the inferior class of accounts. In performing these operations 
 Ite will exercise due judgment and discretion, making proper distinctions 
 between his customers, and reducing chiefly those bills which are of an 
 unbusiness character, or which are drawn upon doubtful people, or upon 
 parties that he knows nothing about ; he will also mark particularly those 
 accounts which require large discounts, but keep no corresponding balance 
 to the credit of their current accounts. 
 
 As the pressure advances, he will find that there are three demands 
 upon his funds. First, his customers will reduce their balances, and keep 
 liss money in his hands. Money lodged at interest will be taken away, 
 because the parties can make higher interest elsewhere, or they will be 
 tempted by the low price of stock to invest it in government securities. 
 Secondly, he will have a greater demand for loans and discounts, not 
 merely from weak" people whom he might not care about refusing, but 
 from persons of known wealth, whom it is his interest and his inclination 
 to oblige. Thirdly, he will think it prudent to guard against sudden de- 
 mands by keeping a larger amount of bank notes in his till. To meet all 
 these demands, he will he compelled to realize some of his securities, and 
 he will realize those first on which he will sustain no loss. 
 
 If a banker has money lying at demand with a bill-broker, he will now 
 have occasion to call it in. If he has money lent at short periods at the 
 Stock Exchange, he will, as he has occasion, take in the money as the 
 loans fall due. If he has discounted brokers' bills, he will receive the 
 amounts when due, and discount no more. Should these operations not 
 be sufficient to meet the demands upon his funds, he will then sell his 
 stock or exchequer bills, or borrow on them in the money market. A 
 country banker who has kept his reserve in bills of exchange will be 
 anxious to rediscount them, and will think himself lucky if he can do so 
 readily and at a moderate rate of interest. 
 
 It will be useless for a banker to attempt to call up dead loans, or to re- 
 duce his discounts, after the pressure has commenced. He should have 
 thought of these matters in the previous season of abundance. As he 
 cannot get in any outstanding advances, he had better not ask for them, 
 but merely charge the parties an increased rate of interest. If he demand 
 the money, he will not get it, and he may give rise to a surmise that he 
 is short of funds. This season of pressure is, however, a good opportunity 
 for calling up advances, or getting rid of connections that he would, on 
 other grounds, like to be without. The " scarcity of money," the " pres- 
 sure on the money market," are capital reasons to assign for refusing ap- 
 plications which, even otherwise, he would refuse, and for calling up loans 
 which, under any circumstances, he would like to see repaid. 
 
 During a pressure, a banker will have to give a great many refusals, 
 and some discretion will be necessary in the form of giving these refusals. 
 Let him refuse in what way he may at such a season, he will be sure to 
 give olTence. And the party refused will possibly publish the refusal, and, 
 from motives of ignorance or malignity, represent the refusal as having 
 arisen from want of means, and possibly may circulate a report that the 
 banker is about to stop payment. Hence rumors about banks are always 
 
 58
 
 Season of Pressure. 
 
 rife in seasons of pressure, and they add to the general want of confidence 
 which then prevails. 
 
 During a pressure, a banker will have offers of new accounts to be 
 transferred from other bankers, provided he will consent to make certain 
 advances. Some caution must be exercised in this matter. It is quite 
 possible that some perfectly safe parties, having large accounts, may be 
 disposed to remove in consequence of their present bankers not being 
 equal to the supply of their wants. In this case, the banker will be regu- 
 lated by the value of the proposed account, and the extent of his own 
 means. On the other hand, it is equally possible that weak people, to 
 whom their present bank might not, in any case, have given advances, 
 may use the " scarcity of money " as a pretext for making application to 
 a new banker, stating their belief that their old banker was unable to meet 
 their requirements. It behoves a banker to use much discretion in such a 
 case, especially if it be a large account. If he errs at all, he should err 
 on the side of caution. 
 
 It will rarely be wise for a banker in a season of pressure to attempt to 
 get away the customers of other bankers by offering them greater accom- 
 modation. The best way of getting new connections is to treat well those 
 that he has. It is better for a banker to employ his funds in supporting 
 his old friends than in attempting to get new ones. If his funds are so 
 ample that he can do both without inconvenience, very well. But caution 
 is necessary in taking new accounts at this time, and he should be doubly 
 cautious in making applications to parties. Unless he has the most ample 
 and satisfactory information as to their circumstances, he had better wait 
 until they apply to him. It would then devolve upon them to satisfy him 
 that he would be justified in making the advances required. 
 
 During the pressure, a banker will find that some of his wealthier cus- 
 tomers, who, when money was abundant, took their bills to be discounted 
 by a bill-broker, because he would cash them at a lower rate, will come 
 back, and expect to have discounts from their banker. This is no fault of 
 the bill-brokers. People put money in their hands avowedly for tempo- 
 rary purposes. In seasons of abundance the bill-brokers are glutted with 
 money. When the pressure commences this money is withdrawn. The 
 consequence is, that in seasons of abundance the bill-brokers will discount 
 at a lower rate than the bankers, and when money is scarce they discount 
 at a higher rate, and in many cases not discount at all. Sharp-sighted 
 people, who are acquainted with the London money market, will, when 
 money is abundant, take all their first-rate bills to a bill-broker, and send 
 to their banker all their inferior bills, which a bill-broker would not take. 
 Now, if a banker has occasion to curtail his advances in seasons of pres- 
 sure, he should begin with people of this sort. But if he has ample means, 
 and the parties are wealthy, he may deem it worth his while to take their 
 bills, charging a high rate of interest, and gently reminding them of their 
 former delinquencies. Exhortations to good behaviour have always a 
 greater effect when administered in seasons of affliction. And reproof at 
 this time to a party who had thus wandered, may induce him to pursue in 
 future a more righteous line of conduct. 
 
 During a pressure, a banker will find that some of his customers will 
 
 59
 
 A Treatise on Banking. 
 
 get into difficulties, and will apply to him for assistance. He will oftch be 
 at a loss to decide whether he should or should not grant the assistance 
 required. This hesitation will arise from his doubts as to the extent to 
 which he can prudently rely upon the calculations and anticipations of his 
 customer. The party states that he must immediately stop payment un- 
 less ho has assistance ; but he has abundance of property, and his difficul- 
 ties arise only from not being able to realize it. If he has a certain sum 
 he can then go on comfortably. The banker grants him this sum. After 
 a while, he comes again, and states he must now stop unless he has a fur- 
 ther sum. The banker hesitates, but ultimately gives him this further 
 sum. He comes a third time, and states he has not yet got enough ; and 
 not being able to get more, he then stops,- leaving the banker at best with 
 a large lock-up, and probably with an ultimate loss. 
 
 During a pressure, those banks that allow interest on deposits will be 
 asked for a higher rate of interest. It is quite right that those parties who 
 have had deposits at the bank for some time, should receive a higher rate 
 of interest, proportionate to the increased value of money. But it may be 
 questioned whether it is worth while to receive further lodgments, during 
 a pressure, at a high rate of interest, unless they are lodged for a fixed 
 period. For, should the pressure increase, these sums are sure to be with- 
 drawn, or else applications will be made for a higher rate of interest than 
 the banker can prudently give. Nor must it be forgotten that it is not 
 wise for a banker to give, during a panic, an extravagant rate of interest. 
 Should he do so, he will give rise to an opinion that he is short of funds, 
 and this may cause more. deposits to be withdrawn than he would obtain 
 from his high rate of interest. 
 
 During a pressure, a banker will pay considerable attention to the pub- 
 lished returns of the Bank of England. The increase or diminution of the 
 gold and silver in the issuing department will show the progress of the 
 pressure. As these increase, money will become less scarce, the rate of 
 interest will fall, and the pressure will subside. In this department, it is 
 the progress of increase, or diminution, more than the actual amount, that 
 should be the main object of attention. The banking department resem- 
 bles any other bank. Its means are the paid-up capital, the real or sur- 
 plus fund, the public deposits, the private deposits, and the seven-day bills. 
 These means are employed in public securities, private securities, and 
 cash in the till. Its ability to make advances, at any given time, depends 
 on the amount of cash in the till. The diminution of this amount shows 
 the increase of the pressure, and the banker will act accordingly. 
 
 As far as past experience goes, all panics or pressures have resulted in 
 a subsequent abundance of money. It would be a grand thing for a 
 banker if he could know beforehand at what precise point this change 
 would take place. But this he cannot know, and he had better not specu- 
 late on the subject, but just follow the course of events as they occur. 
 When, however, the point is fairly turned, he will act wisely in investing 
 all his surplus funds in such convertible securities as are likely to advance 
 in price, from the increasing low rate of interest. Exchequer bills are 
 most likely to be the first affected, and then the public funds. He will, 
 also, be more liberal in granting discounts, and other advances, and he 
 
 60
 
 The Bank Act of 1844. 
 
 will lower the rate of interest at which he takes deposits. At the same 
 time he will be cautious in the bills he discounts. For, thou<fh money- 
 may be abundant, yet trade may be depressed, and the effects of the pre- 
 vious panic may be the failure of a great number of persons in the middle 
 class of society. The banker will therefore be cautious in extending his 
 discounts, except on bills of an undoubted character. 
 
 We will observe, lastly, that, in a season of pressure it is peculiarly ne- 
 cessary that a banker should pay regard to the state of his own health, and 
 to the discipline of his own mind, so as to guard against any morbid or 
 gloomy apprehensions with regard to the future. He should attempt tc 
 form a cool and dispassionate judgment as to the result of passing events ; 
 endeavouring so to arrange his own aifairs as to be prepared for whatever 
 may occur, but taking care not to increase the present evil by predicting 
 greater calamities. If he suffer a feeling of despondency to get the mas- 
 tery of his mind, he will be less able to cope with the difficulties of his 
 position. He will then, probably, refuse reasonable assistance to even 
 first-rate customers, realize securities unnecessarily at a heavy sacrifice, 
 and keep in his till an amount of unemployed treasure excessively dispro- 
 portionate to the extent of his liabilities. This will increase the pressure. 
 Fear, too, is always contagious. A banker of this melancholy tempera- 
 ment will impart his apprehensions to others, and thus the panic will be- 
 come more widely extended. 
 
 Section VIIL — THE ADMINISTRATION OF A BANK UNDER 
 THE ACT OF 1844. 
 
 It would not be consistent with the practical character of this work to 
 discuss, at great length, any theory of the currency. But the Act of 1844, 
 though founded on a theory, was a practical measure, and has so impor- 
 tant a bearing on the administration of banking affairs, that our work would 
 be regarded as incomplete were the subject altogether omitted. We shall, 
 however, endeavour to avoid any observations on its theory, and confine 
 our remarks, as much as we can, to the operation of its practical enact- 
 ments. In this part of our work it will be necessary to consider only 
 those provisions of the Act which refer to the issue of notes by the Bank 
 of England : those which refer to the country circulation will more prop- 
 erly come under review in the section upon Country Banks. It may also 
 be proper to remark, that, in our judgment, the Act of 1819 has no neces- 
 sary connection with the Act of 1844 ; nor would there be any inconsis- 
 tency in advocating the one and not advocating the other. {Commons, 
 3,409.) 
 
 " The Act of 1844 " is the 7 & 8 Vict. cap. 32, and is entitled, 
 " An Act to Regulate the Issue of Bank Notes, and for giving to the Gov- 
 ernor and Company of the Bank of England certain ])rivileges for a lim- 
 ited period." It enacts that, from and after the 3 1st August, 1844, the 
 
 61
 
 A Treatise on Banking. 
 
 Issue department of the Bank of Entrland shall be separated from the 
 Banking department ; that tlie issuing department may issue notes to the 
 extent of £ 14,000,000 upon securities set apart for that purpose, of 
 which the debt of <£ 11,015,100 due from the government to the bank 
 shall form a part ; that no amount of notes above <£ 14,000,000 shall bo 
 issued, except against gold poin, or gold or silver bullion ; and that the 
 silver bullion shall not exceed one fourth the amount of gold coin and bul- 
 lion. Any person is entitled to demand notes from the issuing depart- 
 ment, in exchange for gold bullion, at the rate of .£3 17s. 9d. per ounce. 
 Should any banker discontinue his issue of notes, the Bank of England 
 may, upon application, be empowered by an Order of Council to increase 
 her issue upon securities to the extent of two thirds of the issue thus with- 
 drawn ; but all the profit of this increased issue must go to the govern- 
 ment. 
 
 The theory on which this act was founded, had, for several years pre- 
 viously, been brought before the public in pamphlets written by men of 
 distinguished talent. Upon some of these pamphlets we wrote a critique, 
 which appeared in the " Westminster Review" of January, 1841. That 
 article was afterwards published separately, under the title of " Currency 
 and Banking : a Review of some of the Principles and Plans that have 
 recently engaged public attention with reference to the administration of 
 the Currency." In this review we made the following observations on 
 the plan then proposed, and subsequently carried out in the act of 
 1844: — 
 
 " The plan of making the amount of the circulation fluctuate in exact correspondence with the 
 amount of tjold in the Bank of England. 
 
 " This plan is open to the following objections : — 
 
 " 1. Upon this plan there must be a perpetual increase and diminution in the stock 
 of gold ; consequently, a peipetual increase and diminution in the amount of the cur- 
 rency. The increase in the amount of the currency would raise prices and stimulate 
 speculation. The diminution in the amount of the currency would reduce prices and 
 produce distress. And thus there must be a constant alternation from high jjrices to 
 low prices, and again from low prices to high prices, — from speculation to distress, 
 and from distress to speculation. 
 
 " 2. But depression of prices, and their attendant miseries, may not be experienced 
 only when the foreign exchanges are unfavorable. Excessive caution, an a])prehen- 
 sion of war, or political feeling, may cause a domestic demand for gold, and this would 
 cause for a while a contraction of the currency as severe as that which would arise 
 from an unfavorable exchange; and, as the bank directors would have no discretionary 
 ])Ower, but would be required 'to adhere to princi|)le,' by giving gold for notes, or 
 notes for gold, they could do nothing to assuage these calamities. According to 
 Mr. Loyd,* a drain, from whatever cause it may arise, must be met by a contraction of 
 the currency. Mr. Palmer, in laying down his rule, put in a saving clause, — 'except 
 under special circumstances,' — but Mr. Loyd makes no excejjtions. 
 
 "3. To carry this system into operation would require a se])aration of the issuing 
 department from the other departments of the business of the baidv, and this would 
 cause still further inconveniences. The management of the issuing department would 
 be exceedingly simple. The ollicc of the directors would be a complete sinecure, and, 
 
 * I wish I could have made this quotation without introducing the names. It would 
 preatly assist our in(juiries after truth, and lead to the formation of an independent 
 judgment, if we could engage in discussions of this kind without any reference to these 
 talented men who may have distinguished themselves as either the advocates or the 
 opponents of the doctrines we investigate. 
 
 62
 
 The Bank Act of 1844. 
 
 for any thitip^ they would have to do, their ph\ccs might be as well supplied by four- 
 and-tweiity hrootnsticks. A few cashiers to exchange gold for notes, or notes for 
 gold, would be all the establishment required ; and could Mr. Babbage be induced to 
 construct a 'self-acting' machine to perform these operations, the whole business of 
 the currency department might be carried on without human agency. But the deposit 
 department would recjuire more attention. 'It is in the nature of banking business,' 
 says Mr. Lo>'d, ' that the amount of its deposits should vary with a variety of circum- 
 stances ; and, as the amount of deposits varies, the amount of that in which those de- 
 posits are invested (viz. the securities) must vary also. It is therefore quite absurd to 
 tiUk of the bank, in its character of a banking concern, keejjing the amount of its secu- 
 rities invariable.' As therefore the deposits might vary, the bank would be a buyer or 
 a seller of government securities ; and, as these variations are sometimes to a very 
 large amount, the fluctuations in the price of the public funds and of exchequer bilk 
 would be very considerable. Thus the property of those who held these securities 
 would be always changing in value. Again, the deposits would be withdrawn chiefly 
 in seasons of pressure, and the bank would then be compelled to sell her securities. 
 But suppose the scarcity of money should be so great that the securities would be un- 
 salable even at a reduced price, how then could the bank pay off her deposits ■? 
 
 " 4. If the currency were administered upon this principle, the bank would be unable 
 to grant assistance to the commercial and manufacturing classes in seasons of ca- 
 lamity. 
 
 " Mr. Loyd exclaims, ' Let not the borrowers of money, government, and commerce 
 approach, with their dangerous and seductive influences, the creator of money.' But 
 with all deference to Mr. Loyd, we contend that it is the province of a bank to afford 
 assistance to trade and commerce in seasons of pressure. Mr. Loyd, as a practical 
 banker, would no doubt afford assistance to liis own customers in such seasons ; and 
 if this be the province and duty of a private banker, the duty is more imperative on a 
 public banking company, and more imperative still on a bank invested by the legisla- 
 ture mth peculiar privileges for the public good. Mr. Loyd says, ' Let the bank afford 
 this assistance out of her own funds.' But, under Mr. Loyd's system, she could grant 
 assistance only by selling securities ; and what relief would she aftbrd by selling securi- 
 ties with one hand, and lending out the money with the other ? Besides, it is certain 
 that, under such a pressure as Mr. Loyd's system must occasionally produce, these se- 
 curities would be salable at even any price? 'But,' says Mr. Loyd, 'individuals may 
 afford this assistance.' In seasons of pressure few individuals have more ample funds 
 
 than what are necessary for the supply of their own wants When the distress 
 
 is caused by a contraction of the currency, it can only be removed by an increased 
 issue of notes. And there are many cases, such, for instance, as that of the Northern 
 and Central Bank, in which assistance can only be effectually rendered in this manner. 
 
 " We consider that any system of administering the currency, which prohibits the 
 banking institutions of the country from granting relief to the commercial and manu- 
 facturing classes, must be unsound. We should condemn such a system at once, even 
 if we could not detect the fallacies on which it was founded. In political economy we 
 can judge of principles only by their practical effects, and any system wliich produces 
 these effects must be unsound. When seasons of calamity occur, it is not for the na 
 tional bank to exclaim, Sauve qui pent. They ought to cooperate with the government 
 in attempting to relieve the distress, and to preserve the tranquillity of the country." 
 
 These remarks, written in the year 1841, might, if put into the past 
 tense, almost serve for a history of the year 1847. The act of 1844 was 
 formed upon the principle which is here condemned ; and the effects de- 
 scribed have actually occurred. There have been great fluctuations in 
 the amount of the circulation, in the rate of interest, and in the prices of 
 the public securities. There have been great speculations, followed by 
 great distress. The government funds have, in large amounts, been un- 
 salable ; and the bank has been unable to afford relief to the commercial 
 classes. A severe pressure has taken place ; and, in consequence of this 
 severe pressure, the act was suspended. It has been denied that this 
 pressure was produced or increased by the act. But how stand the facts ? 
 
 63
 
 A Treatise on Banking. 
 
 The act was passed, and, as predicted, a pressure came : the act was 
 continued, and the pressure increased : the act was suspended, and the 
 pressure went away. These are not opinions ; they are facts. 
 
 At the meeting of Parliament in the latter end of 1847, committees 
 were appointed by both the House of Lords and the House of Commons, 
 to " inquire into the causes of the distress which has for some time pre- 
 vailed among the commercial classes ; and how far it has been affected 
 bv the laws for regulating the issue of bank-notes payable on demand." 
 The following is an extract from die report of the Lords' Committee as to 
 the causes of the pressure : — 
 
 " A sudden and unexampled demand for foreign corn, produrcd liy a failure in many 
 descriptions of agricultural produce througliout the United Kingdom, coincided witli 
 the unprecedented extent of speculation ])roduced by increased facilities of credit and 
 a low rate of interest, and had for some time occasioned over trading in many branches 
 of commerce. This was more especially felt in railroads, for which calls to a large 
 amount were daily becoming payable, without corresponding funds to meet them, ex- 
 cept by the withdrawal of capital from other jjursuits and investments. These causes 
 account for much of the pressure under which many of the weaker commercial firms 
 were doomed to sink, and which was felt even by the strongest. To these causes may 
 be added a contemporaneous rise of price in cotton ; and, with respect to houses con- 
 nected with the East and West India trade, a sudden and extensive fall in the price of 
 sugar, by which the value of their most readily available assets underwent great depre- 
 ciation. 
 
 " Some of these causes are obviously beyond the reach of legislative control. But 
 upon those which are connected with tlie extension of commercial speculation, en- 
 couraged or checked by the fiicility or the difliculty of obtaining credit, by the adv.ance 
 of capital and the discount of bills, the powers and position of the Bank of England 
 must at all times enable that corporation to exercise an important influence. The com- 
 mittee have consequently felt it to be their duty to inquire into the course pursued by the 
 bank acting under the provisions of the 7 and 8 Vict. c. 32, and they have come to the 
 conclusion that the recent panic was materially aggravated by the operation of that 
 statute, and by the proceedings of the bank itself This eti'ect may be traced, directly, 
 to the act of 1844, in the legislative restriction imposed on the means of accommoda- 
 tion, whilst a large amount of bullion was held in the coft'ers of the bank, and during a 
 time of favorable exchanges ; and it may be traced to tlie same cause, indirectly, as a 
 consequence of great fluctuations in the rate of iliscount, and of capital previously ad- 
 vanced at an unusually low rate of interest. This course the bank would hardly have 
 felt itself justified in taking, had not an impressicm existed that, by the separation of 
 the issue and the banking departments, one inflexible rule for regulating the bank 
 issues had been substituted by law in place of tlic discretion formerly vested in the 
 bank." 
 
 The nature and extent of the pressure is thus described by the Gov- 
 ernor and Deputy-Governor of the Bank of England : — 
 
 " The panic began by the failures in the corn trade. The price of wheat had risen 
 to about 120s. Large arrivals of grain from the continent of Europe and from Amer- 
 ica, coupled with the prospect of an early .and .abundant harvest, caused a sudden fall 
 in price to about 60s., with a corresponding decline in Indian corn. The failure of 
 most of the corn speculators followed this great reduction in price, and their failure 
 caused the stnpjjage of an eminent discount broker having a large country connection. 
 This latter failure, by closing one of tlie principal channels of discount between the 
 country and Lon<lon, caused distrust to extend into the countrj'. Credit became af- 
 fected by these failures, and several London firms of high standing also failed. Then 
 followed in rapid succession the failure of the Royal Bank of Liverpool, the Liverpool 
 Banking Company, the North and South Wales Baid<ing Comjiany, Some private 
 countrv banks, and the Union Bank of Newcastle, followed by a tremendous nin upon 
 the Ni)rthuiiil)erlaiid and Durham District Hank. To these disasters succeeded alarm, 
 and an almost total prostration of credit, 'i'lie London bankers and discount brokers 
 
 64
 
 The Bank Act of 1844. 
 
 refused to ffrant the usual accommodation to their customers, and necessarily olilijjed 
 every one requiring assistance to resort to the Bank of England. Money was hoarded 
 to a considerable extent; so much so, that notwithstanding the notes and coin issued 
 to the jnil>lic in October exceeded by £4,000,000 or £5,000,000 the amount with the 
 public in August, still the general complaint was of a scarcity of money. Credit wiu? 
 so entirely destroyed, that houses trading to distant countries carrying on their busi- 
 ness through the means of credit, hy a renewal of their acceptances as they became 
 due, were no longer able to meet their engagements, and were forced to stop paymcnt- 
 This was the state of things previous to the issuing of the government letter in 
 October." {Lords, No. 12.) 
 
 The Committee of the House of Commons delivered a report in favor 
 of the continuance of the bill without alteration, in opposition to the opin- 
 ions of by far the majority of the witnesses who were examined. 
 
 Those witnesses who are friendly to the act contend that it lias se- 
 cured the convertibility of the Bank of England note, — that this conver- 
 tibility was endangered in 1825, in 1837, and in 1839, and would have 
 been endangered in 1847 but for this act. (See the Evidence before the 
 Committee of the House of Lords, Questions Nos. 1408 to 1409, and 
 No. 3169.) 
 
 By the phrase " securing the convertibility of the note " it is not meant 
 that the issue department of the Bank of England held a sufficient amount 
 of gold and silver to pay off all the notes it had issued. It is obvious that 
 the gold and silver in hand must always be fourteen millions less than this 
 amount, inasmuch as fourteen millions of notes are issued against securi- 
 ties. By "securing the convertibility of the note" is meant, that the 
 issue department of the Bank of England was in a condition to pay off 
 any amount of notes of which payment was likely to be demanded ybr the 
 purpose of exporting the gold ; the issue department was always in a con- 
 dition to meet any foreign demand for gold. This is called " securing 
 the convertibility of the note." 
 
 It has been contended, that the act has retained in the vaults of the 
 Bank of England a larger amount of gold and silver than would otherwise 
 have been retained. And as this amount is set apart for the express pur- 
 pose of paying the notes, their payment is so far additionally secured. 
 On the other hand, it has been maintained that, by thus reserving all the 
 gold to pay the notes, we endangered the payment of the deposits. And 
 had the banking department stopped payment, a domestic run would have 
 taken place upon the issuing department, and thus the payment of the 
 notes would still have been endangered. 
 
 The following is the evidence of a director of the Bank of Liverpool 
 upon the subject : — 
 
 " With regard to securing the convertibility of the notes, what is your opinion of the 
 bill 1 
 
 " I do not think it has secured the convertibility of the notes at all. The notes re- 
 mained convertible up to the suspension of the bill ; but I believe that if the bill had 
 not been suspended then, or some similar measure adopted, notes would have ceased 
 to be convertible. Looking to the general state of things throughout the country, and 
 to what I know to have been the state of things in London, and the position of trade 
 generally, — to the alarm that was spreading rapidly through the country, and to the 
 fact that the power of the bank had been reduced to such a point, that if there had 
 been any apprehension of the failure of the country banks, it could not further support 
 them, and that very little might iiave occasioned (I might perhaps go further, and say, 
 
 65
 
 A Treatise on Banking. 
 
 would hove occasioned) the failure of banks in lar^e tow-ns and in the country ; belier- 
 ing that if one or two country banks of any niajiTiitude had failed, alarm ■would have 
 spread throu-rhout the kingdom, or if one or two London banks had failed, consterna- 
 tion wouhi have been general ; seeing, also, the considerable amount of reserve in the 
 hands of the country bankers and joint-stock banks, and the necessity that there would 
 have been of havintr that reserve as early as possible converted into gold if the bank 
 was obliged to stop; seeing that a reserve of ^20,000 for each of three hundred coun- 
 try banks would have taken six or seven millions, or of ^15,000 each would have 
 taken five millions; and that if the run for gold had once begun, it would probably 
 have gone on till the treasury was drained ; seeing all this, my firm opinion is, that 
 the bill of 1844 has not secured convertibility, and I state the grounds on which that 
 opinion is formed." {Commons, No. 94.) 
 
 It seems useless at present to speculate upon such a state of things, as 
 we 7WW know that before the pressure arrived to such a height as to cause 
 the banking department to stop payment, the act would be suspended. 
 But it seems fair to ask, whether the precautions of the act are not dispro- 
 portionate to the danger ? We ought to consider not merely the great- 
 ness of the evil, but also the probability of its occurrence ; and is it wise 
 to inflict upon ourselves a vast number of serious evils merely to guard 
 against a danger that may never occur ? It may further be asked, wheth- 
 er the stringent measures that were necessary last year to keep the bank- 
 ing department from stopping payment, would not have been equally ef- 
 fectual under the previous state of the law in preserving the convertibility 
 of the notes ? 
 
 It should be recollected, too, that previous to the passing of the act of 
 1844, the bank had the power of rectifying the exchanges by means of 
 foreign credits, as they did in the year 1839. (Several of the witnesses 
 made suggestions for rectifying this exchange by other means than the 
 exportation of gold. See Commons, 97, 2018, 2023, 2579, 2614, 2620.) 
 But the directors, being now relieved from all responsibility with regard to 
 the issue department, have no inducement to engage in such an operation. 
 Indeed, they might be censured for interfering with the principle of the 
 act, that the exchanges shall be rectified by a transmission of gold and 
 silver. 
 
 It would appear from the evidence, that the sole advantage now claimed 
 for the act is, that it has secured the convertibihty of the note. Other ad- 
 vantages, however, were expected to result. Those expectations are thus 
 disposed of in the report of the Lords' committee : — 
 
 " It is true that to those who may have expected that the 7 and 8 Vict. c. 32, would 
 effectually prevent a recurrence of cycles of commercial excitement and depression, 
 the contrast between the years 1845 and 1847 must produce a grievous disappoint- 
 ment. To those who anticipated that the act would put a check on improvident 
 speculation, the disappointment cannot be less, if reliance is to be placed (as the com- 
 mittee are confident it may) on the statement of the governor of the bank, and of other 
 witnesses, that ' speculations were never carried to such an enormous extent as in 
 1846 and the beginning of 1847.' If the act were relied on as a security against vio- 
 lent fluctuations in the value of money, the fallaciousness of such anticipation is con- 
 clusively proved by the fact, that whilst the difference between the highest and lowest 
 rate of discount was in the calamitous years 1837 and 1839 but 2.-J to 2} per cent., the 
 difference in 1847 rose to 63- If it was contemplated that the number and the extent of 
 commercial failures would have been lessened, the deplorable narrative of the governor 
 of the bank, recording the failure of thirty-three houses comparatively in large busi- 
 ness, in London ulone, to the amount of £8,129,000 is a conclusive reply. If the 
 
 66
 
 The Bank Act of 1844. 
 
 enoiinons extent to which raih-oad speculation has been carried be considered as an 
 evil to which a sound system of bankinj;; could have applied a corrective, such a cor- 
 rective has not been found in an act, since the passinjj of which, during a period of 
 three years, an increased railway capital of upwards of X 221,000,000 has been author- 
 ized to be raised by Parliament ; and when the enormous sum of £ 76,390,000 is stated, 
 on high financial authority, to have been actually expended on railways in two years 
 and a half. If the power of obtaining banking accommodation on moderate terms 
 were considered to be promoted by the act of 1844, it cannot be said that this im- 
 portant object has been attained, since it appears in evidence that in 1847, in addition 
 to an interest of 9 or 10 per cent., a commission was also frequently paid, raising the 
 charge to 10, 20, or 30 per cent., according to the time which bills had to run." 
 
 The report might have added, that if it was expected that the amount 
 of notes in the hands of the public would fluctuate in exact correspon- 
 dence with the fluctuations in the amount of gold in the Bank of England, 
 that expectation has not been fulfilled. From the censure cast on the 
 Bank of England, before the act was passed, for not producmg this cor- 
 respondence, it may be inferred that such an expectation was entertained. 
 {Evidence taken before the Committee on Banks of Issue., Nos. 2677, 
 2713.) 
 
 Those who are opposed to the act of 1844 bring against it the following 
 accusations : — 
 
 First. The Act of 1844 is accused of having produced an abundance 
 of money and a low rate of interest, and thus stimulated to excessive spec- 
 ulation. We showed, in the last section, that these are always the precur- 
 sors of a pressure. 
 
 According to this Act, all persons are entitled to demand from the issue 
 department of the Bank of England, Bank of England notes in exchange 
 for gold bullion at the rate of <£3 175. 9d. per ounce of standard gold. 
 When, therefore, the foreign exchanges are favorable to the importation 
 of gold, this gold, consisting of gold bars and foreign gold coin, which 
 could not be used as money in this country, is taken to the issue depart- 
 ment, and instantly converted into Bank of England notes. The amount 
 of notes is thus increased beyond what the transactions of the country re- 
 quire. Money becomes plentiful, the rate of interest falls, and the low 
 rate of interest gives facilities to speculative undertakings. 
 
 It must be acknowledged that, previous to the passing of this act, the 
 bank directors had adopted the principle of purchasing all foreign gold 
 that might be offered them at <£ 3 17s. 9d. an ounce ; and it formed a fea- 
 ture of their system of management, as explained before a committee of 
 the House of Commons in the year 1832. When the advocates of the 
 act say that it is only during a season of pressure that the act comes into 
 operation (Commons, 5121), they can mean only that it is during such a 
 season that the system established by the act differs from the system pre- 
 viously in existence. The act is as much in operation when it gives out 
 notes as when it gives out gold. 
 
 It must also be acknowledged that on the 31st August, 1844, when 
 the act came into operation, there was a large amount of gold in the bank, 
 and a low rate of interest consequently prevailed. This gold had accu- 
 mulated, not literally in consequence of the act, but in consequence of the 
 principle embodied in the act. From the adoption of this piinciple, the 
 
 67
 
 A Treatise on Banking. 
 
 gold in the vaults of the bank still further increased after the passing of 
 the act. 
 
 It must be further acknowledged, that althotigh the act requires the 
 issue department at all times to issue notes against gold, it does not require 
 that the Bank of England shall at all times issue £, 14,000,000 against 
 securities. The act merely requires that the amount shall not exceed 
 £ 14,000,000. And a London banker who was examined as a witness 
 before the Lords' Committee, said he expected that when the act came 
 into operation, the bank would not issue at first more than £ 11,000,000 
 against securities, and that the remaining ^3,000,000 would not be issued 
 until the rate of interest had advanced to three and a half or four per cent. 
 But the act did not require the Bank of England to adopt this course ; and 
 its adoption would probably have been considered by some parties as a 
 departure from its principle. For it is a fundamental principle of the act, 
 that the amount of the circulation shall jerk up and down in exact con- 
 formity to the importations or exportations of gold. And hence during 
 a favorable course of exchange, money must be abundant, and interest 
 must be low. 
 
 It is alleged that the act still further reduced the rate of interest, and 
 promoted speculative undertakings, by placing the Bank of England in a 
 position in which the directors were led to adopt a new system of man- 
 agement. 
 
 In September, 1844, soon after the act was passed, the directors, whose 
 rate of interest had never previously been lower than four per cent., re- 
 duced it to two and a half per cent. The object of this reduction was to 
 invest a larger portion of their funds in the discount of bills. It stated 
 that, to effect this object, the directors not only reduced their rate of dis- 
 count, but also canvassed for business, and thus gave a stimulus to new 
 transactions. They had been told that the banking department of the 
 Bank of England was to be managed " like any other banking concern 
 using Bank of England notes." And it is not an unusual thing for bank- 
 ers, when they cannot employ their funds at so high a rate of interest as 
 they wish to obtain, to employ them at a lower rate. Nor is it unusual 
 for a banker to offer his surplus cash to bill-brokers and others, who are 
 known to be in the habit of supplying bankers with bills. But however 
 consistent the conduct of the directors may have been with banking prin- 
 ciples, the reduction of the bank rate of discount immediately caused a 
 reduction in the market rate, and in the rates charged by bankers through- 
 out the country. For it must be observed, that when the bank lowers her 
 rate of interest upon money in seasons of abundance, it has the necessary 
 effect of reducing the market rate of interest still lower than the bank 
 rate. Suppose, for instance, the bank discounts at five per cent., and the 
 market rate of discount is four per cent., of course no bills are offered for 
 'liscount to the bank. Then the bank, to get discounts, lowers her rate of 
 mterest to four per cent. A portion of bills that were previously dis- 
 counted by private bankers and bill-brokers will then be taken to the 
 bank ; but the notes thus drawn from the bank make money still more 
 plentiful, and the market rate falls to three and a half or three per cent. 
 Now, should the bank reduce her rate to three per cent, the same jffects 
 
 68
 
 The Bank Act of 1844. 
 
 would again follow. For the additional notes thus drawn out would make 
 money so abundant as to reduce the market rate of interest to two and a 
 half or two per cent., and so on. 
 
 But in seasons of scarcity, precisely the opposite effect follows. For when 
 the bank raises the rate of discount, it has the effect of raising the market 
 rate still higher. Thus, if the bank should be discounting at 5 per cent., 
 and the market rate should be 5.| per cent., let the bank raise her rate to 
 6 per cent., and the market rate will immediately become 7 or perhaps 8 
 per cent., or even higher upon inferior bills. For the bank rate of discount 
 will be the market rate for only the first class of bills, — such bills as 
 could be discounted at the bank ; and all bills of the second class will 
 have to pay an advanced rate, and those of a still more inferior character 
 will not be discountable at all. 
 
 In 1844 the rate of discount was lower than in any previous season of 
 abundance of money. This low rate of interest was produced, in the first 
 place, by the principle of the act of 1844, which caused the issue of a 
 large amount of notes against gold and silver bullion ; and, secondly, by 
 that provision of the act which separated the two departments, and thus 
 brought the banking department of the Bank of England into competition 
 with other bankers and money dealers, as discounters of bills. {Com- 
 mons, Q/Zlb, 5189, 5347-5350.) The directors of the bank seem to 
 think that the spirit of the act of 1844 required that the bank should em- 
 ploy its reserve. 
 
 "If we keep the notes in the reserve, instead of giving them out to the public, the 
 effect that ought to be produced by gold coming into the country is counteracted ; it 
 induces a larger amount of capital to come into the country, because you do not allow 
 that portion which has come in to be employed. If you do not put out the gold, or 
 the representative of gold, you entirely prevent its having any effect upon the circula- 
 tion. The exchange will be kept up, and gold will continue to come in." (Com- 
 mons^ 3009.^ 
 
 Thus it appears that, although there is no positive enactment in the act 
 respecting the management of the banking department, the directors so 
 understand its spirit as to believe that when' gold is going out of the coun- 
 try they ought to take measures to prevent its exit ; and when gold is 
 coming into the country, they ought to endeavour to drive it back again. 
 The first object is attained by raising the rate of interest very high ; the 
 second, by reducing it very low. It must, however, be acknowledged, 
 that, apart from any efforts of the banking department, a large impor- 
 tation of gold will under the act necessarily cause a low rate of interest. 
 
 Secondly. The next charge against the act of 1844 is, that it does not 
 admit of those occasional expansions of the amount of notes in circulation 
 which are often required by the domestic transactions of the country. 
 
 It is alleged that one imperfection of the act was strikingly manifested 
 in the beginning of the year 1846. The Parliament required that all rail- 
 way companies that intended to apply for an act should lodge ten per cent. 
 on their capital within fifteen days after the meeting of Parliament. It 
 was impossible to say beforehand what amount of notes would be required 
 to make these payments. It was variously estimated at from £ 12,000,000 
 to £ 25,000,000, while all the notes in the hands of the public amounted to 
 
 69
 
 A Treatise on Banking. 
 
 only about £ 20,000,000. Ultimately the railway companies of Ireland and 
 Scotland were allowed to make their payments in Dublin and Edinburgh, 
 respectivclv ; and the payments in London did not amount to more than 
 ^14,000,000. {Lords, 1209, 1214.) This large sum was paid by 
 means of the banking department of the Bank of England lending out the 
 money as fast as it was received. Had the act of 1844 not been in exist- 
 ence, the Bank of England (as in the case of the West India loan, and of 
 previous loans) might have lent out the money before the time of payment 
 arrived, and no apprehensions would have been entertained. The notes 
 in circulation would have been largely increased for a few days, and then 
 again have subsided to the former amount. As it was, the payment was 
 not made through any virtue in the act. And had it been required under 
 different circumstances, or when the banking department had a smaller 
 reserve, it could not have been made at all. {Lords, 1209.) 
 
 It is further alleged, that the act of 1844 requires an immediate con- 
 traction in the amount of the notes whenever gold is exported for merely 
 a temporary or specific purpose. Between March 13 and April 24, 1847, 
 £ 2,237,200 was exported in payments for corn. An equal amount of 
 notes was of course cancelled by the issue department. These notes 
 must have been taken out of the hands of the public, or from the baftking 
 department of the Bank of England. About the same time, the govern- 
 ment had occasion to borrow of the banking department about £ 3,500,000 
 to pay the April dividends. The banking department, consequently, foi' 
 a while limited their discounts, and even refused to grant loans on ex- 
 chequer bills. Great pressure was consequently felt, though it did not 
 last for a long time. Now it is alleged, that if the act of 1844 had not 
 existed, the directors would have allowed the gold to be exported without 
 immediately contracting the notes in circulation. They would have lent 
 the money required by the government, without refusing the loans and 
 discounts to the public ; and the contraction of the circulation, by being 
 extended over one or two months, instead of a few weeks, might have 
 produced no inconvenience. 
 
 By the act of 1844, the circtilation of the country banks was restricted 
 to a certain amount. The average of the twelve weeks ending the 27th 
 of April, 1844, was fixed for the maximum. During some months in the 
 year the country requires more notes than this maximum ; and, as the 
 banks can issue no more notes of their own, they obtain Bank of England 
 notes from London. In the year 1845 acts of Parliament were passed for 
 the regulation of the notes issued in Scotland and Ireland. Beyond cer- 
 tain fixed amounts the banks in these countries are required to hold gold 
 equal to the amount of notes in circulation. In both countries this circu- 
 lation fluctuates. In Scotland, the highest amount is in November. In 
 Ireland, the highest amount is in January or February. In these months 
 they require more gold, and this gold they obtain from the issue depart- 
 ment in exchange for Bank of England notes. Before the act of 1844, 
 the circulation of the country parts of England, of Scotland, and of Ire- 
 land, expanded or contracted as required by the wants of the public, 
 without aflecting the London circulation of the Bank of England ; but 
 under this act the expansion of the circulation of the country banks, the 
 
 70
 
 The Bank Act of 1844. 
 
 banks of Scotland and of Ireland, are attended by a contraction of the cir- 
 culation of Bank of England notes in London. This may not be a matter 
 of much consequence in ordinary times, when the banking department of 
 the Bank of England has a large resei*ve ; but in seasons of pressure, such 
 as occurred in 1847, this drain on the London circulation may be more 
 severely felt. 
 
 It may be further stated, that the withdrawal or discontinuance of a 
 certain amount of bills of exchange, through loss of credit or otherwise, 
 would render a larger amount of bank-notes necessary to fill up the space 
 formerly occupied by those bills of exchange. But for such a circum- 
 stance no provision is made by the act. {Lords, 232-235.) 
 
 Thirdly. It is alleged that the act of 1844 tends to produce and to ag- 
 gravate pressure, and at the same time deprives the Bank of England of 
 the power of granting adequate assistance, even when the pressure is most 
 urgent, and when assistance can be rendered without any danger of af- 
 fecting the foreign exchanges. 
 
 This objection assumes that a pressure is an evil. It assumes, that, to 
 advance the rate of interest to a rate which no profit can afford to pay ; to 
 deprive solvent houses of the means of meeting their legitimate engage- 
 ments ; to cause a universal reduction of prices, and thus to baffle the cal- 
 culations of even the most prudent ; to reduce wealthy merchants to the 
 condition of paupers ; to deprive manufacturers of the means of executing 
 their orders, and thus to throw thousands of industrious people out of em- 
 ployment ; to sell to foreigners large amounts of goods and manufactures 
 at less than the prime cost, thus causing a great national loss ; to paralyze 
 the national industry ; to stop the progress of useful works, and to destroy 
 confidence and credit, — the objection assumes, that a pressure which pro- 
 duces effects like these is a national evil. And such must be the opinion 
 of those who suspended the act, and of those who approve of that suspen- 
 sion ; for it was to prevent or to remove evils like these that the act was 
 suspended. 
 
 It is alleged that the act tends to produce such pressures. By issuing 
 notes against all the importations of gold, it causes abundance of money, 
 lowers the rate of interest, and stimulates to speculative undertaking (thus 
 the low rate of interest in 1844 and 1845 stimulated the railway specu- 
 lations), and then, speculation is always succeeded by pressure. If, 
 therefore, similar causes produce similar effects, and if the future shall 
 resemble the past, the operation of the act of 1844 will tend to produce 
 pressure. 
 
 It is further alleged, that when a pressure occurs without being pro- 
 duced by the act, then the act tends to aggravate the pressure. An un- 
 favorable course of the exchange may be produced by a large importation 
 of corn. The act requires that the exchange shall be rectified by an ex- 
 portation of gold, and that this exportation of gold shall be attended by a 
 contraction of the domestic circulation (according to the present meaning 
 of the word circulation) to an equal amount. It is hardly necessary to 
 show that these regulations must aggravate a pressure. 
 
 It has been said, that the pressure of 1847 was produced by the railway 
 speculations and the famine, and therefore it was not produced or in- 
 F 71
 
 A Treatise on Banking, 
 
 creased by the act of 1844. We do not perceive tlie soundness of this 
 reasoning, and it seems to show a forgetfuhiess of the pecuUar operation 
 of the act. The act requires that tlie amount of notes in circulation shall 
 fluctuate in exact accordance with the amount of bullion. Railway spec- 
 ulations, famine, foreign loans, or a hundred other things, may turn the 
 foreign exchanges, and cause gold to be exported, but it is the act which 
 causes our circulation of notes to be contracted in proportion as the gold 
 is withdrawn. So a hundred different circumstances may cause gold to 
 be import<xi, but it is the act which causes the circulation to be inflated in 
 correspondence with this increased amount of gold. Herein, we think, is 
 the injurious operation of the act. When the exchanges are favorable, 
 gold is imported. The gold is in bars and foreign coin, and could not 
 pass as money. But the act issues notes against this gold, thus increasing 
 the circulation, lowering the rate of interest, and giving rise to speculations 
 of all kinds. These speculations, cooperating possibly with other causes, 
 turn the exchanges. Notes are then taken to the bank, and gold demand- 
 ed, for the purpose of being exported. This contraction of the circulation 
 of notes produces pressure, and the apprehension of further pressure pro- 
 duces panic. 
 
 They who contend that the act of J 844 has not " in the slightest degree 
 tended either to create or to increase the pressure" (LortZs, 3106) of 
 1847, seem to be inconsistent in contending, at the same time, that the 
 act has preserved the convertibility of the bank-note. It was the pressure 
 and the high rate of interest, and low prices consequent upon the pressure, 
 that checked the efflux of gold, and turned the exchanges. Now, if the 
 act had no effect in producing or increasing that pressure, the converti- 
 bility of the note, by whatever causes it was secured, was not secured by 
 the act. If the act did not in the slightest degree either create or increase 
 the pressure, in what way, we ask, could it preserve the convertibility of 
 the note .'' It appears to us that those who contend that the act preserved 
 the convertibility of the note are bound by consistency to admit that the act 
 produced or increased the pressure. 
 
 It is further alleged, that the act aggi*avates a pressure by the " panic " 
 which it creates. It is stated that, during the pressure of 1847, notes to 
 the amount of £ 4,000,000 were hoarded under the influence of panic, 
 and this hoarding was occasioned by the provisions of the act. It must be 
 acknowledged, however, that something of this kind has taken place in 
 former pressures. We noticed this circumstance with reference to the 
 pressure of 1836 ( The History of Banking in America,, by J. W. Gil- 
 bart, page 96), and again with reference to the pressure of 1839 {An 
 Inquiry into the Causes of the Pressure on the Money Market in the Year 
 1839, by J. W. Gilbart, page 38). 
 
 " A contraction of the circulation leads to a general apprehension of 
 danger. Hence the bankers and others keep larger reserves of bank-notes 
 on hand, in order to be prepared for the worst, and thus the evils of the 
 contraction are considerably increased. ' That portion of the notes of the 
 Bank of England which is passing from hand to hand, may be called the 
 active circulation. That portion which is hoarded, or kept in reserve to 
 meet possible demands, may be called the dead circulation. Now, it is 
 
 72
 
 The Bank Act of 1844. 
 
 quite certain that the dead circulation, while it remains in that state, has 
 no effect upon the prices of commodities, the spirit of speculation, or 
 the foreign exchanges. These are atrected only by the active circulation. 
 In seasons of pressure the dead circulation is increased at the expense of 
 the active circulation, because people hoard their money to meet contin- 
 gencies. Hence we find the pressure is often more severe than the re- 
 duction of the bank circulation would seem to warrant. But the fact is, 
 that the pressure is in proportion to the reduction of the active circulation, 
 and not in proportion to the reduction of the whole circulation. On the 
 other hand, in seasons of abundance, the dead circulation is diminished, 
 the active circulation proportionably increased, and hence the stimulus 
 given to trade and speculation is much greater than the i;eturns of the 
 Bank of England would warrant us to expect.' " {History of Banking 
 in America^ p. 96.) 
 
 If this disposition to hoard — or, more properly, to make provision for 
 future or contingent demands — existed in 1837 and 1839, when the 
 Bank of England had the unrestricted power of issuing notes, when there 
 was the most unbounded confidence in her ability to render assistance, — 
 and when every solvent person expected, if necessary, to receive that as- 
 sistance, — it is natural to suppose that this disposition would be stronger 
 in 1847, when the Bank of England had become divided into two depart- 
 ments, — one of which could issue no notes except against gold, and the 
 other had barely notes enough to meet its own obligations. For this al- 
 teration in the condition of the Bank of England, and the consequent feel- 
 ings it inspired, the act of 1844 is clearly responsible. 
 
 It is said that this desire of " hoarding " arose from panic ; and that 
 the sum thus " hoarded " amounted to .£4,000,000 of notes. It is diffi- 
 cult to state where prudence ends and panic begins. This hoarding was 
 no doubt carried on by all the joint-stock and private bankers, who, having 
 received from the public large sums of money payable on demand, deemed 
 it prudent to put themselves in a condition to repay these sums in case 
 they should be demanded. And, from the number of banking establish- 
 ments that exist in London, and throughout the country, it is reasonable 
 to suppose that the sums thus hoarded must have been considerable. 
 {Evidence before the Commons' Committee, 70, 1737, 4605, 5776.) .Many 
 private parties, too, from distrust of their bankers, probably kept their 
 hoards in their own hands. No blame, however, can attach to the bank- 
 ers ; for although this " hoarding " increases the pressure, yet, were they 
 not to adopt this course, their banks might stop payment, and thus a 
 heavier calamity would fall upon the public. 
 
 It is further alleged that the act of 1844 has deprived the Bank of Eng- 
 land of the power of granting assistance by the issue of notes during a 
 pressure, even when the pressure is most urgent, and the foreign ex- 
 changes are favorable. Before the passing of the act, when there was no 
 separation of departments, the bank directors restricted their issues when 
 the exchanges were unfavorable, but extended them when the exchanges 
 were favorable. Hence, during the pressure of 1837, they granted as- 
 sistance by a further issue of notes to the Northern and Central Bank, 
 because the exchanges had become favorable. Between the periods of 
 
 73
 
 A Treatise on Banking. 
 
 an efflux and an influx of gold there is always an interval of time. This 
 interval is usually the highest point of the pressure ; and heretofore the 
 Bank of England would relieve the pressure by extending her issue of 
 notes, in anticipation of the gold about to arrive. By this means solvent 
 houses were prevented stopping. ContKlcnce was restored, " hoarding " 
 was diminished, and the pressure removed. But the act of 1844 does not 
 allow this. No additional notes can be issued until the gold has returned. 
 The same course must be followed whether the exchanges are favorable 
 or unfavorable ; and to anticipate the return of the gold, by a further issue 
 of notes, under any circumstances, however urgent, would be a departure 
 from the principle of the act. That such a departure, however, may be 
 made with immense advantage to the public, is obvious from the effects 
 which immediately followed the suspension of the act in October, 1847. 
 (CowmoMs, 5387-5389.) 
 
 It is chiefly in this respect that the system established by the act differs 
 from the system previously in operation. And some of the witnesses, 
 looking no farther than this, merely recommended that a power to suspend 
 the act in cases of severe pressure, should be lodged either witli the 
 government or the bank. We feel no regret that the Legislature did not 
 comply with this recommendation. It is this inflexibility of the act which 
 makes the commercial classes/eeZ the unsoundness of its whole principle. 
 Had a dispensing power been granted, we should merely have fallen back 
 upon the previous system, with the additional disadvantage that the bank 
 would never be able to adopt a better system, even if so disposed. The 
 directors had for several years professed to govern the issue of notes by 
 the foreign exchanges, but departed from that principle according to their 
 discretion. The act of 1844, by its inflexible enactments, put this princi- 
 ple to the test of experiment. The principle could not bear that test, and 
 hence the act was suspended. There is now a chance, at least, that we 
 shall get a better system. The following is the language we addressed to 
 tlie joint-stock banks at the time the act was passed : — 
 
 " It must be acknowledged that the principle of regulating the currency 
 by the stock of bullion in the Bank of England, as proposed by Sir Rob- 
 ert Peel, is one which the joint-stock banks, as well as the private banks, 
 have strongly condemned. But since we cannot obtain the adoption of 
 our own views, the question for our consideration is. Whether the existing 
 system or that now proposed will best promote the interests of our estab- 
 lishments .'' And we shall probably determjne that it is better to have a 
 uniform law, the operations of which may be subjected to some degree of 
 calculation, than unknown laws, which are applied or suspended accord- 
 ing to the impulse of caprice. 
 
 " The proposed measure is an experiment ; and so excellent is the 
 machinery, that the experiment interferes as little as possible with exist- 
 ing interests. And the old machinery being retained by the continuance 
 of the country issues, the return is easy to the former system, if neces- 
 .sary, before any serious injury can be inflicted on the countiy. 
 
 "• As practical bankers, we contend that experience is the only test of 
 the soundness of a theory. Let, then, ' the currency principle ' be tried 
 hv this test. If it succeed, the joint-stock bankers, in common with every 
 
 74
 
 The Bank Act of 1844. 
 
 other class of the community, will share the advantage. If it fail, then 
 other principles will, perhaps, be tried ; and, notwithstanding all the de- 
 nunciations we have heard upon the subject, it may perhaps be ultimately 
 found that the principle of ' competing issues,' as practised in Scotland, 
 is the only elfective principle by which the currency throughout the United 
 Kingdom can be managed." 
 
 In the year 1844, I addressed four letters to the joint-stock banks, un- 
 der the signature of Nchcmiah. " The first was written a short time pre- 
 vious to the opening of Parliament, the second soon afterwards, when an 
 impression prevailed that a plan would be proposed for the establishment 
 of one bank of issue ; the third, immediately after Sir Robert Peel had 
 announced his measures in the House of Commons, and before the depu- 
 ties from the joint-stock banks had held their meeting for the purpose of 
 considering them ; and the fourth, after those measures had become law." 
 The object of the third letter, from which the above quotation is taken, 
 was to advise the joint-stock banks not to discuss the principle of the cur- 
 rency in their communications with the government, but to endeavour to 
 obtain some practical modifications of the measures originally proposed. 
 My advice was followed, and the modifications were obtained. The joint- 
 stock banks have had no meeting respecting the pressure of 1847. They 
 have consequently expressed no opinion respecting it ; nor did they pro- 
 pose any witnesses for examination before the parliamentary committees. 
 It was not thought advisable that the joint-stock banks, as a body, should 
 interfere with public questions, except such as have a special reference to 
 themselves, as joint-stock banks. It was therefore determined to watch 
 the proceedings of the committees, but not to call a meeting of " the dep- 
 uties," unless some measures were recommended that might practically 
 affect the joint-stock banks. 
 
 It is obvious that " the currency principle " has been tried and has 
 failed. It seems now to be the proper time to tiy the antagonist principle, " 
 that the amount of the domestic currency should be wholly unaffected by 
 the importations or exportations of bullion. We doubt not that the talent 
 and ingenuity which framed the act of 1844 can construct a plan for 
 bringing this principle also to the test of experiment. When this is done, 
 we will judge of the soundness of the principle by its results. So far as 
 it has hitherto been tried, it has never failed.* 
 
 * It would appear from the recent Messagic of the President of the United States 
 of America, that his principle has been tested by the operation of the " Constitutional 
 Treasury." 
 
 " During the present year, nearly the whole continent of Europe has been convulsed 
 by civil war and revolutions, attended by numerous bankruptcies, by an unprecedented 
 fall in their public securities, and an almost universal paralysis of commerce and in- 
 dustry ; and yet, although our trade and the prices of our products must have been 
 somewhat unfavorably affected by these causes, we have escaped a revulsion, our 
 money market is comparatively easy, and public and private credit have advanced and 
 improved. 
 
 " It is confidently believed that we have been saved from their effect by the salutary 
 operation of the Constitutional Treasury. It is certain that, if the 24,000,000 of specie 
 imported into this country during the fiscal year ending on the 30th of June, 1847, had 
 gone into the banks, as to a great extent it must have done, it would, in the absence 
 of this system, have been made the basis of augmented bank paper issues, probably to 
 
 75
 
 A Treatise on Banking. 
 
 We have thus endeavoured to trace (impartially, as we believe) the 
 practical operation o the Act of 1844. (The reader will find some fur- 
 ther observations on this act in the section on " The Admimstration of 
 the Banking Department of the Bank of England.'''') It is reasonable to 
 suppose, that under similar circumstances it will produce similar effects. 
 What will be its effects under other circumstances, we have yet to learn. 
 We have yet to learn what will be the operation of the act under a large 
 importation of gold, ah initio., from a favorable state of the exchanges ; 
 what will be the effect of the act during a pressure, when it shall not be 
 suspended ; and how its effects may be increased or mitigated by any dif- 
 ferent system of management on the part of the banking department. 
 We have yet to learn how the act will work financially during a large 
 falling off* in the public revenue, an increase of taxation, or contracts for 
 large government loans ; and how it will work during a war, in which we 
 may have to maintain armies on the continent, or to subsidize foreign 
 powers. We have yet to learn whether the issuing department will be 
 ultimately removed from the Bank of England to the Exchequer, and we 
 shall have a paper currency issued by the government under the authority 
 of an act, the provisions of which may be suspended (as heretofore) by 
 the same government ; and also whether the future suspensions of the 
 act will ever be influenced by party or political considerations. And 
 finally, we have yet to learn how the act will work in case of any large 
 importations of gold from the mines of Russia or California. 
 
 We may be reminded that, should the act work unfavorably under any 
 of the above circumstances, there is one remedy always at hand, the 
 remedy which has already been applied, to suspend it. And no doubt, 
 under any government, men will be found who will have the courage to 
 apply this remedy. But this will not remove the previous evil. The sus- 
 pension, too, may be long delayed, and in the mean time much evil may 
 arise. In the next pressure the nation will be like " a cat in an air- 
 pump." The animal will not be allowed to die, but at what precise 
 period of exhaustion relief will be afforded will depend upon the views and 
 theories of the philosophic statesman who may at the time be performing 
 the experiment. 
 
 It will not be safe for practical bankers to calculate with too much con- 
 fidence upon the suspension of the act. They sliould make their arrange- 
 ments on the supposition that it will not be suspended. And it behoves 
 them to inquire what are the principles upon which, under such circum- 
 stances, their establishments ought to be administered. This we shall now 
 proceed to do. 
 
 an amount not less than 60,000.000 or 70,000,000 of dollars, proilucing, as an inevita- 
 ble consequence of an inflated currency, extravagant prices for a time, and wild sjjec- 
 ulation, which must have been followed, on the retlux to Euroi)e the succeeding year 
 of so much of that specie, by the prostration of the business of the country, the suspen- 
 sion of the banks, and most extensive l)ankru|)tcies. The restiainiiig cfl'ect of the sys- 
 tem upon tht tendencies to excessive pajicr issues by banks, has saved the government 
 from heavy losses, and thousands of our l)usiness men. from bankruptcy and ruin. 
 The wisdom of the system has been tested by the experience of the last two years, and 
 it is the dictate of sound policy that it should remain undisturbed." 
 
 76
 
 The Bank Act of 1844. 
 
 We pointed out at the passing of the act the course which we thougl.t 
 prudent bankers ought to pursue. 
 
 " Permit me now, with all deference, to point out the course which I 
 think, the joint-stock banks should pursue. In future, the amount of notes 
 in circulation will be regulated by the foreign exchanges. When the ex- 
 changes are favorable, money will be abundant ; when they are unfavor- 
 able, it will be scarce. The evils arising from a scarcity of money can 
 only be avoided by following a prudent line of conduct when money is 
 abundant. We, then, as prudent bankers, ought at present to check our 
 desires of making large profits and declaring high dividends, and be con- 
 tent to employ our funds at a low rate of interest, rather than lock them 
 up in hazardous or inconvertible securities. We should call up our old 
 over-drafts, and our dead loans, and, if necessary, increase our capital, so 
 as to place ourselves in the position most favorable for meeting an adverse 
 state of the foreign exchanges. In cases of pressure on the money mar- 
 ket, arising from an unfavorable course of exchange, the Bank of Eng- 
 land will not be able, as heretofore, to relieve that pressure by a further 
 issue of notes, and, so far from granting assistance to other banks, she 
 may, from the extent of her transactions, be more in need of assistance 
 herself. We must, therefore, conduct our banks, individually, on a prin- 
 ciple of self-dependence ; we shall have to limit our overdrawn accounts, 
 to avoid all advances on inconvertible securities, and to call up such an 
 amount of capital as shall secure to us the means at all times of giving 
 reasonable accommodation to our customers. On the recurrence of a 
 pressure similar to that of 1839, the cry will be sauve qui pent, — ' every 
 one must take care of himself.' " (Letters of Nehemiah.) 
 
 The knowledge we have acquired of the working of the act will tend to 
 give additional force to these recommendations. The attention of prac- 
 tical bankers will also be called to other points besides those which are 
 here named. 
 
 It will become a question with them to what extent they should continue 
 'to allow interest on their deposits. Some of the joint-stock banks in Lon- 
 don allow interest on the minimum balance of a current account. Others 
 allow interest only on deposit receipts. But most London bankers, whether 
 private or joint-stock, allow interest on the daily balance to their country 
 connections. In seasons of abundance, however, they usually limit the 
 amount on which they allow interest, to prevent themselves being glutted 
 with money from the country banks. But should the act of 1844 produce 
 those frequent alternations from abundance to pressure, and again from 
 pressure to abundance, which we think it will produce, then it will become 
 a matter of consideration how far the practice of allowing interest on de- 
 posits can be continued. It can never be worth a banker's while to allow 
 interest on money which remains in his hands only so long as it cannot 
 be employed, and is taken from him the moment it becomes valuable. 
 During the year 1847 vast sums were withdrawn from both the London 
 and the country bankers, not from any distrust of these bankers, but with 
 a view to make more profitable investments. The rate of interest had 
 been for some time previously very low. Consols had been at par ; and 
 when consols fell so low as to yield Sh per cent, interest, and the railway 
 
 77
 
 A Treatise on Banking. 
 
 companies issued debentures bearing interest at five per cent., lar^e sums 
 were witlidrawn from all the banks, as well as from the savings banks, for 
 the purpose of being invested in these securities. The bankers had no 
 right to complain of this, as they were called upon only to fulfil their en- 
 gagements ; but they will probably be unwilling in future to allow interest 
 on deposits of this description. 
 
 Another circumstance which the operations of the act of 1844 will lead 
 practical bankers to reconsider, will be the extent to which they should 
 invest their surplus funds in government securities. Many bankers have 
 considered it as a sound principle to invest a certain portion of their funds 
 in government securities. We have laid before our readers extracts from 
 evidence given before parliamentary committees in favor of this principle, 
 and we expressed our own convictions respecting the same doctrine. But 
 we must acknowledge the operations of the act are sufficient to show that 
 this principle should be acted upon with caution, and should be limited in 
 its application. The act will cause money to be alternately abundant and 
 scarce. When money is abundant, the funds are high ; and when money 
 is scarce, the funds are low. In seasons of abundance the banker will be 
 full of deposits ; in seasons of pressure his deposits will be withdrawn, and 
 he will, moreover, be asked to assist his customers by further advances. 
 He will, therefore, always have occasion to sell out of the funds when the 
 price is low, and thus he will sustain loss. It will, consequently, be his 
 interest to employ his surplus funds in other investments, or even to keep 
 his money unemployed in his till, rather than invest it in government se- 
 curities. His risk will be greater if the act should be capriciously sus- 
 pended. In October, 1847, several banks are said to have sold out of the 
 funds only a few days before the appearance of the government letter. 
 After the issue of that letter the money was not wanted ; but, as the funds 
 immediately rose, the money could not be replaced but at considerable 
 loss. The repoi-ts and proceedings of the joint-stock banks brought to 
 light some transactions of this kind, and it is probable that the private 
 banks sustained heavy losses by similar transactions. 
 
 Another lesson that will be more deeply im[)rcssed upon the minds of 
 practical bankers, will be to conduct their establishments in such a way as 
 to be self-dependent in seasons of pressure. 
 
 The events of the year 1847 are sufficient to show to what extent de- 
 pendence can be placed on the Bank of England. Several of the direc- 
 tors complained that every body looked for assistance to the Bank of 
 England. No expectation could be more complimentary to the bank, nor 
 show more strongly the confidence she had inspired under her previous 
 government. In no preceding pressure had she refused assistance upon 
 the ground that she was unable to grant it. But in former pressures there 
 was no separation between the issuing and the banking departments. Her 
 great strength lay in the power she possessed of expanding the circulation. 
 That power she surrendered to the act of 1844. She then became like 
 " any other banking concern issuing Bank of England notes." Her locks 
 are now shorn. {Commons, 769, 3223-4, 3941-2, 4566, 5389.) 
 
 The Bank of Liverpool had been one of the oldest and most respectable 
 of the connections of the Bank of England. They had, from their com- 
 
 78
 
 The Bank Act of 1844. 
 
 mencement, never issued any but Bank of England notes, and had always 
 a pretty large discount account with the branch at Liverpool. Yet, in the 
 year 1847, their minute book contains several entries similar to the follow- 
 ing : — "The manager stated he had seen the agent of the branch bank 
 this morning, and that he would not discount any thing for us to-day." 
 Even in the comparative light pressure of April, 1847, the bank suddenly 
 restricted their discounts ; and in October, 1847, they were quite unable to 
 meet the public demand, although in some cases they lent consols instead 
 of money. Indeed, it was because the means of the bank were unable to 
 supply the demand for notes that the act of 1844 was suspended ; yet the 
 governor, and all the other witnesses who supported the act of 1844, 
 stated their opinion that the pressure of 1847 was not so severe as some 
 preceding pressures. How much sooner, then, would the means of the 
 bank have been exhausted if the pressure had equalled its predecessors in 
 severity ! 
 
 While bankers should not depend on the Bank of England, neither 
 should they depend on the bill-brokers. A broker, as the name implies, 
 is an intermediate party between the borrower and the lender. When 
 money is abundant, the bill-broker has large funds at his disposal, with 
 which he will discount at a lower rate of interest than the bankers. When 
 a pressure arrives, these funds are withdrawn, and his occupation is gone. 
 Some bill-brokers have large capitals of their own, and take in deposits, 
 repayable on demand ; and to this extent they may be regarded as bankers. 
 When money is abundant, sometimes cunning people, instead of going to 
 their own banker's, will take their bills to the bill-brokers, who will dis- 
 count them at a lower rate ; and when the pressure arrives, and the bro- 
 kers no longer discount, they think to return to their banker's. It is said 
 that some country banks have occasionally adopted the same system. 
 But it is clearly a bad system for any bank to adopt. A bank that is 
 dependent on re-discount, will most likely feel some inconvenience in a 
 season of pressure, even when the bills are all undoubtedly good. But 
 if the bank has, from a desire of making large profits, been induced in 
 seasons of abundance to re-discount inferior bills, the results may be more 
 serious. For in a season of pressure, a large portion of those bills will 
 not be paid, and the bank will have to provide payments for its own in- 
 dorsements, while its former channels of re-discount will be closed. All 
 the joint-stock banks that stopped payment in 1847, had been accustomed 
 to re-discount ; and though some of them were unsound in other respects, 
 yet tlie immediate cause of their stoppage was the inability to re-discount. 
 We again refer to the proceedings of the Bank of Liverpool. " The 
 manager stated that out of two small sums of .£ 10,000 sent to London to 
 the broker's, only one had been done." " We had then £ 100,000 at call 
 with certain bill-brokers, who were unable when applied to, to return us 
 more than ,£25,000." The governor of the bank stated that the failure 
 of the corn speculators caused the failure of an eminent discount-broker 
 having a large country connection ; and this failure, by closing one of the 
 principal channels of discount between the country and London, caused 
 distrust to extend into the country. 
 
 Banks should not only avoid depending on the Bank of England, or on 
 
 79
 
 A Treatise on Banking. 
 
 bill-brokers ; they should also avoid depending on other banks. Some 
 banks in manufacturing districts arc in the habit of discounting with banks 
 in agricultural districts, — a very good practice, as we think. But the 
 banks requiring the discount should always recollect that when a pressure 
 arrives, the discounting bank may have other ways of employing its funds. 
 Country banks, too, should not rely too much on their London agents. 
 Some London bankers have, no doubt, immense power. At the same 
 time, in seasons of pressure, they have immense claims upon them. 
 (Commons, 2344-8.) If free from a run upon themselves, they will 
 endeavour so to administer their funds as to afford reasonable assistance to 
 all their connections. And no one connection should expect to receive 
 more than this reasonable amount of assistance. But they may them- 
 selves be exposed to danger. The panic of 1847 was not a banking 
 panic, but a commercial panic ; and therefore the London bankers were 
 comparatively free from molestation. But banks had failed in Liverpool 
 and Newcastle, and this might have caused a banking panic in London. 
 The panic of 1825 commenced by the failure of a country bank. In such 
 a case the London bankers could have rendered but little assistance to 
 their country connections. It must be recollected, that the act of 1844 
 was suspended upon the application of the London bankers. The gover- 
 nor of the bank stated to the Committee of the House of Lords, " The 
 London bankers and discount-brokers refused to grant the usual accom- 
 modation to their customers, and necessarily obliged every one requiring 
 assistance to resort to the bank of England." 
 
 The most effectual way of acquiring this self-dependence that we have 
 been recommending, is to call up an adequate amount of capital. During 
 a pressure, as we have already said, a banker has three additional claims 
 on his funds. In the first place, a large amount of his deposits may be 
 withdrawn. Secondly, many of his customers, and some probably of the 
 wealthiest, will require addititional assistance, in the way of loans and 
 discounts. And, thirdly, he will think it prudent to keep a larger sum in 
 his till to meet contingent demands. On the other hand, the bills lie holds 
 •will not all of them be regularly paid ; the temporary loans he has granted 
 will have to be renewed ; and should he call up any of his permanent, or 
 dead loans, it will resemble calling spirits from the deep. In this case he 
 will find the benefit of a large capital ; and it is only by means of a large 
 capital that all these operations can be performed wath comfort to himself 
 and satisfaction to his customers. But if we increase our capitals to the 
 full extent that may be required in seasons of pressure, we must not ex- 
 pect to pay high dividends. It is obvious that, with the same extent of 
 business, a bank with a large capital must pay a lower dividend than a 
 bank with a small capital. It seems therefore likely that the average rate 
 of banking profits will be reduced. 
 
 " The fluctuations in the value of money produced by attempting to 
 regulate the currency by the foreign exchanges are injurious to both the 
 London and the country bankers. In seasons when money is abundant, 
 the bankers obtain but a low rate of interest on their loans and discounts ; 
 and they are tempted to make imprudent investments in order to employ 
 their funds. And when, on the other hand, money is scarce, the amount 
 
 80
 
 - The Bank Act of 1844. 
 
 of their lodgments is reduced ; the rate of interest allowed on the perma- 
 nent deposits is advanced ; a larger sum is kept unemployed in the till ; 
 and there is more danger from losses, either by the failure of parties in 
 debt to the bank, or by the necessity of realizing government securities. 
 Those country bankers who are in the habit of re-discounting their bills in 
 London are induced, when money is abundant, to carry this system to a 
 great extent, because they can obtain money at two or three per cent, 
 in London, and lend it in the country at four or five per cent. But when 
 money becomes scarce they have to pay an exorbitant interest or are 
 denied discounts altogether, and they are then compelled to refuse their 
 customers their usual accommodation, and then great distress is occasioned 
 in the provinces. Except under peculiar circumstances, both the extremes 
 of abundance and scarcity of money are unfavorable to large banking 
 profits, — a state in which money is easy without being abundant, and 
 valuable without being scarce, is the most conducive to the prosperity of 
 both the banking and the commercial interests of the countiy." {An In- 
 quirij into the Causes of the Pressure on the Money Market during the 
 year 1839.) 
 
 While, however, the profits of a banker from the ordinary operations 
 of his business may be diminished, it is possible he may have opportuni- 
 ties of making other profits by those fluctuations in the prices of public 
 securities, which usually occur in the different periods of a circle of the 
 currency. In the first period, immediately after a pressure, money is 
 abundant without speculation ; in the second period, money is abundant 
 and speculations abound ; in the third period, speculation begins to decline 
 and money is in demand ; in the fourth period, money is scarce and a 
 pressure arrives. It is impossible to say how long each of these periods 
 may last, as they will be influenced by political events, the abundance of 
 the harvests, the direction which speculation may take, and the state of 
 the public mind. Their approach or decline is generally indicated by the 
 stock of gold in the Bank of England. 
 
 During the first period money will be abundant, because the importation 
 of gold will cause an increased issue of bank-notes ; because, the import 
 of commodities being diminished, there will be fewer bills drawn from 
 abroad upon English houses and offered for discount to the London bank- 
 er ; and because trade will have become paralyzed at home, and prices 
 will have fallen, so that less money will be required to carry it on. A 
 banker at this period, will have more money than he can employ. But 
 at this period, the prices of the public funds and of other securities are 
 low. The act of 1844, by causing great fluctuations in prices, gives 
 great advantage to prudent capitalists, at the expense of the less prudent 
 or less wealthy classes of the community. " AH fluctuations in trade," 
 says Mr. Gurney, "are advantageous to the knowing man." (Lords, 
 1324.) To those who are not " knowing men," these fluctuations are 
 injurious. The abundance of the circulation produces a multiplication of 
 contracts, and then the contraction of the circulation produces an inability 
 to fulfil them. (Lords, 3845.) And those who have stock or any other 
 kind of salable property, are obliged to realize in order to fulfil their 
 engagements. Bankers may, during this period, make advantageous in 
 
 8^1
 
 A Treatise on Banking. 
 
 vestments ; and as they may calculate that another pressure will not ar- 
 rive for two or three years, they may purchase a limited amount of secu- 
 rities that have six or twelve months to run. During the second period, 
 money will be in demand, though tliere may be no great advance in the 
 rate of interest. The securities purchased by the banker in the first pe- 
 riod, will now be falling due or advancing in price. But this will be the 
 period of his greatest danger, and he must have a care not to let his de- 
 sire of getting higher interest lead him to make undue advances upon the 
 commodities or securities that may be the subject of speculation. The 
 third period will be the most profitable for the banker in his direct busi- 
 ness. Money will be in full demand at a good rate of interest, and liis 
 deposits will hardly have begun to decline. He should now sell out stock 
 and exchequer bills, or any other securities likely to be afJected by the 
 approaching pressure. He should make advances only by discounting 
 short bills or making short loans. He should weed his accounts of such 
 customers as have deeply engaged in the previous speculations ; and put 
 himself in a condition to support liberally through the pressure those who 
 may be entitled to his assistance. 
 
 It seems therefore probable that bankers will, under the act of 1844, 
 endeavour to make up for diminished profits by dealing more largely in 
 securities. According to the evidence of Mr. Pease, the fluctuations in 
 the currency have already produced similar effects in the departments 
 of trade and commerce. 
 
 " I stated, as clearly as I was able to do, that the man who bought from hand to 
 moutli, wliich is the common case, and did not watch those fluctuations of capital, so 
 as to buy when things were unusually depressed, and to sell when things rose again, 
 i^iiled. The only man who succeeded in making money, succeeded in carrying on a 
 speculative kind of business, that has arisen from the want of regularity in tiie values 
 of money and produce. The man who did not so speculate — buying largely at one 
 time, and selling very freely at another — did not succeed." "It is of great import- 
 ance that persons who do not desire to carry on a speculative business, should have 
 some assurance that it is moderately ])roductive. That assurance tliey have lost, by 
 being suddenly deprived by those fluctuations of that which they thought they had se- 
 cured by their industiy." {Commons, 4700, 4702.) 
 
 Though we would not confound this kind of speculation with that which 
 takes place by means of time bargains on the Stock Exchange, yet we do 
 not think it desirable that banks should deal in the public securities mere- 
 ly with a view of making a profit from the fluctuations in price. Some- 
 times the banker will be out in his calculations, and, instead of selling at 
 a profit, he will have to sell at a loss, or else submit to a lock-up of his 
 funds. And at all times there is a danger that he will acquire a specula- 
 tive feeling, which will lead him to disregard the steady pursuit of his 
 trade. 
 
 Section IX. — THE ADMINISTRATION OF TIIE BANKING DE- 
 PARTMENT OF THE BANK OF ENGLAND. 
 
 By the act of 1844, the banking department of the Bank of England 
 was separated from its issuing department ; and was to be managed like 
 
 82
 
 The Bank of England. 
 
 " any other banking concern issuing Bank of England notos." Taking 
 this view of the banking department, we propose to inquire on what 
 principles it ought to be administered. We shall do this, however, not 
 so much with the view of bringing forward any notions of our own, as to 
 lay before the reader some account of those principles which the bank 
 directors have adopted for their government. This will lead us, perad- 
 venture, to discuss some principles of practical banking to which we have 
 not hitherto had occasion to refer. We shall then trace the operations 
 of this department since the passing of the act of 1844. 
 
 The Bank of England is governed by a court of directors, consisting 
 of twenty-four members. These are selected from the mercantile classes 
 of London, virtually, by the other directors, who form what is called a 
 House List. They recommend certain persons to be chosen as directors, 
 and the proprietors always follow this recommendation. The court hold 
 their meetings every Thursday, and they then receive a report of the 
 transactions of the preceding week. 
 
 The executive administration, in the mean time, is in the hands of the 
 governor and deputy-governor, who may be advised or assisted by the 
 committee of treasury. This committee is composed of those directors 
 who have held the office of governor, of the existing governor and deputy- 
 governor, and of the director who is intended to be the next deputy-gov- 
 ernor. A director is at first an ordinar)' director, and attends the weekly 
 meetings of the court. In turn he becomes, for one year, a member of 
 the committee of treasury ; then deputy-governor for two years ; then 
 governor for two years ; and afterwards a permanent member of the 
 committee of treasury. This committee meet once a week, and at such 
 other times as they may be called together specially by the governor. 
 Sometimes they discuss the measures that are to be submitted to the next 
 meeting of the court ; but the court do not now so readily as formerly 
 adopt their recommendations. The governor and deputy-governer, for 
 the time being, make all loans and advances, and sometimes raise the 
 rate of discount, without waiting for the opinion of the court. They 
 conduct all negotiations with the government, and, subject to the sanc- 
 tion of the court, have the whole administration of the affairs of the bank. 
 Each director must hold <£ 2,000 bank stock; the deputy-governer, 
 £ 3,000 ; and the governor, £ 4,000, It was the rule that every director 
 should take his turn for becoming governor, but recently it has been 
 determined to place in that office the director whom the other directors 
 shall, by ballot, think best qualified. Several suggestions were made be- 
 fore the parliamentary committees, for improving the composition of the 
 court of directors. It was proposed that all the directors should not be 
 taken from the commercial classes, but that some should be selected 
 from the banking and manufacturing interests. It was also asked, wheth- 
 er a permanent governor, either for life or for a number of years, would 
 not be preferable to the present system. 
 
 The act for separating the two departments came into operation on the 
 31st August, 1814, and the following was the first return made under the 
 act, showing the condhion of the banking department on the 7th of Sep- 
 tember, 1844 : — 
 
 83
 
 A Treatise on Banking. 
 
 Account of the Liabilities and Assets of (he Bank of England, for the iceek ending 1th 
 September, 1844.* 
 
 Dr. 
 Notes issued, 
 
 ISSUE DEF 
 £ 
 
 . 28,351,295 
 
 ARTMENT. 
 
 Government debt, 
 Otlier securities, 
 Gold coin and bullion, . 
 Silver bullion, . 
 
 :partment. 
 
 Government securities, 
 Other securities. 
 Notes, .... 
 Gold and silver coin, 
 
 Or. 
 
 £ 
 . 11.015,100 
 
 2,984,900 
 . 12,657,208 
 
 1,694,087 
 
 Proprietors' capital, 
 Rest, .... 
 Public deposits, . 
 Other deposits. 
 Seven-day and other bQls, 
 
 £28,351,295 
 
 BANKING Dl 
 £ 
 
 . 14,553,000 
 3,564.729 
 
 . 3,630,809 
 8,644,348 
 1,030,354 
 
 £31,423,240 
 
 £28,351,295 
 
 £ 
 
 . 14,554,834 
 
 7,835.616 
 
 . 8,175,025 
 
 857,765 
 
 
 £31,423,240 
 
 It will be seen from the above, that the means or funds of the banking 
 department for carrying on its business, consists of, — 1. The paid-up 
 capital ; 2. The rest, or surpUis fund ; 3. The public deposits ; 4. The 
 other deposits ; 5, The seven-day and other bills. These funds are in- 
 vested in " government securities " and in " other securities," and the 
 remainder is kept as a reserve in the till. 
 
 1. Viewing this as the condition of a private and independent bank, the 
 first thing that would strike the mind of a practical banker would be the 
 large amount of the Paid-up Capital. The capital is £ 14,553,000 ; 
 while the total deposits are only £ 12,275,157. The object of a large 
 capital is, in the first place, to secure the public confidence ; then, to have 
 the means of repaying the deposits whenever demanded ; and also, of 
 affording to the customers of the bank every reasonable accommodation 
 in the way of loans or discounts. But after making due provision for 
 these objects, this amount of capital appears unnecessarily large, \^'ere 
 it only i^ 7,000,000, that would be amply sufficient for carrying on the 
 present extent of business, and the rate of dividends might then be in- 
 creased. All above this amount could only be invested in government 
 securities, never likely to be required for banking purposes ; and if re- 
 quired, could not be suddenly realized, or at least not within the period 
 in which they are likely to be wanted. 
 
 2. The next thing that would appear remarkable for a private bank, is 
 ♦he large amount of the Rest, or surplus fund. 
 
 The Rest, or surplus fund, or Guarantee Fund, as it is sometimes 
 called, consists of the accumulation of surplus or remaining profits after 
 the payment of the dividend. The object of this fund is not to guarantee 
 tlie public for the security of their deposits, but to guarantee to the share- 
 holders the uniformity of the dividend. If, in any one year, the profits 
 fall below the amount required to pay the usual dividend, the deficiency 
 
 * The Table on the next page will give a more detailed account of some of the 
 items in the above return. 
 
 84
 
 The Bank of England. 
 
 is taken from the rest or surplus fund. The amount of this fund should 
 be regulated by the extent of the business and the probable loss that 
 might arise in conducting that business. If the fund is five or six times 
 the amount of the deficiency that might possibly arise in making up tlie 
 annual dividend, it would appear to be sufficient. For if, after making 
 up this deficiency for one, two, or three years, it should appear that the 
 
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 K ?
 
 A Treatise on Banking. 
 
 profits of the bank had become pennanciitly diminished, then the course 
 would be to reduce tlie dividend until the sur[)lus fund had recovered its 
 former amount. 
 
 Banks tliat have made largo profits have either increased the dividend, 
 or distributed them among the shareholders in the form of bonuses, or 
 have added them to the capital. The Bank of England have adopted all 
 these plans. Yet, after all these distributions of increased dividends, bo- 
 nuses, and additional capital, the bank had on the 7th of September, 1844, 
 a rest, arising from surplus profits, of £ 3,564,729. No other " banking 
 concern carrying on business with Bank of England notes," would think 
 it necessary to keep such a rest. Neither the kind nor the extent of busi- 
 ness carried on, is ever likely to require any thing like this amount to 
 meet any occasional losses. The amount is altogether excessively dispro- 
 portionate to the purposes for which a surplus fund is usually applied, and 
 at the same time it tends to give an erroneous view of the profits of the 
 bank. This rest is employed in the business, and yields profits, but it 
 pays no dividends. The profits go to swell the dividend on the capital, 
 and hence the capital appears to yield a profit of 7 per cent. But the 
 dividend of 7 per cent, is not made upon the capital alone, but on the 
 capital and rest together, and hence upon the funds employed it amounts 
 to only about 5| per cent. 
 
 3. The Deposits. 
 
 The Public Deposits are thus classified : — 
 
 £ 
 
 Exchequer account, 2,198,000 
 
 For payment of Dividends 315,000 
 
 Savings Banks, &c., 501,000 
 
 Other public accounts, 617,000 
 
 £.3,631,000 
 
 The " Exchequer account" is the current account with the govern- 
 ment, and this account is credited with the amount of the taxes as they 
 are lodged in the bank. In the beginning of January, April, July, and 
 October, this account is debited for the amount necessary to pay the 
 quarterly dividends, and the amount is carried to the credit of the ac- 
 count " for payment of dividends." The balance here standing to the 
 credit of this account is the amount of the dividends that had not then 
 been claimed. The next account is called " Savings Banks, &;c." The 
 trustees of the savings banks throughout the country are required to lodge 
 the deposits in the Bank of England to the credit of the Commissioners 
 for the Reduction of the National Debt, who afterwards invest it in the 
 public funds. We do not know what is meant by " &c.," nor yet by the 
 " other public accounts." We believe there are certain accounts con- 
 nected with the Court of Chancery that are required to be kept with the 
 Bank of England; and, by the last bankruptcy law, the effects of bank- 
 rupts' estates are required to be lodged in some one or other of the 
 branches. These may form the " other public accounts." 
 
 86
 
 The Bank of England. 
 The Private Deposits are thus classified : — 
 
 Railways, 30,000 
 
 London Bankers, 963,000 
 
 East India Company, 636,000 
 
 Bank of Ireland, Royal Bank of Scotland, &c., . 1 75,000 
 
 Other Deposits, 5,631,000 
 
 Deposits at Branches, 1,209,000 
 
 8,644,000 
 
 With regard to both the public and the private deposits, a banker would 
 inquire whether they were fluctuating or permanent ; whether repayable 
 at fixed periods, or liable to be suddenly withdrawn. He would thus as- 
 certain what proportion could be profitably employed, and what amount 
 should be kept in the till, to meet constant or occasional demands. He 
 would observe on inspection that the balance of the " exchequer account " 
 increases gradually during the quarter, from the receipt of the taxes, until 
 the commencement of the next quarter, when it is largely reduced by the 
 payment of dividends. He will, therefore, provide for these quarterly 
 payments ; but his provision will be less ample when informed, that, as 
 the public deposits decline, the private deposits will increase, and more 
 especially those of the London bankers. This is partly in consequence 
 of the bankers holding powers of attorney to receive the dividends due to 
 parties who reside in the country, and pardy because the abundance of 
 money caused by the payment of dividends increases their own deposits, 
 and thus enables them to keep for a time larger balances in the Bank 
 of England. We have already said that no rule can be given as to the 
 amount of notes which any banker should keep in his till, — the proper 
 amount can be ascertained only by experience. But we should imagine 
 that in ordinary times the deposits in the Bank of England are sufficiently 
 steady to prevent any perplexity on the subject. We may be asked what 
 we mean by " ordinary times," since now every year differs from its pre- 
 decessor, and the steadiness and uniformity which heretofore characterized 
 banking and commercial affliirs are no longer known. We reply, that by 
 " ordinary times," we mean those times that are the least affected by the 
 foreign exchanges. For some years past it has been the practice to reg- 
 ulate the issue of bank notes by the foreign exchanges. When the foreign 
 exchanges bring gold into the country, bank notes are issued against it, 
 money becomes abundant, and the bank deposits increase. When the 
 exchanges take out gold, the bank notes are diminished, and the bank de- 
 posits decline. This system has, in a great measure, been acted upon by 
 the bank directors since the year 1832, and it is now rigidly enforced by 
 the act of 1844. These extraordinary seasons of great influx or great 
 efflux of gold appear to be subject at present to no general rules. But at 
 other times there seems to be no reason why the Bank of England should 
 not profitably employ a large portion of her deposits. We may observe, 
 however, that, as the bank allows no interest on any of her deposits, she 
 sustains no loss even when they are not employed ; but were they to be 
 employed, her profits would be greater. 
 
 G 87
 
 A Treatise on Banking. 
 
 4. With regard to the Investments, a banker would inquire first, Are 
 they safe ? Secondly, Are they convertible ? 
 
 There seems no ground to question their safety, — their convertibility 
 is not so obvious. The Government stock, Exchequer bills, and East 
 India bonds, must be considered in ordinary times, and to a reasonable 
 amount, as strictly convertible. But this is not the case with the Govern- 
 ment annuities. They could not be sold in the market ; and even by 
 private negotiations, few buyers would be found, except the insurance 
 offices. Even with them the negotiations would probably occupy consid- 
 erable time. As to the city bonds, railway bonds, and mortgages, they 
 would in a season of pressure be altogether useless. It may be said, that 
 the bank's capital being so large, a portion may, without inconvenience, 
 be locked up in dead securities. This observation is valid to a certain 
 extent, but not to an indefinite extent, and, after giving it due weight, the 
 amount thus invested seems too large. 
 
 The annuities form a large portion of the amount of the " Stock and 
 Annuities." The first is an annuity of .£585,740, usually called the 
 "Dead Weight," which commenced on the 5th April, 1828, and is to 
 continue for forty-four years from that time. Other annuities arose out 
 of the Bank Charter Act of 1833. The government were to pay to the 
 bank one fourth of the permanent debit of £ 14,686,800, amounting to 
 ■£'3,671,700. At first it was arranged that the bank should receive in 
 payment of this sum £4,000,000 three per cent, reduced annuities; but 
 it was afterwards changed to an annuity for twenty-six years, and will 
 expire in 1860, at the same time as the " Long Annuity." 
 
 The bills discounted, and the short loans called " Advances on bills of 
 exchange, exchequer bills, stock, &c.," are most legitimate banking in- 
 vestments. 
 
 The plan of granting short loans was commenced in 1829, to obviate that 
 tightness in the money market which was felt for a month or six weeks 
 before the payment of the dividends, through the gathering in of the 
 taxes into the exchequer. The rate ^f interest charged was usually about 
 one per cent, less than the discount charged on bills. The loans were 
 repayable to the bank at about the time tliat the dividends were paid to 
 the public. Notices were issued, stating the rate of interest, and the kind 
 of securities on which loans would be made, and the time of repayment. 
 The first notice was issued on the 3d of December, 1829, and the prac- 
 tice continued until after the passing of the act of 1844. 
 
 Advances on deficiency bills are a kind of short loans made to the gov- 
 ernment, whenever the taxes are less than sufficient to pay the public 
 dividends. These advances seem to be very legitimate. The bank has 
 one large customer. A customer who keeps large deposits will some- 
 times require large advances. These advances mav, peradvcnture, be 
 wanted at a time when it may not be exactly convenient for the banker to 
 make them. All large accounts may at times be attended with some in- ' 
 convenience. But if a banker takes such accounts, he must make his ar- 
 rangements accordingly. In the present case, the bank has the advan- 
 tage of knowing, by the progress of the lodgments on the " Exchequer 
 account," whether such advance is likely to be required.
 
 The Bank of England. 
 
 When the government requires these advances, the bank must either 
 make them out of her reserve in the till, or sell public securities to obtain 
 bank-notes, or restrict her advances to other parties. It is peculiarly un- 
 fortunate that the government is more likely to require these advances in 
 seasons of pressure, inasmuch as in those seasons the taxes are usually 
 less productive and are less punctually paid. Hence the bank may be 
 called upon to make advances to government at the same time that simi- 
 lar advances are required by the commercial classes. In some cases the 
 bank might not have the means of making advances to both parties. Had 
 the government required such advances in October, 1847, the commercial 
 distress must have been considerably increased. 
 
 5. The Reserve. — A practical banker would, at first sight, consider 
 this reserve as too large. From the amount and character of the depos- 
 its it would not appear that so large a reserve was necessary, and a portion 
 might well be employed in earning interest, instead of lying unproductive 
 in the till. But, before we condemn the bank directors, we must give this 
 matter further consideration. We have already stated, that, even before 
 the passing of the act of 1844, the directors had been in the habit of issu- 
 ing their notes against gold and silver bullion ; and when a large amount 
 of notes had not been thus issued, the deposits in the bank were increased. 
 Now, when this act came into operation, — August 31st, 1844, — the bank 
 had in this way acquired a large amount of gold and silver bullion ; in- 
 deed, she does not ever before appear to have had so large an amount in 
 the whole course of her history. If we look to those years which preceded 
 pressures (for in these years gold on hand is usually large), we shall find 
 that in 1824 the amount was £ 13,810,080; in 1836 the highest quota- 
 tion is i: 7,80 1,000; and in 1838 it is £ 10,126,000; but on the 7th of 
 September, 1844, the amount returned in the issue department is, gold 
 .£12,657,208, and silver .£1,694,087, while the sum of .£9,032,790 
 was retained in the banking department. Notes, of course, had been 
 issued against all this bullion, and the deposits in the bank had conse- 
 quently increased. " Well," it may be said, " this will account for the 
 increase of the deposits, but not for the increase of the reserve. Why 
 were not the deposits invested ? " We will explain this. There are 
 some classes of investments which the bank directors can make indepen- 
 dently of other parties. For instance, they can purchase government 
 stock, exchequer bills, and railway bonds, just as they please. But, as 
 we have stated, it is not prudent in a banker to invest the temporary in- 
 crease of his deposits in this way, as, when the deposits are withdrawn, 
 he may have to sell these securities at a lower price, and thus sustain 
 loss. There are other classes of investments for which the bank is, to a 
 certain extent, dependent on other parties ; such, for example, as the dis- 
 counting of bills and the granting of loans. The bank directors cannot 
 invest their money in these ways unless there are parties willing to receive 
 it. Now, while a portion of the notes issued against gold and silver bul- 
 lion are lodged with the bank in the form of deposits, another portion, and 
 sometimes the largest portion, do not go into the bank, but are circulated 
 among the public, and soon find their way into the hands of bankers, bill- 
 brokers, and money dealers, who, from the abundance of money, will 
 
 89
 
 A Treatise on Banking. 
 
 discount bills and grant short loans at a lower rate of interest than the 
 bank. The bank will, therefore, have no further applications. When 
 her bills and loans fall due, they will be paid, and the amount will go to 
 increase her reserve. Thus it appears that the notes which, in a favor- 
 able course of the foreign exchanges, are issued against gold and silver 
 bullion, w^ill tend in two ways to increase the bank reserve ; first, by in- 
 creasing her deposits, and secondly, by diminishing her securities. This 
 will account for the large amount of the reserve. The rule laid down by 
 the directors is, that the reserve should be about one third the amount of 
 the deposits. 
 
 Having given these explanations, we shall now proceed to notice tlie 
 operations of the banking department of tlie Bank of England since its 
 separation from the issuing department by the act of 1844 : — 
 
 I. The operations of the Banking Department, from the passing of the 
 act in 1844, to September 5, 1845. 
 
 The act came into operation on the 31st of August, 1844, and almost 
 immediately some important changes were introduced. Up to that date 
 the bank had never discounted at a lower rate than four per cent. This 
 rate, in ordinary times, had seldom varied, and all bills discounted at the 
 same time were charged the same rate. But, on the 5th of September, 
 the rate of discount on bills was reduced from four to two and a half per 
 cent., and on notes to three per cent. On the 18th of March, 1845, the 
 bank introduced the principle of a minimum rate of discount ; fixing two 
 and a half per cent, as the rate on first-rate bills, and charging a higher 
 rate on other bills. The object of these changes was to employ a portion 
 of the i-eservc in the discount of bills. 
 
 This line of conduct was by no means unwarranted by the practice of 
 " other banking concerns." It is an established principle in practical 
 banking, that a banker, when he cannot employ his surplus funds at so 
 high a rate of interest, as he wishes to obtain, should employ those funds 
 at a lower rate, rather than keep them unemployed in his till. And it is 
 also an established practice to charge different rates of discount on differ- 
 ent bills, according to the class or character of the bills, the respectability 
 of the parties, the time they have to run, and a variety of other circum. 
 stances. In adopting these regulations, therefore, the directors were only 
 performing the work assigned to them, of conducting the banking depart- 
 ment " like any other banking concern issuing Bank of England notes." 
 
 These changes gave rise, in the parliamentary committees of 1847, to 
 some discussion upon the question as to whether the Bank of England 
 governed the market-rate of interest, or the market-rate of interest gov- 
 erned the bank-rate. There can be but little difference of opinion upon 
 tliis subject. The " market-rate " of interest is the rate which bankers 
 and bill-brokers charge for discounting first-class bills to the public. 
 When the foreign exchanges are bringing gold into the country, and notes 
 are issued against this gold, the abundance of money in the hands of the 
 bankers and bill-brokers causes the market-rate of discount to fall below 
 the bank-rate. If during this season the bank charges a high rate, she 
 gets but few bills. On the other hand, when gold is going out of the 
 
 90
 
 The Bank of England. 
 
 country, and money becomes scarce, the market-rate is higher than the 
 bank-rate. If during this period the bank charges a low rate, she must 
 soon Umit her discounts, or her reserve will be exhausted. But, though 
 the bank cannot change the course of the current, she can give it in- 
 creased strength. Though she cannot make money dear when it is 
 cheap, nor cheap when it is dear, yet when it is cheap she can make it 
 cheaper, and when it is dear she can make it dearer. Hence, every al- 
 teration in the bank-rate has always an immediate influence on the 
 market-rate. 
 
 Such was the case in September, 1844. The large importations of 
 gold had reduced the market-rate of discount to 2| per cent., while the 
 bank charged 4 per cent. But when the bank reduced her rate to 2| 
 per cent., the market-rate went down to 2, and even to 1| per cent. To 
 engage actively in discounting bills was a new feature in the bank man- 
 agement. In 1832, the then governor stated to the committee of the 
 House of Commons, that he thought the bank should be a bank of cir- 
 culation and of deposit, and only occasionally a bank of discount. But the 
 act of 1844 placed the bank in a new position, and led to the adoption 
 of new principles. Formerly the bank had invested her surplus funds in 
 government securities. But when she purchased, the price advanced ; 
 and when she sold, the price fell. This produced a fluctuation inconve- 
 nient to the public. Often, too, she purchased when the price was high, 
 and sold when the price was low ; and thus sustained loss. It was there- 
 fore deemed preferable to invest a portion of her reserve in the discount 
 of bills. The sums thus invested would return as the bills fell due, and 
 the reserve could at any time be strengthened by checking the dis- 
 counts. 
 
 The directors having determined to invest a portion of their funds in 
 discounts, it became necessary to reduce their rate of interest to nearly 
 the market-rate, or they would have got no bills. 
 
 An eminent London banker, distinguished by his support of the act of 
 1844, says, — " If the bank is to continue as a large discounting body 
 (of the expediency of which I entertain considerable doubts), I think it 
 very desirable that its rate of interest should conform to the real market 
 value of money." {Lords, 1632.) The directors seemed to think it 
 necessary that they should in some way employ their reserve, in order to 
 prevent the too great accumulation of bank notes in the issue department. 
 {Commons, 3009.) We here give no opinion as to the best way of em- 
 ploying the bank's reserve, but we are quite ready to admit, as the gov- 
 ernor admits in reply to a question, that " the true principles of banking 
 are, first, that a bank shall never place itself in such a position as that 
 it shall be unable to meet its liabilities ; and next, that it shall employ the 
 whole of its resources at the greatest profit that it can with reference to 
 prudence, looking to its reserve." {Commons, 3722.) 
 
 In thus coming into competition with the money dealers, reducing the 
 rate of interest, exciting a feverish state of feeling in the public mind, and 
 giving facilities to the formation of companies for speculative purposes, 
 the bank directors are accused of having violated their public duties as the 
 bank of the government, and thus sacrificed the interests of the nation to 
 
 91
 
 A Treatise on Banking. 
 
 the interests of tlicir proprietors. We sliall not meddle with this question. 
 We have here nothing to do with the public duties of the bank directors. 
 We are considering the banking department as " any other banking con- 
 cern." Generally speaking, Providence has so constituted human so- 
 ciety, that all banking companies, and all individuals too, will most effec- 
 tually promote the public interests, whtn by honorable means they pro- 
 mote their own. If this is not the case with the Bank of England, it 
 must have arisen from the acts of the Legislature ; and the fact — if it be 
 a fact — is presumptive evidence against the wisdom and the justice of 
 those laws by which she was placed in that position. 
 
 At the close of this period, we find that the London discounts had in- 
 creased from ^113,000 to c£ 2,365,000, and the "City Bonds, &c.," 
 had increased from £ 3,357,000 to £ 4,009,000, owing, it is presumed, 
 to the purchase of railway debentures. The circulation of the issuing 
 department had increased from ^28,351,295 to ^28,953,300 (see the 
 Returns at the end of this section), and the minimum rate of interest 
 charged by the bank was 2-|- per cent. 
 
 II. The Administration of the Banking Department from September 6, 
 1845, to September 5, 1846. 
 
 During this period there were three alterations in the minimum rate of 
 interest. On October 16th, 1845, it was raised froin 2 A to 3 per cent. ; on 
 November 6th to 3^ per cent. ; and on August 17th, 1846, it was again re- 
 duced to 3 per cent. In fixing the rate of discount, the directors took 
 into account the amount of bullion in the issue department, the rcseiTC in 
 the banking department, and the amount of the discounts. The amount 
 of bullion virtually regulated the other two ; and thus the interest was gov- 
 erned by the foreign exchanges. At the same time, the directors, as 
 practical bankers, would pay the greatest attention to their reserve, as it 
 was only from this source that any advances could be made. Hence, 
 sometimes one object of raising the rate of discount was to diminish the 
 number of applications. It was thought better to protect the reserve by 
 raising the rate, than by positively refusing to discount. 
 
 In the beginning of 1846, a circumstance occurred which increased both 
 the deposits and the discounts of the bank, and added greatly to her profits. 
 The railway companies, who were desirous of obtaining acts of Parliament 
 to authorize the construction of their lines, were required to pay into the 
 Bank of England, within fourteen days of the meeting of Parliament, ten 
 per cent, on the estimated amount of their capital, to be returned when 
 the company had obtained the act, or when the application had been re- 
 jected. Every body wondered beforehand how so large a sum could be 
 paid out of the amount of notes then in circulation. But the bank acted 
 with the railway deposits as she had been accustomed to act with the 
 public deposits previous to the payment of dividends. As fast as the 
 money came in, it was lent out ; and thus a transaction of large magnitude 
 was effected without much difficulty. This shows the imjiortance of a 
 government bank. Had the deposits been required to be lodged in the 
 exchequer, and there to remain until reclaimed by the railway companies, 
 the operation could not have been effected. The bank could have per- 
 formed it with greater facility previous to the passing of the act of 1844. 
 
 92
 
 The Bank of England. 
 
 She could then have lent out her notes before the lodgments were re- 
 quired to be made ; there would have been no previous apprehensions, nor 
 any tightness during the operation. 
 
 in. The Administration of the Banking Department from September 
 the 5th, 1846, to September the 4th, 1847. 
 
 In September, 1846, the minimum rate of discount was 3 per cent. 
 On January the 14th, 1847, it was raised to 3| per cent., and on the 20th 
 of the same month to 4 per cent. ; on April the 8th to 5 per cent., and on 
 the 5th of August to 5^ per cent. 
 
 During the whole of this period the foreign exchanges were unfa- 
 vorable, and the circulation of the issuing department declined from 
 i: 29,760,870 to <£ 22,396,845. (By deducting .£14,000,000 from this 
 sum, we see the amount of gold and silver bullion on hand in the issue 
 department.) This was attended by a decline in the reserve of the bank- 
 ing department, and an increase in the amount of loans and discounts. 
 
 The bank directors did not raise their rate of discount above 3 per cent, 
 until the month of January, 1847. For this they have been severely cen- 
 sured by parties who have had the advantage of not being compelled to 
 form any opinion until after the result was known. The month of April was 
 an important month. From the deficiency of the harvest, large importa- 
 tions of corn took place. These imports were paid for in gold, which was 
 suddenly withdrawn from the issue department, for exportation. 
 
 Contemporaneous with this export of gold, the government required to 
 borrow .£ 3,500,000 upon deficiency bills, in order to pay the dividends. 
 Under the old system this might not have been a matter of much impor- 
 tance, but the case was different under the act of 1844. The banking de- 
 partment was rather in danger of getting into what the Americans call a 
 " fix." To avoid this " fix," the directors raised the rate of discount to 
 5 per cent. ; they refused to led money even upon exchequer bills ; they 
 limited their discounts; and they borrowed .£1,275,000 on consols. 
 These measures caused a severe pressure on the money market, but it 
 soon subsided. From this period the foreign exchanges were favorable 
 to this country. 
 
 The operations of this month of April, 1847, have given rise to much 
 discussion. 
 
 The advocates of the act of 1844 have pointed to the transactions of 
 this month to prove that the management of the issue department cannot 
 be safely intrusted to the bank directors. They say that if the bank had 
 advanced its rate of interest, they might have prevented the unfavorable 
 course of exchange, and consequently have avoided the pressure which 
 then occurred. On the other hand, it has been stated that the bank 
 ought to be guided in its rates of interest by the amount of its reserve ; 
 that from November, 1846, to April, 1847, the reserve was above one 
 third of its deposits, a greater reserve than any other bank would think it 
 necessary to keep ; that the demand for gold was so sudden, and for so 
 large an amount, that no ordinary rules could have prevented it ; and 
 even had it been prevented, it might have been injurious to the country, 
 as it would have checked the importation of corn, which was then required 
 in consequence of the deficiency in tlie harvest. There can be no.doubi, 
 
 93
 
 A Treatise on Banking. 
 
 that, under the act of 1844, a sudden exportation of gold must cause a 
 sudden contraction of the .amount of notes in circulation. This " self- 
 acting machine " acts by jerks, like a steam-engine without a fly-wheel • 
 and its advocates look to the banking department to supply the fly-wheel, 
 and to cause the machine to move smoothly and equably. It may b(( 
 doubted whether the banking department has the power of doing this. 
 But when this is not done, the advocates of the act throw the blame upon 
 that department. They resemble the court preceptor, who, when the 
 royal pupil did any thing wrong, inflicted the beating on his fellow- 
 student. If on this occasion the bank did wrong, it may be feared that it 
 was her court connection which led her astray. The government were 
 then negotiating a loan of eight millions for the relief of Ireland. And 
 " there was a feeling in the court that, in the face of the government ne- 
 gotiating a loan, it would be an act of want of courtesy to put up the rate 
 of interest immediately." {Commons, No. 3001.) In the secret history 
 of the Bank of England we may possibly find other instances of similar 
 faults. But if on the present occasion she was influenced by such consid- 
 erations, she did not act " like any other banking concern." 
 
 The events of April, 1847, also lead us to remark that the London 
 bankers never vary their rate of discount with a view to regulate the for- 
 eign exchanges. If it behoves the banking department to do this, it 
 has certainly to perform duties which are not considered to belong to 
 " any other banking concern." Nor do the London bankers suddenly 
 and abruptly stop discounting for those customers in whom they have 
 confidence. The frequent occurrence of such suspension of loans and 
 discounts as occurred in April, 1847, would form an insuperable barrier 
 to the banking department ever acquiring that kind of business which is 
 carried on by the London bankers. No merchant would like to depend 
 on such a bank for the means of making his daily payments. We be- 
 lieve, however, that most mercantile firms that have a discount account 
 with the Bank of England, have another banking account elsewhere, and 
 some have also accounts with the large bill-brokers. 
 
 The pressure that existed in April, 1847, has been attributed to the 
 publication of the amount of the bank's reserve. It was said, and said 
 truly, that the bank might very prudently reduce her reserve for a few 
 days below the average amount, knowing that, by bills falling due, or by 
 other means, she would soon receive a sum that would replenish her cof- 
 fers. But the public, seeing only the amount of the reserve, and knowing 
 nothing of the sums about to be received, might become unnecessarily 
 alarmed, and hence a panic might ensue. Upon this ground, some par- 
 ties questioned the policy of publishing the bank accounts in their present 
 form. But the remedy for this is not to supjircss the returns, but to cir- 
 culate throughout the community such an amount of knowledge as shall 
 enable them to judge accurately respecting bunking afl'airs. Other par- 
 tics, of a higher class than those we denomiiiale the public, have fallen 
 into erroneous opinions by a literal adhesion to these returns. Almost uj) 
 to the time of the suspension of the act of 1844, it was contended by 
 some who *' sit in high places" that there could be no pressure on the 
 commercial classes, since tiiere were thcii more notes in the hands of the 
 
 94
 
 The Bank of England. 
 
 public than in former seasons when no pressure existed. And before the 
 Parliamentary committees of 1847, it was stated by the governor and 
 deputy-governor that it could make no difference to the public whether the 
 bank advanced three millions, or any other sum, to the government on 
 deficiency bills, or advanced the same sum in loans and discounts to the 
 commercial classes, inasmuch as the returns would show that the amount 
 of notes in circulation would be the same. The events that followed the 
 suspension of the act showed the fallacy of these opinions. It was shown 
 that the amount of notes in the hands of the public is not of itself a cer- 
 tain criterion by which to judge of the amount of banking facilities en- 
 joyed by the commercial classes. 
 
 IV. The Administration of the Banking Department from September, 
 1847, to September, 1848. 
 
 During this period the minimum rate of interest was advanced from 5| 
 to 6 per cent, on the 23d of September ; to 8 per cent., by authority of 
 the government letter, on the 25th of October. It was reduced to 7 per 
 cent, on the 22d of November ; to 6 per cent, on the 2d of December ; to 
 5 per cent, on the 23d of December ; to 4 per cent, on the 27th of Janu- 
 ary, 1848 ; and to 3| per cent, on the 16th of June. 
 
 At the commencement of this period a great number of commercial 
 houses failed, not only in London, but also in Liverpool and Glasgow, and 
 other large places. The following is the account given by the Governor 
 of the bank to the committee of the House of Lords : — 
 
 " An unprecedented large importation of food, caused by a deficient harvest, re- 
 quired in payment the export of a large amount of bullion, to the extent of about 
 £ 7,500,000, from the coffers of the bank, and probably not less than £ 1.500,000 from 
 other sources, — together ;£ 9,000,000. From this great reduction in the available capi- 
 tal of the country, in addition to the still larger amount invested in railway expendi- 
 ture, acting suddenly upon a previous high state of credit and excessive speculation, 
 arose the pressure in the money market. There was an abstraction of £ 7,500,000 
 from the bullion held by the bank, and consequently a diminution in the notes to that 
 extent." {Lords, 12.) 
 
 During this period the bank acted with great liberality. The following 
 is a list of the advances made between the 15th of September and the 
 15th of November : — 
 
 " 1. The Bank of England being applied to by a very large firm in London, who had 
 at that time liabilities to the extent of several millions sterling, advanced £ 150,000 on 
 the security of debentures to that amount of the Governor and Company of the Copper 
 Miners in England, and thereby prevented them from stopping payment ; it was dis- 
 tinctly understood that the operation was for that purpose. 2. The bank advanced 
 j£ 50,000 to a country banker on the security of real property. 3. On the urgent rep- 
 resentations of several parties of the first importance in the city of London, the bank 
 advanced .£ 120,000 to the Governor and Company of the Copper Miners, on the guar- 
 antee of approved names, taking at the same time a mortgage on the company's prop- 
 erty for .£270,000 to cover this sum, and the amount of £150,000 debentures before 
 advanced upon ; it was stated that the stoppage of this company would have thrown 
 ten thousand people out of employment. 4. The bank advanced £ .'500.000 to the 
 Royal Bank of Liverpool, on the security of bills of exchange, over and aliove tlicir 
 usual discounts to this bank. This advance unfortun.ately proved inadequate, and the 
 Royal Bank, having no more security to offer, stopped payment. 5. The bank assist- 
 ed another joint-stock bank in the country with .£ 100,000 on the security of bills of 
 exchange, over and above usual discounts. 6. The bank advanced .£ l.'?0,000 on real 
 property to a large mercantile house in London. 7. The bank advanced £ 50,000 to 
 
 95
 
 A Treatise on Banking. 
 
 another mercantile house on tlic guarantee of approved names. 8. The bank ad- 
 vanced £ 50,000 to a joint-stock issuinjr hank on hills of exchange, and agreed to open 
 a discount account with the said hank, on condition that it should withdraw its issues, 
 but the joint-stock hank stopped payment before the arrangement could he completed. 
 
 9. The bank advanced £15,000 on real property to a large establishment in London. 
 
 10. The bank assisted, and prevented from failing, a large establishment in Liverpool, 
 by forbearing to enforce payment of upwards of .£ 100,000 of their acceptar>oes, and 
 engaging to give further aid if required. 11. The bank assisted a very large joint- 
 stock bank in the countri' with advances on loans on bills of exchange to the extent of 
 about £800,000, over and above usual discounts. 12. The bank advanced £ 100,000 
 to a country banker on real property. 13. The bank advanced a joint-stock bank in 
 the country £200,000 on the security of local bills, besides discounting £ 00,000 of 
 London bills. 14. The bank assisted another joint-stock bank in the country with an 
 advance of £ 100,000 on local and London bills. 15. The hank advanced £ 100,000 to 
 a large mercantile house in London, on approved personal security. lf>. The bank 
 assisted a large house at Manchester to resume payment by an advance of £40.000 on 
 approved personal security. 17. The liank advanced £30,000 to a country bank on 
 real property. 18. The hank assisted many other houses, both in town and country, 
 by advances of smaller sums on securities not admitted by the bank under ordinarj- 
 circumstances; nor did the bank, during the period in question, reject at their London 
 establishment any one bill otfercd for discount, except on the ground of insufficient 
 security." ( Commons, 2645.) 
 
 Some of these advances were not made till after the appearance of the 
 government letter on the 25th of October. Up to that date the efforts of 
 the bank were inadequate to allay the pressure, while they largely re- 
 duced the bank's reserve. On Saturday, the 23d of October, a deputa- 
 tion from the London bankers waited on the Government, who then deter- 
 mined to suspend the act of 1844 ; and on the same day gave intimation 
 of their intention to the Bank of England. On Monday morning, a letter 
 appeared from Lord John Russell and the Chancellor of the Exchequer, 
 authorizing the directors of the Bank of England to enlarge their dis- 
 counts and advances, and promising that if by so doing the existing law 
 should be infringed, the government would apply to the legislature for a 
 bill of indemnity. The letter suggested that these advances should not 
 be made at a lower interest than 8 per cent. The effect of this letter was 
 immediate. Confidence was restored, the hoarded notes were brought 
 into circulation, and discounts were everywhere readily obtained. From 
 these causes no infringement of the act took place. 
 
 The state of the bank reserve at the date of the suspension of the act 
 occupied the attention of the Parliamentary committees. On Saturday, 
 the 23d of October, the notes on hand amounted to £ 1,5-47,270, and the 
 coin to .£447,246. This, it should be remembered, was the amount at 
 the London office and at the thirteen branches put together. At the same 
 time the public deposits were ,£4,766,000, and the private deposits 
 £ 8,581,000, of which £ 1,615,000 belonged to the London bankers. The 
 questions put to the governor on this subject seemed designed to show that 
 the bank, so far from being able to assist others, was not in a condition to 
 meet her own engagements. But the governor contended that the amount 
 of the reserve should be taken on the Friday night, before they were ac- 
 quainted with the intention of the government to issue their letter. ' The 
 reserve then was £2,376,000. The directors had from £2,000,000 to 
 .£2,500,000 of stock which they could have sold, and a large amount of 
 the bills they held fell due in the following week. From these sources 
 
 96
 
 T]ie Bank of England. 
 
 they would easily have increased their reserve. On the other hand, some 
 of ihe witnesses declared that no large amount of stock could have been 
 sold, and that, had a run taken place on the London bankers such as 
 that which had taken place on the banks at Newcastle, the bankers' de- 
 posits must have been withdrawn, and the Bank of England itself might 
 have been placed in jeopardy. 
 
 As we have considered in a previous section the operation of the act of 
 1844, it is not necessary to pursue this subject any further. After the 
 government letter was issued, the bank still continued to make advances 
 with caution, and, with the view of not infringing the act, they borrowed 
 money on the Stock Exchange at seven per cent., though they had the 
 unlimited power of issuing notes. 
 
 Soon afterwards the gold began to return, and money became abundant. 
 From the high rate of interest, the amount imported was large ; and, from 
 trade having been paralyzed by the pressure, the demand for it was veiy 
 small. As the gold increased, the bank rate of interest was reduced. 
 By September 2d, 1848, the circulation of the currency department 
 amounted to .£26,883,505, and the bank resen^e to ^9,410,952. 
 
 The following is a copy of the official returns for the four years that 
 have passed under review. To show the further progress of the bank 
 since September, 1848, we have added the returns for the week ending 
 the 2d of February, 1849 : — 
 
 BANK OF ENGLAND WEEKLY RETURNS. 
 
 Account, pursuant to Act 7 and 8 of Victoria, cap. 52, for the weeks ending as follows. 
 
 Issue Department. 
 
 1844, 1845, 1846, 1847, 1848, 1849, 
 
 Sept. 7lh. Sept. 6lh. Sept. 5th. Sept. 4th. Sept. 2d. Feb. 2d. 
 
 ££££££ 
 Notes Issued, . . 23,351,295 23,953,300 29,760,870 22,396,345 26,883,505 28,330,845 
 
 Government Debt, 11,015,100 11,015,100 11,015,100 11,015,100 11,015,100 11,015,100 
 
 Other Securities, . 2,984,900 2,984,900 2,984,900 2,984,900 2,934,900 2,984,900 
 
 Gold Coin and Bullion, 12,657,203 12,982,591 13,057,997 7,373,815 12,177,567 13,828,773 
 
 Silver BuUion, . . 1,694,087 1,970,709 2,702,873 1,023,030 705,938 502,072 
 
 £28,351,295 £28,953,300 £29,760,870 £22,396,845 £26,883,505 £23,330,845 
 
 Banking Department. 
 
 1844, 1345, 1846, 1847, 1843, 1,349, 
 
 LiABaiTiES. Sept. 7th. Sept. 6th. Sept. 5lh. Sept. 4th. Sept. 2d. Feb. 2d. 
 ££££££ 
 
 Proprietors' Capital, 14,553,000 14,553,000 14,.%3,000 14,553,000 14,553.000 14,553,000 
 
 Rest, . . . 3,564,729 3,603,180 3,864,479 3,936,593 3,826,332 3,576,625 
 
 Public Deposits,* . 3,630,809 6,474,705 7,318,919 7,722,704 5,021,591 3,922,307 
 
 Other Deposits, . 8,644,343 8,507,213 ,8,557,109 6,791,373 8,824,607 11,323,544 
 Seven-Day and other 
 
 Baia, . . . 1,030,354 1,021,639 935,830 842,711 1,016,921 1,144,824 
 
 £31,423,^40 £34,164,737 £35,229,337 £33,896,381 £33,242,501 £31,525,300 
 
 * Including Exchequer, Savings Banks, Commissioners of National Debt, and Dividend Accounts. 
 
 97
 
 A Treatise on Banking. 
 
 
 1844, 
 
 1845, 
 
 184G, 
 
 1817, 
 
 1813, 
 
 1849, 
 
 Resourcbs. 
 Government Securi- 
 
 Sept. 7th. 
 £ 
 
 Sept. 6th. 
 £ 
 
 Sei)l. 5lh. 
 £ 
 
 Sept. 4th. 
 
 £ 
 
 Sept. 2d. 
 £ 
 
 Feb. 2d. 
 
 ties,* . 
 Other Securities, 
 Notes, . 
 Gold and Silver Coin, 
 
 14,554,834 
 
 7,835,616 
 
 8,175^025 
 
 857,765 
 
 13,463,643 
 
 11,967,081 
 
 8,255,505 
 
 473,553 
 
 12,861,735 
 
 12,523,550 
 
 9,231,095 
 
 512,957 
 
 11,636,340 
 
 17,503,119 
 
 4,189,830 
 
 562,092 
 
 12,462,735 
 
 11,368,814 
 
 8,784,795 
 
 626,157 
 
 13,882,267 
 
 10,314,651 
 
 9,553,460 
 
 774,919 
 
 £31,423,240 £34,164,787 £35,229,337 £33,896,381 £33,242,501 £34,525,300 
 
 We have thus taken a review of the first four years of the proceedings of 
 tlie Banking Department of the Bank of England. Whatever may be the 
 future operations of that department, this portion of its history will always 
 be interesting. This period is remarkable also as containing one of those 
 monetary cycles to which we must always be liable as long as our cur- 
 rency is regulated by the act of 1844. Each year has a peculiar char- 
 acter. The first commenced at a period of full currency ; money was 
 abundant and cheap, the minimum of the bank-rate being 2^ per cent. 
 In tlie second year the exchanges fluctuated, and the rate of interest fluc- 
 tuated also. During the whole of the third, the exchanges were unfavor- 
 able ; gold was exported, and the rate of interest advanced. At the com- 
 mencement of the fourth year came the pressure ; then a favorable course 
 of exchange brought back the gold, the rate of interest was reduced, and 
 again money became abundant. 
 
 This period is, moreover, important as an indication of the principles on 
 which the banking department will hereafter be governed. The governor 
 and deputy-governor were examined before the Parliamentary committees 
 in March, 1848. They stated that they approved of the reduction of in- 
 terest in September, 1844 ; but they expressed regret that the bank had 
 not advanced tlie rate of interest in November, 1846, and that they suf- 
 fered the reserve to fall so low in October, 1847. Should these sentiments 
 be acted upon in future, we may expect that the " banking department" 
 will reduce its rate of interest as heretofore ; but when money becomes 
 scarce, it will advance its rate at an earlier period, and be less liberal in 
 making advances. 
 
 The following question was put to the governor by a member of the 
 committee of House of Commons : — " You have described as part of 
 the operation of the act of 1844, that you were during the year 1847 
 obliged to lend consols instead of notes, on account of the limit prescribed 
 by the act ; that you borrowed on consols in April ; that you were obliged 
 to raise the rate of interest to 9 per cent. ; that you refused loans on ex- 
 chequer bills ; that there was a pressure in April and a panic in October ; 
 and that Government were obliged to interpose by a letter, in order to 
 protect the public from the restrictive effects of the act : Do you call that 
 a satisfactory history of any system ? " {Commons, 3450.) 
 
 We must, however, distinguish between the " system " as established 
 by the act of Parliament, and the administration of the banking depart- 
 ment in consequence of the establishment of that system. We have 
 given in the preceding section our opinion of the system. But the ad- 
 
 * Including Dead Weight Annuity. 
 
 98
 
 Joint' Stock Banks. 
 
 ministration of the Banking Department of the Bank of England under 
 the system has, in our sober judgment, been distinguished by a high de- 
 gree of both wisdom and liberality. 
 
 The administration of the banking department since September, 1848, 
 does not call for any particular remark. We have had the usual indica- 
 tions of the first stage after a panic. The bullion in the issue department 
 has increased from £ 12,883,505 to £ 14,330,845 ; the notes in reserve 
 from £ 8,784,795 to £ 9,553,460. Money has been abundant, and the 
 rate of interest low. On the 2d November, 1848, the bank reduced the 
 minimum rate of discount to 3 per cent. This would probably have been 
 done at an earlier period but for the political aspect of the continent. 
 The same reason possibly has induced the directors to maintain the same 
 interest to the present time (February, 1849), although this appears to be 
 an abandonment of the principle adopted in the year 1844. 
 
 Section X. — THE ADMINISTRATION OF JOINT-STOCK BANKS, 
 WITH INQUIRY INTO THE CAUSES OF THEIR FAILURES. 
 
 The chief points in which a joint-stock bank differs from a private bank 
 are, the number of its partners, the permanency of its capital, and the 
 form of its government. A private bank has not more than six part- 
 ners ; a joint-stock bank may have a thousand partners. If a partner 
 in a private bank die, or become insolvent, his capital is withdrawn from 
 the bank ; in the case of a partner in a joint-stock bank, his shares 
 are transferred, and the capital of the bank remains the same. In a pri- 
 vate bank all the partners may attend to its administration ; a joint-stock 
 bank is governed by a board of directors. The business principles on 
 which these two kinds of banks are administered are the same, and the 
 observations of the preceding sections will equally apply to both. The 
 topics, therefore, to which we shall in this section more particularly direct 
 our attention, will be those that have a special reference to the constitution 
 of joint-stock banks. We shall describe these banks as they now exist, 
 and then notice those modifications which are imposed on new banks by 
 the "Act to regulate Joint-stock Banks" (7 and 8 Vict., cap. 113), 
 passed in the year 1844. After the 6th of May, 1844, it was not lawful 
 for any new company of more than six persons to carry on the trade or 
 business of bankers in England, unless by virtue of letters patent to be 
 granted by her Majesty according to the provisions of that act. 
 
 I. All joint-stock banks have a certain amount of paid-up capital. 
 
 The payment of a certain portion of the capital before the commence- 
 ment of business, is a pledge that the project is not a more bubble, and 
 this is especially necessary when the proprietors have no further liability. 
 But even with unlimited liability a certain amount appears to be neces- 
 sary. The employment of capital judiciously is sometimes a means of 
 acquiring business ; and in case of loss, there should always be a suffi- 
 cient capital to fall back upon without recurring to the shareholders. 
 
 99
 
 A Treatise on Banking. 
 
 There is an evil in a bank having too small a capital. In this case, the 
 bank will be but a small bank ; the number of proprietors will be few, 
 and the number of persons eligible to be chosen directors will be few ; 
 hence there will not be the same guarantee for good management. If a 
 bank with a small capital have also a very small business, it had much 
 better cease as an independent establishment, and become the branch of a 
 larger bank. If, on the other hand, it has a large business, whh a large 
 circulation, large deposits, and large loans or discounts, its losses will 
 sometimes be large, and hence the whole capital may be swept away. 
 It is true, that while it avoids losses, the shareholders will receive large 
 dividends, but these large profits had much better be left in the bank as 
 an addition to its capital, than shared among the proprietors in the form 
 of dividends. There is danger, too, that the high premium on those 
 shares may induce many shareholders to sell out and form other, and per- 
 haps rival, establishments. 
 
 On the other hand, there is an evil in a bank having too large a capital. 
 In this case, as the capital cannot be employed in the business, the direc- 
 tors are under the temptation of investing it in dead or hazardous securities 
 for the sake of obtaining a higher rate of interest ; perhaps, too, they may 
 speculate in the funds, and sustain loss. Hence it is much better that a 
 bank should commence business with a small capital, and increase the 
 amount as the business may require. 
 
 It is difficult to state in all cases Avhat proportion a capital ought to bear 
 to the liabilities of a bank. Perhaps the best criterion we can have is the 
 rate of dividend, provided that dividend be paid out of the business profits 
 of the company. When we hear of a bank paying from fifteen to twenty 
 per cent, dividend, we may be assured that the capital is too small for the 
 business. The liabilities of the bank, either in notes or deposits, must far 
 exceed the amount of its capital. As a general maxim, the greater the 
 capital the less the dividend. Let the whole capital be employed at any 
 given rate of interest, say three per cent., then the capital raised by notes 
 or deposit, produce, after paying all expenses, a certain sum as profit. 
 Now, it is evident that if this amount of profit be distributed over a large 
 capital, it will yield a less rate per cent, than when distributed over a 
 small capital. Sometimes, however, a large capital may have increased 
 the rate of dividend, in consequence of having been the means of acquir- 
 ing a large increase of business. It may have done this in consequence 
 of inspiring the public with confidence in the bank, and thus inducing 
 them to make lodgments or circulate its notes ; or it may have enabled 
 the bank to make large advances, and thus gained the support of wealthy 
 and influential customers. 
 
 Although the proportion which the capital of a bank should bear to its 
 liabilities may vary with different banks, perhaps we should not go far 
 a-strav in saying it should never be less than one third of its liabilities. I 
 would exclude, however, from this comparison all liabilities except those 
 arising from notes and deposits. If the notes and deposits together 
 amount to more than three limes the amount of the paid-up capital, the 
 bank should call up more capital. It may be said, that tlie bank is liable 
 also fo- its drafts upon its London agents, and for the payment of those 
 
 ioo
 
 Joint- Slock Banks. 
 
 bills which it has indorsed and reissued : admitted ; but in both these 
 cases the public have other securities besides that of the bank. 
 
 Presuming that banks are to commence with a moderate amount of 
 capital, and to increase that amount as the business increases, the question 
 is suggested, what is the best way of increasing the capital ? The Eng- 
 lish banks have followed two ways of doing this ; one, by a further issue 
 of shares ; and the other, by further calls upon the existing shareholders. 
 The capital of all the joint-stock banks in England is divided into certain 
 portions, called shares ; each proprietor holds a certain number of these 
 shares, and pays a certain sum upon them. If he wishes to transfer a 
 portion of his capital he cannot transfer a half share or a quarter share, 
 but must transfer a whole share, or a certain number of shares. Thus, if 
 the capital of a bank be £ 500,000 it may be divided into 5,000 shares of 
 £ 100 each, or 50,000 shares of <£10 each, and a certain proportion of 
 the amount of each share will be paid up ; and this proportion is called 
 the real or the paid-up capital. Thus, if one tenth of the above capital is 
 paid up, then £ 50,000 will be the real or paid-up capital, and £ 500,000 
 will be called the nominal capital. In the chartered banks, on the other 
 hand, there is usually no nominal capital, and the real capital is not 
 divided into shares or portions, but any fractional sum may be trans- 
 ferred. The capital is then called stock. When there is no nominal 
 capital, nor any way of increasing the amount of the real capital, this is 
 the best way. But, in the other case, it is more convenient to have the 
 capital divided into shares. 
 
 Some persons have objected altogether to a nominal capital ; but their 
 objections have been directed more to the misrepresentations that may at- 
 tend it, than to the thing itself. They say, " a bank announces that it 
 has a capital of =£500,000, whereas few shares are issued, and but a 
 small sum is paid on each share ; hence people are misled, and the bank 
 acquires a confidence which it does not deserve." The objection here is 
 against representing the nominal capital to be paid-up capital ; it does not 
 bear upon the principle of a nominal capital. In fact, we are misled by 
 words. What is called nominal capital, is nothing more than a further 
 sum, which the directors have the power of calling up. If this sum had 
 not been called capital, it would not be objected to, as it could lead to no 
 misapprehension. But the inquiry simply is, ought the directors to have 
 the power of calling upon the shareholders for a further amount of capital 
 beyond that already paid up ? Were they not to have the power, the 
 bank would at its commencement probably have too large a capital, and 
 after its business had advanced would have too small a capital. And if 
 the bank, by any unforeseen occurrence, became involved, and should 
 have occasion for further sums to extricate itself from its difficulties, it 
 could not make any further call upon its shareholders, although a very 
 small advance might prevent its utter ruin. In case of a very large capi- 
 tal, such as two or three millions, a nominal capital may not be neces- 
 sary, as so large a sum is likely to be in all cases amply sufficient. But 
 in banks of a second class, it will always be best to give the directors the 
 power of making further calls upon the shareholders. 
 
 The second way of increasing the capital of a bank is, by the issue of 
 
 101
 
 A Treatise on Banking. 
 
 new shares. The wliole amount of shares to be issued is fixed in the fii-s 
 instance, and the bank commences as soon as a certain proportion has 
 been issued. If the bank were not allowed to commence business until 
 the whole of the shares were taken, a small amount would be fixed upon, 
 and the bank would be proportionably weaker. But by beginning with a 
 small number of shares, you have capital enough for your business, and 
 you acquire more as you proceed. Many persons will join a bank after 
 it is established, who would not take shares at the commencement. Some 
 shares are therefore reserved for persons of this description ; and as the 
 shares are more valuable when the success of the undertaking is no 
 longer doubtful, they are often given out at a premium, and always a 
 greater degree of caution is exercised as to the persons to whom they 
 are distributed. 
 
 Some members of the Parliamentary committee of 1836 appear to have 
 an objection to shares of a small amount ; they apprehend that these 
 shares are taken by an inferior class of persons ; and hence the body of 
 proprietors are less respectable. But it would appear from the returns 
 that the general effect of small shares is, that each shareholder takes a 
 greater number. Thus in the banks of ^ 100 shares, each proprietor has 
 taken upon an average twenty-eight shares, on w hich he has paid the sum 
 of £ 444. In the banks of £ 20 shares, each proprietor has taken forty- 
 three shares, and paid .£359. In the banks of<£ 10 shares, each proprie- 
 tor has taken fifty-two shares, and paid £ 400. While in the only bank 
 of .£5 shares, each proprietor has taken 117 shares, and paid £585. It 
 appears to me that the chief objection to which small shares are liable is, 
 that they do not admit of a large amount of nominal capital. The banks 
 of <£ 5 and £ 10 shares have usually the whole capital paid up ; and hence, 
 in case of necessity, the directors have no power to call for a further 
 amount. Could the Northern and Central Bank have made a call upon 
 their shareholders of £ 5 per share, this bank might have been saved from 
 destruction. 
 
 According to the new act above referred to, no bank can now be 
 formed with a less capital than £ 100,000 ; and the shares must not be 
 less than £ 100 ; of which 10 per cent, must be paid up before the sign- 
 ing of the deed of settlement ; and all the shares must have been sub- 
 scribed for, and half the amount paid up, before the bank commences 
 business. 
 
 II. Joint-stock banks are governed by a board of directors. 
 
 " The directors are chosen from among the shareholders at a general 
 meeting; the pecuniary qualification being that they hold a stipulated 
 number of shares in the company. 
 
 " There are several points of view in which a man becomes eligible as 
 a director of a bank, independent of his qualification as the holder of the 
 required number of shares. Indeed, his qualification as a shareholder 
 merely must not be taken into the account. 
 
 " 1. He ought, in the first place, to be a man enjoying public confi- 
 dence. Unless he is a man whom the community contemplate as de- 
 serving of their confidence and esteem, it is not presumable he can be of 
 much service to the bank, either by his infiuence or character. The 
 
 102
 
 Joint- Stock Banks. 
 
 public are not likely to deposit their money in an establishment where 
 they cannot place the fullest reliance upon tlx; directors ; and, for the 
 same reason, parties of respectability will not readily be induced to open 
 accounts with the bank. 
 
 " 2. He ought to be a man possessing a knowledge of commercial 
 business. It is a matter of great importance to the satisfactory and effi- 
 cient management of a bank, that those to whom is intrusted the direction 
 of its affairs, be in some measure conversant with the ordinary affairs of 
 trade. Men who are retired from business are unquestionably tlie most 
 eligible, not merely from their business knowledge, but because they are 
 not apt to be contemplated with that suspicion, jealousy, and distrust 
 which tradesmen will sometimes exercise towards such directors of a bank 
 as are likewise engaged in trade. But retired men of business are not 
 readily to be had as directors of a bank, nor are they in most cases dis- 
 posed to accept of such an office. Where such is the case, men of high 
 standing and character, engaged in trade, should be sought for. 
 
 " 3. A bank director should be a man of strict integrity and upright- 
 ness. This is a qualification perfectly indispensable to the welfare of the 
 bank. He must be above all trafficking in the stock of the company, or 
 taking any undue advantage over the other shareholders through his inti- 
 mate knowledge of the state of their affairs as regards the bank. He 
 must never for a moment forget, that while he is a partner in the concern, 
 and, as an honest man, is bound to conduct it in as faithful and diligent a 
 manner as he would his own private affairs, that he is at the same time 
 appointed to a solemn trust, in having the interests of numerous others, 
 equally interested with himself, under his mangement and control. In 
 fact, unless the director of a bank is a man of strict integrity, he is placed 
 in a position calculated to be productive of great mischief. He is invest- 
 ed with power to ruin the fortunes of others, and to inflict much com- 
 mercial evil upon the community. Where there is a want of integrity, 
 there is a want of principle, and the bank must necessarily be misman- 
 aged. 
 
 " 4. A bank director should be a man of influence and respectability. 
 He ought to be a man well known and respected in the district. Such a 
 man is desirable in a variety of ways. He adds his own personal respec- 
 tability to the establishment, and he influences the favor and support of 
 his friends and acquaintances. His standing in society gives the public 
 confidence in the establishment with which he is connected, and they 
 bring their money and business to its support ; the paper of the bank be- 
 comes more readily current in the district, and the weight of his influence 
 destroys any suspicion of its stability. 
 
 " 5. A bank director should be in good pecuniary circumstances. It 
 would be a most wholesome regulation, were it stipulated in all deeds of 
 settlement, that no bank director should be privileged to overdraw his ac- 
 count. The great facilities which directors enjoyed of raising monev 
 from overdrawing their bank accounts, have, in some instances, resulted 
 in extensive commercial disasters, and in the total wreck of large estab- 
 lishments. The temptation to speculations of all descriptions which such 
 facilities hold out, necessarily increases the risk of the bank, and induces 
 H 103
 
 A Treatise on Banking. 
 
 a less rigid inspection of the accommodation afforded to other customers. 
 Where those who are intrusted with the management of the bank forget 
 the extent and importance of the trust reposed in them, and begin to enter 
 into unwarrantable speculations with the funds committed to their care, it 
 is not supposable that they will be particularly scrupulous as to the general 
 management of the affairs of others. 
 
 " 6. A bank director should be one who can bestow some attention 
 upon the affairs of the establishment. It has appeared in evidence that 
 gentlemen have been appointed, and have accepted the office of directors 
 of banks, who gave little or no attention to the affairs ; who, in fact, ap- 
 pear to have considered that the office of director was conferred on and 
 accepted by them more for the purpose of complying with the letter of 
 the deed of settlement, which enjoined the appointment of a certain num- 
 ber of directors, than from any idea of their being expected, or of its be- 
 ing necessaiy for them, to know any thing regarding the management. 
 The consequence of this has been, that the duties which the shareholders 
 devolved upon, perhaps, six individuals, were confined to two, or possibly 
 only one, and the others approving, without suitable knowledge or proper 
 inquiry, of all their acts, the mass of shareholders, as well as an extensive 
 commercial circle, have been involved in the disastrous results of misman- 
 agement. It is altogether an anomaly that any man, or body of men, 
 should have the credit, honor, and distinction of being managers and di- 
 rectors of a bank, and yet not exercise any of the active functions and im- 
 portant duties that relate thereto. Upon what principle can they undertake, 
 as by accepting the office they unquestionably do, to discharge a solemn 
 trust, in faithfully administering the affairs of a bank, into which they make 
 it no part of their business to look > Were the fact not very well known, 
 it would seem absurd ; yet it is not the less absurd that it is known." 
 [Philosophy of Joint-Slock Banking., by G. M. Bell.) 
 
 Mr. Taylor, in his " Statesman^'''' makes the following observations 
 upon the age of members of public boards : — 
 
 "Boards, or other cooperative bodies, should be so formed that youtlifulness and 
 elderliness may meet in due proportion in their counsels. If any such body be wholly 
 composed of elderly men, it will commonly be found to be ineffective, so far as inven- 
 tion of new courses and intrepidity of purpose are required, and, perhaps, also unequal 
 to any unusual amount of spontaneous activity. If, on the other hand, it be composed 
 wholly of young men, its operations will probably be wanting in circumspection ; and 
 the foresight by which it will be guided will be too keenly directed to the objects of 
 a sanguine expectation, too dully to prospects of evil and counteraction. The respec- 
 tive positions in life of the young and the old operate to these results not less than 
 their temperaments : for the young have their way to make, their reputation to earn, 
 and it is for their interest to be enterprising, as well as in their nature ; the old have 
 ascertained their place in life, and they have, perhaps, a reputation to lose." 
 
 The new act requires that provision shall be made in the deed of 
 partnership " for the retirement of at least one fourth of the directors 
 yearly, and for preventing the reelection of the retiring directors for at 
 least twelve months." 
 
 III. Joint-stock banks have a principal officer, called a manager. 
 
 " The prudent and satisfactory management of a joint-stock bank very 
 materially depends upon the upright and consistent discharge of those so- 
 
 104
 
 Joint- Slock Banks. 
 
 cial duties and reciprocal interchanges of confidence which ought to char- 
 acterize the directors and manager. 
 
 " The manager, from his experience, and the importance of the office 
 he fills, is entitled to the kind consideration and entire confidence of the 
 directors. He is selected by them to occupy an arduou's and highly re- 
 sponsible situation, and ought to be rewarded, not merely with an adequate 
 pecuniary remuneration, but with the respect and friendship of the di- 
 rectors, by whom he should be considered in every respect, so far as re- 
 gards the bank, at least upon an equally elevated footing. Without the 
 confidence and friendship of the directors, he can neither take his place at 
 their meetings free from restraint, discuss with them matters relating to 
 the welfare of the establishment with composure, nor appear before the 
 customers with that satisfaction and independence which is required to the 
 proper discharge of his duties. Having placed him in the position of 
 manager of the bank, it is their duty always to contemplate him in that 
 light, to respect and confide in his opinions and conduct, which in many 
 cases have been formed by long years of active and arduous employment 
 in the profession ; and to speak well of him among their friends and ac- 
 quaintances. In the degree in which the manager is respected, and well 
 spoken of by the directors, will respect and confidence be extended to 
 him, and consequently to the establishment, by the public, and a good 
 opinion entertained of their judgment and discernment in his selection. 
 
 " The conduct of the manager ought to be characterized by great cir- 
 cumspection and uprightness. He ought, unquestionably, in every in- 
 stance, to be chosen for his business qualifications, and not because he is 
 a rich man, a gentleman, a man of fashion, or a man with an extensive 
 circle of friends. To choose him on account of any one of these qualifi- 
 cations, and not principally from his practical experience of banking, 
 would be similar to appointing a man to the care and management of a 
 steam-engine, who knew nothing of its mechanism, nor the nature of its 
 operation, but was recommended solely because he had a taste for travel- 
 ling ; or it would be like placing a man at the helm to pilot a vessel over 
 quicksands, and through a reef of rocks, who knew nothing of a seafaring 
 life, but was fond of contemplating the grandeur of the elements. The 
 manager of a joint-stock bank ought to be chosen exclusively for his ex- 
 perience in banking ; other qualifications are well enough in their own 
 place, but ought never to be taken into consideration in choosing a person 
 to act as manager of a bank. In this way a stimulus is given to persons 
 of talent, who may be looking forward to the reward of a life of toil and 
 drudgery ; and thus merit is patronized and protected. In a well-regulated 
 office no one will be promoted over the head of another, but a prudent se- 
 lection being made at the outset, a system of regular promotion should be 
 uniformly practised. 
 
 " The manager of a bank may be contemplated in three important 
 points, — in his intercourse with the customers and the public ; with the 
 directors ; and with the subordinate officers of a bank. In each of these 
 departments he has important duties to perform. He must be scrupulously 
 diligent in his attention to the affairs of the bank, courteous in his inter- 
 views with the public, affable and unreserved in his communications with 
 
 105
 
 A Treatise on Banking. 
 
 the directors, and kind and conciliating towards the subordinates of the 
 bank, treating them as those who may be one day placed in a similar situa- 
 tion with himself. The days are now gone past when a man of business was 
 considered in the light of a machine, a mere automaton for the purpose of 
 forming figures and casting up accounts ; but it is still necessary, enlarged 
 as our views of the powers and capabilities of the human mind are, in 
 order to the proper management of any business, that it be carefully at- 
 tended to. The manager of a joint-stock bank, being allowed a compe- 
 tent salary, cannot be justified in occupying his time with any other em- 
 ployment which may occasion his absence from the duties of the bank. 
 But it is not intended to insinuate that he must be a man of one idea, and 
 restrained from turning his mental acquirements to his own amusement 
 or profit. This would be as absurd as it would be unreasonable. Nor is 
 it meant that a man of business may not be also a man of great erudition, 
 and, it may happen, of literary and scientific eminence. On the contrary, 
 it cannot be denied that, in the present day, this is often the case. What 
 is contended for is, that the bank is entitled to, and ought to have, his 
 close and chief attention. 
 
 " As it is obvious that he cannot manage any other trade or profession, 
 without sacrificing or delegating more or less the duties he owes to the 
 bank, it seems also very doubtful whether he can be justified in taking a 
 prominent part in public or political affairs. There are two arguments 
 against his being a public character : the first is, that he may be drawn 
 away during the hours of business ; the second, that, by becoming a par- 
 tisan, he is certain of being more or less obnoxious to a portion of the in- 
 habitants, and, it may be, of the bank's customers. A man whose mind 
 is occupied in framing political speeches, in promoting political schemes, 
 and whose time is partially given to political, magisterial, or other meet- 
 ings, cannot possibly, from the exciting nature of such subjects, give that 
 cool, deliberate, and uniform attention to the duties of the bank which they 
 necessarily require. 
 
 " The customers ought always to be treated with civility and kindness, 
 their business transacted promptly and cheerfully, and every inquiry re- 
 garding their accounts, or any matter of business, readily and satisfac- 
 torily explained. When an accommodation is to be declined, it ought to 
 be done in as polite and inoffensive a manner as possible, the manner of 
 a refusal being of paramount moment to the character of a manager. 
 
 " The shareholders, being, in other words, the proprietors of the bank, 
 are to be received with that freedom and confidence which is due to their 
 character as such, but without compromising or revealing to them either 
 the business and accounts of each other, or of the customers of the bank. 
 
 " Next to being secret and cautious, a manager ought to be prompt and 
 decided in all his measures, free from party influence, and firm in his 
 purpose. A habit of promptitude and decision is very essential to the 
 proper regulation of the business of a bank, and acquired by forethought 
 and circumspection. It is, perhaps, a constitutional virtue which cannot 
 be enjoyed by every one in the same degree, but it is nevertheless a vir- 
 tue winch every one may acquire by proper attention. Nothing makes a 
 manager look more silly and contemptible than a hesitating, dubious, and 
 
 106
 
 Joint'Stock Banks. 
 
 capricious manner. His answer ought to be prompt and satisfactory ; he 
 should be sufficiently acquainted with business to say at once whether an 
 act can be done or not, and should appear free from restraint, and not dis- 
 posed to alter an opinion when once formed." (Bell's Philosophy of 
 Joint-Stock Banking.) 
 
 IV. In joint-stock banks the administrative functions are usually dis- 
 tributed between the directors and the manager. 
 
 With reference to both private and joint-stock banks, the distribution of 
 the administrative functions is a most important topic of inquiry. By 
 what parties ought these functions to be exercised .? We have spoken of 
 " the banker," as though a bank consisted of only one person, and this 
 one person administered all the powers and functions of the bank. But 
 few banks consist of only one person. One class of banks consists of 
 two, three, four, five, or six persons, some or all of whom attend to the 
 practical administration of the bank. Another class of banks consists of a 
 great many, it may be of several hundred persons, who appoint some 
 dozen or score of their own number to administer the bank on their 
 behalf. 
 
 But how many soever the number of partners may be in a bank, the 
 administrative functions are in fact practically exercised by a small num- 
 ber of persons. A private bank may consist of as many as six partners, 
 but it is- rarely, we believe, that so many as six are actually engaged 
 in the business. When more than one are thus employed, their duties 
 may be distributed according to their seniority or other circumstances. 
 In ordinary matters there may be a division of labor, and each partner 
 may preside over a distinct department of the business. But in all im- 
 portant cases there is usually one leading partner who practically guides 
 the others. When a bank has risen speedily to eminence, it has gener- 
 ally been through the talents of some one man. It does not follow that 
 this one man did not receive great assistance from the advice or sugges- 
 tions of his partners. It is the part of a wise man to avail himself of the 
 knowledge and wisdom of others ; and he will often gather much useful 
 information from men far below himself in general talents. There is, per- 
 haps, more uniformity, consistency, and energy in the proceedings of a 
 bank managed by a few partners, than by many. On the other hand, 
 banks have sometimes been ruined by placing too much power in the 
 hands of one or two of the partners. 
 
 In a joint-stock bank, though the number of directors may be large, the 
 daily exercise of the administrative power is practically in the hands of a 
 few persons. In some banks this power is vested solely in the manager ; 
 sometimes in one or two managing directors ; sometimes in a permanent 
 committee of two directors and the manager ; and in other cases, in a 
 changeable committee, on which each member of the board takes his rota 
 of service for two or three weeks in succession. In all cases, however, 
 the board of directors lay down the general principles on which the bank 
 is to be administered ; reports are made to them at their weekly meeting, 
 of the actual condition of the bank in all its departments, and all very im- 
 portant matters are reserved for their special consideration. 
 
 V. Some joint-stock banks have many branches. 
 
 107
 
 A Treatise on Banking. 
 
 When the law existed in England -that no bank should have more thnn 
 six partners, the branch system scarcely existed. In some cases, a bank 
 had a branch or two a few miles distant, but no instance occurred of a 
 bank extending itself throughout a county or a district. But with joint- 
 stock banking arose the branch system ; the head office was placed in the 
 county town, and branches were opened in the principal towns and vil- 
 lages around. The credit of the bank being firmly established, hs notes 
 circulated freely throughout the whole district. The chief advantages of 
 this system are the following : — 
 
 There is greater security to the public. The security of the whole 
 bank is attached to the transactions of every branch ; hence there is 
 greater safety to the public than could be afforded by a number of sepa- 
 rate private banks, or even so many independent joint-stock banks. 
 These banks could have but a small number of partners, the paid-up capi- 
 tal and the private property of the partners must be comparatively small ; 
 hence the holder of a note issued by one of the independent joint-stock 
 banks could have a claim only on that bank : but if that bank, instead of 
 being independent, were a branch of a large establishment, the holder of 
 a note would have the security of that large establishment ; hence the 
 branch system unites together a greater number of persons, and affords a 
 more ample guarantee. 
 
 The branch system provides greater facilities for the transmiission of 
 money. The sending of money from one town to another is greatly fa- 
 cilitated, if a branch of the same bank be established in each of those 
 towns, for all the branches grant letters of credit upon each other. 
 Otherwise you have to ask the banker in the town from which the money 
 is sent, to give you a bill upon London, which is transmitted by post ; or 
 you request him to advise his London agent to pay the money to the 
 London agent of the banker who resides in the town to which the money 
 is remitted. This takes up more time, and is attended with more ex- 
 pense. A facility of transmitting money between two places usually fa- 
 cilitates the trade between those places. 
 
 The branch system extends the benefits of banking to small places 
 where independent banks could not be supported An independent bank 
 must have an independent board of directors, who in most cases will be 
 better paid ; the manager must have a higher salary, because he has a 
 heavier responsibility, and a large amount of cash must be kept unem- 
 ployed in the till, because there is no neighbouring resource in case of a 
 run. There must be a paid-up capital, upon which good dividends are 
 expected ; a large proportion of the funds must be invested in exchequer 
 bills, or other government securities, at a low interest, in order that the 
 bank may be prepared to meet sudden calls ; and the charge for agencies 
 will also be more. On the other hand, a branch has seldom need of a 
 board of directors, one or two being quite sufficient ; the manager is not 
 so well paid ; there is no necessity for a large sum in the till, because, in 
 case of necessity, the branch has recourse to the head office, or to the 
 neighbouring branches ; nor is a large portion of its funds invested in gov- 
 ernment securities that yield but little interest, as the head office takes 
 charge of this, and can manage it at a less proportional expense. Besides, 
 
 108
 
 Joint- Slock Banks. 
 
 at some branches the manager attends only on market days, or once or 
 twice a week. The business done on those days would not bear the ex- 
 pense of an independent establishment. 
 
 The branch system provides the means of a due distribution of capital. 
 Some banks raise more capital than they can employ ; that is, their notes 
 and deposits amount to more than their loans and discounts. Others 
 employ more capital than they raise, that is, their loans and discounts 
 amount to more than their notes and deposits. Banks that have a surplus 
 capital usually send it to London to be employed by the bill-brokers. 
 The banks that want capital must either restrict their business, or send 
 their bills to London to be re-discountcd. Now, if two banks, one having 
 too much, and the other too little capital, be situated in the same county, 
 they will have no direct intercourse, and will consequently be of no as- 
 sistance to each other : but if a district bank be established, and these two 
 banks become branches, then the surplus capital of one branch will be 
 sent to be employed at the other, thus the whole wealth of the district is 
 employed within the district, and the practice of re-discounting bills in 
 London will be proportionably diminished. 
 
 The branch system secures a better system of management. The only 
 way to secure good management is to prevent the formation of small banks. 
 When banks are large, the directors are men of more wealth and respecta- 
 bility ; they can give large salaries to their officers, and hence can command 
 first-rate talent ; there will be a more numerous proprietary ; and in a 
 large number there will be always some active spirits who will be watch- 
 ful of the conduct of the directors and the manager ; besides, in a numer- 
 ous proprietary there is a greater number of persons eligible to be direct- 
 ors, and consequently there is a wider choice. In populous cities, such as 
 liOndon or Manchester, a large bank may be formed without branches ; 
 but in smaller places there is no way of forming a large bank but by 
 giving it branches throughout the district. A branch bank in a small 
 town will probably be better managed than an independent bank in the 
 same place. The directors and manager of the branch will be appointed 
 by the directors at the head office, assisted by the general manager, who 
 are very competent to judge what qualifications are necessary for these 
 offices, and who would not be biassed by local partialities. But the di- 
 rectors of the independent bank would most likely be self-appointed, or 
 chosen b-y the proprietors, because no others could be obtained, and these 
 directors would appoint some friend of their own to be manager. The 
 manager of the branch, besides the superintendence of the directors, 
 which he has in common with the manager of the independent bank, 
 will be subject to visits from the general manager or the inspector ; and 
 he must send weekly statements of his accounts to the head office. The 
 consciousness of responsibility will thus secure a more anxious attention 
 to his duties ; and besides, he will probably be looking forward for promo- 
 tion to a higher branch as a reward for his successful management. 
 These circumstances seem to insure a higher degree of good manage- 
 ment to the branch. 
 
 At the same time, it must be admitted that banks with numerous 
 branches require a proportionate paid-up capital, and that the capital be 
 
 109
 
 A Treatise on Banking. 
 
 kept in a disposable form ; it also requires vigilant and constant inspec- 
 tion, and a rigid system of discipline. 
 
 A proportionate paid-up capital is necessary, because, in case of a run, 
 there are a greater number of points of attack ; hence the funds must be 
 divided to meet all these possible attacks, for if one branch be overpow- 
 ered, the whole bank is immediately exposed to suspicion. 
 
 Another danger arises from the incompetency or negligence of the 
 managers of branches. Among a number of men, it is not likely that afi 
 are clever, and all prudent ; and one case of neglect on the part of one 
 manager may, in times of alarm, throw discredit on the whole establish- 
 ment. Besides, there is sometimes danger even from the zeal of the branch 
 managers. Each manager is naturally anxious to increase the business 
 of his own branch ; and he will perhaps find that the most easy way of 
 doing this is to extend his loans and discounts. Hence each manager 
 tries to employ as much capital as he can ; and the urgent remonstrances 
 he receives from head quarters, requiring him to restrict his discounts, are 
 either evaded or delayed. Thus the bank proceeds until some heavy de- 
 mand for money arises at head quarters, and it is then found that all the 
 capital of the bank had been absorbed by the branches. These advances 
 cannot be suddenly recalled, and thus the bank may be ruined. 
 
 What number of branches a bank ought to have, and what distance 
 they ought to be from the head office, have been the subject of much dis- 
 cussion. No general rules can be given. The subject may very safely 
 be left to the discretion of the banks themselves. Several of the banks in 
 Scotland have from thirty to forty branches. The Provincial Bank of 
 Ireland, whose head office is in London, have branches spread all over 
 Ireland. I am not aware that in these cases any danger or inconvenience 
 has been experienced. When branches are found troublesome or un- 
 profitable, they will very soon be discontinued. In some instances, even 
 in Scotland, the branches of the larger banks have been withdrawn in con- 
 sequence of being unable to sustain a competition with the local ban^ks of 
 the district. 
 
 Had the act of 1826 permitted joint-stock banks of issue to be estab- 
 lished in London, we should probably by this time have had ten or a 
 dozen banks having their head quarters in London, and extending their 
 branches throughout the country. But as the law prohibited joint-stock 
 banks being established within sixty-five miles of London, it necessarily 
 gave rise to banks occupying particular districts in the country. The ad- 
 vantages which are alleged to belong to the district system are the follow- 
 mg : — That the bank will be better adapted to the wants and habits of the 
 people ; that a local feeling will be excited in its favor, hence the inhabit- 
 ants of the district will take shares, and the occurrence of runs upon the 
 bank will be less probable ; that a better system of management may be 
 expected, as it can more easily be governed, and will be more under con- 
 trol ; that a panic in the district will not affijct the other parts of the 
 country, and hence supplies may be more easily obtained ; that banks will 
 be of a moderate size, and hence will be attended with the advantages 
 arising from numerous banks acting as checks upon each other, instead 
 of a few large banks who may combine for objects injurious to the nation ; 
 
 110
 
 Joint- Stock Banks. 
 
 and that as each bank will have an agent in London, the bills they draw 
 will thus have two parties as securities, and the public will have a pledge 
 that there is no excessive issue in the form of kites or accommodation 
 bills. On the other hand, it may be contended, that in Scotland the large 
 metropolitan banks which have branches extended throughout the coun- 
 try, have generally been more successful than the provincial or district 
 banks ; that there is a greater security to the public for the notes or de- 
 posits ; that advances are not so likely to be made to speculative parties 
 merely on account of their local influence ; that the capital raised in one 
 part of the country can be employed in another ; that the transmission of 
 money from one part of the country to another is more rapid and direct ; 
 that the establishment of the bank, being on a larger scale, you have a 
 superior class of directors, and can command the services of higher talents 
 in those who are employed as officers. 
 
 It does not appear that these two systems are necessarily at variance 
 with each other. County or district banks have no doubt many advan- 
 tages, but they do not seem to supersede banks on a larger scale. 
 
 VI. Joint-stock banks have an annual meeting of shareholders, to whom 
 is usually exhibited a balance-sheet showing the assets and liabilities of 
 the bank. 
 
 All banks do not exhibit a balance-sheet. The practice is said to be 
 open to the following objections : — 
 
 1. That it is not a fair criterion by which you can form any judgment 
 of the real condition of the bank. You might see that the bank had a 
 certain amount of securities, or had advanced a certain sum upon loans ; 
 but whether those securities were available, or whether those loans could 
 suddenly be called up, are points upon which the balance-sheet could give 
 no information. The Agricultural and Commercial Bank of Ireland pub- 
 lished a very satisfactory balance-sheet a few weeks only before they 
 stopped payment. 
 
 2. It lays the bank open to attacks from its rivals or opponents. The 
 balance-sheet will show in what way the funds of the bank are employed, 
 but it will not state the reasons why they are so employed. The oppo- 
 nents of the bank may attack every item of the balance-sheet, and the 
 directors may not be able to repel those attacks without a breach of con- 
 fidence that would be injurious to the establishment. Suppose, for in- 
 stance, the balance-sheet should show that the bank had advanced a few 
 thousand pounds upon mortgage. This might be justly considered as a 
 departure from the sound principles of banking ; yet it might in this case 
 be justified by some peculiar circumstances, which, nevertheless, the di- 
 rectors could not publish without serious injury to the parties concerned. 
 The production of a balance-sheet is advocated upon the ground that it 
 would enable the shareholders to judge of the ability and prudence of the 
 directors. But how can they do this without knowing the reasons by 
 which the directors are influenced in their decisions ? 
 
 3. It causes a great deal of speculation in the shares. The sharehold- 
 ers and the public would form their opinions of the bank from the state- 
 ments in the balance-sheet ; and according to these opinions the price of 
 the shares would fluctuate in the market. Suppose it were seen that the 
 
 111
 
 A Treatise on Banking. 
 
 hank had invested a large portion of its funds in government securities, 
 and it was known that during the year the price of those securities had 
 experienced a considerable fall, would not the bank shares immediately 
 fall too ? Again, suppose at the end of a year like 1836, it should appear 
 that the bank held a considerable amount of overdue bills, the apprehen- 
 sion of loss would cause the bank shares to fall ; soon afterwards these 
 bills might be paid, and then the shares would rise again. Thus, the pub- 
 lication of balance-sheets would keep the prices of shares in perpetual 
 fluctuation, and furnish a most fruitful source of speculation and gam- 
 bling. 
 
 4. It is perfectly inefficient as a protection against fraud. The balance- 
 sheet, it seems, is to be a check upon the directors, and yet the directors 
 themselves are to prepare the balance-sheet. They must be stupid knaves 
 indeed, if they produce such a balance-sheet as shall expose their own 
 knavery. Besides, the balance-sheet merely shows the state of the bank 
 on one day in the year. Would it not be easy to put the bank on that 
 day in such a condition as would give satisfaction to the shareholders .'' 
 
 VII. At the annual meeting, the directors announce the amount of the 
 profits and the mode of their distribution. 
 
 The first appropriation of the profits is, to pay to the shareholders a 
 dividend on the capital. But all the profits are not usually thus appro- 
 priated ; a certain portion is generally retained as a rest, or surplus fund, 
 or, as it is sometimes called, a guarantee fund. This last title has led to 
 an erroneous impression with regard to the nature and purposes of this 
 fund. It is not designed as a guarantee to the depositers for the amount 
 of their deposits, — these are guaranteed by the paid-up capital and the lia- 
 bility of the shareholders, — but as a guarantee to the shareholders for the 
 uniformity of their dividends. Should the profits in any one year fall be- 
 low the sum necessary to pay the usual dividend, the deficiency may 
 then be taken from the surplus or guarantee fund. The amount of this 
 fund, therefore, will be regulated by the amount of the transactions, and 
 the consequent danger of loss. But it sometimes happens, that, after 
 paying a liberal dividend, the surplus fund accumulates far beyond the 
 sum necessary for the above purpose. In this case a portion of the fund 
 may be employed either in still further increasing the dividend, or it may 
 be distributed to the shareholders in the form of bonuses, or it may 
 be added to the capital. The course to be adopted must depend upon 
 circumstances. When the capital is small, iv will probably be best to 
 make an addition from the surplus fund ; but when the capital is suffi- 
 ciently large, the best way will be to give an oce-^sional bonus to the pro- 
 prietors. This is usually better than increasing tb« dividend ; for if the 
 dividend be once increased, the same rate of dividend will always be ex- 
 pected ; and it is better not to make any advance, unless there is good 
 reason to believe that the same rate will always be maintained. 
 
 When urging the establishment of a surplus fund, we are met with the 
 remark, that we are not bound to do any thing for posterity, inasmuch as 
 posterity have done nothing for us. We recollect meeting with this joke 
 many years ago, we think in " Joe Miller." As it is so frcaucntly re- 
 peated, we presume it is thought to be witty. We profess not to be a 
 
 112
 
 Joint- Stock Banks. 
 
 ludgc of vvittic'smo. As a piece of reasoning it seems very unsound. To 
 deny ourselves present gratifications in order to make provision for tlie 
 future, is one of the most important lessons that reason teaches to man. 
 Nor is it for posterity, in the present case, that the provision is made. All 
 bank proprietors should wish that it may be so ; but it is very probable 
 that within their own lifetime some untoward events may occur that will 
 require a portion of the reserved fund to keep up the ordinary dividend. 
 
 Those persons are under a mistake who object to a reserved or surplus 
 fund on the ground that it takes away the profits from the existing share- 
 holders, and gives them to the future shareholder. This is not the fact. 
 An existing shareholder who keeps his shares until the fund is in some 
 way distributed, receives of course his portion of the fund. But an exist- 
 ing shareholder who sells out his shares before the fund is distributed, re- 
 ceives the value of his portion of the fund in the price of his shares. The 
 amount of the surplus fund will influence the market-value of the shares. 
 In proof of this, we may observe that after a bank has declared a bonus, 
 the market-price of the shares usually falls, as in fact, ccEteris 2)aribus, 
 it ought to do. 
 
 We consider it of high importance that a bank should maintain an am- 
 ple surplus fund. Without such a fund, the dividends will fluctuate very 
 widely, and sometimes there may be no dividend at all, even though upon 
 a series of years the bank may have been very successful. Even if it is 
 known that a bank has met with losses, its credit is not so much affected 
 when it has an ample reserved fund to fall back upon. And besides the 
 ordinary losses in the way of business, a bank will sometimes, in a season 
 of pressure, be called upon to sustain loss by the realization of securities, 
 and it is very convenient to have a surplus fund sufficiently ample to bear 
 all these contingencies. Such a fund, too, has a moral efl'ect in strength- 
 ening the reputation of the bank in public estimation. It is regarded as 
 an indication that its affairs are governed by a wise and prudent adminis- 
 tration. 
 
 It will assist us in forming a correct judgment as to the principles on 
 which joint-stock banks ought to be administered, if we take a view of 
 those banks that have fallen, and notice the causes to which their failure 
 may be assigned. In investigating these causes, we shall find that the 
 disasters which have befallen joint-stock banks have arisen, not from any 
 unsoundness in the principles of joint-stock banking, but purely from mal- 
 administration. It was predicted by their opponents that they would be 
 ruined by the excessive issue of their notes : but the banks that have 
 failed have been chiefly those that did not issue notes. It was stated they 
 would be ruined by carrying on an extensive business with a small capital ; 
 but among the banks that have stopped have been some of the largest 
 capital. It was supposed they would be ruined by unprincipled men get- 
 ting to be directors, who, having no property of their own, would care 
 little about squandering the property of others. But the fallen banks are 
 chiefly those which were governed by honorable men ; and the greatest 
 sufferers have, been the directors. Nor can it be said that the joint-stock 
 banks have made their losses by engaging in speculations unconnected 
 with banking. Private bankers have done so. But joint-stock banks are 
 
 113
 
 A Treatise on Banking. 
 
 confined by their deeds of settlement to the business of banking. Nor has 
 it appeared — except, perhaps, in the Isle of Man Bank — that they have 
 violated their deeds in this respect. To what, then, must we ascribe the 
 failure of so many joint-stock banks ? We reply. To mal-administration ; 
 or, in other words, to bad management. And this leads us to inquire, In 
 what way has this mal-administration been exemplified ? What are those 
 erroneous principles that have led to these fatal results } Without at- 
 tempting to enumerate them all, we will endeavour to specify a few of 
 the most prominent. 
 
 I. Taking the unsound business of other banks. 
 
 One cause of the rapid extension of joint-stock banks in 1836, was the 
 " merging " of numerous private banks. I obtained from the managers 
 the names of these private banks, which were printed as an appendix to 
 the " History of Banking in America," published in 1837. This list was 
 afterwards extended, and inserted in the Bankers' Magazine for 1844. 
 Thus it appears that one hundred and thirty-eight private banking estab- 
 lishments have merged in joint-stock banks. Some of the private banks 
 sold their business after the joint-stock banks had come into operation. 
 Others formed a joint-stock bank upon the private bank, the senior partner 
 often becoming a director, and the junior partner the manager, of the 
 new bank. 
 
 In by far the majority of cases, these unions, or " merges," were ad- 
 vantageous to both parties. The private bankers obtained the value of 
 the business they had surrendered, and an interest in the future prosperity 
 of the bank they had joined. On the other hand, the new joint-stock bank 
 acquired a business already formed, and also obtained the advantage of 
 the practical knowledge and superintendence of experienced bankers. 
 
 But in some instances the bargain was a disastrous one for the joint- 
 stock bank. The bad and overdrawn accounts were taken without due 
 examination, and soon afterwards occasioned considerable loss. The loss 
 of the purchase-money was generally by far the smaller loss of the two. 
 A joint-stock bank in the West of England purchased a private bank in a 
 country town for a large sum, and took the overdrawn accounts without a 
 guarantee. These accounts were considered good at the time, but a few 
 years afterwards the parties failed, and the joint-stock bank lost consider- 
 ably. A joint-stock bank gave to the Northern and Central Bank the sum 
 of J? 6,500 for their business at Leeds, after they had stopped. The ac- 
 counts they took over were afterwards the occasion of great loss. The 
 Isle of Wight Joint-stock Bank was formed upon a private bank, but a few 
 months only had elapsed when they found they were insolvent from the 
 losses that would arise from the bad accounts they had accepted. They 
 immediately determined to wind up, and transfer their business to the 
 National Provincial Bank of England. Other instances might be adduced 
 of joint-stock banks having been founded on private banks which are now 
 supposed to have been, at the time, in a state of insolvency. 
 
 II. Some banks have sustained losses by making advances on dead 
 Bccurity. 
 
 Instead of the word " some," we think we might use the word " all " ; 
 for among the banks that have failed we doubt if we could find one that 
 
 114
 
 Joint-Stock Banks. 
 
 had not sinned in this respect. But the greatest sinners were those hanks 
 that were established in places of the greatest trade. All the banks at 
 Newcastle advanced money on collieries, and also on other public works. 
 The banks of Manchester made advances on mills and manuftictories, as 
 did also some of the banks at Leeds. These advances were attended with 
 several evil effects. In the first place, there was a lock-up of capital, 
 which restrained the operations of the bank. To relieve themselves from 
 this restriction, they took bills for their loans, and re-discounted them in 
 the London money market. The facilities thus obtained induced them to 
 extend this system of advance. Bills were perpetually renewed, and per- 
 petually re-discounted. At last a pressure came, and the renewed bills 
 could not be re-discounted. The bank could not take up the old bills 
 that were returned, and consequently stopped payment. Sometimes, too, 
 the bank tried to relieve itself from this pressure by increasing its drafts 
 on its London agent. It has for a long time been the practice in Lanca- 
 shire to pay for cotton with a three months' banker's bill. Banks in diffi- 
 culties avail themselves of this practice to make all their advances by 
 drafts on London, instead of cash. The Bank of Manchester had at one 
 time an enormous circulation of this kind. 
 
 Another effect was, that, however good the security might be at the time 
 the advance was made, when a change took place in the state of trade, its 
 value fell much below the amount of the advance ; and in some cases it 
 could not be sold at any price. But the evil did not stop here. As the 
 property given as security would have been worth nothing if not worked, 
 the bank was induced to make further advances to carry on the works on 
 their own account. A coUierj'-, if not kept in operation, soon gets out of 
 order ; and it will then require a considerable sum to set it at work again. 
 Hence some of the collieries at Newcastle were worked by the banks ; and 
 mills in the neighbourhood of Manchester were carried on in the same 
 way. The plan, however, does not often succeed. It is generally throw- 
 ing good money after bad. The ultimate loss is usually increased. 
 We may just observe in passing, that the banks in the East Indies get in- 
 volved in the same way, through making advances on indigo works. 
 These works are of no value except kept in operation ; and hence it has 
 occurred that a bank which has made an advance, is compelled to carry 
 on the works to keep up the value of its security. To show that a bank 
 governed by the strictest rules may sometimes be drawn into transactions 
 of this kind, it may be observed that at the present time an iron concern 
 in Wales is said to be carried on by the Bank of England. It belonged 
 to the Governor and Company of the Mines Royal. The bank made an 
 advance on mortgage to this corporation during the pressure of 1847, and 
 now takes the profits of the woi'ks. Some joint-stock banks have made 
 advances upon buildings. This has occurred chiefly in places where 
 there has been an increasing population. A ^g\v years ago a joint-stock 
 bank in a town of fashionable resort, advanced large sums to builders 
 upon the security of the houses they were erecting. The houses did not 
 let ; they could not be sold for any thing like the cost price ; the builders 
 were ruined, and the loss fell upon the bank. The bank had recourse 
 to the expedient of re-discounting the builders' bills ; but after a while it 
 
 115
 
 A Treatise on Bunking. 
 
 was compolled to stop payment. In agricultural districts, banks have 
 sometimes made considerable advances to farmers and graziers. Indeed, 
 it is almost a universal practice to do so at some seasons of the year. 
 These advances are not individually of large amount, and are not usually 
 attended with much loss, — not with any thing like the losses incurred by 
 advances on collieries, mills, and houses. But it is a lock-up of capital 
 until the year comes round. And when the system has been carried to 
 too great an extent, the bank has become embarrassed through the want 
 of funds. 
 
 III. Some banks have lost large amounts through advances made by 
 way of loan or discounts to men engaged in speculative undertakings. 
 
 Two of the banks that stopped at Newcastle-upon-Tyne sustained great 
 losses through advances to corn-merchants. Specvdations in corn are 
 usually carried on more by bills than by loan. A merchant buys a quan- 
 tity of corn, and places it in the hands of a factor, and draws bills for 
 something under the market value, leaving the factor a margin to guard 
 against loss. He gets these bills discounted, buys more corn, which he 
 also places in the hands of his factor, and then draws fresh bills. This 
 second batch of bills he also gets discounted, and buys more corn ; and 
 thus he goes on in the same course. Now if he thinks the market will 
 rise (as all speculators do), he will not allow his factor to sell the corn ; 
 but when the first bills fall due he will renew them, and with the produce 
 of the new bills, when discounted, he will pay the old ones. It is thus that 
 a large speculation may be carried on with a smalt amount of capital (and 
 that may be borrowed from the bank), and all the speculation is kept 
 afloat by bills. These bills are always for large amounts, and when the 
 parties fail the losses are usually heavy. The failures in the corn trade 
 in 1847 fell heavily on the banking and moneyed interests. It was the 
 stoppage of Messrs. Lesley, Alexander, & Co., the corn factors, that 
 caused the stoppage of Messrs. Sanderson & Co., the bill-brokers. 
 
 Wool is another " heavy article," as it is called ; that is, it costs a great 
 deal of money, and the bills are usually for large amounts. Occasionally 
 there is much speculation in this article. A joint-stock bank that failed 
 in Yorkshire is said to have lost large sums by persons engaged in this 
 trade. 
 
 Builders are generally a speculative class. Banks that advance money 
 to parties engaged in this trade have usually to take possession of the 
 buildings. We have already noticed an instance of this in the conduct of 
 a joint-stock bank. 
 
 People who speculate in railway and other companies are dangerous 
 customers to a bank. A joint-stock bank that failed at Leeds is said to 
 have lost considerably by advances to share-brokers and others, upon the 
 security of their shares. 
 
 It may be remarked, that it is generally bad policy in a bank to make 
 a very large permanent advance to any one customer. The word 
 "large" is a relative term, and must be undertsood with reference to the 
 extent of business that the customer is carrying on, and to the means of 
 tlie bank. It is not the business of bankers to supply their customers 
 *vith capital to carry on their trade. But it is tiieir business to make tem- 
 
 116
 
 Joint- Stock Banks. 
 
 porary advances, and these advances may sometimes be large. In such 
 cases, the banker should have a kind of security, tliat shall not only se- 
 cure the debt, but shall prevent its becoming permanent. Almost every 
 bank that has failed can point to some one, two, or three large accounts 
 to which it mainly ascribes its failure. The temporary stoppage of the 
 Royal Bank of Liverpool is attributed to an advance of this sort. 
 
 But tlie worst form of illegitimate advance is that which is made by a 
 bank to one of its own directors. Some of the banks at Manchester 
 sinned grievously in this respect. 
 
 A baidc that is known to act imprudently in making large advances, 
 will occasion a suspicion that its smaller advances are made with, at 
 least, equal imprudence. A large number of imprudent small transac- 
 tions may be as fatal to a bank as a smaller number of a larger amount. 
 A sum which appears small as a loan, will appear large as a loss. A man- 
 ager who accustoms himself to examine all the circumstances connected 
 with the small bills he discounts, will acquire a habit of investigation that 
 will guide him with safety in dealing with large transactions. But if he 
 get into a laxity of manner in regard to small amounts, he will ultimately 
 deal less carefully with large sums, and be in danger of making great 
 losses. In every case the rules of sound banking should be strictly applied. 
 
 IV. Some banks have become involved in difficulties through a general 
 want of system and discipline in conducting its affairs. This laxity usu- 
 ally shows itself in two ways, — the absence of a good system of book- 
 keeping, and the want of a proper control over its branches. 
 
 We could not adduce a more striking illustration of this observation 
 than has been furnished in the history of the Agricultural and Commercial 
 Bank of Ireland, as related before a Committee of the House of Commons 
 in the year 1837. The following are extracts from this evidence. The 
 books at the head office had not been posted for four months. There 
 were no stock books, showing the amount each shareholder had paid on 
 his share. There were no books showing the amount of the circulation. 
 An auditor states : " They showed us no general account ; their books 
 were in a perfect chaos." They had no account at the head office by 
 which they could check any transaction at the branches. Bills were sent 
 away to be re-discounted without any entry of them being made in the 
 bank books. At the branches there was no regular system of accounts. 
 At no one branch was there a system of accounts that formed an ade- 
 quate check upon the amount of notes in circulation ; " and from one 
 branch we were told that returns had not been made to the head-office for 
 fourteen months, and from another for six weeks, and there was no ques- 
 tion about it from the head office." (It is to be feared that some of the 
 English country banks are too neglectful in regard to book-keeping. See 
 the case of the Honiton Bank,, in Burgess's Circular to Bankers, Feb- 
 ruary 2, 1849.) 
 
 We will not intimate that any thing like this has ever existed in a joint- 
 stock bank in England. We never beard that any one has had any diffi- 
 culty in making out a statement of its affairs. With some banks, how- 
 ever, there has been a laxity in regard to the government of their 
 branches. The system of inspection was not well understood ; the re- 
 
 117
 
 A Treatise on Banking. 
 
 turns from the branch were not so ample as they should have been ; ano 
 the orders of the head office were not rifrorously enforced. We could 
 mention the names of several fallen banks that lost very considerably by 
 their branches. In some cases the banks had opened branches in towns 
 that required an amount of capital disproportionate to the means of the 
 bank, and their administration had been intrusted to parties who had 
 neither banking nor local knowledge. 
 
 A good system of book-keeping cannot be too highly valued. Its ob- 
 ject is not merely to secure accuracy of accounts between the bank and 
 its customers. A further object is to classify and arrange all the transac- 
 tions in such a way as easily to produce a weekly balance-sheet, showing 
 the actual condition of the bank. Nor must it be supposed that such ab- 
 stracts or balance-sheets are intended merely for the use of the directors. 
 They are of the utmost use to the manager, and should be the subject of 
 his constant study. A manager who, day after day, attends only to indi- 
 vidual transactions, and that, too, possibly in a state of mental exchement, 
 may involve his bank in difficulty, even though each transaction may, 
 upon its own ground, be perfectly justifiable, unless he attends to those 
 summaries and classifications of his transactions which are presented in 
 the weekly balance-sheet. He will there see on one side the means of the 
 bank, and on the other the way in which his funds are employed. He 
 will notice if his loans, or overdrawn accounts, or past-due bills, are un- 
 duly increased. If a good system of book-keeping does not prevent a 
 manager from going wrong, it will prevent his going wrong without know- 
 ing it. If he act unwisely, his balance-sheet will stare him in the face 
 and remind him of his faults. 
 
 It is a great defect not to take an accurate estimate of the losses every 
 half year before striking the balance of profit and loss. It is clear, that 
 common sense and common honesty require that the loss should be taken 
 into account as well as the profit. Yet some of the banks that failed 
 went on, year after year, exhibiting a balance-sheet to their shareholders 
 showing a respectable profit, which enabled the directors to declare a fair 
 dividend, and to make an addition to the reserved fund. While the an- 
 nual balance-sheets thus showed a steady increase of profit, the bad debts 
 had actually eaten up the whole of the capital. 
 
 Another defect is, not to have an account in the general ledger show- 
 ing the amount of bills re-issued or re-discounted. The amount of these 
 bills not due should appear on both sides of the account, — on one side as 
 a liability, and on the other as an asset. For want of doing so, some 
 banks have not been able to ascertain easily what amount of bills they 
 have under re-discount. But it is important to know this ; for it may be 
 expected that, during a season of pressure, no small portion of these bills 
 will be returned unpaid, and the bank must find funds to take up its in- 
 dorsements. If they fail to do this, it amounts to a stoppage of pay- 
 ments. In fact, the amount of such bills suddenly returned has in some 
 cases been the immediate cause of a bank stopping payment. 
 
 We have no horror of numerous branches. When we see that in 
 Scotland the largest and most prosperous banks have each a large num- 
 ^»er of branches, we are led to believe that branches are not attended 
 
 118
 
 Joint- Stock Banks. 
 
 with any dangers which cannot be overcome by wise administration. At 
 the same time, we are ready to admit that numerous branches require a 
 pecuUar mode of government, and a rigid system of discipline. The 
 chief officer of such a bank should be a good banker, and something 
 more. He must be a good administrator ; that is, skilled in the adminis- 
 trative department of good government. 
 
 In the first place, each branch must have a good system of book-keep- 
 ing, and the system must be uniform at eveiy branch. Secondly, Care 
 should be taken to appoint efficient officers. Thirdly, A code of laws should 
 be drawn up, and the branch manager should be distinctly informed as to 
 the extent to which he may exercise his discretion, and what cases must 
 be referred for the consideration of the directors. Fourthly, Weekly re- 
 turns must be made to the head office of all the transactions, and a half- 
 yearly balance-sheet attended with full supplementary details. Fifthly, 
 Special reports should be occasionally required, as special circumstances 
 may occur, either with reference to the branches generally, or with refer- 
 ence to a branch individually. Sixthly, An inspector should be appoint- 
 ed for the purpose of visiting the branches. His duties will be to explain 
 the instructions of the directors, and to see that they are properly ob- 
 served ; to maintain a uniform system of transacting business at all the 
 branches ; to instruct the officers of the branch in their duties when ne- 
 cessary, and to communicate the knowledge he has acquired in visiting 
 the other branches ; to answer any difficult or knotty questions that may 
 be proposed to him by the manager, and to consult with the manager as 
 to the best means of promoting the interests of the branch ; to observe the 
 talents and capabilities of the several officers, and to recommend for pro- 
 motion any who seem to have qualities that might be usefully employed 
 in a higher department in the bank. In large banks there are usually 
 several inspectors. ( We shall hereafter notice in detail the mode of con- 
 ducting business in the Provincial Bank of Ireland, as an illustration of the 
 above remarks.) 
 
 Branches should always be kept in strict subordination to the head 
 office. Prompt obedience to orders is a duty that must be rigidly en- 
 forced. The chairman of the Northern and Central Bank stated to the 
 Parliamentary committee, that at some of the branches where the heaviest 
 losses had occurred, the managers had not obeyed the orders they had 
 received from the directors. Similar accusations were made against some 
 of the branch managers of the Commercial Bank of England. It is quite 
 impossible for any bank to be well administered as a whole, if every 
 branch is allowed to exercise an independent authority. Upon this 
 ground, some parties object altogether to the appointment of local direct- 
 ors at the branches. A local board, consisting of the branch directors 
 and the manager, are more likely than the manager alone to assume in- 
 dependent authority, to postpone carrying out the directions they may re- 
 ceive from head quarters, and to take upon themselves the responsibility 
 of acting somewhat at variance with the strict letter of their instructions. 
 And although local directors may sometimes be useful in extending the 
 connections of the bank, or in aiding the managers with information or 
 advice, yet, for the above or other reasons, they are now in Englan'l but 
 1 119
 
 A Treatise on Banking. 
 
 very seldom appointed. The branch is under the sole care of a manager. 
 The general manager of the bank is not merely the manager of the head 
 office, but has authority also over all the branches. Whenever neces- 
 sary or expedient, he issues circular letters of instruction to the branch 
 managers, and these instructions the branch managers are expected to 
 obey. 
 
 V. Some banks have been unfortunate in consequence of having made 
 no provision to meet contingencies. 
 
 This class of banks has not fallen into any of the practices that we have 
 enumerated. They have not, on the whole, been badly managed, but 
 they have traded to the full amount of their means, and have kept no re- 
 serve, either in government stock, exchequer bills, or bills of exchange, to 
 meet those contingencies to which all banks are liable. One bank of this 
 class had, during the railway speculation, received from some of these 
 companies a large amount of deposits. A portion of these deposits was 
 lodged, as its agent, with another bank. That bank stopped. This bank 
 was, consequently, unable to pay back the deposits to the railway compa- 
 nies. From this circumstance, and the known connection between the 
 two banks having damaged its credit, it was compelled also to stop pay- 
 ment. Another bank had but a small capital, but for a number of years 
 it was exceedingly well managed. In 1847 it had discounted, and again 
 re-discounted, a large amount of bills on a first-rate London house that 
 failed. The London house afterwards paid 20s. in the pound. But the 
 directors concluded from this circumstance that a bank with a small capi- 
 tal was not in a condition to bear a large loss, and they resolved to wind 
 up the concern. After sustaining the losses and expenses of winding up 
 (and in such a case some losses necessarily occur), the bank realized 
 nearly the whole of its paid-up capital. We doubt not that some of the 
 other banks that have wound up their affairs have done so from causes 
 similar to those we have described. 
 
 We consider that this head of our inquiry is not less instructive than the 
 four by which it was preceded. They will teach us the vices we ought 
 to avoid ; this will teach us the virtues we ought to cultivate. The lessons 
 we here gather are, that we ought not only to avoid all mismanagement, 
 but we ought also to provide for those contingencies to which, even with 
 good management, we are exposed. We ought to raise our capital in 
 proportion to our business, or else keep down our business to a level with 
 our capital; we ought to have a surplus fund adequate to meet any 
 unforeseen loss ; we ought to have a reserve of convertible securi- 
 ties ready to meet contingent evils ; and, finally, we ought always to 
 keep our bank in such a condition, that, even if not successful, we shall 
 still be in a condition to wind up our affairs without inconvenience to the 
 public. 
 
 VI. We may observe, that these erroneous principles of administration 
 have sometimes been the result of a defect in the constitution of the bank, 
 of the appointment of incompetent persons, or of an unwise distribution of 
 the administrative functions. 
 
 Joint-stock banking did not grow up gradually in England as in Scot- 
 land. On the introduction of this system into England, the directors were 
 
 120
 
 Joint- Stock Banks. 
 
 necessarily unacquainted with the practical operations of banking.* For 
 all the practice and experience were confined to the private bankers, 
 whom the new system was intended to subvert. In some places there 
 was a prejudice against directors who were in business. Hence, officers 
 in the army, barristers, solicitors, medical men, retired tradesmen, and 
 country gentlemen, were considered as the most eligible directors. These 
 boards of directors, all of whom were unacquainted with banking, and 
 some of whom were destitute of business habits, had to encounter difficul- 
 ties which would have tried the most experienced bankers. 
 
 The want of experience in a board of directors did not, however, pro- 
 duce any dangerous consequences when they appointed an efficient mana- 
 ger. He prudently advised and instructed them. They gradually in- 
 creased their knowledge, adopted his principles, and were guided by his 
 counsels. By their daily intercourse with him, by their own reflections, 
 by the direction given to their thoughts, and by the experience they ac- 
 quired, they became in a few years as conversant with their duties as the 
 manager himself. We believe this was almost uniformly the case with 
 those joint-stock banks that were formed within five or six years after they 
 were allowed to be established in England. As a proof that such was the 
 case, it may be stated that the greater portion of the banks formed during 
 that period have, at the present moment, the same managers they had at 
 their commencement. 
 
 But, after joint-stock banks were started as matters of speculation, they 
 increased more rapidly than efficient managers could be found. The 
 new banks naturally enough looked to Scotland. But the Scotch banks 
 had the sagacity to raise the salaries of their principal officers, to prevent 
 their emigration to England. In some cases, those Scotchmen who were 
 appointed managers of English banks, had never held office in a bank be- 
 fore, or else it was an office so inferior that all they knew about banking 
 was merely the routine of the office. Wherever efficient managers were 
 appointed, whether English or Scotch, the same effects were produced as 
 in the former cases. The inexperienced directors acquired the knowledge 
 and experience necessary to the discharge of their duties, and the banks 
 prospered. But sometimes the case was reversed. The manager was 
 inefficient and the directors inexperienced, and then the effects were dis- 
 astrous. 
 
 In some cases the manager labored under an inconvenience from being 
 taken from a lower social position. Not a few of the managers were 
 previously bankers' clerks ; and the appointment to the office of bank 
 manager did not, in England (as it does in Scotland and in Ireland), raise 
 him to the same social position as a banker. This was injurious to the 
 bank in several ways. It lessened his influence with his directors. From 
 
 * The chairman of the Northern and Central Bank gave the following answers to a 
 Committee of the House of Commons : — 
 
 " Is there any one of your colleagues in the direction of the bank that had previous 
 experience in banking business ? — I do not think there was one. 
 
 " Had the directors of the joint-stock hanks about you many of them had previous 
 banking experience? — I do not recollect one." — Committee on Joint-Stock Banks, 
 1837. 
 
 121
 
 A Treatise on Banking. 
 
 me days of Solomon to the present time, the degree of deference paid to 
 even good advice has depended upon the social rank of the party who 
 offered it : " Wisdom is better than strength ; nevertheless the poor man's 
 wisdom is despised, and his words are not heard." {Eccles. viii. 16.) 
 The public, too, had been so long accustomed to private banking, that, 
 seeing the manager paid by a salary, tliey could not bring their minds to 
 view him as the banker, but considered him as holding an office analo- 
 gous to that of chief clerk in a private bank. It may be feared that in 
 some banks the directors took the same view, and thought that the influ- 
 ence and the salaries of the two offices ought to correspond. These im- 
 pressions have now passed away. 
 
 In some cases the manager was superseded in his functions by the ap- 
 pointment of managing directors. The manager was a man of banking 
 knowledge and experience, but he had placed over him a couple of manag- 
 ing directors who had neither knowledge nor experience. Consequently, 
 his voice was never heard in the board-room, and, with the name of 
 manager, he acted only in the capacity of a chief clerk. The manager 
 was thus deprived of the opportunity of discharging the most impor- 
 tant of his functions, — that of giving advice to the directors, — and 
 was required to confine his attention to the more easy duty of obedi- 
 ence. 
 
 In other cases the managing directors and the manager formed a secret 
 committee, who alone were acquainted with the actual condition of the 
 bank. The directors of the Bank of Manchester stated, in their first re- 
 port, that " two of their body, who are out of business, alone have access 
 to the accounts, and are authorized to advise with the manager, when re- 
 quisite, on the current transactions of the bank. At the same time, each 
 of the other directors engaged, individually, to refrain entirely from in- 
 specting any of the customers' bills or accounts; thus combining all the 
 secrecy of a private bank with the advantages of a public institution." 
 The Bank of Manchester had at that time the largest paid-up capital of 
 any joint-stock bank in England. Three of its directors were examined 
 before the Bank Charter Committee, in the year 1832. They presented 
 to the committee a list of twenty-three joint-stock banks then formed, and 
 strongly urged that measures should be adopted to require from them an 
 adequate amount of paid-up capital. It is somewhat remarkable, that, out 
 of these twenty-three banks, the only one that has stopped payment is the 
 Bank of Manchester. Another has ceased to exist, but it was by a trans- 
 fer of its business. 
 
 In some cases a bank has been ruined by its manager ; in others, by 
 the manager and the managing directors conjointly ; in others, by the 
 managing directors without the manager ; and in others, by one, two, or 
 three directors, who, though not formally appointed managing directors, 
 have, by their influence with the board, virtually monopolized that office, 
 and discharged its functions. It may be questioned whether any case has 
 occurred in England of a bank being ruined by the acts of its whole 
 board, where all the directors were honest and intelligent men, and each 
 was accustomed to think and judge for himself. 
 
 VII. We may observe, that sometimes joint-stock banks have been led 
 
 122
 
 Joint- Stock Banks. 
 
 into erroneous principles of administration by the proceedings of the pro- 
 prietors. • 
 
 The constitution of joint-stock banks appears theoretically absurd. 
 The manager, — the banker, — who is presumed to have some knowledge 
 and experience in banking, is placed under the command of a board of 
 directors whose knowledge and experience are supposed to be inferior to 
 his own. These directors are again placed under the control and instruc- 
 tion of a body of proprietors whose knowledge of banking is much less 
 than that of the directors. Practically, however, the system works well. 
 But when an attempt is made to carry out the theory, the effects are in- 
 jurious ; and some joint-stock banks have fallen into danger through the 
 operations being too much regulated by the proceedings of the pro- 
 prietors. 
 
 Sometimes the directors have been influenced by the applauses of the 
 shareholders. 
 
 It is natural to all shareholders to wish for large dividends upon the 
 capital they have invested. Hence they applaud most loudly those direc- 
 tors who contrive to declare the highest dividends, to make the largest bo- 
 nuses, to keep up the shares at the highest premiums in the market, and 
 then to distribute more shares at par. The directors, knowing these to be 
 the feelings of the shareholders, very naturally attempt to gratify them. But 
 those transactions that yield a large immediate profit, are either attended 
 with a risk of loss or a lock-up of capital. But the profit is immediate, 
 the danger is remote. With the applauses of the shareholders ringing in 
 their ears, the directors become too giddy for reflection, and recklessly 
 engage in a course of action that ends in ruin. This evil is increased 
 when there are two joint-stock banks of about equal strength in the same 
 place. The spirit of rivalry is natural to man. The competition between 
 the two boards of directors is not which bank shall be governed with the 
 greatest prudence, and with the strictest regard to sound banking princi- 
 ples, but which shall produce the most glowing reports, which shall de- 
 clare the largest dividends, and which shall keep up its shares at the high- 
 est price in the market. A strong competition is carried on, which ends 
 in the destruction of one or both of the rival banks. Such feelings are 
 said to have prevailed at Manchester ; and at that place several boards of 
 directors were presented with services of plate, by their respective share- 
 holders, within a short time of the stoppage of their banks. 
 
 Sometimes directors are induced to act unwisely from the censures of 
 their shareholders. 
 
 Every one who knows any thing of banking must know that it cannot 
 be carried on without occasional losses. A bank that is so conducted as 
 never to make a loss, will seldom make much profit. And sometimes 
 these losses will be so great as to absorb a large portion of the profits of 
 the year. The object of having a surplus fund is to provide for these 
 contingencies, so that the usual dividend may be maintained. But when 
 an occasion arises for making use of a portion of this fund, there is often 
 what is called " a stormy meeting," and the shareholders walk away 
 sulky and dissatisfied. This produces a bad effect on the minds of the 
 directors. It is a great mistake to suppose that boards of directors are in- 
 
 123
 
 A Treatise on Banking. 
 
 different to tne applauses or censures of their shareholders. As a general 
 rule, the fact is lamentably the reverse. In some cases they have had 
 so much dread of " the general meeting " that they could not muster 
 courage enough to make honest reports. Had they done so in the first 
 instance, their banks might have been saved from destruction. 
 
 Sometimes directors are in danger of being led astray by the admoni- 
 tions and instructions of their shareholders. 
 
 A very prudent class of proprietors exhort the directors to practise the 
 strictest economy. When rightly understood, this exhortation is worthy 
 of the rounds of applause with which it is usually attended. But it is 
 liable to be misunderstood. In banking, as in housewifery, the lowest- 
 priced article is not always the cheapest. The largest portion of the ex- 
 penditure of a bank consists of salaries. Hence an exhortation to econo- 
 my amounts to, " Keep down the salaries of your officers " ; and as the 
 manager has the largest salary, he will most likely be the heaviest suf- 
 ferer. We believe that if the suggestion were made in these terms, it 
 would receive no support from any body of shareholders. Were it cus- 
 tomaiy to announce to the proprietors the advances made in the salaries 
 of the managers, we think the announcement would be received with the 
 same feelings as were manifested in the following instance. At the elev- 
 enth annual meeting of the proprietors of a bank in one of the northern 
 counties, held on the 5th of February, 1846, " the chairman informed the 
 meeting that, appreciating highly the services of the manager, and the 
 prosperity of the bank fully justifying them in doing so, the directors had 
 raised his salary to £ 1,500 a year; at which the proprietors present ex- 
 pressed their hearty concurrence. And it was recommended to the di- 
 rectors, by the proprietors present, still further to augment the manager's 
 salary, with the increasing business and prosperity of the bank." At that 
 time the paid-up capital of the bank was £ 260,450. In the " Banking 
 Almanac for 1849," this banking is stated to have a capital of 
 £ 300,000, and a reserved fund of £ 30,000. 
 
 The following is an extract from the sixth report of another joint-stock 
 bank : — 
 
 " The manager having claimed for his nominees the 1 ,000 shares at par 
 to which they were entitled by his agreement when originally engaged, 
 the same have been issued to them, which increases the number of paid- 
 up shares, entitled to participate in the present dividend, to 32,080." 
 
 A more mischievous recommendation, when thus understood, can 
 hardly be conceived. Next to having a dishonest manager, the greatest 
 evil is to have one that is badly paid. If he is known to be poor, his ad- 
 vice will have less weight in the board-room ; the directors individually 
 will treat him with less respect ; his wealthy customers will not disclose to 
 him their private affairs ; the needy class, when refused discount, will in- 
 sult him by threatening to complain to the directors ; and his inferior offi- 
 cers will be less prompt in their obedience. But worse than all this will 
 be the effect produced upon his own mind. He will not be, and he cannot 
 be, so efficient a manager when badly paid, as he would be if he received 
 a liberal remuneration. It is the besetting sin of men of business, that 
 they never pay attention to mind, though among no class are mental phe- 
 
 124
 
 Joint-Slock Banks. 
 
 nomena more strikingly exhibited. The amount of his salary is the only 
 tangible means by which a manager can judge how far his services and 
 his cliaracter are appreciated. It is not the money alone, but the feelings 
 of which the money is an indication, that produces an effect on the mind. 
 It is a law of our nature, that the kindness, Hberality, and generosity of 
 others will produce corresponding feelings in ourselves. And it is an- 
 other law of our nature, that when the mind is under the influence of such 
 feelings, it is capable of intellectual efforts of a higher order. But wc 
 forget ; we were writing about pounds, shillings, and pence, and our pen 
 has darted off into phiIoso[)hy. We will now return. 
 
 Sometimes the shareholders fly at higher game, and canvass the sala- 
 ries of the directors. Such discussions are always unpleasant, as they are 
 carried on in the presence of the parties interested. Among all the 
 charges brought against the directors and managers of banks that have 
 failed, we have never met with the accusation that they received exces- 
 sive salaries. We are tempted to fancy, that, had their salaries been 
 higher, the banks might not have failed. As far as salary is concerned, 
 they certainly would have had a greater interest in preventing the failure. 
 In some banks, however, directors have paid themselves for their services 
 in ways far more costly to the bank. Take the following instance : — 
 
 " The qualification for directors of the Northern and Central Bank was 100 shares. 
 It was, however, ascertained that each of the oriirinal directors took 1 ,000 shares, and 
 that besides these, other shares were, at later dates, distributed among the directors 
 and their near connections. Instead of paying the calls to the bank, the directors 
 and their nominees were severally debited with the amount in a private ledger, locked 
 up, and the key deposited with the chief accountant. In addition to this, each director 
 had a current account with the bank, and many of them had overdrawn their accounts 
 to a very large amount. Nor was this all, for it further appeared that many of them 
 were also indebted in large sums of money on notes of hand, which being placed to the 
 account of securities, did not appear in the books as a debit against the directors. 
 Upon combining these several items of debt, it was ascertained that there was no less 
 than £290,000 due by the directors, and that there was near £14,000 due by the 
 managers and clerks." {Committee on Joint-Stock Banks, 1837.) 
 
 It is not creditable to any bank to receive the services of its directors as 
 a matter of charity ; nor is it wise. A director who is paid for his services 
 may justly be called to account for neglect of duty. In this case, too, he 
 cannot expect payment in any other way. In his transactions with the 
 bank he is then on the same footing as any other customer. It has been 
 said, that the directors are such honorable men that they will attend to their 
 duty as strictly if badly paid as if liberally paid. If so, they ought to be 
 liberally paid, as it is very desirable that such honorable men should be 
 most closely attached to the bank. But we doubt the fact. In matters of 
 almsgiving, men will give only what they can conveniently spare. If a 
 director is to give his time for nothing, he will give only that portion of 
 his time which he cannot more profitably or more agreeably employ else- 
 where. In matters of business, men will apportion their services accord- 
 ing to the return they receive for them. There is no way of securing 
 constant punctuality of attendance on the part of directors, but by paying 
 them liberally for that attendance. In some cases where payment has not 
 been given, or given only to the managing directors, it is said that the 
 
 125
 
 A Treatise on Banking. 
 
 government of the bank has fallen into the hands of a few persons whose 
 punctuality of attendance has been almost their only banking virtue. But 
 the main advantage of liberal payment is its effect upon the minds of the 
 directors. Every honorable man wL'' attend to his duty with alacrity and 
 energy, and will even make extra ex \ions for the benefit of the bank, 
 when he finds that his services 3 handsomely and liberally appre- 
 ciated. 
 
 We need hardly say, that the faults we have pointed out in the admin- 
 istration or constitution of joint-stock banks are by no means inherent in 
 the system. They are accidental circumstances, arising from its estab- 
 lishment in a new country, by parties who had no previous opportunity of 
 understanding its principles. The system is no longer new, its princi- 
 ples are now well understood, and it may reasonably be expected that the 
 calamities of the past will never recur. 
 
 Section XL— THE ADMINISTRATION OF THE OFFICE. 
 
 In this section we shall consider the following topics : — 
 
 I. The Arrangement of the Office. 
 II. The Selection and Appointment of the Clerks. 
 
 III. The proper Distribution of their Duties. 
 
 IV. The Arriount of their Salaries. 
 V. The System of Promotion. 
 
 VI. The Rules of Discipline. 
 VII. The Training of Clerks for higher Offices. 
 
 I. The Arrangement of the Office. 
 
 The proper situation of a bank is a matter of some importance. It 
 should be situated in what is deemed the most respectable part of the 
 town. If it be placed in an inferior locality, approachable only by nar- 
 row and disagreeable streets, and surrounded by buildings the scats of 
 smoky and dirty trades, it is not likely to be so much frequented, nor to 
 acquire so large a business, as though it were more pleasantly situated. 
 Another point to be observed is, that the bank itself should be a handsome 
 building. The necessary expenditure for this purpose is no sin against 
 economy. It is an outlay of capital to be repaid by the profits of the 
 business that will thus be acquired. A portion of the building will pro- 
 bably be set apart for the private residence of the manager, or of some 
 other officer of the establishment. It is desirable that this portion should 
 be entirely separated from the office. The communication should be only 
 by a single door, of which the manager should keep the key. The build- 
 ing should be so constructed that what is going on in the private house, 
 whether in the kitchen, or the nursery, or the drawing-room, should not 
 be heard in the bank. The ofiicc being thus isolated, must then be fitted 
 
 126
 
 Arrangement of the Office. 
 
 up in the way that will most effectually promote the end in view. And 
 here are three points to be considered, — space, light, and ventilation. 
 
 A chief consideration is space. A banker should take care that his 
 clerks have room enough to do their work comfortably. Every account- 
 ant knows that he can often work faster if he can have two or more books 
 open at the same time ; but if his space is so confined that he must shut 
 up one book and put it away, before he can use another, he will get on 
 more slowly. The cashiers, too, will bo much impeded if they are 
 obliged to stand too close to each other ; and the public will be huddled 
 together, and will often count incorrectly the money given to them, and 
 thus take up the cashiers' time to put them right. Want of space will ne- 
 cessarily occasion errors, from the confusion it produces, and from one 
 clerk being liable to interruption from the noise or vicinity of the others. 
 A banker should therefore take care that his office is large enough for his 
 business ; and that it will admit of being enlarged in case his business 
 should increase. Ample space is also conducive to the health of the 
 clerks, as there will be more air to breathe, and the atmosphere is less 
 liltely to become polluted by the burning of lamps and candles. 
 
 Another consideration is light. It is well known in every London 
 bank that fewer mistakes are made by the clerks in summer than in 
 winter. Abundance of light prevents mistakes, and saves all the time 
 that would be employed in the discovery of errors. Light is also of great 
 importance to the cashiers in detecting forged signatures, and bad or 
 counterfeit money. Thieves are also less likely to attempt their robbe- 
 ries in a light office than in a dark one. Faint or illegible hand-writing 
 can be more easily read, and hence mistakes are less likely to occur. 
 The clerks, too, perform their duties with more quickness and cheerful- 
 ness. The gloominess of an office throws a gloom over the mind ; but 
 " light is sweet, and a pleasant thing it is for the eyes to behold the sun." 
 
 The lightest part of the office should be devoted to the clerks. We 
 have observed sometimes a violation of this principle. The entrance 
 door has been placed in the middle of the front, with a window on each 
 side, and the counter thrown across the room, so that the lightest part of 
 the office has been given to the public. It is better that the entrance be 
 placed at the right or the left corner, and the counter be made to run from 
 the window to the opposite wall. Tlie light will thus fall lengthways on 
 the counter, and the space behind the counter will be occupied by 
 the clerks. 
 
 Ventilation. — Volumes have been written by medical men upon the 
 advantages of fresh air, and on the unwholesome atmosphere of crowded 
 cities. If the air that circulates in the streets of towns and cities is impure, 
 what must be the state of those offices or rooms where twenty or thirty per- 
 sons are breathing close together during the whole of the day, and gas 
 lights are burning during the evening ! In such cases we are told that a 
 person afflicted with consumption of the lungs may communicate the com- 
 plaint to others, as they must inhale a portion of the atmosphere which he 
 has breathed out. The air in a close office is not only rendered impure 
 by the number of people that breathe it, and by the burning of gas, but h 
 also contains very frequently particles of dust arising from the floor, 
 
 127
 
 A Treatise on Banking. 
 
 through the number of people constantly walking in and out. It is almost 
 impossible for persons so circumstanced to enjoy for a length of time even 
 moderate health. A portion of this evil may be mitigated by a good system 
 of ventilation. To obtain this should be regarded as an object of the first 
 importance. If a banker does not insist upon the architect performing 
 this in the most effectual manner, he must be content to be often put to 
 inconvenience through the illness and consequent absence of his clerks. 
 
 Having made due provision for space, light, and ventilation, it will now 
 become necessary to arrange the counter, desks, and other furniture, so as 
 to enable any given number of clerks to discharge their duties with the 
 greatest efficiency, and so as best to promote the public convenience. It 
 is not necessary, or possible, to give very minute instructions on this head, 
 as much will depend upon the form of the building, the extent of the busi- 
 ness, and other circumstances. We will notice only a few general objects 
 to be kept in view. 
 
 It is desirable at all times to make those arrangements that shall best 
 promote the convenience of the public. 
 
 The counter should be readily accessible, and of sufficient length to 
 meet the requirements of the business ; and the cashiers' desks sufficient- 
 ly wide apart for the public to be promptly served, and to stand without 
 jostling one another. Some banks have two counters, one for paying, 
 and the other for receiving. At other banks the cashier does not enter 
 the credits, but merely agrees the amount with the customer, and then 
 passes them to a clerk, who enters them in the Waste Book. In the same 
 way, when a cheque is presented for payment, he gives it to a clerk be- 
 hind him, who enters it, and hands the notes to the cashier, who pays out 
 the gold and silver. When the business is large, extra or supernumerary 
 cashiers are appointed, who take the place of the regular cashiers when 
 they are absent at dinner or otherwise, so that during the whole of the day 
 all the cashiers' desks are occupied. To relieve the counter, the payment 
 of bills that have been presented in the morning and not paid, is usually 
 received at a separate desk or office. All these are expedients that should 
 be adopted when necessary, to save the time of the public. There are 
 few things that try a man's temper more than to be kept waiting a long 
 time at a banker's counter ; and he will be veiy apt to give vent to his 
 iVnpatience by quarrelling with the clerks, or reproaching the establish- 
 ment. 
 
 Another object is, to place near together those clerks whose duties will 
 require them to have frequent communication with each other. If this 
 rule be not observed, the clerks will lose much time in the course of the 
 day in passing from one part of the office to the other ; and the work will 
 not be so expeditiously performed. It is especially desirable that the 
 ledger keepers should be placed close behind the cashiers ; so that if a 
 doubtful cheque be presented for payment, the cashier may be able to 
 show it to the ledger keeper, and be informed if he may pay it, without 
 being observed by the party presenting it. 
 
 Another point is, to place the desk of the chief or head clerk in such a 
 position that he can see all over the office. " A master's eye will do 
 inoro work than both his hands." In this case, if the counter is crowded, 
 
 128
 
 Selection of Clerks. 
 
 the chief clerk will perceive it, and appoint additional clerks to assist the 
 cashiers. If disputes take place between the clerks, or between the 
 ceishiers and the public, he will come forward and settle the matter before 
 the dispute is carried to high words. He will observe, too, the customers 
 who come frequently to the counter, and from their transactions he will 
 often draw conclusions respecting their circumstances which will be ser- 
 viceable to the bank. It is generally best that many of the clerks should 
 be so placed as to look towards the counter. It has been said that this 
 draws off their attention from their work ; but we do not think this is gen- 
 erally the case, although it may occasionally relieve the irksomeness of 
 their duties. A dishonest person standing at the counter, and watching 
 an opportunity of committing a robbery when the cashier is engaged, will 
 be more likely to abstain from making the attempt when the eyes of other 
 clerks have a command of the counter. This arrangement will depend 
 in some measure on the direction of the light. The clerks should not 
 have their faces or their backs towards the window, but the light should 
 fall on them sideways. These matters may appear trifling, but they 
 will not be deemed unimportant to those who are intrusted with the 
 practical administration of an office. It is only by attention to minute 
 things that the business of an office can be well conducted. 
 
 II. The Selection and Appointment of Clerks. 
 
 When a bank is first formed, they sometimes advertise for clerks; but 
 this is usually for clerks of a higher rank, who have had some experience 
 in the business of banking. When a bank is established, it has seldom 
 occasion for new clerks of this class. A vacancy in one of the higher de- 
 partments is filled up by the next clerk in rank, and so on in order, and 
 the new clerk comes in as a junior. Applications for this post are usually 
 so numerous that the only difficulty is in making the selection. Those 
 recommended by parties known to the bank, as customers or sharehold- 
 ers, usually have the first claim. In some banks the nomination of the 
 junior clerks is regarded as a portion of the patronage of the directors, 
 upon the understanding, however, that they nominate none but such as are 
 properly qualified, and who shall prove their fitness to the satisfaction of a 
 committee of directors. 
 
 In making inquiries into the qualifications of applicants, it is necessary 
 to ascertain, in the first place, their age. In London, the age at which 
 clerks are admitted into a bank is usually about nineteen. As their first 
 duty is to collect payment of bills, it is necessary they should have ar- 
 . rived at a sufficient degree of strength to be able to make some resistance 
 were an attempt to be made to rob them of their bill-case ; and also that 
 they should have arrived at an age to be conscious of the responsibility 
 of their office. In the country parts of England, and in Scotland, clerks 
 are taken at an earlier age ; but the duties are different from thosa dis- 
 charged by the same class in London. 
 
 Another consideration is the class of society from which clerks are 
 taken. Candidates for the office of bank clerks are usually the sons of 
 the middle class of tradesmen, or of professional men, as clergymen, 
 officers in the army or navy, or persons in the service of Government. 
 
 129
 
 A Treatise on Banking. 
 
 During the last war, bankers' clerks were generally tne sons of trades- 
 men, as the sons of gentlemen could usually find employment under Gov- 
 ernment. But now that places under the Government are not so easily 
 obtained, members of what are called respectable families are found 
 among the candidates for admission into the service of banks. Each class 
 has some advantages. The sons of gentlemen have generally a better 
 literary education, and have usually a more courteous address. On the 
 other hand, they have no notion of business, and no business habits. 
 They have been accustomed to go a-hunting and a-fishing with the sons 
 of men of large property, and they look upon banking business as a 
 drudgery to which they submit from necessity, but which is much be- 
 neath the destiny to which they think they are entitled. On the other 
 hand, the sons of tradesmen have been accustomed to notions of business 
 from the ordinary conversation of their fathers' fireside ; they know they 
 must get their own living ; they look upon their admission into a bank as 
 a lucky event, and, consequently, apply themselves to their duties with 
 heartiness and cordiality. 
 
 Another inquiry of those who are candidates for admission into a bank 
 is, how they have been employed. Lads just come from school, of course 
 know nothing of the business of a bank, and, if taken at all, they should 
 be taken upon trial for three or six months, so that their qualifications 
 may be discovered before they are permanently appointed. Those who 
 have been two or three years in a merchant's counting-house are gener- 
 ally found to be the most efficient. But to have been in the office of a 
 stock-broker or a solicitor, or to have studied for one of the learned pro- 
 fessions, is no recommendation. Clerks from country banks, and espe- 
 cially those from the banks of Scotland, when introduced into London 
 banks, are at first usually considered to be slow. 
 
 It is also proper to inquire into the parentage of the candidate. For 
 although honesty and dishonesty do not run in the blood, yet it is probable 
 that religious and virtuous parents have given their children a religious 
 and virtuous education ; and a youth who has been accustomed to see ex- 
 amples of excellence at home, will be the most likely to exhibit those ex- 
 cellencies in his own conduct. A high degree of moral principle is in it- 
 self a necessary qualification in a post of trust and responsibility, and it is 
 usually associated with a cultivated and improved state of the intellectual 
 faculties. " If there be in the character not only sense and soundness, 
 but virtue of a high order, then, however little appearance there may be of 
 talent, a certain portion of wisdom may be relied upon almost implicitly. 
 For the correspondencies of wisdom and goodness are manifold, and that 
 they will accompany each other may be inferred, not only because men's 
 wisdom makes them good, but also because their goodness makes them 
 wise. Although, therefore, simple goodness does not imply every sort of 
 wisdom, it unerringly implies some essential conditions of wisdom ; it 
 implies a negative on folly, and an exercised judgment, within such limits 
 as nature shall have prescribed to the capacity." {Taylor''s Stales- 
 man.) 
 
 Testimonials are to be received with caution. Young men who come 
 to London in .■-earch of a place, often bring with them a host of testimo- 
 
 130
 
 Duties of Clerks. 
 
 nials, which they expect will place them at the head of any list of candi- 
 dates. When upon other grounds there is an intention of engaging the 
 applicant, these letters of recommendation may sometimes be read. It 
 may be useful to observe by whom the testimonials are given, and 
 whether those persons have had opportunities of judging of the adaptation 
 of the party for the office he seeks. It may also be noticed what qualities 
 are, and more particularly what qualities are not., ascribed to the appli- 
 cant. It has been said, that when a lady is praised for being " amiable 
 and accomplished," it may be inferred that she is neither young nor hand- 
 some. So if a testimonial speaks highly of a young man's " industry and 
 integrity," it may generally be inferred that he does not possess much tal- 
 ent. It is true that these qualities are of more importance than talent. 
 But while they are more important, they are also more common ; and if a 
 young man possesses any kind of intellectual superiority, the fact will 
 certainly not be omitted in his testimonial. 
 
 III. The distribution of the duties of the various clerks is a matter of no 
 small importance. Experience is the only efficient guide in making such 
 arrangements. We may, nevertheless, lay down a few general princi- 
 ples. The great division of the business of a bank office is into the 
 cashier's department and the accountant's department. In London banks 
 there is a third, — the tellers, or out-door department. In the distribution 
 of duties, it is desirable that the accountant's department should be a 
 check itpon the other departments. The cashiers must not have the con- 
 trol of the books, nor the accountants the care of the cash. The account- 
 ants' books should show what amount of cash is in the hands of the cash- 
 iers ; and it is the business of the cashiers to show that they have that 
 amount of cash which corresponds with the accountant's books. If the 
 same officer has the care of the cash and the command of the books, he 
 may abstract a portion of the cash, and alter the books to make them cor- 
 respond. It is further desirable, in large establishments, that two books 
 which act as a check upon one another, should not be kept by the same 
 clerk. While it is not proper to indulge a spirit of suspicion in regard to 
 individuals, it is advisable that the duties of a bank office should be so dis- 
 tributed that the intromissions of any one clerk, either by the abstraction 
 of cash or the falsification of the books, should be liable to immediate de- 
 tection by the entries in some book kept by another clerk. For the same 
 reason, it is proper that any document issued to the public (such as de- 
 posit receipt?, drafts on London, &c.) should be signed by two officers, of 
 whom one should belong to the cash, and the other to the accountants' 
 department. There ought to be a complete division of labor in a bank. 
 Every clerk should have fixed duties to perform, and every duty, however 
 unimportant, should be assigned to some particular clerk. If any thing is 
 neglected, there should be no doubt as to who is to blame. No one should 
 be able to say, " It was not my business ; it was yours." Nor ought any 
 duties to be assigned in common to two or three clerks, to be performed 
 by them as each may find time. In this case, each will do as little as he 
 can, and nothing will be done well. If any dispute arises among the 
 clerks as to the due division of their labors, a reference should be made 
 
 131
 
 A Treatise on Banking. 
 
 to the chief clerk, who will give to each man his work, and hold him re- 
 sponsible for its proper performance. 
 
 IV. The Amount of their Salaries. 
 
 According to Adam Smith, the wages of labor are regulated by the fol- 
 lowing circumstances : — 1. The agreeableness or disagreeableness of the 
 employments themselves. 2. The easiness and cheapness, or the diffi- 
 culty and expense of learning them. 3. The constancy or inconstancy 
 of employment in them. 4. The small or great trust which must be re- 
 posed in those who exercise them. 5. The probability or improbability 
 of success in them. 
 
 Mr. Mill makes the following observations with regard to the salaries 
 of clerks : — 
 
 " A clerk from whom nothing is required but the mechanical labor of copyinp:, pains 
 more than an e(iuivalent for his mere exertion if he receives the wapes of a bricklay- 
 er's laborer. His work is not a tentli part as hard, it is quite as easy to learn, and his 
 condition is less precarious, a clerk's place bcincr generally a place for life. The higher 
 rate of his remuneration, therefore, must be partly ascribed to monopoly, the small de- 
 gree of education required being not even yet so generally diffused as to call forth the 
 natural number of competitors, and partly to the remaining influences of an ancient 
 custom, which requires that clerks should maintain the dress and appearance of a more 
 highly paid class. 
 
 " It is usual to pay greatly beyond the market price of their labor all persons in 
 whom the employer wishes to place peculiar trust, or from whom he requires some- 
 thing besides their mere services. For exam])le, most persons who can afford it, pay to 
 their domestic servants higher wages than would purchase in the market the labor of 
 persons fully as competent to the work required. They do this, not from mere osten- 
 tation, but from reasonable motives ; because tliev desire that those they employ should 
 serve them cheerfully, and be anxious to remain in their service ; because they do not 
 like to drive a iiard bargain with people whom they are in constant intercourse with ; 
 and because they dislike to have near their persons, and continually in their sight, 
 people with the appearance and habits wliiih are the usual accompaniments of a mean 
 remuneration. Similar feelings operate in the minds of men in business with respect 
 to their clerks." {Principles of Political Economy, by John Stuart Mill, Vol. I 
 pp.461 -475.) 
 
 There would be considerable difficulty in applying the rules laid down 
 by political economists with regard to the wages of labor to the case of 
 bank clerks. A banker does not hire a clerk because he is the cheapest 
 man he can get, nor does he dismiss hiin as soon as he can get another 
 man to do the same work at a lower price. He would not find it his in- 
 terest to do this ; for his work is of a peculiar kind. Ilis clerks must have 
 a certain degree of education and of manner, and be taken from a certain 
 class in society. They are not allowed to engage in any other employ- 
 ment ; they have to maintain a respectable appearance ; they must be 
 qualified, not merely for the lowest post in the bank, but must be pre- 
 pared to take higher posts should vacancies occur. And in every post 
 they are intrusted with a large amount of property, and upon their integ- 
 rity and prudence much reliance must at all times be placed. All these 
 circum.stances serve to show, that, in fixing the amount of their salaries, 
 the banker should be anxious to err (if he err ^t all) on the side of 
 liberality. 
 
 He ought also to take into consideration the elfcct which the amount of 
 
 132
 
 Salaries. 
 
 salary produces on the mind and condition of the party receiving it. If 
 an advance of salary quickens the attention or the zeal, or strengthens the 
 fidelity of a party, or induces him to cultivate those talents which add to 
 his efficiency, or if it enables him to move in a higher class of society, 
 and gives him a station and an influence which enable him to be useful to 
 the bank, then is such advance of salary, though entered in the books 
 under the item of expenditure, an outlay of capital which is repaid to the 
 banker with interest in the effect it produces, — an outlay that becomes 
 probably one of the most profitable of his investments. We have great 
 pleasure in transcribing the following letter from Mr. Samuel Jones Loyd. 
 It was addressed to the chief clerk of his London bank. We abstain from 
 all eulogium, as the letter will speak for itself: — 
 
 "Dear Mr. Kirbt, — The inclosed draft for £1,000 I request you will place to 
 the credit of the ' Clerks' Christmas Fund.' At the close of the first year since my 
 accession to the head of this concern, I am desirous of offering to those through whose 
 assistance I have been enabled to bring it to a satisfactory conclusion, some substantial 
 proof of my sense of their services, and of the interest which I feel in all that concerns 
 their comfort and happiness. The year now closing has been marked by some 
 circumstances of an accidental and temporary character, which have tended to throw 
 an unusual degree of labor and trouble on the clerical department of the office. Of 
 the readiness with which this difficulty has been met and overcome I am very sensible ; 
 and for this, as well as for the uniform zeal and integrity with which the general duties 
 of the office are discharged, I beg that the clerks will accept my grateful acknowledg- 
 ment, and that you and they will believe me to be the faithful friend of you all. 
 
 "S. J. LOTD. 
 
 " Lothbury, December iUh, 1845." 
 
 In all banks the junior clerks have lower salaries than the senior clerks. 
 In Scotland, a clerk usually serves an apprenticeship of three years, dur- 
 ing which he receives but a small salary. This plan has been introduced 
 into some of our country banks. In London it does not exist. In the 
 private banks, a junior clerk usually commences with .£60 a year, and a 
 portion of the Christmas money. In the joint-stock banks, where no 
 Christmas money is allowed, the commencing salary is usually £ 80. But 
 the rules of advance are various, and, indeed, must be so, depending as 
 they do upon the prosperity of the banks, and other contingent circum- 
 stances. One bank may assign a certain fixed annual increase to each 
 clerk, whether he advance in rank or not. In this case, his salary will be 
 regulated entirely by the number of his years of service. Another bank 
 may have a fixed salary for each post, and a clerk has no increase of sal- 
 ary except when he takes a step in rank. Another bank may adopt a 
 scale of salaries combining the principles of the other two. For instance, 
 every post in the bank may have a fixed minimum salary. But each 
 clerk holding a post for a certain period (say for five years), has an 
 annual advance for that period. Then he stops, and receives no further 
 advance until he is promoted to the next post, where again he becomes 
 entitled to the annual advances belonging to that post. We give no opin- 
 ion as to the respective merit of these plans. But there is one principle 
 we would enforce, that the salaries of the clerks should be regulated by 
 the prosperity of the bank. If the bank is prosperous, the clerks ought to 
 share in its prosperity ; and if the bank is unfortunate, the clerks must 
 consent to share in its ill fortune. But, under any cirumstances, a scale 
 
 133
 
 A Treatise on Banking. 
 
 of salaries is desirable. It prevents caprice on the part of the bank, and 
 jealousy on the part of the clerks. The amount of salary in each case 
 should be fixed by rule, and not by favor. 
 
 With reference to this subject we quote from Mr. Taylor's work, en- 
 titled " The Statesman," a work which he states to have been the result 
 of twelve years' official experience : — 
 
 " It is often said, that in order to pet efficient service good pay must be offered. But 
 this is not true as applied to first appointments of younp men. On the contrari-, it will 
 often happen that the largeness of tlie temptation, by bringing into activity the most 
 powerful interests through which abuses of patronage are engendered, will lead to the 
 appointment of a worse man than would have been obtained by a smaller ot^'er. On 
 the other hand, though men of promise are to be had cheap, whilst they are young and 
 their value is little known to themselves or others, they cannot, when this is no longer 
 their condition, be kept for a small consideration, or at least kept contented. But a 
 reasonable degree of contentment is of essential importance where the understanding 
 is the workman. There is no position so strong as that of a man who stands upon his 
 head ; and if he be not induced to the activity of just thinking and clear reasoning, he 
 will hardly be coerced to it. Upon the whole, therefore, I would say, that what is 
 most conducive to good appointments in the first instance, and thenceforward to deriv- 
 ing benefit from them, is to offer small remuneration to the beginner, with successive 
 expectancies proportioned to the merits which he shall manifest, and of such increas- 
 ing amount as shall be calculated to keep easy, through the progressive wants of single 
 and married life, the mind of a prudent man. Upon such a system, if unfit men be- 
 longing to influential families shall make good an entrance into the ser\'ice, they will 
 be more easily got rid of; since, finding that they have got but little in hand, and have 
 hut little more to look to, they will hardly be desirous to continue in a career in which 
 they must expect to see their competitors shoot ahead of them." 
 
 The following is an account of the total amount of salaries, morning 
 money, gratuities, &c., paid to the servants of the Bank of England in 
 London and at the branches, and of the number of persons to whom the 
 said amount was paid, for the year ending the 29th of February, 
 1832 : — 
 
 820 Clerks and porters, 1 
 
 38 Printers and engravers, ... V £211,903 10s. lOd. 
 
 82 Clerks and porters at the branches, . . ) 
 
 940, Average £ 225 each. 
 
 Amount of pensions paid in the same period, 193 pensioners, average £161 each, 
 £31,243 18s. l\d. 
 
 Securities. — In all banks the clerks give sureties for their integrity, — 
 usually two, of £ 500 each ; and in some banks these amounts are in- 
 creased on accession to higher offices. Of late years, societies have been 
 formed, both in England and Scotland, for the purpose of giving, on the 
 part of clerks and others, the amount of security required. These socie- 
 ties allege that, — 
 
 " Suretiship by private bondsmen is attended with various inconveniences and ob- 
 jections ; instances have constantly occurred in which persons of the highest respectfi- 
 bility have been obliged to forego valuable appointments, from cither the great diffi- 
 culty of obtaining security, or a repugnance to place their relatives or friends and 
 themselves under the obligations involved therein. The society undertakes, on the 
 annual payment of a small sum, to make good in case of default I)y fraud or dishon- 
 e.«ty any losses which may be sustained to an amount specifically agreed upon, and 
 
 134
 
 Securities. 
 
 by such means obviates the necessity for private sureties, as well as the obligations 
 arising therefrom, which often prove as prejudicial to the best interests of employers 
 as to tlie party seeking guarantee. 
 
 " The association offers to the public the following advantages : — 
 
 " To the employed. — It obviates the difficulty of obtaining the requisite securities 
 for personal integrity, which has often placed an insuperable barrier in tlic way of 
 many persons of the "highest character and ability; it aftbrds fiicilities to those in pur- 
 suit of employment, and relief from the embarrassment attendant upon asking, with 
 the uncertainty of obtaining, private suretiship ; and removes that weight of obligation 
 and discomfort which such engagements necessarily impose. 
 
 " To the employer. — The ample capital of the association, with the power and su- 
 pervision lodged in the Board of Trade, renders the policy of the company much more 
 valuable than that of any individual, inasmuch as it is not liable either to doubt or de- 
 preciation. In large establishments, both public and private, where the securities are 
 numerous, and the sureties often resident in many different parts of the country, and 
 known only by repute, it becomes nearly impossible to watch over their continued ex- 
 istence and solvency; and cases of default have frequently occurred when, upon inves- 
 tigation, it has been found that all the sureties have been dead for many years. 
 
 " The rates are from 10s. per centum per annum, and upwards (according to the na- 
 ture of the employment), on the amount of security required. 
 
 " No charge is made for stamp duty except in special cases ; the usual legal ex- 
 penses of surety bonds will therefore be entirely avoided by persons who enter on their 
 respective duties under the guarantee of this society. 
 
 " A reduction is made in the premium on the sixth annnal payment." 
 
 The Lords of the Treasuty, and a great many banking companies, have 
 accepted the guarantee of these societies. 
 
 A new society has recently been formed, entitled " The United Guar- 
 antee and Life Insurance Company," the object of which is to grant po- 
 licies for fidelity of trust, combined with policies of insurance on life, or 
 with deferred annuities or endowments. The following are extracts from 
 the prospectus : — 
 
 " Public guarantee and life insurance are, in principle and practice, so closely assim- 
 ilated, that they may be fairly recognized as the relative accompaniments of each 
 other, and their specific advantages are here mutually presented to the public at a con- 
 siderable reduction of premium. 
 
 " In order to provide against the numerous cases of hardship and constant uncer- 
 tainty' to which private bondsmen are exposed, the directors confidently recommend 
 the combined application of the two principles to all classes who may be called upon to 
 assume the risk, or who may stand in need of it from others. 
 
 " The superiority of the policies of a public company has, in consequence of the se- 
 rious losses which have arisen from decayed or depreciated sureties, induced the 
 heads of public institutions and private mercantile firms to require those engaged in 
 their service to provide the guarantee of a public company, in lieu of, and in pref- 
 erence to, that of private individuals. How much more valuable must that surety be- 
 come when strengthened and additionally secured by the contingent personal interest 
 (increasing yearlv in value) of insurance on life? 
 
 •' The life policies thus issued, payable either at a given age, say 50, 55, 60, and 05, 
 — or at death, should that event take place before, —or for the whole term of- life, — 
 and the deferred annuities, so granted in conjunction with the fidelity policies, will, in 
 the event of breach of trust, be cancelled, and the premiums paid thereon forfeited. 
 This, however, can only occur by a voluntary act of the insured themselves, and will 
 not in anv other respect affect the value of the life policies or annuities. 
 
 " Particular attention is requested to this system of granting deferred annuities, in 
 conjunction with policies for the fidelity of the annuitants ; by which it will be seen 
 that, upon paying a moderate sum annually to this company, any young man of ap- 
 proved character mav secure, in addition to a policy for his fidelity, a certain provision of 
 £50 per annum for the remainder of his life, commencing at the age of 50 or upwards. 
 
 " To the provident among that numerous class of persons who either hold or are 
 K 135
 
 A Treatise on Banking. 
 
 seeking situations of trust and responsibility, this company offers the most complete 
 substitute for pensions in old age, which may thus be secured by the insured them- 
 selves. 
 
 " The value of this union of the two principles will be extended to parties who de- 
 sire surety policies, and whose health may not be sufficiently sound to render their 
 lives insurable at the ordinary rates ; and who may endow a child to receive, say £ 100, 
 upon attaining the a<;e of twenty-one, — a plan wliich will be found preOminently ad- 
 vantaj^cous to those enfjaped in occupations of trust, and of limited income. 
 
 " It will be manifestly apparent that the risks thus combined will render the surety 
 policies so granted infinitely preferable to those provided by private sureties and other 
 guarantee companies ; and that they hold out to the employers increased security, by 
 making the insured specially interested in their own good conduct; and to the em- 
 ployed or assured, they insure a greater share of contidcnce from their employers, and 
 independence to themselves, than under the common form of policy, and they are re- 
 lieved in a great degree from paying for the dishonesty of others. 
 
 " Should the insured at any time wish to discontinue the surety policy, the life policy 
 will not be affected thereby, hut will remain in force upon payment tlieneeforlh of an 
 annual premium to be specially calculated. 
 
 " To persons whose lives are insured in this company, and who may, at any future 
 time, require policies for their fidelity, the directors will be prepared to grant the same, 
 in conformity with the regulations of the company, on the payment of a moderate ad- 
 dition to the premium chargeable on the life policies alone." 
 
 The claims of the society are further set forth in a pamphlet on 
 " Public Guarantee and Private Suretiship," published by its secretary, 
 Mr. James Knight. 
 
 In the year 1841 the Bank of England took measures for discontinuing 
 the system of requiring sureties from the clerks. Every clerk subscribed 
 annually two shillings per cent, upon the amount of his surety bond. 
 When he had subscribed in the course of five years (or immediately, if he 
 chose) ten shillings per cent., the liability of his sureties ceased. Every 
 new clerk subscribes, when admitted, ten shillings per cent, on the amount 
 of the bond he would otherwise give. These contributions are invested in 
 the Three per Cent. Reduced, or Consols. This fund is fi.xed at ^6,000 
 stock. When at this amount, the interest is given to the " Clerks' 
 Widows' Fund," a fund established by the clerks, with the assistance and 
 support of the bank. When the claims have reduced the guarantee fund 
 below .£6,000, the interest goes to this fund until it has increased to this 
 amount. If the claims reduce the fund .so low as c£ 4,700, then the clerks 
 are required to make a further contribution until the fund is again raised 
 to <£6,000. But this contribution is never more than two shillings per 
 cent, per annum on the amount of their respective bonds. Nor can any 
 claim be brought against the fund greater than the amount of the bond 
 that would have been required from the defaulter. The clerks still give 
 their personal bonds, which arc for the full amount of their deficiencies. 
 This is an admirable plan for a large establishment. In adopting it, the 
 directors have shown a sound discretion, as it makes all the clerks inter- 
 ested in watching over one another. At the same time, they have mani- 
 fested that kindness and goodwill wliich have, we believe, at all times dis- 
 tinguished the directors of the Bank of England in their conduct towards 
 their clerks. 
 
 V. The System of Promotion. 
 
 It need hardl}' be observed that some posts in a bank are more import- 
 
 136
 
 Promotion of Clerks. 
 
 ant than others ; and it is always desirable that the most clever men 
 should occupy the most important posts. This object is desirable, but 
 how is it to be attained ? 
 
 The three main divisions of employment in a London bank are, the 
 cashier's department, the accoimtant's department, and the teller's or out- 
 door department. All the clerks enter, in the first instance, in the tellers' 
 department, and their first duties comprise the collection of the payment 
 of bills. The senior tellers are occupied within doors in various duties 
 connected with the out-door operations. From this department, as vacan- 
 cies occur, the clerks are promoted to higher posts in either the cashiers' 
 or the accountant's department. 
 
 It is, of course, only in large banks, where there is necessarily a great 
 subdivision of labor, that these three departments exist in a separate form. 
 In smaller banks, though the duties are the same, yet one clerk may, in 
 one day, perform duties belonging to each of the three departments. 
 
 The Cashiers'' Department.. — The cashiers* of a bank stand at the 
 counter, and attend to the public. These officers, in Scotland, are called 
 tellers ; but in Scotland their duties are less important, as tellers pay no 
 cheques until they have been marked by the accountant, who is their su- 
 perior officer. We should form a very inadequate idea of a cashier in a 
 London bank, if we considered him only as a mere counter of money- 
 Quickness in counting money is indeed one very necessary qualification. 
 But, besides this, he should have such a mental organization that he can 
 recollect the general average of each customer's balance, so as to be able 
 to pay their cheques without a too frequent reference to the ledger- 
 keeper. He should also possess a quickness of eye in detecting forged 
 signatures. — a self-possession, so as to be cool and collected when the 
 counter is thronged with people, — a command of temper, so as not to be 
 irritated by undeserved reproach, — and not only a general courtesy of 
 manner towards the public, but a peculiar urbanity towards the customers 
 of the bank, with a readiness and an anxiety to promote their convenience 
 in any matter on which they may require information or advice. In fact, 
 it may justly be said, that there is no class of clerks on which the reputa- 
 tion of a bank with the public so much depends as on the cashiers. And 
 hen'ce, in London banks, those clerks who are deemed the quickest, the 
 most able, and the most gentlemanly, are usually promoted to this office. 
 
 The Accountant''s Department refers to the keeping of the books and 
 the accounts. The main qualifications for the clerks in this depaitment 
 are, good hand-writing, accuracy in figures, and method in the arrangement 
 of their work. Slowness is no positive disqualification, provided it be as- 
 sociated, as it often is, with application and perseverance. An accountant 
 is not compelled to do any given quantity of work within a given time. 
 By a proper arrangement of his duties, he can usually contrive to keep 
 himself pretty equally employed during the whole of the day, and on busy 
 occasions he can perform what remains in the evening, after the hours of 
 public business. A steady perseverance is of the first importance. But 
 we must distinguish between those qualities required in the clerks of the 
 accountant's department, and those required in the accountant himself. 
 
 * In the United States termed Tellers. — Am. Editor. 
 137
 
 A Treatise on Banking. 
 
 The chief accountant in a bank is not a mere book-keeper. It is one 
 thing to keep a set of books previously prepared and arranged, and an- 
 otlier to frame a set of books, or a new system of book-keeping, adapted 
 for any operation that is proposed to be carried on. In the latter case, 
 mental powers are required that are by no means common. And even 
 where a system is established, the chief accountant of a bank will often 
 liave occasion to consider the best way of passing certain transactions 
 through the books, of framing abstracts of operations which the books 
 may not immediately supply, of making difficult calculations, and of ex- 
 amining lengthy and complicated accounts, and exhibiting them with 
 clearness and brevity. A good system of book-keeping, and a clear- 
 headed accountant, would have prevented many a bank from stopping 
 payment. 
 
 From this statement of the qualifications of cashiers and accountants, it 
 will appear that most clerks will be more fitted for one office than the 
 other, and it is desirable that each clerk should be placed in the depart- 
 ment for which he is best adapted. Where there is no peculiar adaptation, 
 and where there is no marked difference, among the clerks, the promo- 
 tion should go according to seniority, — not seniority in regard to age, but 
 seniority according to the time they have been in the bank. But it will 
 often happen, not only in the first, but also in subsequent steps of ad- 
 vancement, that the clerk who is entitled to a vacant post by length of 
 service, is not so well qualified for it as some of his juniors. But even in 
 this case, the individual should not be passed over, if he can perform the 
 duties with an average degree of efficiency. Should he, however, be 
 wholly unqualified, or fall below mediocrity in his qualifications for the 
 office, there should be no hesitation in promoting over him some other 
 clerk better adapted for the office. As, liowever, all such cases will give 
 rise to some suspicion of favoritism, and as the party who is passed over 
 is sure to think himself unfairly treated, it is desirable that the clerk 
 thus promoted should possess such a marked superiority over the other, 
 that no doubt can exist of the justice and propriety of the arrangement. 
 On this subject, we again quote Mr. Taylor's " Statesman " : — 
 
 " The cliiims of promotion are twofold : first, merit ; second, leiifrth of service. And 
 the difticulties to be considered are those which arise when tliesc ch\ims clash ; that is, 
 wlien the most meritorious officer is not lie who has served the longest. And. haviny; 
 rejjard to the larj^e public interests and the deep individual conccrnnu-nts with which 
 tliey deal, it may be stated broadly, as a general rule, that merit, or in other words, in- 
 dustrious ability, should be the one essential consideration to be regarded in their pro- 
 motion. But the question then arises. Will the judge be always incorrui)tible and in- 
 fiillible ? And if not, how arc injustice, favoritism, and abusive promotion to be 
 guarded against? The answer, as I conceive, is, that there can l>e no perfect protec- 
 tion against these evils ; that the principle (like most other princijdcs) resolves itself 
 into a matter of degree ; and that tlic protection will be adequate in tlic main, if the 
 rule of preferment by merit, as against seniority, be apjilicd only where there is a 
 mtirked distinction of merit. For there are divers securities, each of which may be 
 more or less leaned upon, the aggregate of which will aiVord in the main all but a cer- 
 tain reliance, where the distinction of merit is marked. If motives of favoritism l)e at 
 work, the most able and useful officer will, at all events, have a fair chance of being 
 the favorite. But if he labor under some defect (as unsightliness, ill manners, &c.), 
 which, without impairing his j)ul)li(' utility, tends to throw him out of favor, lie will 
 nevertheless have that hold upon the self-interest of his principal, which he wants upon 
 
 138
 
 Discipline. 
 
 his good will. Further, of this intellectual order of men, there will hardly ever be ten 
 brought tot^ether, of whom one will not have a generally acknowledged superiority to the 
 rest. Even the vanities of men make tliem just, as umpires ; and he who cannot pre- 
 tend to postpone nine others to himself, will not consent to postpone himself to any 
 but the best of the nine. It will be found, then, that a man's reputation amongst his 
 fellows in an ofhce will seldom fail to be according to his deserts, and that where the 
 superiority is marked, the award of common repute will be both just and decisive ; and 
 being so, it will rarely happen that the patron will be induced by any motive of favorit- 
 ism to brave the reproach of disregarding it. In short, it is the nature of industrious 
 al)ility, acting through various methods and upon various motives, to vindicate its own 
 claims under any system in which those claims are recognized; and the system which 
 shall conform to this natural tendency, and be so framed as to legitimate the rising of 
 what is buoyant, will be found to work the best. 
 
 " Tliere is, however, a certain moderating hand to be applied, even in the preferment 
 of merit. Except in urgent and peculiar cases, in cases of extreme necessity on the 
 part of the service, or extraordinary endowments, and character also, on that of the in- 
 dividual, preferment should proceed, as Lord Bacon teaches, '/>er gradus, non per saltus.'' 
 For, besides the ordinary evils attendant upon sudden elevations, it should be observed 
 that the hope, and not the fact, of advancement is the spur to industry ; and that by a 
 large dispensation of reward at once, which cannot be followed by like rewards in fu- 
 ture, the patron sinks his capital, and forestalls that revenue of reward which should 
 furnish him with resources of inducement through successive years. Moreover, if a 
 mat! be advanced largely at once, there will not only be little room left for his further 
 promotion, but that little room will seem less when measured upon the scale to which 
 his ambition will now expand itself; for he who has advanced by a stride, will not be 
 content to advance afterwards by steps." 
 
 VI. The Rules of Discipline. 
 
 As the discipline of the office must depend very much upon the chief 
 clerk, a description of his duties will describe many of the duties of the 
 other clerks. 
 
 ■ The office of chief clerk requires qualifications of no ordinary kind. 
 It need hardly be said that he should possess a thorough knowledge of the ' 
 business of the office. He ought also to possess certain moral qualifica- 
 tions, such as a command of temper, a love of order and regularity, a 
 rigid adherence to discipline, accompanied by kindness of disposition 
 and of manners towards his colleagues, a gentlemanly and courteous de- 
 meanour, and, above all, he will be expected to exemplify in his own 
 conduct those precepts it may become his duty to inculcate upon others. 
 
 The following are the principal duties of a chief clerk : — 
 
 To see that the clerks come at proper time in the morning, are not 
 absent unnecessarily during the day, and that they do not leave the bank 
 at night until they have finished their work. To see, by occasional in- 
 spection, that all the books of the office are kept in a proper manner ; and 
 where he finds this not to be the case, to give such instructions and ad- 
 monitions as the circumstances may require. To see that during the day 
 the counter is properly appointed, and that no delay takes place in attend- 
 ing to the wants of the public. For this purpose, it is desirable that his 
 desk should be so placed as to command a view of the counter. To see, 
 by occasional inspection, that the customers' books are written up in a 
 proper manner ; and in case of complaint, he will personally investigate 
 the matter, and explain it to the customer. To see, early in the morning, 
 that the balance was correct on the preceding night ; and when otherwise, 
 he will himself attend on the second or third evening, and direct thai 
 
 139
 
 ♦ A Treatise on Banking. 
 
 proper means be employed to discover the difference. To count, at such 
 times as may be deemed proper, the money of tlie several cashiers, and 
 when necessary to report thereon to the banker. To see that all the offi- 
 cers of the bank conduct themselves towards each other and the public in 
 a courteous and gentlemanly manner, and to maintain throughout the 
 office a proper state of discipline and subordination. To take charge of 
 the stationery and other matters used in the office, and to prevent any loss 
 or waste of any portion of the property of the bank. 
 
 Besides the points of discipline hinted at in the above description, there 
 are others that may require more particular notice, as 
 
 Punctuality of A tlendance. — To insure punctuality of attendance in 
 the morning, some banks adopt the practice of keeping a book, in which 
 every clerk writes his name on his arrival ; and when the time has ex- 
 pired, a line is drawn, which shows who has arrived in time and who has 
 arrived late. 
 
 Punctuality of attendance is an index of character. It may fairly be 
 inferred that those who are the most punctual in the morning will be most 
 attentive to their duties during the day ; that they have formed the most 
 regular habits, and are, consequently, the most deserving of promotion. 
 Those, too, who are the most punctual are the most deserving of occa- 
 sional holidays. They who are habitually late must be regarded as hav- 
 ing chosen to take their holidays by piecemeal each day, and they can 
 therefore have no claim to other holidays besides. In all applications for 
 promotion or leave of absence, it is deserving of inquiiy, wliether the 
 party is usually punctual in his attendance. With regard to absence from 
 illness, it cannot be supposed for a moment that any clerk would pretend 
 to be ill when he is not so, in order to have an excuse for absenting him- 
 self from the bank. An act of this kind would show such a want of per- 
 sonal honor as should be a disqualification for holding any office in a 
 bank. 
 
 " Few things occasion more dissatisfaction and annoyance to the supe- 
 riors in a bank than the absence of clerks on every slight attack of illness. 
 Unless a clerk feels himself quite unable to perform his duties, it is very 
 injudicious for him to absent himself. It interferes with his ])romotion, for 
 his superiors will be reluctant to advance him to any post where his ab- 
 sence would be more inconvenient than while he is engaged in an inferior 
 situation. In addition to this, the superior in the office may attribute the 
 attack of ' bile ' or ' indigestion ' to the indulgence of a convivial taste, 
 which it will be well for a clerk to avoid obtaining a character for. And, 
 under any circumstances, a man who continues at his post as long as he is 
 able, will stand much higher in the estimation of those with whom he is 
 engaged, than he who forsakes his duties on every trivial occasion." 
 {The Banker'^s Clerk, p. 151, an excellent little work, published as one 
 of the series in the Guide to Serrnce, by Mr. Charles Knight.) 
 
 A clerk should take care of his own health. We thiidt it is better for 
 him to stand than to sit at his work. His desk should be raised to such a 
 height that he can do this without stooping. He should at all times avoid 
 pressing his chest against the edge of the desk, as that may produce se- 
 rious complaints. The post most friendly to health is that of cashier. 
 
 140
 
 Punctuality. 
 
 He is generally standing ; his attention and mental faculties are in more 
 constant activity, and he is obliged to talk, which is useful to the lungs. 
 It may be doubted whether the exercise of the intellectual faculties, when 
 not carried to excess nor attended with anxiety, is ever injurious to health. 
 Those mental operations which are connected with the office of a bank 
 clerk are in themselves beneficial. It is the confinement, the impure air, 
 and the keeping of the body too long in one posture, that affects the 
 health. Hence, clerks should live at a distance from the bank, and walk 
 to and fro. If they reside at the bank, they should take exercise in the 
 open air, either in the morning or the evening. When the weather is 
 bad, they can walk up and down the room, with the windows open. Any 
 kind of amusement that should throw the body into a variety of attitudes, 
 would be useful. Singing is friendly to health, if not carried to excess, 
 nor practised in confined or crowded apartments. Boating, in modera- 
 tion, is serviceable. Gardening is highly beneficial. A clerk who wishes 
 to enjoy good health should never keep late hours, nor get into debt, nor 
 gamble in the funds. He should also have a hobby, that is, some kind of 
 fixed amusement to employ his time when absent from the bank, in order 
 to change the current of his thoughts, and to counteract those evils that 
 sometimes arise from a monotony of occupation. If this hobby should be 
 of a kind to be useful or instructive as well as recreative, all the better. 
 The great disease against which he should guard is consumption. He 
 will be more subject to this in youth than in more advanced age. And it 
 has been remarked that healthy young men, fresh from the country, 
 when appointed clerks, have become more susceptible of consump- 
 tion than less robust persons who have been seasoned by a residence in 
 London. 
 
 The Bank of England have a medical gentleman who attends at the 
 bank one hour every day. He is employed by the directors upon matters 
 connected with the health of their clerks. Every clerk, when appointed, 
 is examined, to ascertain that he is in good health. If he applies for leave 
 of absence on the ground of ill health, he undergoes a medical examina- 
 tion. If absent from illness, he is visited by the bank surgeon, who re- 
 ports to the directors upon the nature of his complaint, and its probable 
 duration. If a clerk complains that his employment is injurious to his 
 health, he is examined, and in some cases his employment is changed. 
 If he applies for a pension on account of age or illness, he is also ex- 
 amined. In each of these cases a formal medical report is drawn up, and 
 laid before the directors. The present surgeon is Mr. Alfred Smee, 
 F. R. S., of Finsbury Circus, a son of the chief accountant of the bank. 
 It is not his duty to prescribe for the clerks ; but in the case of the porters 
 or messengers, he acts as their medical attendant, and is paid by the 
 bank. 
 
 It is worthy of inquiry, whether this excellent arrangement might not 
 be extended, and adopted by other banking institutions. Why should not 
 every large company give a fixed salary to a medical man to attend to the 
 health of all their clerks ? This would often be useful in preventing ill- 
 ness, or in checking its first approaches. It would thus preclude, in some 
 cases, those inconveniences which are now felt through the absence of 
 
 141
 
 A Treatise on Banking. 
 
 sick clerks ; while it would be a boon to the establishment, and save 
 them what, in some instances, must be a heavy item of expense. 
 
 Holidays. — It is desirable, on several accounts, that all the officers of 
 a bank, and especially those who are intrusted with cash or other prop- 
 erty, should once a year have leave of absence for at least a week or a 
 fortnight. This should not even be optional ; it ought to be a fixed rule 
 witb which they should be expected to comply. These absences should be 
 arranged to take place at those seasons of the year when they will be of 
 the least inconvenience to the business of the bank. These holidays ought 
 to be readily granted on the ground of kindness and humanity ; but where 
 these feelings do not exist, motives of self-interest alone would prompt a 
 ready acquiescence in such applications. In the first place, a great in- 
 convenience is often experienced in large establishments from the illness 
 of the clerks when they are denied proper seasons of relaxation. In this 
 case, the loss of time from ill health is greater than that which would be 
 occasioned by holidays. A sick clerk, even when he attends to his du- 
 ties, is neither so quick nor so correct, nor can he get through so much 
 work, as a clerk who, by proper recreation, has been kept in perfect 
 health. These occasional holidays tend very much to improve the efficien- 
 cy of an office. When a clerk is absent, the next in seniority takes his 
 place ; and when all the clerks have been absent in turn, every duty in 
 the bank becomes perfectly familiar to at least two persons, so that in the 
 case of those absences which airse from unavoidable causes, little inconve- 
 nience comparatively is felt. But while the bank is thus rendered inde- 
 pendent of any one individual, it must not be supposed that the absence 
 of a clerk lessens the importance attached to his services. When a clerk 
 is really efficient, an occasional absence renders his value more apparent, 
 and increases the estimate formed of his character ; while the indulgence 
 he has received will stimulate his energies and increase his desire to 
 render himself more than ever useful to his principals. 
 
 Another advantage to a banking establishment from the absence of 
 their clerks is, that it furnishes an additional guarantee for their honesty. 
 We have known instances of frauds being carried on for several years by 
 clerks who were constant in their attendance, while a single day's absence 
 would necessarily have led to a detection of their dishonesty. When a 
 clerk takes his holidays, all the property under his care is given over into 
 other hands, and the knowledge that he will be called upon to do this 
 periodically, may deter him in the first instance from commencing a 
 career which must thus be necessarily exposed. 
 
 The following is stated in a city article of the Times to be the arrange- 
 ment of the Bank of England on this subject : — 
 
 " It is not generally known that the Bank of Enghind have recently entered into an 
 arrangement by which ail the persons on the estal^lishment are allowed leave of ab- 
 sence once every year, the holiday varying in length according to the length of service. 
 To carry out this plan, the whole ninnbcr of persons is divided into four portions, and 
 each of these four portions takes the vacation in one of the four periods of the year 
 that follow the payment of the dividends, and precede the shutting, these being the pe- 
 riods in which the'lciist business is done. So complete is the system, that the parties 
 who take their holiday in the spring (|nartcr one year, take it in the summer quarter 
 in the year foUowing,"and so on through all the four, that one may not have an unfair 
 
 142
 
 Bank Books. 
 
 advantage over the other. The shortest holiday, we understand, is about nine days, 
 and the longest about three weeks." 
 
 Customers'' Books. — It should be a great object with the chief clerk to 
 see that the customers' books are written up correctly and neatly, in a 
 good hand-writing, and free from blots or erasures. These are the only 
 books that go out of the bank, and therefore they are the chief means by 
 which the customers can judge as to the manner in which the business of 
 the office is conducted. It is not advisable that the writing up of these 
 books should be left to the junior clerks. They should be placed in the 
 hands of clerks of some standing. The same book should always be 
 written up by the same clerk ; and, when it can be so managed, the credit 
 and debit side should both be in the same hand-writing. One of the best 
 writers in the office should be appointed to this post, and his salary should 
 be proportionate to its importance. 
 
 It is the practice of all bankers to let the customers' book be a copy of 
 the ledger with the sides reversed ; thus the credit side of the ledger is the 
 debit side of the customers' book. The reason assigned for this is, that 
 the ledger is the banker's account against his customer, and the book is 
 the customer's account against the banker. Hence the customer, when 
 he looks at his book, has at his left hand the sums with which he has de- 
 bited his banker, and at his right the sums which are to the banker's 
 credit. 
 
 Cas/iter's Deficiencies. — It cannot be expected that a cashier can re- 
 ceive and pay away money for a whole year, and yet never make any 
 mistakes. Some deficiencies will be sure to arise. Each cashier is con- 
 sidered liable to make good his own loss. But, to meet these deficien- 
 cies, some banks allow to each cashier a certain sum, — say <£ 20 or ^ 30 
 per annum, — which is called risk-money. Others pay such deficiencies 
 as may arise during the year, giving an admonition to any cashier whose 
 deficiencies are unusually large. Superior accuracy in this respect is also 
 considered as one test of superior merit, and therefore as forming one 
 claim to promotion. When a cashier takes his holidays, he delivers up 
 his cash to the chief clerk, who counts it and sees that it is correct, and 
 then delivers it to the clerk who is to act for the cashier, who signs an 
 acknowledgment in the money-book that he has received the right amount. 
 The cashier, on his return, will make a similar entry. It is said to be the 
 practice in some establishments for the chief clerk to count the cash of 
 all the cashiers every Saturday night. But when, from the extent of the 
 business, this cannot be done, he counts the cash of each cashier individu- 
 ally, at such times as may be most convenient to himself, giving the 
 cashier no previous notice of his intention to do so. He immediately re- 
 ports to the banker any deficiency he may discover. In all banks it is 
 understood that the cashier is not allowed to apply any part of the bank 
 money, even temporarily, to his private use, nor to lend any sum, however 
 small, to the other clerks, upon their I. O. U.s or other engagement. 
 Any violation of this rule, though with no fraudulent intention, is consid- 
 ered a sufficient ground for instant dismissal. 
 
 Gambling in the Funds., or in Shares. — Some banks make it a rule to 
 dismiss any clerk that is found to be engaged in transactions of this kind. 
 
 143
 
 A Treatise on Banking. 
 
 The evil efTects of such practices are very great. Speculative engage- 
 ments will necessarily distract their minds, and draw their attention from 
 their official duties. If unfortunate, their personal comforts may be di- 
 minished : they may incur debts that will require years of saving to liqui- 
 date, or they may be tempted to actions which would ruin themselves and 
 disgrace their families. 
 
 VII. The Training of Clerks for higher Offices. 
 
 Whatever natural talents a young man may have when he enters a 
 bank, he cannot be expected to perform his duties well until he has been 
 instructed. There is a good way and a bad way, a quick way and a slow 
 way, of performing even the most simple operation. Incorrect or slovenly 
 habits, when once acquired, are not easily abandoned, ^^'hen, therefore, 
 a young man enters a bank, he should be placed under the tuition of an- 
 other clerk, w^ell qualified to instruct him with regard to all his immediate 
 duties. It is also desiral)le that the chief clerk should not have much 
 manual labor, but should have leisure to walk round the office, stand for 
 awhile at the elbow of each clerk, observe his peculiar defects, and give 
 such instructions as he may deem necessary or useful. The senior 
 clerks generally should also be ready at all times cheerfully and courte- 
 ously to give instruction to their juniors. 
 
 There are many ways of ascertaining the relative merits of a clerk. 
 There is one obvious way ; that is, to inspect the books which he keeps. 
 It can readily be seen if they are kept in a good and neat hand, if there 
 are any blots or erasures, and if they indicate any great degree of care- 
 lessness or otherwise. Quickness is generally an evidence of cleverness. 
 A clerk who can count notes very fast, or who can cast up a long column 
 of figures very quickly, and yet accurately, is generally a clever man. 
 Quickness of hand denotes quickness of head, and it will generally be 
 found that these two kinds of quickness go together. We do not say that 
 this mechanical quickness of head proves soundness of judgment, but 
 neither does it prove the reverse. In a clerk it is a decided recom- 
 mendation. 
 
 Another test of the cleverness of a clerk is, the opinion formed of him 
 by his fellow-clerks. When men associate together day after day for a 
 number of years, both their excellencies and their defects become known 
 to each other, and each man falls into the position to which his qualities 
 entitle him. The opinion which any one clerk expresses of the relative 
 merits of the other clerks will generally be correct, when his own interest 
 is not concerned. The opinion he may express will, in fact, be the opinion 
 of the office, formed, not only on his own experience, but also on the ex- 
 perience of all the other clerks. 
 
 The report of the chief clerk will generally express this united opinion 
 of the office. But it is well for a banker to keep himself well acquainted, 
 at all times, with the sentiments generally entertained by the chief clerk 
 respecting the other clerks, and not ask his opinion merely when there is 
 an opening for promotion. On these occasions, feelings of kindness, or the 
 rever.se, may induce a chief clerk to speak of the party in a somewhat 
 different tone from that which he would employ in ordinary times. 
 
 144
 
 Training of Clerks. 
 
 With a view to the proper training of clerks, it is desirable that there 
 should not be too many in proportion to the work. If the clerks are un- 
 employed for any considerable portion of the day, their habits of atten- 
 tion, of industry, and of quickness are impaired, so that they do less work 
 even in those hours in which they are occupied. The duties of each clerk 
 should bo sufficiently heavy to require a continuous application of the 
 mind during the whole of the working hours. If a banker find that the 
 clerks have time to read books or newspapers, or to carry on either gam- 
 bols or quarrels among themselves, during the hours of business, he may 
 safely infer that he has too many hands. By reducing the number, he 
 will make each clerk . more efficient, and the work will be better done. 
 He will also be able ,to increase their salaries individually. It is better 
 that the same amount of money should be distributed anriong a smaller 
 number of effective men, than among a larger number who are less effec- 
 tive. The amount of Christmas money received by each will also be 
 greater. 
 
 For the purpose of training the clerks, it is desirable that their labors 
 should be so subdivided as that the duties of one office should be a train- 
 ing for the office immediately above it. The clerk, on his entrance into 
 the bank, will thus have to perform those operations that require the 
 least degree of professional knowledge, — of knowledge peculiar to the 
 business of a bank, — and will advance step by step (each step requir- 
 ing but a small addition to his previous knowledge) to the higher posts. 
 When it is ascertained for which department — the cashier's or the ac- 
 countant's — the teller is best adapted, he should be put into that post 
 the operations of which will form the best training for those duties which, 
 when promoted, he will have to discharge. 
 
 The occasional absences of the clerks are conducive to their improve- 
 ment. The juniors thus learn to perform the duties of their superiors. 
 New arrangements are formed temporarily for a different division of la- 
 bor, and, the hands being fewer, an additional stimulus is given to exer- 
 tion. It is also useful, when it can be done, for the clerks to change oc- 
 casionally, and do each other's work. Every clerk should be encouraged 
 to suggest any improvements for abridging or facilitating his own labor. 
 When a bank has several branches, it is often advisable that an occasional 
 absence at one branch should be supplied by a clerk brought from an- 
 other branch. A good inspector of branches will inspect the cashier's and 
 the accountant's department, as well as the manager'^ ; and when he finds 
 any improvement at one branch, he will introduce it into all the other 
 branches. 
 
 But the greatest stimulus to improvement in the clerks is an impartial 
 system of promotion. It is, perhaps, desirable that instances should occur 
 sometimes of a clerk who is entitled to a higher post, from seniority, being 
 unfit to take it, in order to show that superior merit is regarded. But it 
 should always be obvious that the clerk who is promoted has superior 
 merit. If a clerk is put over the head of another from favoritism, or ca- 
 price, on the part of the banker, or from the influence of friends, custom- 
 ers, or shareholders, or even for qualities good in themselves, but not in- 
 creasing his efficiency as a clerk, then will great evils arise from his ap- 
 
 145
 
 A Treatise on Banking. 
 
 pointment, even though he should be as well qualified as the man who 
 was entitled to the post from seniority. 
 
 Another etrectual means of training clerks is the daily balance. 
 
 The books arc balanced every night, before the clerks leave the bank. 
 But mistakes will necessarily occur during the day, and to discover these 
 will occupy a little time. The total amount of error is called " the differ- 
 ence " ; and to endeavour to discover the error is called " searching 
 for the difference." Those clerks who are thus employed in the evening 
 are said to be " upon the balance." In large establishments, it is usual 
 to divide tlie whole body of clerks into classes, who take it in turn to be 
 " upon the balance." By this arrangement, all those who are not " upon 
 the balance " can leave the bank as soon as their own work is done. The 
 smaller the number of clerks on the balance, the better. Thus, in a bank 
 of forty-two clerks, six would be sufficient to be on the balance. If 
 a larger number — say twelve — were retained, the juniors would do 
 nothing, or else they would be employed on the inferior books, from 
 which they would learn nothing. But when only six are retained, they 
 must all work, and, what is better still, they must all think. They will all 
 acquire a thorough knowledge of the whole system of book-keeping, and 
 be able to ascertain in what way errors in one book may counteract er- 
 rors in another book, and how the errors discovered will bear upon " the 
 difference." In large establishments, almost the only way in which a 
 junior clerk can learn the whole system of book-keeping, is from being 
 " upon the balance." But this is an effectual one. It also gives him an 
 opportunity of showing his talents. Some clerks are far more quick in 
 discovering the difference than others are ; and this quickness is generally 
 a fair criterion of the general talent of the party. The clerk who 
 " skulks " the balance, avoids the best means of improvement, and the 
 best opportunity of showing his talents. But such persons have usually 
 no talents to show. A clerk who acts in this way betrays a conscious- 
 ness of being a fool. 
 
 We have here spoken of that kiiwl of training which is adapted to the 
 making of clever clerks. But as in the joint-stock banks a clerk may be- 
 come a manager, it is desirable that those clerks who are deemed the 
 most clever should be put under a course of training that will, with expe- 
 rience, qualify them for that ofhce. It is, in some respects, more difficult 
 to do this in a large establishment than in a small one. In a bank that 
 has forty clerks, one clerk sees only a fortieth part of its operations. In a 
 bank where there are only ten clerks, one clerk sees a tenth part, and 
 may easily acquire a tolerable knowledge of the whole. A bank that has 
 many branches has a great facility for training clerks to become mana- 
 gers. When a branch manager is absent from illness, or any other 
 cause, one of the senior clerks of that or some other branch will take his 
 place, and thus gradually become accustomed to the duties of the office. 
 
 The clerks thus selected for this kind of training should be young men 
 who are quick and efficient in the discharge of all their official duties, and, 
 moreover, possess a good temper, gentlemanly appearance and manners, 
 a degree of literary information, with a desire of improving their knowl- 
 edge and their talents. They should not be young men who have cn- 
 
 146
 
 Training of Clerks. 
 
 tered the bank until they can get something better, but those who look to 
 banking as their profession, and are ambitious of attaining to the highest 
 posts in the establishment. But beyond the qualities we have enumerat- 
 ed, it is necessary, above all things, that they should have habits of 
 business. 
 
 " Habits of business is a phrase which includes a variety of qualities, — industry, 
 arrangement, calculation, prudence, punctuality, and perseverance. And these virtues 
 are exercised, not from the impulse of particular motives, but from habit. If you 
 hear a man boast of being industrious, you may safely infer that he does not possess 
 the habit of industry, for what a man does from habit, he does mechanically, without 
 thinking of the merit of his actions, though they may be highly meritorious. Habits 
 of business are essential to a merchant. But though essential to a merchant, they are 
 not peculiar to him. They are as necessary to a professional man as to a merchant, 
 — as necessary to ladies as to gentlemen, — as necessary for the government of a 
 family as for the government of a commercial establishment. The greater the intel- 
 lectual talents of the individual, the more necessary are habits of business to keep him 
 steady in his course. The more canvas he spreads, the more ballast he requires. If 
 we examine the history of those illustrious characters who have risen to eminence as 
 the masters, the legislators, or the instructors of mankind, we shall find they have 
 been as much distinguished by their habits of business, as by the superiority of their 
 intellect. 'WTiile, on the other hand, we could easily point out, in every science and 
 in every path of life, some young men who, though of towering genius, have become 
 lost to themselves, and have disappointed the hopes of all their friends, through a want 
 of habits of business. They have burst upon the world with more than noontide 
 splendor, they have attracted universal notice, they have excited big expectations, and 
 suddenly they have darted into an oblique course, and passed into oblivion." (Lectures 
 0)1 Ancient Commerce, by J. W. Gilbart, p. 94.) 
 
 If a clerk be intended to be trained for a manager, it may be questioned 
 whether he will be improved by remaining a long time as a clerk. The 
 two offices are very distinct, and they call into operation distinct qualities 
 and operations of mind. A very old banker's clerk (unless he has 
 been a chief clerk) is generally, from the very length of his service, dis- 
 qualified for being a manager. Seven to ten years' experience as a clerk 
 is quite long enough, and after that period the sooner he becomes a man- 
 ager the better, provided he has the necessary qualifications. Even dur- 
 ing that time he should have been occasionally employed in those opera- 
 tions that require the exercise of his faculties as a man of business. It 
 has often been said, that good servants make bad masters. If this be 
 true, it is probably the result of an intellectual more than a moral defi- 
 ciency. A lengthened service causes the mental faculties to move in a 
 routine from which they cannot be suddenly aroused into an attitude of 
 independence, so as to be able to trace causes and effects, to balance op- 
 posing considerations, and to engage in those reasoning processes which 
 are required by the exercise of authority. Hence it is, that before a clerk 
 is appointed a manager, he should undergo some kind of training. The 
 best training for being a manager is that of being chief clerk, or of hold- 
 ing an equivalent post next to the manager. It will necessarily follow 
 that the holder of such a post will have occasionally to take the place of 
 the manager, and the manner in which he may then act will be a fair cri- 
 terion by which to judge of his qualifications for that, or a similar sit- 
 uation. 
 
 Among the means of training clerks for superior offices, we should give 
 
 147
 
 A Treatise on Banking. 
 
 a high rank to the formation of a library of banking books, to which the 
 whole of the establishment should at all times have access. Tlie remarks 
 we made in a letter, addressed to the manager of a country bank, in the 
 year 1846, and which was afterwards published in the sixth volume of 
 the Bajikers'' Magazine, are, we think, not inapplicable to this subject : — 
 
 " 1 wish you would advise your directors to celebrate their success by 
 sending to each of their branches monthly a copy of the Bankers'' Maga- 
 zine. It would be sent direct from London, the last day of the month, I 
 believe, free of expense ; and as the number of next month will com- 
 mence a new volume, they could not begin at a better time. I am sure 
 this would be a profitable investment of some portion of your surplus 
 funds, and would yield an ample return in the results arising from the in- 
 creased knowledge and skill of your managers. Here they will learn 
 points of law and of practice, with which they were previously unac- 
 quainted, and be better prepared to deal with such cases when they occur 
 in their own experience. It seems peculiarly necessary that managers of 
 branches, who have not the opportunity of immediately consulting with 
 any of the directors, should be supplied by the bank with the means of 
 obtaining this kind of information. Losses are sometimes incurred by 
 joint-stock banks, through the want of knowledge of a little banking law on 
 the part of their principal officers. The managers would not be the only 
 gainers. The other officers of the branches would have the opportunity 
 of self-improvement ; and thus routine clerks might become intelligent 
 bankers, and you would train in your own establishment a constant supply 
 of able men, to take the places, when necessary, of the existing managers. 
 It is one of the excellencies of our system, that the junior clerks may look 
 forward to being placed at the head of the establishment ; but this can 
 only take place in those instances wherein the clerks endeavour to acquire 
 that professional and general knowledge which is necessary in the pres- 
 ent day, in order to discharge the duties and maintain the position of a 
 manager. Unless they do this, those who are now clerks will remain 
 clerks as long as they live, and the next generation of managers will be 
 taken from the more instructed classes of society." 
 
 The manager of a joint-stock bank in the midland counties, on whom 
 we called last summer, informed us that his directors had recently voted 
 £ 100 towards the formation of a bank library. To the directors of other 
 banks we would say, " Go and do likewise." 
 
 In training clerks for intellectual offices, it is advisable not to give 
 them too many instructions with regard to minute details. They should 
 be taught to think for themselves. A man's talents are never brought out 
 until he is thrown, to some extent, upon his own resources. If, in every 
 difficulty, he has only to run to his principal, and then implicitly obey the 
 directions he may receive, he will never acquire that aptitude of percep- 
 tion, and that promptness of decision, and that firmness of purpose, which 
 are essentially necessary to those who hold important and responsible of- 
 fices. Young men who are backward in this respect should be intrusted 
 at first with some inferior matters, with permission to act according to 
 their discretion. If they act rightly, they should be commended ; if other- 
 wise, they should not be censured, but instructed. A fear of incurring 
 
 148
 
 Training of Clerks. 
 
 censure, a dread of responsibility, has a very depressing effect upon the 
 exercise of the mental faculties. A certain degree of independent feeling 
 is essential to the full development of the intellectual character. It should 
 be the object of a banker to encourage this feeling in his superior officers. 
 Those bankers who extend their commands to the minutest details of the 
 office, exacting the most rigid obedience in matters the most trivial, 
 harshly censuring their clerks when they do wrong, and never com- 
 mending them when they do right, may themselves be very clever men, 
 but they do not go the way to get clever assistants. At the same time, 
 they exhaust their own physical and mental powers by attending to mat- 
 ters which could be managed equally well by men of inferior talent. 
 
 After a clerk has become a manager, his education has yet to be com- 
 pleted. Lord Bacon observes, that reading makes a wise man ; writing, 
 an exact man ; and conversation, a ready man. Whatever knowledge he 
 may have acquired by reading or otherwise, however exact he may have 
 been in the discipline of the office, the young manager has yet to become 
 a ready man. He has to apply his knowledge promptly and independent- 
 ly, and, at the same time, wisely. This habit he will acquire by time. 
 The exercise of authority over other men produces an independence of 
 mind which is friendly to the maturing of the understanding ; while the 
 necessity for giving immediate decisions in conversation with his custom- 
 ers will have a tendency to produce promptness of judgment. There is 
 no profession in which experience is more useful than in banking. But it 
 is useful, not so much in the amount of knowledge that is acquired 
 (though that is important), as in the improvement it imparts to those in- 
 tellectual faculties which are called into exercise. It is by constant prac- 
 tice that these faculties gather strength. Habits are formed by repeated 
 acts, and they can be formed in no other way. 
 
 Before closing this section on the administration of the office, we may 
 observe, that although the duties of a chief clerk are quite distinct from 
 those of a banker, yet in small establishments they are often performed by 
 the same person. In branch banks, generally, the manager is both the 
 banker and the chief clerk. But as the branch increases, the manager 
 will gradually transfer to the second officer the duties of the chief clerk, 
 and confine his own attention to those of a banker. It is too much the 
 practice in England to view a bank manager as holding the same relative 
 position in a joint-stock bank which a chief clerk does in a private bank. 
 This is an error. A manager is not a banker's clerk, — he is a banker. 
 And although he may reserve some important cases for the consideration 
 of his directors, yet they are usually such cases as a private banker 
 would reserve for consultation with his partners, or on which, had he no 
 partners, he would take time to form his own determination. 
 
 It may also be observed, that although the government of the office 
 will generally be left entirely to the chief clerk, and it is not necessary 
 that the banker should be made acquainted with all the trivial delinquen- 
 cies of the clerks, yet there are certain acts of misconduct that must al- 
 ways be reported, and when reported must be dealt with by the banker 
 himself. In a well-disciplined establishment these cases will be rare, but 
 they will occur sometimes, and then the mode of reproof or punishment 
 
 149
 
 A Treatise on Banking. 
 
 will be regulated by the kind of offence and the character of the party. 
 Every act of dishonesty, however trifling the amount purloined, must be 
 followed by instant dismissal. Acts of deliberate disobedience to orders, 
 gross disrespect to superior officers, or acts of immorality that would 
 bring discredit on the bank, will generally be visited with the same pun- 
 ishment. But extreme punishment should be inflicted only in extreme 
 cases. Mere accidental errors, though they may sometimes occasion 
 great loss, must not be treated in the same way as those faults which 
 arise from gross neglect, or which imply a deficiency in personal honor. 
 It is generally a good rule, that a banker should not reprove a clerk in the 
 presence of the other clerks. By following this rule, he can adapt his re- 
 proofs to the character and position of the party ; for a valuable clerk, 
 even when really culpable, is not to be treated in precisely the same way 
 as another whose services are of less importance. Nor is it any violation 
 of justice, that those faults which arise from inadvertence should be 
 viewed differently from those that arise from bad habits. Nor will it 
 tend to impair the discipline of the office should it be known that a good 
 character will sometimes get a young man out of a scrape, while he who 
 had not that good character would be punished more severely for a less 
 important offence. Another rule to be observed in administering reproof 
 is, in reminding a clerk of his defects, to commence with telling him of 
 his good qualities. There is a credit as well as a debit side in every 
 man's character ; and it seems hardly fair to run over all the debit items, 
 and say nothing of the other side of the account. This plan, too, in 
 creases, instead of diminishing, the pungency of the reproof, while it re- 
 moves from the mind of the party any impression that the banker is influ- 
 enced by motives of personal dislike. * 
 
 Section XII. — BANKING BOOK-KEEPING. 
 
 " Although the business of keeping books is extremely easy when 
 once the accounts are properly arranged, yet the adaptation of the prin- 
 ciple of double-entry to extensive and complicated transactions, so as to 
 receive the full benefit of the system, is a process which requires the 
 most complete knowledge, not only of the practice, but also of the science, 
 of book-keeping." 
 
 " Book-keeping, like all other arts, can only be mastered by industry, 
 perseverance, and attention. The learner must think for himself, and 
 endeavour to understand the ivhy and wherefore of all that he does, instead 
 of resting satisfied with vague notions and words devoid of sense." 
 
 " The study of book-keeping affords an excellent means of intellectual 
 discipline ; that is, when its principles are exhibited as well as their appli- 
 cation. When the reasoning powers are called into exercise as well as 
 the memory, the student who has carefully attended to the instructions, 
 and who is the master and not the slave of rules, will experience no diffi- 
 culty in unravelling or adjusting any set of accounts, however complicated 
 Di diversified." {^Double- Entry Elucidated, by B. F. Foster.) 
 
 150
 
 Book-keeping. 
 
 We have commenced this section with these quotations in order to 
 quicken the attention of the reader to a subject, whicli, by those who do 
 not understand it, is considered complicated, and by those who do under- 
 stand it, is considered dull. It is, in fact, neither the one nor the other. 
 But still it is a subject on which it is difficult to write in such a way as 
 to avoid the possibility of being misunderstood. We purpose in this 
 section : — 
 
 I. To notice those Preliminary Operations with which a young Book- 
 keeper should become acquainted. 
 II. To describe the system of Banking Book-keeping as published in 
 the former edition of this work. 
 
 III. To state those Improvements of which this system has been found 
 
 to be susceptible. 
 
 IV. To trace the Resemblance between Banking Book-keeping and 
 
 Mercantile Book-keeping. 
 
 I. Preliminary Operations. 
 
 When a young man enters a bank as a clerk, he should be instructed 
 to be careful with regard to his hand-writing, or, in his anxiety to write 
 fast, he may forget to write well. If he write a bad hand, he should not 
 be above taking a few lessons from a professor of penmanship, who will 
 teach him to write fast and well at the same time. But, however badly 
 he may write, he should try to write plain. Plainness is of more conse- 
 quence than neatness or elegance. He should be very careful in writing 
 the names of the customers of the bank. If he write them illegibly, there 
 will be a loss of time in making them out, or they may be misunderstood, 
 so that money may be posted to the wrong account, and thereby loss arise 
 to the bank. On this account also, when two or more customers have 
 the same surname, he should be very careful to write the Christian 
 names fully and distinctly. 
 
 The necessity for writing quickly, and the want of carefulness at first, 
 are the causes why so few bankers' clerks comparatively write a good 
 hand. But they should remember that this is a most important qualifica- 
 tion, and a deficiency in this respect may be an insuperable bar to pro- 
 motion. Without this attainment, a clerk cannot be put to write up the 
 customers' books, nor to make out the country accounts, nor to write the 
 letters, nor to fill the office of secretary. " You ought to be careful to 
 write a plain hand. You impose upon your correspondents a very unne- 
 cessary and a very unpleasant tax if you require them to go over your 
 letters two or three times in order to decipher your writing. A business 
 hand is equally opposed to a very fine hand. A letter written in fine, 
 elegant writing, adorned with a variety of flourishes, will give your corre- 
 spondent no very high opinion of you as a man of business." {Lectures 
 on Ancient Commerce^ by J. W. Gilbart, p. 239.) 
 
 The plan of writing-masters who advertise to teach good and expedi- 
 tious writing in a few lessons is as follows: — The pupil rests his hand 
 upon the paper without touching it with his litlle finger. All the motion 
 is then made from the wrist. Those who have to write their names 
 L - 151
 
 A Treatise on Banking. 
 
 many times in succossion, such as in signing bank-notes or in accepting 
 bills, will find that on this plan they can get through their work in much 
 less time than if they bend their fingers with every stroke of the pen. 
 
 The young clerk should also be taught to make his figures clear and 
 plain, so that a 2 cannot be mistaken for a 3, nor a 3 for a 5. He should 
 also take care that the tail of liis 7 or his 9 does not run into the line be- 
 low, and thus turn a into a 6, and also that the top of his 4 does not 
 reach so high as to turn a in the line above it into a 9. He should be 
 careful, too, in putting his figures under one another, so that the units 
 shall be under the units, the tens under the tens, the hundreds under the 
 hundreds, and the thousands under the thousands. Otherwise, when he 
 adds up the columns together, he will be in danger of making a " wrong 
 cast." 
 
 He will also learn to use both hands at the same time. In counting 
 gold or silver coin, he will count ■^vith two hands instead of one, and thus 
 do double the work. In entering a number of cheques or bills, while he 
 holds the pen in one hand he will hold a cheque in the other, and then 
 turn over the cheques as quickly as he enters them. He will always 
 turn them over one on the back of the other, so that they will be in the 
 same order after he has entered them as before, and when they are 
 " called over " they will come in the same order in which they are en- 
 tered. 
 
 He must also learn to "cast" quickly and accurately. The two main 
 qualifications in this operation are accuracy and quickness. To insure 
 accuracy, a clerk will cast every thing twice over. The first time he will 
 begin at the bottom of the column, and the second time at the top. If he 
 begin both times at the bottom of the column, the association of figures 
 will be the same; and if he has fallen into an error the first time, he will 
 be apt to fall into the same error the second time. But if he changes the 
 order, the association of the figures will be different, and he will not be 
 likely to fall into the same error. Quickness can be acquired only by 
 practice. But he will accelerate his sj)ccd by making his figures plain, 
 and placing them strictly in a line under one another. He should also 
 learn to cast without speaking, for the eye and the head will go faster 
 than the lips. 
 
 He must also be taught to " call over." "When he first comes into the 
 bank, he will call this sum, ,^315 10s. 6f/., three hundred and fifteen 
 pounds ten shillings and six pence, but he will soon learn that more than 
 half these words may be suppressed, and he will say, three, fifteen, ten, 
 six. And so in the larger amount, <£ 4,785 13s. 4(Z., instead of saying, 
 four thousand seven hundred and eighty-five pounds thirteen shillings 
 and four pence, he will call, forty-sevtm, eighty-five, thirteen, four. By 
 proceeding in this way, and speaking quickly and yet distinctly, a column 
 of figures may be called over and checked in a very short space of thne. 
 He will, however, take care to avoid ambiguity. Thus, if the sum be 
 ^40 5s. 6f/., he will not say forty, five, six, as tliat would mean forty-five 
 pounds six shillings; but he will sav, in this case, forty poimds, five, and 
 six. In cases where the pounds consist of five figures, the first two de- 
 noting the thousands are expressed separately ; thus .£25,347 8s. 6d. is 
 
 152
 
 Book-keeping. 
 
 called over, twenly-five, three forty-seven, .eight, six ; and six figures, say 
 .£468,379 8s. 6(i., are called over, four sixty-eight, three seventy-nine, 
 eight, six. 
 
 He will also be taught to balance ; that is, to find the difference between 
 two sums by addilion, instead of subtraction. Thus, if the two sums be 
 d& 1,347 IGs. 'Sd. and £ 4,831 19.s\ 8d. he will be apt, at first, to put one 
 under the other and subtract, in this way : 
 
 £4,834 19 8 
 1,347 16 3 
 
 Difference, .... £3,487 3 5 
 But he must be taught to proceed by a mental process, and will add the 
 difference to the smaller number, thus : 
 
 £1,347 16 3 — £4,834 19 8 
 
 Difference, .... 3,487 3 5 
 
 £4,834 19 8 
 
 He performs this operation by beginning with the pence, saying, or rather 
 thinking, " three and five make eight," and so on. And thus the two 
 sides of an account are made to balance, that is, both sides are of the 
 same amount. 
 
 The principle of balancing pervades the whole system of book-keeping. 
 For example, we know that if to the amount of cash in the bank last 
 night we add the amount received to-day, and deduct the amount paid to- 
 day, the remainder will show the amount on hand to-night ; and a novice 
 would very naturally put it down in this form : 
 
 £ 
 
 Cash on hand last night, 100,000 
 
 Received to-day, 60,000 
 
 160.000 
 Paid to-day, 80,000 
 
 Cash on hand to-night, £ 80,000 
 
 But an accountant would arrange these four items in such a way as to 
 form a balance, thus : 
 
 £ 
 
 Cash on hand last night, . . 100,000 
 
 £ 
 Cash paid away to-day . . 80,000 
 Cash on hand to-night, . . 80,000 
 
 £160,000 
 
 Cash received to-day, . . 60,000 
 
 Balance, . , . £160,000 
 
 In keeping the Progressive Ledger, the principle of balancing is of con- 
 stant occurrence. The ledger-keeper brings out a new balance every 
 time he turns to an account. But he never deducts, — always adds. And 
 if he post several articles at the same time, the method is the same, thus : 
 
 If the credit balance is £1,214 3 7 
 
 And he posts the following sums to the debit 
 of the account, . . . . . £ 141 2 4 
 
 8 7 6 
 49 3 11 
 305 4 2 
 £710 5 8 
 
 153
 
 A Treatise on Banking. 
 
 He will add up these items, and mentally add a sum that will make the 
 whole equal to £ 1,214 3s. 7rf., bringing out this sum as a new balance, 
 and placing it under the former one as he goes on. Thus he will say, 
 or rather think, " 4 and 6 are 10, and 11 are 21, and 2 are 23, and (here 
 he must supply the figure) 8 are 31 = 7 and carry 2 " ; and he puts 
 down the 8 in the pence division of the balance column ; and goes on in 
 the same way to the shillings, and afterwards to the pounds. When he 
 has placed this sum, ^710 5s. 8f/., he adds up the whole, including this 
 sum, in order to check the operation, and to be sure that he is right. 
 
 He will then acquire a knowledge of the names and functions of the 
 different books, and of the terms and phraseology used in book-keeping. 
 The same book is sometimes called by different names in different banks, 
 and different terms are employed to describe the same operations. But 
 every clerk should use the language of the office in which he is placed. 
 He should call every book by its proper name, and employ the phrases 
 which are used by others. For instance, if the word " money " is used 
 to denote coin, he must always use it in that sense ; and not say 
 " money " when he means bank-notes. 
 
 It will be of great advantage to a sensible youngster, if one of the se- 
 nior clerks should take the trouble to give him a general notion of the sys- 
 tem of book-keeping, and show him the connection that exists between the 
 books that he keeps and the other books of the office. 
 
 II. We shall now describe the system of Banking Book-keeping, as 
 published in the former editions of this work. 
 
 Every person, on opening an account with a London banking-house, 
 enters his name in a book called the Signature-Book, and this book is re- 
 ferred to whenever a draft is presented having a doubtful signature. The 
 person is supplied free of cost with a book of printed drafts, and a cash- 
 book, called in some houses a Pass-Book, in which is entered an account 
 of his debts and credits, as often as he thinks proper to leave it for that 
 purpose. 
 
 London bankers do not usually give receipts for money paid into their 
 hands, but they enter the amount into the customer's book. A person 
 paying money on account of a country book, will sometimes require a re- 
 ceipt, and he is then given what is called a shop-receipt, in the following 
 form : — 
 
 London, May 1, 1827. 
 Received of \the country banlc\ the sum of one thousand pounds. 
 To account for on demand. 
 
 For Hope, Bich, ^- Co. 
 £1,000. * A Cashier. 
 
 The name of the party paying the money is not inserted in the receipt, 
 as that would require a stamp. 
 
 The payment of a draft, or a bill, is always made either in Bank of 
 England notes, or sovereigns, as the party receiving it may desire. The 
 London bankers never re-issue any country notes or bills of exchange, that 
 may come into their hands. When a cheque is paid, it is cancelled bv 
 
 154
 
 Book-keeping. 
 
 drawing the pen four times, in different directions, across the name of the 
 drawer. In Scotland a paid note or cheque is said to be " retiredy It 
 is retired or witlirlrawn from circulation. 
 
 Before explaining the banking system of book-keeping, I will define a 
 few terms which are often used in connection with the subject. By the 
 word bill is always meant a bill of exchange not yet due. The word 
 cash denotes the various items included in a credit or cash entry, and may 
 denote due bills, cheques, bank notes, country notes, or coin. The terms 
 cheque and draft are used synonymously, and denote an order on a banker, 
 payable on demand. The word draft is never used in London to denote 
 a bill of exchange, though this use of the term is very common in the 
 countrv'. Both bills and drafts are often called articles, and if they are 
 cash, they are styled cash articles. An addressed bill is a bill made pay- 
 able at a banking-house. A discounted bill is usually called a discount. 
 By mo7iey is always meant coin. To post an article is to place or enter it 
 in the ledger. One book is said to mark against another when the same 
 entry is made in both books. One book is checked by another when any 
 error in one book would be detected by some operation in another. To 
 check a book, or an account, is to examine it, and prove it correct, or 
 make it so. To cast., or cast up., means to add together. The balance of 
 an account is the difference between the credit and the debit side. An 
 account is said to balance when the credit and the debit side are of the 
 same amount. To balance an account is to enter the balance, and to add 
 up both sides, and then to bring down the balance as a new amount. 
 The credit side of an account, or that on which the cash received is 
 placed to the credit of a customer, is the right-hand side as you face the 
 ledger; the debit side is the left-hand side. In London, the establish- 
 ments of bankers are usually called banking-houses., not banks. A per- 
 son who has an account at a banking-house, is said to keep a banker. 
 
 I shall now describe the various books in the order of the different de- 
 partments to which they belong. 
 
 I. — The Cash Department. 
 
 The principal books in this department are the following : — 
 1. Two Waste-Books. — One is called the Received-Waste-Book, 
 and the other the Paid-Waste-Book. In the former is entered an account 
 of all the cash received, and in the latter is entered an account of all the 
 cheques and bills paid. The Received- Waste-Book is ruled with a double 
 cash column on the right-hand side of the page. In making an entry 
 into this book you will proceed as follows : — First, enter the name of the 
 party who lodges the money ; then enter in the first cash column the par- 
 ticulars of which the credit consists, specifying each particular in the 
 space at the left-hand. In receiving Bank of England notes, the number 
 and date of each note must be mentioned ; but if the notes are numerous, 
 make them up in a parcel, and write on the outside the total amount, 
 and the name of the party of whom they were received. Call this parcel 
 ' Sundries " in your entry. These parcels of sundries will be marked, 
 
 155
 
 A Treatise on Banking. 
 
 and sent to the Bank of England for other notes on the following day- 
 Cheques on your own bank are to be entered by the name of the drawer 
 and the amount. Country notes are to be entered by the name of the 
 London banker at whose house they are made payable. These are dis- 
 tinguished from cheques upon bankers, by stating short the number and 
 denomination of the notes ; thus, y'^^, §. All gold and silver are to be 
 called money. After entering all the particulars of a credit, add them to- 
 gether, and carry out the amount into the farther cash column. At the 
 close of the day add up this outer column, and see that the total agrees 
 with the amount in the Day-Book. 
 
 If a customer brings his book with him when he lodges cash, ihe cash- 
 ier enters the credit, and returns the book to him, unless it be left at the 
 bank for the purpose of having the debit side also written up. 
 
 In receiving money for a deposit receipt, the entry is made in the same 
 way as when the money is placed to a current account ; but the words 
 Deposit Receipt, or the letters D. E.., are written against the name of the 
 depositor. 
 
 In the Paid-Waste-Book is entered an account of all the bills and 
 cheques paid by the bank. This book is ruled on each page with a cash 
 column on the right hand, and another on the left hand, leaving a space 
 between. When a cheque is paid, the amount is placed in the left-hand 
 cash column, then the name of the drawer in the open space, and in tlie 
 right-hand cash column are entered the particulars of the payment. Bank 
 of England notes are entered by their number. It is not necessary to 
 enter the date, as that can be found if necessary either in the Cash-Book 
 of the preceding evening, or in the Received- Waste-Book, or the Lists of 
 the same day. When a deposit receipt is paid, the same order is ob- 
 served, but the letters D. R. are added. All gold, silver, and copper are 
 called money. At the close of the day, all the payments are added to- 
 gether, and should agree with the amount in the Day-Book. 
 
 Each cashier has a Received- Waste-Book, a Paid- Waste-Book, and a 
 Money-Book. 
 
 2. Money-Book. — This is a small book ruled with a cash column on 
 the right-hand side of each page, and it contains an account of all the 
 coin^ that is, the gold, silver, and copj)er, in the bank. Each cashier 
 will enter in his own Money-Book the money he receives and pays in the 
 course of the day. On the left-hand page of the book he will copy from 
 liis Paid-Waste-Book the various sums of money he has paid, and on the 
 right-hand page he will copy from his Received-Waste-Book the various 
 sums of money he has received. In each case he will enter against the re- 
 spective sums the totals in w'hich they are included. Thus, if in paying 
 a cheque of =£ 175 2s. 6rf., he pay 5-2-6 money, he will enter it thus, 
 " £ 175 2.6. iC 5 - 2 - 6." The money is counted up at night, and must 
 agree with the balance of the Money-Book ; and this balance is then en- 
 tered in the Cash-Book. 
 
 3. Cash-Book. — In this book is entered every night a specification of 
 all the cash in the bank. The items will consist chiefly of Bank of Eng- 
 land notes, parcels of sundries, country notes, cheques on other banks, 
 and the balance of the money. Tlu» P>ank of England notes are entered 
 
 156
 
 Book-keeping. 
 
 by their number, date, and amount. The parcels of Bank of England 
 notes called sundries are entered by the word " Sundries," then the 
 name of the parties of whom they were received, and the amounts ; 
 country notes by the name of the country bank, and the London agent at 
 whose house they are made payable ; cheques on other banks by the 
 name of the drawer of the cheque, the name of the banker, and the 
 amount. In this book generally the cash articles are more fully de- 
 scribed than in the Received-Waste-Book. In some banking-houses the 
 Cash-Book is called the Stock-Book, and in others the Make-up-Book. 
 
 4. Day-Book. — This book is ruled with a double cash column at the 
 right-hand side of each page. The accountant enters in the Day-Book 
 an account of all cash paid and received during the day, placing each 
 transaction under the class of operations or accounts to which it belongs. 
 On the left-hand page of the book he enters the cash which is paid, and 
 on the right-hand side the cash which is received. He commences by 
 writing the day of the week, and of the month ; then on the left-hand side 
 he writes a heading, " Current Accounts." Under this head he enters 
 all the cheques paid, copying from the cheques the name of the drawer, 
 and the amount, which is placed in the first cash column. The sum of 
 all the cheques is brought forward into the second cash column. The 
 second heading is " Deposit Receipts " ; under which head the individ- 
 ual receipts paid are entered, mentioning the number, the name of the de- 
 positor, and the sum ; and bringing out the total amount, as before, into 
 the second cash column. 
 
 The accountant may, if he please, make these headings in the morning, 
 leaving such a space for the transactions under each head as his experi- 
 ence may show him to be necessary. Thus, he may keep up his Day- 
 Book throughout the day, and merely have to add it up and balance it 
 when the bank closes. The other headings may be, " Bills Discounted 
 this day," " Interest paid on Deposit Receipts," " Bank Premises," " In- 
 cidental Expenses," " Branch Accounts," &c., answering to the ac- 
 counts in the General-Ledger. 
 
 On the right-hand page, or credit side of the Day-Book, the cash re- 
 ceived is entered under corresponding headings, as " Current Ac- 
 counts," " Deposit Receipts," " Bills Discounted paid this day," 
 &c., &c. The entries under the heads of Current Accounts, and Deposit 
 Receipts, are copied from the Received-Waste-Books : the entiy ex- 
 presses only the name and the amount. 
 
 After all the entries have been made, add up the debit and the credit 
 sides. To the credit side, add the amount of the Cash-Book on the pre- 
 ceding evening ; to the debit side, add the amount of the Cash-Book on 
 the same evening ; and if the totals agree, the " bank is right," that is, 
 the transactions of the day have been correctly entered ; but if not, then 
 the bank is wrong, and the error must be discovered by " marking off" 
 the various books. 
 
 In large establishments the Day-Book is divided into two books ; the 
 debit side forming one book, and the credit side the other book. One is 
 called the " Paid Day-Book," and the other, the " Received Day-Book." 
 The advantage of this division is, that two persons can be employed at the 
 
 L57
 
 A Treatise on Baiiking. 
 
 Day-Book at the same time. In some banks the Day-Book has three 
 cash columns, the third being used for transfer entries. These are en- 
 tries in which no cash is actually paid or received by the bank ; but an 
 amount is transferred from one account to another. In other banks, all 
 the transfers are passed through the Received-Waste-Book. By some 
 London houses the Day-Book is called the Cash-Book, and its two divi- 
 sions are called the " Received-Cash-Book " and the " Paid-Cash- 
 Book." 
 
 5. Current- Account-Ledger. — In this book ever}' customer has a 
 separate account. The sums received to his credit are posted from the 
 credit side of the Day-Book, and the Ledger folio is placed in the Day- 
 Book, in a column ruled for that purpose. The debit side is posted from 
 the cheques themselves, and the Ledger folio placed in the debit side of 
 the Day-Book on the following morning, when the Day-Book is marked 
 against the Ledger. The entry of a cheque in the Ledger includes the 
 date of payment, the name of the party to whom it is payable, and the 
 amount. The entry of a credit includes the date, the word " Cash," and 
 the amount. When the cash is paid into the bank by a third party, it is 
 usual to enter it in the Ledger as " Cash per A. B." When a credit 
 arises from a bill lodged for collection having become due, the name of 
 the acceptor is substituted for the word cash. 
 
 Some banks follow what is called the progressive plan of keeping the 
 Ledger. By this plan the balance is brought out every day, and thus we 
 see the progress of the account. In the ordinary way, each page of the 
 Ledger is divided into the debit and the credit ^de, and each side has 
 ruled columns for the date, the transaction, and the amount. But in the 
 progressive Ledger there is only one column for the date of both the 
 credits and the debits; one space for a description of the transaction, 
 whether credit or debit ; and then three cash columns. The first column 
 is the debit column ; the second is the credit column ; and the third is the 
 column into which the daily balance is brought out. The advantage of 
 this plan is, that you can see at once what sum a party has on his ac- 
 count, without the delay of adding up the debit and the credit columns. 
 Most banks that allow interest on the balance of the current accounts, 
 keep their Ledger on the progressive plan; and, besides the columns I 
 have mentioned, there are, on the right side of the balance coliuiin, a 
 space for inserting the number of days the balance may remain station- 
 ary, and two interest columns, one for the interest of a credit balance, 
 and the other for the interest of a balance overdrawn. Most banks divide 
 the Current- Account-Ledger into two or more parts, and the names of the 
 depositors are placed in alphabetical order, from the beginning of the first 
 Ledger to the end of the last. 
 
 6. Deposit-Receipt-Book. — Deposit Receipts are receipts granted 
 for sums of money that are likely to remain a considerable time, and 
 upon which interest is allowed. These receipts are distinguished from 
 current accounts. Cheques cannot be drawn against any sum lodged as 
 a deposit receipt ; but when the amount, or any part thereof, is with- 
 drawn, the receipt itself must be produced at the bank, and delivered up. 
 The Deposit-Receipt-Book is not kept Icdger-u-isc ; that is, each person 
 
 158
 
 Book-keeping. 
 
 has not a separate account opened for him in a distinct part of the book, 
 but the receipts are entered chronologically, according to the date of the 
 lodgment. The entry includes date of lodgment, name of depositor, pro- 
 fession, residence, amount, interest paid, principal and interest. The last 
 two particulars are, of course, not entered until the receipt is cancelled. 
 If a party is desirous of withdrawing only a part of the lodgment, the 
 whole receipt is entered as paid, and a new receipt made out for the sum 
 which remains. 
 
 II. — The Bill Department. 
 
 Bills are divided into two classes, — bills deposited, and bills discount- 
 ed. Bills deposited are bills lodged in the bank for collection, to be 
 placed, when due, to the credit of the depositors. Bills discounted are 
 those for which the money has been advanced, and which are therefore 
 the property of the bank. These two classes of bills are entered in sepa- 
 rate sets of books ^ but, as the books are kept in nearly the same manner, 
 I shall describe them together. 
 
 1. Bill-Register. ) These books are kept, as the word regis- 
 Discount-Register. ) ter seems to imply, chronologically, the bills 
 
 being entered immediately after each other, in the order in which they 
 come into the bank. The entry includes date when deposited or dis- 
 counted, name of ingiver, drawer, accepter, date, term, when due, 
 amount, daily amount. The bills are numbered, and the register-number 
 placed upon each bill. The daily amount of the Discount-Register is en- 
 tered in the debit side of the Day-Book, under the head " Bills Discounted 
 this day." I advise that the headings of the columns of this, and of all 
 the other books, be printed. This saves time and prevents mistakes. 
 
 2. Bill-Ledger. I In these books a separate account is opened 
 Discount-Ledger. ) for each party ; and the same bills which have 
 
 previously been entered in the Registers are entered in these Ledgers ; 
 but the entry is much shorter. A full description of a bill is given in the 
 Register only, and the register-number is placed as a reference in every 
 book in which the bill may subsequently be entered. The entiy in the 
 Bill, or Discount Ledger, includes date when deposited or discounted, 
 name of accepter, when due, and amount. In some banks the Discount- 
 Ledger is kept upon the progressive plan, which is very useful, as it 
 shows at once to what amount any pai'ty may be under discount. In ad- 
 dition to this, some banks place in the Discount Ledger an account of all 
 bills they may have discounted, to which the party is an accepter. These 
 bills are distinguished from those which have been discounted for the 
 party himself, by being placed on the left-hand side of the page. This 
 account is also kept on the progressive plan. A Discount-Ledger kept 
 in this way will have three cash columns ruled on each side of the page : 
 the three on the left-hand will be headed " Where Accepter," and the 
 three on the right-hand will be headed " Where last Indorser." Between 
 the two sets of columns will be entered, date when discounted, register- 
 number, name of accepter or drawer, when due. The advantage of this 
 plan is, that on turning to any party's account, you see at once the whole 
 
 159
 
 A Treatise on Banking. 
 
 of his engagements to the bank, whether arising from bills that have been 
 discounted for himself, or bills to which he is only the accepter. 
 
 3. Bill-Journal. Discount-Journal. — In these journals the bills 
 are entered under the respective davs on which they fall due. For this 
 purpose, the day of the week, and of the month, is placed at the top of 
 each page. This book may be made to last exactly a year, by having 
 headings for every day, from the 1st of January to the 31st of December, 
 omitting Sundays. The entry includes the register-number, name of de- 
 positor, or for whom it was discounted, accepter, and amount. The Dis- 
 count-Journal has three cash columns, — one for the amount of each bill, 
 another for the bills paid, and another for those unpaid. The entry is 
 made in the first column, on the day the bill is discounted ; and in the 
 other two on the day the bills fall due. The total amount of bills paid 
 each day is copied from the Journal into the received side of the Day- 
 Book. Those unpaid are entered into the transfer column of the Day- 
 Book, and in the Past-Due-Bill-Book. The Bill-Journal need only have 
 one cash column, as inost banks find it more convenient to credit their 
 customers' accounts with all the bills on the day they fall due, and debit 
 them on the following day for those that remain unpaid. Those banks, 
 however, that prefer it, may have separate columns in the Bill-Journal for 
 the paid and the unpaid bills ; and, in that case, the unpaid bills are re- 
 turned on the following day to the depositor, without being passed 
 through his cash account. This is sometimes called being " entered 
 short." Some b?i?ks make one book serve the purpose of both a Bill- 
 Journal and a Discount-Journal ; one page of the book being used as a 
 Discount-Journal, and the opposite page being used as a Bill-Journal. 
 
 4. The Lists. — Each banking-house divides London into a certain 
 number of districts, af cording to the extent of its business. Each district 
 is called a walk, arid usually takes its name from the direction in which it 
 lies ; as the East Walk, the West Walk, and so on. To each walk is 
 assigned a book, in which is entered every day a list of the bills due in 
 the walk ; and hence the bock is called a List. Each List takes its name 
 from the walk to which it belongs ; as the East List, the West List, &c. 
 The page is divided into four columns, the first and third of which are 
 cash columns. In the first column is entered the amount of the bill ; in 
 the second, the name of the accepte.- and the register-number. This is 
 done the day before the bills are due. After the teller has returned from 
 presenting these bills for payment in his walk, he " answers " each bill ; 
 that is, he places against it an account of the cash he has received for it, 
 whether cheques, bank-notes, or money. The amount is entered in the 
 third column ; and, in the fourth, the description of each kind of cash. If 
 the bill be not paid, he writes L. D. for " left direction," and then enters 
 the bill in the " Unpaid List." 
 
 In the Unpaid-List are entered all the bills not paid when presented 
 for payment. In the course of that day or the following, these bills are 
 "answered," either by being paid, or by being passed to the debit of a 
 customer's account, or by being transferred to the Past-Due-Bi^'«Book. 
 In some banks the Unpaid-List is called the " Take-up-Book." 
 
 Cheques upon other banks are entered in the Lists in the sami way 
 
 160
 
 Book-keeping. 
 
 as bills, unless the bank sends a clerk to the Clearing-house, and then they 
 are entered in the " Clearing-out-Book." 
 
 From this description it will be seen that when a sum is received to the 
 credit of a current account, it is entered in the Received-Waste-Book, 
 copied from thence into the Day-Book, and from thence into the Current- 
 Account-Ledger. When a cheque is paid to the debit of a current ac- 
 count i.t is entered from the cheque itself into the Paid-Waste-Book, the 
 Day-Book, and the Current-Account-Ledger. 
 
 When a sum is received for a deposit receipt, the sum is entered before 
 the receipt is granted in the Deposit-Receipt-Book, and afterwards in the 
 Receipt- Waste-Book and Day-Book. When a deposit receipt is paid, it 
 must be discharged in the Deposit-Receipt-Book, then entered in the Paid- 
 Waste-Book, and afterwards in the Day-Book. 
 
 When a bill is discounted, the discount is calculated by the accountant, 
 who at the same time observes if it is drawn on a proper stamp, and is in 
 every respect a regular and negotiable instrument. If the party for 
 whom it is discounted have a current account, the full amount of the bill 
 is placed to his credit, and he is debited for the interest. If he have no 
 account, he is paid the amount minus the discount, and the entry is made 
 in the Paid- Waste-Book. The bills discounted each day are entered in- 
 dividually in the Discount-Register, and the total amount copied into the 
 Day-Book. The bills are also entered individually in the respective ac- 
 counts in the Discount-Ledger, and under the days they full due in the 
 Discount-Journal. When these bills are due, the amount paid each day 
 is entered in the Day-Book in the cash column, and the amount unpaid is 
 transferred to the Past-Due-Bill account, and is entered in the Day-Book 
 in the transfer column. 
 
 When a bill is deposited, it is entered in the Bill-Register, the Bill- 
 Ledger, and the Journal. When due, it is placed to the credit of the 
 party by whom it was lodged, and is copied from the Journal into the 
 Day-Book, thence into the Current-Account-Ledger. If unpaid, the ac- 
 count is debited on the following day, and the bill is returned to the de- 
 positor. 
 
 At the commencement of each day, all the entries made the preceding 
 day in the Day-Book are marked against the respective books by the ac- 
 countant, or under his superintendence. He also marks the Cash-Book, 
 and checks the adding up. The Customers' Books are then compared 
 with the Current- Account- Ledger. The debit side of these books is usu- 
 ally written up the preceding evening from the vouchers by the tellers, or 
 out-door clerks. The accountant writes up the credit side, and sees that 
 both sides agree with the Current-Account-Ledger. 
 
 III. — The Country Department. 
 
 In this department is managed the business of the country banks, and 
 of those customers who live in the country. When the letters are deliv- 
 ered in the morning by the postman, one clerk takes them and enters in 
 the Waste-Book the cash inclosed in the letter to the credit of the respec- 
 tive parties. Another clerk takes the letters and enters the hilh in the 
 
 161
 
 A Treatise on Bankins- 
 
 Country-Bill-Register, the Bill-Ledger, and the Bill-Journal. The letters 
 are then handed to a third clerk, who copies off into a book all the pay- 
 ments., which are to be made immediately in cash. This book is usually 
 called the Draft-Book, as the party receiving the money signs a draft for 
 the amount, which is as good as signing a receipt. If the payment is to 
 be made to a banker, he receives notice in a printed form, called a memo- 
 randum ; but if the payment is ordered to be made to a private individual, 
 he must call for it, and claim the exact amount. The following is the 
 form sent to a banking-house. The right-hand side is filled up by the 
 house to whom it is sent, and the memorandum is paid through the 
 clearing. 
 
 London, December 1, 1834. 
 Messrs. Steady ^- Co. 
 
 Receive of \the country tMnk\, per 
 Messrs. Hope, Rich, ^ Co., the sum of 
 £100. 
 
 On account of [E. F. , Esq.] 
 
 i3foL 
 
 London, December 1, 1834. 
 Messrs. Hope, Rich, Sf Co. 
 
 Pay E. F., Esq., or bearer, the sum 
 of one hundred pounds, on account of 
 [the country bank]. 
 
 For Messrs. Steady ^' Co. 
 £ 100. A Clerk. 
 
 A fourth clerk now takes the letters, and enters all the advices (that is, 
 bills advised to be paid when due) in the Advice-Book and in the Advice- 
 Journal. The corresponding clerk who answers the letters usually man- 
 ages the stock department. Hence he observes the orders to purchase or 
 sell stock, to procure powers of attorney, and other business of that kind. 
 When writing a reply to the letters received, he notices if all the items in 
 the letters are marked by the proper clerks. If any thing is wrong, he is 
 informed of it. Bankers' letters are usually short and plain, comprising 
 only two or three lines. The following example includes all the ordinary 
 topics : — 
 
 Messrs. Hope, Rich, & Co., Bankers, London. 
 
 Country Town, May 1, 1827. 
 Gentlemen, — Inclosed we remit you sixteen bills, value £ 1,750, and cash £2.50, 
 makinj^ together £ 2.000 to our credit; and we subjoin a list of payments and advices, 
 to be made to our debit. We will thank you to purchase £ 10.000 new Fours, in the 
 name of .James Wealthy, gentleman, of Stately House, near Prince Town; and for- 
 ward us a power of attorney for sale, and dividends of .£200 Consols, now standing in 
 the name of Susan Thrifty, spinster, of this place. Please inform us of the respecta- 
 bility of Messrs John Careful & Co., of South wark, — they bank at Messrs. Steady & 
 Co.,'LomIiard Street. The bill you sent us to present here for payment has been paid, 
 and we credit you £ 50, the amount. We herewith send you the signature of our rela- 
 tive, Mr. John Keen, who is going to London, and whose drafts to the extent of 
 JE 3,000 wc wish you to honor to our debit. On Mr. Keen's return, which will be in 
 about a week or ten days, he will bring with him our paid notes. 
 
 We are, Gentlemen, 
 
 Your obedient Servants, 
 
 Keen, Busy, & Co. 
 
 [heplt.] 
 
 Messrs. Keen, Busy, & Co., Bankers, Country Town. 
 
 fA>ndnn, May 2, 1827. 
 Gentlemen, — We have received your favor of yesterday's date, inclosing sun- 
 dries, value £2,000, which we have passed to vour credit, and note your lists of pay- 
 
 162'
 
 Book-keeping. 
 
 ments and advices. We also credit you £ 1,476 16s. 6d., per Messrs. Good & Co., on 
 account of John Green. We have inquired of Messrs. Steady & Co., as to tiie respec- 
 tability of Messrs. John Careful & Co., and are informed they are hijj;hly respectable. 
 We now inclose a stock receipt for Mr. James Wcalthy's £10,000 new Fours, 
 £10,012 10s. to your debit; and also Susan Thrifty's power of attorney, for which we 
 debit you £ 1 Is. 6c?. ; also a dishonored bill on Badluck, noted £ 100 Is. 6f/., to your 
 debit; and your weekly cash account and monthly account current, which we trust will 
 be found correct. We debit you £ 50 for the bill j'ou had the goodness to present for 
 us ; and we now inclose another on White, £ 120, which we will thank you to get ac- 
 cepted and return. We have opened a credit in favor of Mr. John Keen for £3,000, 
 and will forward your paid notes by him as requested. 
 
 We are, Gentlemen, 
 
 Your obedient servants, 
 
 Hope, Rich, & Co. 
 
 Those London bankers who act as agents to banks, or to other parties 
 in the country, will have occasion for the following books. The first 
 seven are kept in the same manner as the corresponding books in the 
 Town Department. All the entries in the Country Ledger, ' as well as 
 those in the Town Ledger, must first pass through the Waste and Day- 
 Books. The credit side of the Ledger is posted from the Bill-Journal 
 and the Day-Book. The debit side is posted from the vouchers them- 
 selves, and, like the debit side of the Town-Ledger, will mark against the 
 Paid-Day-Book and the " Clearing-in-Book." 
 
 1. A Country-Ledger. 
 
 2. Country-Bill-Register. 
 
 3. Country-Discount-Register. 
 
 4. Country-Bill-Ledger. 
 
 5. Country-Discount-Ledger. 
 
 6. Country-Bill-Journal. 
 
 7. Country-Discount- Journal. 
 
 8. Advice-Book. — In this book are entered an account of bills advised 
 to be paid on account of the Country Banks. This book is kept ledger- 
 wise, each bank having a separate account. 
 
 9. Advice-Journal. — This book is similar to the Bill-Journal, and it 
 contains the advices under the heading of the days on which they are to 
 be paid. 
 
 10. Credit-Book. — This book contains an account of the credit grant- 
 ed by a country bank in favor of any party. Each party has an account 
 open for him in this book, and the amount of his credit is placed to this 
 account. He is debited for such cheques as he may draw, and the 
 cheques are then passed to the debit of the country bank in the Country- 
 Ledger. 
 
 IL Acceptance-Book. — In this book are entered those bills which 
 have been received from the country, and which require the acceptance 
 of the party on whom they are drawn. The entry includes the date 
 when taken out, the name and residence of the drawee, the register- 
 number, and the amount. There are also two vacant columns, in one of 
 which the clerk who takes the bill for acceptance enters his initials when 
 he brings it back ; in the second column are entered the initials of an- 
 other clerk to whom the bills when " brought in from acceptance " are 
 delivered. Though this book is connected with the country department, 
 it is usually kept in the town office. 
 
 163
 
 A Treatise on Banking. 
 
 12. Stock-Book. — London bankers have usually powers of attorney 
 from their correspondents in the country, authorizing them to receive divi- 
 dends on the government funds. All these are entered in a book called 
 the Stock-Book. The book is divided into severat parts for the different 
 kinds of stock, as 3 per Cent. Consols, 3 per Cent. Reduced, &c., &ic. 
 In each division are entered the powers of attorney held by the bank. 
 The entry includes date of the powers, names of the attorneys, names of 
 the holders of the stock, and the amount. These entries should be made 
 a tolerable distance apart from each other, to leave room to notice any 
 alteration that may take place in the amount of the stock either by sales 
 or new purchases. 
 
 Every country bank keeps an account with a London bank. The 
 country banker receives from London a weekly statement of his cash ac- 
 counts, and a monthly account current. The cash account is a copy of 
 the London banker's ledger. But as the London banker does not con- 
 sider as cash any thing which may not be immediately turned into Bank 
 of England notes, the cash account does not exhibit a statement of the 
 undue bills which the country banker may have remitted, nor of the bills 
 which he may have advised to be paid. By means of a monthly account 
 current he has a full view of all these transactions. On the credit side of 
 the account current is entered the total amount of each remittance, 
 whether it consists of bills or cash. These are followed by entries of 
 " extra " sums of cash that have been lodged to the credit of the country 
 bank by parties resident in London. On the debit side of the account 
 current is placed the total amount of the "advices"; that is, of bills ad- 
 vised to be paid, and also any " extra " payments of " drafts " to per- 
 sons in London. Then the account is balanced, and we have an easy 
 check by which any error that may have crept into either the cash ac- 
 count or the account current is detected. For if both accounts be correct, 
 the amount of advices not yet due, added to the balance of the account 
 current, will be equal to the amount of bills not due, added to the balance 
 of the cash account. 
 
 IV. — The Note Department. 
 
 Those banks that issue notes, will have occasion for 
 
 A Note-Register. — In which the denomination, number, and date 
 of the notes will be entered when prepared for circulation. The total 
 amount of notes, as soon as they are received from the stamp-office, or 
 at least as soon as they arc signed by the banker or manager, are entered 
 to the credit of " note account," and are afterwards taken down daily as 
 part of the " cash" in the possession of the bank. If the notes on hand be 
 deducted from the balance of the note account, the remainder will show 
 the amount of notes in circulation. Another way is to open an account 
 for " Notes in Circulation," and to credit this account for the notes on 
 hand every morning, and debit it for the notes on hand every night : the 
 balance will show tlie amount of notes in circulation. There should also 
 be a book for the " Register of Cancelled Notes," in order to keep an ac- 
 count of those notes which, having become unfit for further use, have 
 
 164
 
 Book-keeping. 
 
 been cancelled and destroyed. The notes when cancelled are placed to 
 ♦he debit of the " Note Account." 
 
 V. — The Branch Department. 
 
 In those banks that have branches, the head office keeps an account 
 with each branch in the same way as a London banker keeps an account 
 with a country bank. There is usually an additional " Bill-Register " for 
 the bills payable at branches. Each branch has also two Bill-Registers, 
 for the bills payable at head-office, and the bills payable at branches, and 
 frequently another for the bills sent for collection to agents, where the 
 branch does not remit all its bills to the head office, but direct to agents in 
 other places in order to be collected. Every country banker has also 
 similar Bill-Registers for " Bills payable in London," " Bills payable at 
 Bristol, Manchester, &c.," as the case may be ; and of course correspond- 
 mg accounts must be opened in the General-Ledger. 
 
 There must also be a book for entering " Branch Notes paid." These 
 notes may either be placed as the debit of the branch on the day they are 
 Daid, or they may be carried daily or weekly to the debit of an account 
 to be called " Branch Note Account," and may be placed to the debit of 
 the branch on the day they are sent home. 
 
 VI. — The General-Ledger. 
 
 Into this Ledger, under the various accounts, will be entered the totals 
 of the corresponding headings or accounts specified in the Day-Book. 
 The accounts in this Ledger denote the various classes of operations, and 
 the balances show at all times the exact state of the bank. Every Satur- 
 day night the totals and balances of these accounts should be taken off on 
 a balance-sheet. When all the debits are added together, and all the 
 credits are added together, the two sides will agree ; that is, they will be 
 of the same amount. These balance-sheets may be printed and bound 
 together in a book, to be called the " General-Balance-Book." I cannot 
 better explain the General-Ledger than by giving the form of the weekly 
 balance-sheet, with the names of those accounts which most banks have 
 occasion to introduce. I have distributed these accounts into five classes : 
 — L Lodgments ; 2. Investments ; 3. Expenditure ; 4. Cash Account, 
 with Branches ; and 5. Proprietors' Accounts. Each bank, however, 
 will open such accounts as are adapted to its transactions. Whatever 
 books the business may render necessary will require to have correspond- 
 ing accounts. The General-Ledger contains the summaries of all the 
 other books. Thus, the account called " Current-Accounts " contains 
 the summaiy of the Current-Account-Ledger. The account called " De- 
 posit-Receipts " is a summary of the Deposit-Receipt-Book. The ac- 
 count called " Bills discounted " is a summary of the Discount- Register 
 ^nd the Discount-Journal. In this way every book in the office has a cor- 
 responding summary in the General-Ledger. Hence, this book is a check 
 mpon all the other books ; and by means of these summaries, the partners 
 ')r directors of a bank can see at once the actual state of their affairs, and 
 ••^n trace the progress or decline of different branches of their business. 
 
 165
 
 A Treatise on Banking. 
 
 THE 
 
 BANKING COMPANY, 
 
 Amounts and Balances of the General Ledger on 
 
 Amounts. Dr. 
 
 Balances. Dr. 
 
 Titles of Accounts. 
 
 I. Lodgments. 
 
 London Current Accounts. 
 
 Country ditto. 
 
 Depo.sit Receipts. 
 
 Bills Deposited (in London) 
 
 Ditto (from the Country). 
 
 Notes in Circulation. 
 
 Credits on Agents. 
 
 n. Investments. 
 
 Bills Discounted (in London) 
 
 Ditto (from the Country). 
 
 Past-Due Bills. 
 
 Government Stock. 
 
 East India Bonds. 
 
 Exchequer Bills. 
 
 Loans to Customers. 
 
 Ditto to Brokers. 
 
 Interest Account. 
 
 III. Expenditure. 
 
 Bank Premises. 
 
 Rent. 
 
 Taxes. 
 
 Salaries. 
 
 Stationery. 
 
 Incidental Expenses. 
 
 Law Expenses. 
 
 IV. Cash Account, with 
 
 Branches. 
 
 Branch A. 
 Branch B. 
 Branch C. 
 Branch D. 
 
 V. Proprietors'Accounts. 
 
 Paid-up Capital. 
 Preliminary Expenses. 
 
 Dividend Account. 
 
 Unclaimed Dividends. 
 
 Surplus Eund. 
 
 Profit and Loss. 
 
 Fund for Bad Debts. 
 
 General Account of Cash. 
 
 166 
 
 jji 
 
 Balances. Cr. 
 
 Amounts. Cr.
 
 Book-keeping. 
 
 It will be observed, that the accounts introduced into the preceding 
 balance-sheet are such as would be necessary to a London bank that had 
 country agencies and branches, and issued notes. No such bank exists. 
 But I have introduced all these accounts that each bank may take those 
 which are adapted to its transactions. It will also be observed, that I have 
 kept the country business distinct from the town business ; so that the 
 comparative extent of each may be immediately perceived. I have intro- 
 duced cash columns for the amounts as well as the balances ; for although 
 the balances are sufficient to show the actual state of the bank, yet the 
 amounts are necessary to show the business that has been done since the 
 previous half-yearly balance. 
 
 1. The first class of accounts, under the head of Lodgments, are all 
 credit accounts ; that is, the balance is on the credit side. 
 
 Current Accounts are those which are usually kept by the London 
 bankers, and are called by the Bank of England " Drawing Accounts." 
 Deposit Receipts are more permanent lodgments, upon which the joint- 
 stock banks allow interest. The account " Bills Deposited," not be- 
 ing a cash account, might be omitted without deranging the balance of the 
 General-Ledger. If introduced, its balance must be placed on both sides 
 the balance-sheet, or the totals will not agree. The General-Ledger is no 
 check upon the accuracy of this account. It should therefore be checked 
 periodically, by taking off the daily amounts current from the Journal, 
 and comparing the total with the balance of " Bills Deposited in the Gen- 
 eral-Ledger." 
 
 Some banks distribute their bills deposited into several accounts, as 
 " Bills Deposited by Agents," " Bills Deposited by Branches," " Bills 
 Deposited by Private Parties," &c., &c. On the debit side of the General- 
 Ledger these " bills deposited " are mixed with the bills discounted in 
 different accounts, according to the places where the bills are payable, as 
 " London Bills," " Manchester Bills," " Branch Bills," &c. Those de- 
 posited bills that are payable in the place where the bank is established, 
 are usually distinguished from the discounted bills ; one account being 
 called " Local Bills Discounted," and the other, " Local Bills Deposited." 
 
 Notes in Circulation. — When the notes are made payable at any 
 other place beside the place of issue, this account will only show the 
 " apparent circulation," as the notes that have been paid by the agents, or 
 at the other branches of the bank, cannot be brought into the account 
 until they have been returned for re-issue. I have classed this account 
 under the head of Lodgments, because it denotes a portion of the debt due 
 from the bank to the public. 
 
 Credits on Agents. — When a bank grants a Bill, or Letter of Credit, 
 upon their agents, the money received is placed to the credit of this ac- 
 count. When the bill is due, or the credit paid, it is placed to the debit 
 of this account, and to the credit of the agent's cash account. The busi- 
 ness of some banks requires a subdivision of their credits, as " Credits on 
 Jjondon Agents," " Credits on Bristol Agents," &c. Some banks have 
 also an account for " Credits on Branches " ; but where all the credits 
 granted are payable on demand, they are usually placed at once to the 
 ''-redit of the cash account of the branch on which they are drawn. 
 M 167
 
 A Treatise on Banking. 
 
 2. Investments. — The accounts belonfring to this class are all debit 
 accounts; that is, the balance (if any) is always on the debit side. 
 
 In the foregoing balance-sheet it is presumed that all the bills are pay- 
 able in London, as the London bankers do not discount bills payable else- 
 where. The division into two accounts is nnerely to show the comparative 
 extent of the town and the country business. The first account includes 
 the bills discounted for parties resident in London, and the second in- 
 cludes the bills discounted for parties resident in the country. Where the 
 bills are payable at ditrerent places, they are referred, as I have already 
 intimated, to different accounts, as " London Bills," " Bristol Bills," 
 " Manchester Bills," «SlC. It is not usual, in these cases, to distinguish 
 between the bills discounted and the bills deposited, but to place them 
 together on the same account ; for instance, the account " London Bills " 
 would include all bills payable in London, whether discounted or de- 
 posited. If thought proper, however, they may be easily divided into 
 separate accounts, as " London Bills Discounted," and " London Bills 
 Deposited." 
 
 Past-Due-Bills. — When a discounted bill is not paid, it is transferred 
 to the debit of this account. " Bills deposited " never pass into this ac- 
 count ; but if unpaid, are returned to the parties by whom they were de- 
 posited. 
 
 When the bank purchases " Government Stock," " Exchequer Bills," 
 " India Bonds," &c., the purchase-money is passed to the debit of an ac- 
 count raised for the purpose. Upon re-sale, the account is credited for 
 the money received, and the difference between the money invested and 
 the money received is passed, at the end of the year, to the debit or the 
 credit of profit and loss account. 
 
 Loans. — This account is debited for the amount of any loan granted 
 to a customer, or to any other party, on security. When a customer 
 wants a temporary advance, the usual way, in London banks, is, not to 
 let him overdraw his account, but to place to his credit the sum he may 
 require, and debit the loan account. The interest is charged upon the full 
 amount of the loan. When the loan is repaid, this account is credited. 
 
 3. Expenditure. — The accounts under this head require little expla- 
 nation. " Bank Premises " is debited for the expense of altering, paint- 
 ing, &c., the buildings and offices connected with the bank. The other 
 accounts are debited for the different classes of expenditure as they occur. 
 At the end of the year these accounts are credited, and the several 
 amounts are placed to the debit of " profit and loss account." 
 
 4. Cash Account with Branches. — The title of this class of ac- 
 counts is sufficiently explanatory. I will only observe, that in some banks 
 each branch keeps a distinct cash account with every other branch, and 
 with the several agents of the bank with whom it may have transactions. 
 But, in other banks, each branch passes all its transactions through its 
 cash account with the head office. It debits the head oflice for wlialever 
 it may remit to either a branch or an agent, and it credits the head office 
 for whatever sums it may receive from a branch or an agent. 
 
 5. Proprietors' Accounts. — This class of accounts refers to the in 
 ternal operations of the bank. 
 
 168
 
 Book-keeping. 
 
 Paid-up Capital. — If the capital has been paid up at different times, 
 this account may be divided into " First Instalment," " Second Instal- 
 ment," " Third Instalment," &c. 
 
 Preliminary Expenses. — Several joint-stock banks have passed to 
 an account of this sort the expense of forming the company ; and these 
 expenses are discharged out of the profits, by equal portions, in the course 
 of five or ten years. This is considered a more equitable mode than to 
 pay these expenses out of the profits of the first two or three years. 
 
 SiTRPLUS Fund. — When the whole of the annual profits are not di- 
 vided among the partners or proprietors, the surplus is transferred to an ac- 
 count, called " Surplus Fund," where it remains for the purpose of being 
 applied to meet any losses or contingencies that may occur in after years. 
 
 Profit and Loss. — To the credit of this account is placed all interest 
 and commission received ; and to the debit is placed all interest paid. 
 These entries are made at the time the transactions occur. At the end 
 of the year this account is credited for all the profits that have been made 
 during the year upon Government Stock, Exchequer Bills, &c., and is 
 debited with the several items of expenditure. The Profit and Loss Ac- 
 count may be subdivided into several accounts, as " Interest Received on 
 Bills Discounted," " Commissions Received," "Interest paid on Deposit 
 Receipts," " Charge for Agency," &c., die. When it is not thus divided, 
 a complete abstract of the account should be made out at the end of the 
 year. 
 
 General Account of Cash. — The introduction of this account makes 
 the General-Ledger a perfect check upon the other books. For by this 
 means the total of all the balances of the debit side of the General- 
 Ledger are equal to the total of all the balances of the credit side. To 
 the debit of this account is passed, every day, the total amount of the 
 credit side of the Day-Book ; and the account is credited for the amount 
 of the debit side of the Day-Book ; consequently, the balance of this ac- 
 count will be always on the debit side, and will be equal to the difference 
 between the sum of all the other debit balances, and the sum of the 
 credit balances; that is, it will show the amount of cash in the bank. 
 The General-Ledger is always kept on the progressive plan (see page 
 158), so that the balance of any account can be seen upon inspection ; 
 and its progress from any past period can be distinctly and readily 
 traced. 
 
 VII. — Periodical Balances. 
 
 Daily Balance. — It is well known that bankers try their balance at 
 the close of their business every night, with a view of correcting any er- 
 rors that may have occurred during the day. The process is very easy. 
 If to the amount of the Cash-Book last night, we add the amount of the 
 cash received to-day, and deduct the amount of the cash we have paid, 
 the remainder will be the amount of the Cash-Book to-night. If, on trial, 
 we find this is not the case, there must be some error. Suppose, for in- 
 stance, the Cash-Book last night amounted to £ 100,000, and we have re- 
 ceived £ 40,000 and paid ^^50,000 to-day, then will the Cash-Book to- 
 night amount to £ 90,000. The trial stands thus : — 
 
 169
 
 A Treatise on Banking. 
 
 Cash-Book last night 
 Received-Day-Book 
 
 £100.000 
 . 40,000 
 
 £ 140,000 
 
 Paid-Day Book 
 Cash-Book to-night 
 
 £ 50.000 
 90,000 
 
 £140,000 
 
 The daily balance, therefore, is nothing more than the balance of the 
 Day-Book ; and the only books employed are the Day-Book and the 
 Cash-Book. But as these books, when finally closed, include the amount 
 of several other books, the trial is usually made (for the purpose of avoid- 
 ing alterations) on a half-sheet of paper, called the trial paper, previous 
 to those entries being made, and then the amounts of these several books 
 are stated separately, in the following manner : — 
 
 Dr. 
 
 BANKING HOUSE. 
 
 Or. 
 
 Amount of Cash-Book last night 
 [This is usually called the Rest.] 
 Do. of Received-Day-Book 
 Do. of Bill-Journal 
 Do. of Discount-Journal 
 
 Amount of Paid-Day-Book 
 Do. of Clearing- in-Book* 
 Do. of Balance * of the Clear 
 
 Do. of Cash-Book to-night 
 Do. of Balance of Money 
 
 Book .... 
 Do. of Discount-Register 
 
 The balance of the clearing t is always to the credit of the house ; for, 
 if the clearing " takes out," then the bank notes paid away at the 
 Clearing-house are entered in continuation of the clearing-out ; so that, 
 in this case, the balance is usually thrown a small sum on the other side. 
 When the clearing is finally closed, the notes forming this balance are 
 entered in continuation of the clearing-in, and subsequently in the Cash- 
 Book. The notes entered in the clearing-out are, of course, not entered 
 in the Gash-Book. 
 
 Weekly Balances. — The daily balance checks the Waste-Books, 
 the Discount-Register, the Journals, the Day-Books, the Lists, and the 
 Money-Books. If any errors occur in any of these books throughout the 
 day, the balance will be wrong. But the daily balance does not check the 
 Current-Account-Ledger, though this is the most important book of all. 
 The Ledger is therefore " marked off" every morning against the Day- 
 Book, the Bill-Journal, and the Clearing-in-Book : but this is not a suffi- 
 cient check. Hence the balances of all the accounts in the Current- 
 Account-Ledger should be taken off" weekly in a book called the Currcnt- 
 Account-Balance-Book, and added together, and the amount made to 
 agree with the balance of " current accounts " in the General-Ledger. 
 This is usually done by the London bankers quarterly or half yearly. 
 When the Ledger is kept on the progressive plan, it may be done weekly 
 without much trouble. The " Current- Account-Balancc-Book " should 
 be ruled so that the names of the parties having accounts may be placed 
 under one another at the left-hand, and all the rest of the left-hand page, 
 2uid the whole of the right-hand page, divided into double cash columns : 
 
 * When a bank does not " clear" these items are of course omitted. 
 t For an account of the books in the clearing department, see the section on Lon- 
 don Bankers. 
 
 170
 
 Book-keeping. 
 
 one column for the balances of the accounts when in cash, and the other 
 for the balances overdrawn. On this plan it will not be necessary to 
 write the names more than once in seven weeks. 
 
 In the same way the balances of the Discount-Ledger should be taken 
 off weekly in the " Discount-Balance-Book." The balances of the 
 General-Ledger are also taken off weekly in the " General-Balance- 
 Book " in the way I have already described. 
 
 Half- Yearly Balance. — The weekly balancing of the Ledger does 
 not preclude the necessity for a half-yearly balance. The usual days for 
 balancing are the last days of .Tune and December. Some banks, how- 
 ever, balance on the last Saturday in June and December, and others on 
 the 30th of June and on Christmas-eve. On the balancing day the fol- 
 lowing operations are passed through the books: — I. The current ac- 
 counts will be debited for any interest or commission that may be due 
 from the party to the bank. — 2. The Current- Account-Ledger will be 
 balanced, and the balance will be brought down as the commencement of 
 the transactions of the ensuing half-year. — 3. The customers' books 
 must be balanced, and made to agree with the Current-Account-Ledger. 
 4. The interest due upon the outstanding deposit receipts must be calcu- 
 lated, and the sums added together. — 5. The General-Ledger must be 
 balanced, and at the December balance the amount standing to the debit 
 of the several classes of expenditure must be passed to the credit of those 
 accounts, and to the debit of profit and loss account, and the several 
 sums of profit that have been realized upon Government stock, India 
 bonds, &c., are transferred to the credit of profit and loss account. 
 
 For each half year a book must be provided to be called the Half- 
 Yearly-Balance-Book. This book will contain the following entries : — 
 
 L A balance-sheet showing the balances of the respective accounts in 
 the General-Ledger in the same way as the weekly balance sheet. 
 2. A debtor and creditor balance-sheet, showing the exact condition of 
 the bank. — 3. An abstract of the profit and loss account, viz : — 
 
 Abstract of Profit and Loss Account, from Jan. 1, to Dec. 31. 
 
 Dr. 
 
 To Bank Premises . 
 Furniture . • • 
 
 Rent 
 
 Salaries 
 
 Stationery . . . 
 Incidental Expenses 
 
 Total Expenses . . . . 
 Loss on bad bills, &c. . . 
 Balance in favor of the 
 Bank 
 
 Cr. 
 
 By Interest on Bills dis- 
 counted 
 
 By Interest on Loans 
 
 By Commission on Cur- 
 rent Accounts . . . . 
 
 Bv Profit on Exchequer 
 Bills, &c 
 
 171
 
 A Treatise on Banking. 
 
 4. A list of all the balances of the current accounts. 
 
 5. A list of all the outstanding deposit receipts, and the interest due 
 upon each. 
 
 6. A list of all discounted bills current, i. e. bills not yet due. 
 
 7. A list of all deposited bills current. 
 
 8. A list of all other securities, distinguishing those that belong to the 
 bank from those that are lodged by its customers. 
 
 At the end of the year the final balance of the profit and loss account 
 is transferred to other accounts according to the purposes to which it is to 
 be applied. If intended to be held as a " surplus fund," it is transferred 
 to that account. If intended to be divided among the proprietors, it is 
 transferred to a " dividend account," which is raised for that purpose. If 
 the balance of the profit and loss account should bo against the bank, then 
 it must remain " on the wrong side " until further profits shall turn the 
 balance the other way. 
 
 Besides the books connected with the business of banking, eveiy joint- 
 stock bank will require, 
 
 1. A Shareholders'-Rf.gister. — In this book the names of the 
 shareholders are entered chronologically in the order in which they be- 
 come shareholders. The entry includes the date, the name, residence, 
 number of shares, and sum paid. 
 
 2. Transfer-Register. — In this book are entered the transfer of 
 shares from one proprietor to another. The entry includes date of trans- 
 fer, from whom transferred, residence, ledger-folio, to whom transferred, 
 residence, purchase-money, and transfer stamp. 
 
 London, the . . day of . 18 
 
 To the Directors of . . . Banking Company. 
 Gentlemen, 
 
 Please to prepare the necessary document for transferring . , Shares, from 
 
 the name of of 
 
 to of 
 
 the consideration for which .... Shares is £ 
 
 Broker, 
 
 of 
 
 If a proprietor in a joint-stock bank wishes to dispose of his shares, he 
 directs a stock-broker to sell them in the market. After the sale the 
 broker gives notice to the directors of the bank in the preceding form. 
 The deed of transfer is then made out according to a printed form pre- 
 pared by the bank. This agreement is liable to a stamp duty, varying 
 according to the amount of the purchase-money. When shares are trans- 
 ferred for a nominal consideration, say five or ten shillings, the stamp 
 duty is thirty shillings. 
 
 The debtor and creditor balance-sheet will contain the same amounts 
 as the balance-sheet of the General-Ledger (see page 166), but differ- 
 ently arranged. They may be disposed according to the following 
 form : — 
 
 172
 
 Book-Keeping. 
 
 Statement of the Affairs of the Bank, on 
 
 Dr. 
 
 THE 
 
 BANKING COMPANY. 
 
 Or. 
 
 Due to the Public on 
 Current Accounts. 
 
 Head Office, Town . . 
 DiUo, Country . . . 
 
 Branch A 
 
 Branch B 
 
 Branch C 
 
 Total Current Accounts . 
 
 Deposit Receipts. 
 
 Head Office .... 
 
 Branch A 
 
 Branch B 
 
 Branch C 
 
 Total Deposit Receipts 
 
 Notes in Circulation . 
 Credits on Agents . . 
 
 Total Lodgments . . 
 
 Interest Account. 
 
 Head Office 
 
 Branch A 
 
 Branch B 
 
 Branch C 
 
 Total Amount of Interest. 
 
 Fund for Bad Debts. 
 
 Head Office 
 
 Branch A 
 
 Branch B 
 
 Branch C 
 
 Total Amount of Fund ? 
 for Bad Debts . . S 
 
 Paid-up Capital 
 
 Sundry Accounts. 
 
 Forfeited Shares 
 Dividends. . . 
 Unclaimed ditto 
 Surplus Fund . 
 Profit and Loss . 
 
 Total Sundry Accounts 
 Total . . . 
 
 Due to the Bank on 
 
 Overdrawn Accounts 
 
 Head Office, Town . . 
 
 Ditto, Country . . 
 
 Branch A 
 
 Branch B 
 
 Branch C 
 
 Total Overdrawn Acct's. 
 
 Bills Discounted. 
 Head Office, Town . . 
 
 Ditto, Country . . 
 
 Branch A 
 
 Branch B 
 
 Branch C 
 
 Total Amount of Bills ; 
 Discounted . . . S 
 Loans. 
 Head Office .... 
 
 Branch A 
 
 Branch B 
 
 Branch C 
 
 Total Amount of Loans 
 
 Investments. 
 Government Stock . . 
 Exchequer Bills . . . 
 India Bonds .... 
 Other Investments . . 
 
 Total Investments . . 
 
 Total available Assets . 
 
 Expenditure. 
 Head Office .... 
 
 Branch A 
 
 Branch B 
 
 Branch C 
 
 Total E.xpenditure . . 
 
 Past-Due Bills. 
 Head Office .... 
 
 Branch A 
 
 Branch B 
 
 Branch C 
 
 Total Amount of Past- } 
 Due Bills . . . . S 
 Sundry Accounts. 
 
 Stamp Account . 
 
 House Account . 
 Ditto Branch A. 
 Ditto Branch B. 
 Ditto Branch C. 
 
 Total 
 
 General Account of 
 
 Cash. 
 Head Office .... 
 
 Branch A 
 
 Branch B 
 
 Branch C 
 
 Total amount of Cash . 
 Total . . . 
 
 173
 
 A Treatise on Banking. 
 
 The following is the scale of stamp duties upon the transfer of shares 
 in joint-stock banks : — 
 
 2n the purchase 
 
 money 
 
 is under £ 20 
 
 For £ 20 and under 
 
 50 
 
 50 . 
 
 
 150 
 
 150 
 
 
 . 300 
 
 300 . 
 
 
 500 
 
 500 
 
 
 . 750 
 
 750 . 
 
 
 . 1,000 
 
 1,000 
 
 
 . 2,000 
 
 2,000 . 
 
 
 3,000 
 
 3,000 
 
 
 . 4,000 
 
 4,000 . 
 
 
 5,000 
 
 5,000 
 
 
 . 6,000 
 
 6,000 . 
 
 
 7,000 
 
 7,000 
 
 
 . 8,000 
 
 8,000 . 
 
 
 . 9,000 
 
 9,000 
 
 
 10,000 
 
 £0 10 
 
 1 
 
 
 
 1 
 
 10 
 
 2 
 
 
 
 3 
 
 
 
 6 
 
 
 
 9 
 
 
 
 12 
 
 
 
 25 
 
 
 
 35 
 
 
 
 45 
 
 
 
 55 
 
 
 
 65 
 
 
 
 75 
 
 
 
 85 
 
 
 
 95 
 
 
 
 The bank charges a fee of one shilling per share upon five shares or 
 above for making the transfer, and two shillings and sixpence per share 
 for any number less than five shares. Where there is no pecuniary con- 
 sideration the charge is ten shillings for each transfer. 
 
 3. Proprietors' Ledger. — In this ledger each proprietor has an ac- 
 count open, in the same way as in a cash-ledger. He is credited for the 
 number of shares ; and an entry is made of the different instalments he 
 may pay. When he sells or transfers his shares, he is debited the shares, 
 and they are placed to the credit of the party who may have purchased 
 them. The entry includes the date, number of register, calls and trans- 
 fers, number of shares, and amount. 
 
 III. We shall now consider those improvements of which the above 
 system is capable, so as to render 'it more efficient in large establish- 
 ments. 
 
 As a bank increases its business, it becomes of importance to improve 
 its system of book-keeping, and to adopt means of increasing the effi- 
 ciency of its clerks. A large establishment can generally be conducted 
 with a less proportionate number of hands than a small one. It admits 
 of a more extensive application of the principle of a division of labor. 
 In a small bank, one clerk may keep two or three books of various kinds, 
 or perhaps act as both cashier and accountant. But in a large bank, each 
 clerk is in general kept wholly to one employment. The effects of this 
 separation of occupations is the same in banks as in manufactories ; and 
 the description of these effects given by Adam Smith will equally apply 
 to both cases. 
 
 " Tlie great increase in the quantity of work which, in consequence of the division 
 of labor, the same number of people are capal)le of performing, is owing to three dif- 
 ferent circumstances ; first, to tlic increase of dexterity in every particuhir workman ; 
 secondly, to. the saving of time which is commonly lost in passing from one species of 
 work to another ; and lastly, to the invention of a great number of machines which 
 facilitate and abridge labor, and enable one man to do the work of many." 
 
 The increase of dexterity by constant practice is very observable in 
 
 174
 
 Book-keeping. 
 
 the practice of " casting up." A clerk who is much accustomed to this 
 operation will cast up a long column of figures with singular quickness 
 and accuracy. It is also very observable in " calling over." Besides, 
 owing to the abbreviations we have mentioned in p. 152, a clerk in call- 
 ing over will speak so rapidly that an unpractised ear will hardly be able 
 to follow him. Mr. Babbage gives the following instance of great dex- 
 terity acquired by practice : — 
 
 " Upon an occasion when a large amount of bank notes was required, a clerk in the 
 Bank of England signed his name, consisting of seven letters, including the initial of 
 his Christian name, five thousand three hundred times during eleven working hours, 
 and he also arranged the notes he had signed in parcels of fifty each." 
 
 The loss of time in passing from one operation to another is as obvious 
 in mental processes as in those which are purely mechanical. 
 
 " When the human hand or the human head has been for some time occupied in any- 
 kind of work, it cannot instantly change its employment with full efifect. The muscles 
 of the limbs employed have acquired a flexibility dui'ing their exertion, and those to 
 be put into action a stiffness during rest, which renders every change slow and unequal 
 in the commencement. A similar result seems to take place in any change of mental 
 exertion ; the attention bestowed on the new subject is not so perfect at the first com- 
 mencement as it becomes after some exercise." * 
 
 The invention of expedients for facilitating and abridging labor is also 
 as common in a bank as in a manufactory. 
 
 Mr. Francis has recorded, in his History of the Bank of England, a 
 variety of improvements introduced into that establishment by Mr. William 
 Rae Smee, a son of the chief accountant. 
 
 He proposed an alteration in the cheque office, by which he stated that 
 the work which employed three principals and twenty-one clerks would be 
 done more effectually by two principals and seven clerks. In the circula- 
 tion department, the posting which formerly took fifty now employs only 
 eight clerks. And the whole of that department, if now conducted upon 
 the old system, would probably require nearly eighty additional assistants. 
 In the National Debt Office Mr. Smee introduced such measures that 
 " the directors were enabled so far to consult the accommodation of the 
 public as to enable the transfers in the various offices to be made eight or 
 nine days later than usual, the business which formerly occupied about 
 thirty-two days being accomplished in about twenty-three." t 
 
 Similar improvements have been introduced into commercial book- 
 Iceeping. 
 
 " The old method of journalizing and posting each transaction separately, unneces- 
 sarily swells the accounts in the ledger with a multiplicity of figures, which greatly in- 
 creases the difficulty of balancing, and, to say nothing of extra labor and loss of time, 
 the liability to error is always in proportion to the number of entries, and vice versd. 
 If a hundred sums are posted when one would answer, then a hundred chances of 
 error are incurred where only one was necessary ; and in the event of an error in ad- 
 justing the accounts, a hundred entries must be called over and examined, instead of 
 one. {Double Entry Elucidated, by B. F. Foster, p. 18.) 
 
 * The Economy of Machinery and Manufactures, by Charles Babbage. 
 t History of the Bank of England : its Times and Traditions ; by John Francis. 
 Vol. II. p. 141. 
 
 175
 
 A Treatise on Banking. 
 
 The expedients introduced to improve any system of book-keeping 
 have for their object either the saving of time directly by abbreviating the 
 entries, or to save time indirectly by new modes of preventing or detect- 
 ing errors. And it may be observed, that a minute alteration, hardly 
 worthy of being adopted in a small bank, where it would save but a few 
 minutes a day, may be very properly adopted in a large establishment, 
 where the time saved would be in proportion to the greater extent of 
 business. Sometimes an entry may be shortened by omitting some of the 
 particulars. Thus, where we have been accustomed to enter with every 
 bill, the name of the last endorser, the drawer and his residence, the ac- 
 ceptor and his residence, the date, term when due, and the amount, we 
 may properly, perhaps, omit some of these items. Or where we have re- 
 peated the same entry in several books, we may enter it in fewer books, 
 or, perhaps, make the individual entries in only one book, and enter the 
 total amount in the others, or, at other times, the whole form of a book 
 may be changed, and we may, by a new arrangement, obtain the same 
 results more clearly and in less time. Almost every bank will occasion- 
 ally make some alteration of tliis kind as its business may require. And 
 even each accountant has usually some little expedients of his own for 
 facilitating his daily operations. We will notice a kw of those amend- 
 ments tliat have been adopted with the view of saving time and labor in 
 some of our banking establishments. 
 
 Some large banks have adopted " the horizontal system of book-keep- 
 ing," which is in some respects an improvement on the systems described 
 in the former editions of this work. The chief difference is in the mode 
 of ruling the Received and the Paid-Waste-Books. 
 
 The Received- Waste-Book, instead of being ruled as described in 
 p. 155, has four cash columns, three at the left hand as you face the 
 book, and the fourth at the right hand, with a space between the third and 
 the fourth. The different items of a credit entry, instead of being placed 
 under one another, as in the former system, will be placed separately in 
 the first three columns, and the total in the fourth column. Thus, if a 
 sum of £ 543 10s. Id. be received from Mr. Smith, and this sum con- 
 sists of <>C3 10s. Id. in coin or money, £ 100 in a Bank of England 
 note, and i&440 in a cheque on Jones, Loyd, «Ss Co., the entry will stand 
 thus : — 
 
 Money. 
 
 Bank 
 Notes. 
 
 Sundries. 
 
 Name. 
 
 Total. 
 
 £ 
 3 
 
 s. 
 10 
 
 d. 
 
 7 
 
 100 
 
 £ 
 440 
 
 s. 
 
 
 d. 
 
 
 Smith. 
 Jones, Loyd, & Co. 
 
 £ 
 .543 
 
 s. 
 10 
 
 d. 
 7 
 
 Thus it is seen that the first column is for money, the second column 
 for bank notes, and the third column for " sundries," that is, for all other 
 articles ; and these three columns are added together " horizontally," and 
 the total brought out into the fourth cash column at the right hand. It 
 will be observed, that the cashier has to add the items together, not long- 
 
 176
 
 Book-keeping. 
 
 ways, but cross-ways, — not longitudinally, but " horizontally." After a 
 little practice, one way is just as easy as the other. 
 
 Some cashiei-s prefer having two columns only at the left hand, and 
 two at the right hand, with the space between the second and third co- 
 lumn ; as the numbers of the bank-notes, and the names of the bankers 
 on whom the cheques are drawn, can then be placed on the same line ; 
 but this is not a matter of much consequence. 
 
 Now, if you " cast up " the first left-hand column, you will have at the 
 close of the day the total amount of money, that is, coin, received during 
 the day. If you cast up the second column, you will have the total 
 amount of bank notes. The third column will give the total amount of 
 " sundries." And the amount of these three columns together will be 
 equal to the fourth column, containing the total amount of the credits. If 
 this should not be the case, there must be some error, which must be dis- 
 covered forthwith. Thus the horizontal Received- Waste-Book is a check 
 upon itself. As soon as the cashier gets to the bottom of a page, he casts 
 up his book, and sees that the three columns are exactly equal to the 
 fourth. Thus he keeps his book right as he goes on. Whereas, in the 
 former system, any error in the Received-Waste-Book would not be dis- 
 covered till the General Balance was tried at the close of business, and 
 not then, perhaps, until after a long course of " marking off." 
 
 To simplify my explanation, I have described the Received-Waste- 
 Book as having only four cash columns, and these are perhaps enough for 
 a small bank. But large establishments have sometimes seven or eight, 
 perchance in the following order : — 1. Money, //mi is, coin. 2. Bank- 
 notes. 3. Parcels of bank-notes, called sundries. 4. Countiy notes. 
 5. Checks on clearing bankers. 6. Checks on bankers who do not clear. 
 
 7. Checks on our own bank. a space. 8. The total amount of 
 
 the credit. 
 
 The horizontal Paid-Waste-Book is ruled with three cash columns ; 
 one to the left for the amount of the cheque paid ; then an open space for 
 the name ; then a column for the bank-notes ; and another for the money, 
 that is, coin. The London bankers do not pay away any bills or country 
 notes in exchange for cheques, but only Bank of England notes and coin. 
 The entry stands thus : — 
 
 Amount of 
 Cheque. 
 
 Name, and No. of Bank- Note. 
 
 Bank 
 Notes. 
 
 Money. 
 
 £ 
 101 
 
 s. 
 4 
 
 d. 
 3 
 
 White. 1473. 
 
 £ 
 100 
 
 £ 
 1 
 
 s. 
 4 
 
 d. 
 3 
 
 The amount of the columns containing the bank-notes and the money 
 will of course be equal to the column containing the amount of the 
 cheques. And thus this Paid-Waste-Book contains a check upon itself. 
 
 The horizontal Paid- Waste-Book may have at the left hand two cash 
 columns, one for the town and the other for the country departments, and 
 dlso a separate column for the country notes ; thus : — 
 
 177
 
 A Treatise on Banking. 
 
 Town. 
 
 Country. 
 
 Country 
 
 Notes. 
 
 Name. 
 
 Bank 
 
 Notes 
 Paid. 
 
 Money. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 This prevents the necessity for having both a Town and a Country Paid- 
 Waste-Book, while the two departments are still kept distinct. The 
 country notes are also separated, and can be checked by themselves. 
 When all are added together, the total of the three columns at the left 
 must be equal in amount to the total of the two columns at the right hand. 
 The articles paid must be equal to the bank-notes and money which were 
 issued in payment. 
 
 ^Ve shall now point out some of the advantages of the horizontal sys- 
 tem of keeping the Waste-Books. 
 
 First. As all the receipts and payments of money, that is, coin, are en- 
 tered individually in the Received and Paid Waste-Books, and the 
 amounts added together, it will not be necessary that these sums be 
 copied individually into the Money-Book. The total amount only of each 
 column is entered in the Money-Book at the close of the day's business, 
 and the Money-Book is balanced. Thus, all the time employed in mak- 
 ing the entries individually in the Money-Book is saved. 
 
 Secondly. As all the credits to current accounts are added together in 
 the Received- Waste-Book, it is not necessary they should be entered in- 
 dividually in the Day-Book. They can be individually posted direct into 
 the Ledger, and the total only be entered in the Day-Book. The same 
 remark will apply to the Paid- Waste-Book. This is another saving of 
 time and labor. 
 
 Thirdly. Every Waste-Book, as we have already intimated, is a check 
 upon itself VVe have spoken of a Received- Waste-Book and a Paid- 
 Waste-Book as though a bank had but one, and in small banks this is the 
 case. But in large banks there are seven or eight cashiers or more, each 
 having a Received- Waste-Book and a Paid- Waste-Book for the town de- 
 partment, and another Received- Waste-Book and Paid-Waste-Book for 
 the country department, with a Supplemcntary-Receivcd-Waste-Book, and 
 a Supplementary-Paid- Waste-Book, and a Money-Book besides. Now, it 
 is a great advantage to have the means of keeping all these books free 
 from errors during the day, and to know at night that they are all correct. 
 If the " Balance " be wrong, the field of inquiry is thus very much limit- 
 ed, and the time that would otherwise be employed in checking the Waste- 
 Books is devoted to the examination of the other books of the bank. 
 
 Fourthly. This plan gives the means of checking separately those 
 items that have a column appropriated to them. Take, for example, the 
 column of Bank-notes. If we add to the amount of bank-notes on hand 
 last night the amount received to-day, and deduct the amount paid away, 
 the remainder should be the amount on hand to-night. When this is the 
 case, the bank-notes are right. In the same way we may check the 
 
 178
 
 Book-keeping. 
 
 money columns, the clearing columns, «fcc. Thus, when the trial balance 
 is wrong, we can check these items separately, and thus more readily dis- 
 cover the error. Without this expedient, we should have to " mark ofT" 
 the whole business of the day. 
 
 It will be observed that the above Waste-Books refer only to receipts 
 and payments on current accounts. All other receipts and payments are 
 entered in a Supplementary-Receipt-Book and a Supplementary-Paid- 
 Book. These books are ruled in the same way as the other Waste-Books, 
 and they embody entries in connection with deposit receipts, received or 
 paid, credits or debits to interest accounts, debits to salaries, taxes, inci- 
 dental accounts, &c., &c. All these items are then entered in the Day- 
 Book, from whence they are posted into the General-Ledger. A book is 
 also provided, usually called a Transfer-Book, in which are entered all 
 the cheques on the bank paid in by other customers, as these merely 
 cause a transfer of the amount from one customer to another. 
 
 Books which are designed chiefly as registries or summaries should be 
 kept on the horizontal system. Thus, a London bank which keeps an ac- 
 count with the Bank of England, will have to lodge to its credit notes, 
 gold, silver, post-bills, cheques, dividend warrants, &c. 
 
 To keep a registry of this, a book may be opened horizontally, — the 
 first column at the left hand being the date, and then these words being 
 entered over separate columns, at the top of the page ; afterwards a col- 
 umn for the total amount of all these items, then a credit column for the 
 cheques drawn each day, and then the daily balance. If this book be 
 made of such a size as to contain about thirty lines, then each page will 
 contain the transactions of a month. And, by adding up the columns, the 
 figures at the bottom of the page will show the separate amounts of notes, 
 gold, silver, &c., paid into the Bank of England in the course of a 
 month. By comparing the different pages, it will be seen on what 
 months the largest or the smallest sums are paid into the bank. 
 
 In constructing tables, it is also best to follow the horizontal system. 
 Thus, to keep a record of the weekly returns of the Bank of England, it 
 is best to arrange the items into columns, with the heading at the top of 
 each column, the first column containing the dates of the several returns. 
 It will then be easy to trace the fluctuations in any one item ; such, for 
 instance, as the " Public Deposits," the " Private Deposits," the " Rest," 
 &c. Some of the Returns published in the Appendix to the Parlia- 
 mentary Evidence of 1847 have been arranged on this principle. 
 
 We will now notice some further improvements that have sometimes 
 been adopted by large banks in their system of book-keeping. The great 
 object of all these improvements is, as we have already mentioned, either 
 to save time directly, in making the entries, or indirectly, by preventing 
 or discovering errors. These are, — 
 
 I. The abolition of the Discount- Register. Here the bills are entered 
 at once in the Discount-Ledger, under the names of the respective parties 
 for whom they are discounted ; and the total amount of bills discounted 
 each day is entered in the Day-Book, from the Interest-Book, which con- 
 tains the calculations of discount. The only objection to this plan is, that 
 the space in the Discount-Ledger does not admit of so full a description 
 
 179
 
 A Treatise on Banking. 
 
 of the bill as is usually given in the Discount-Register. The Bill-Register 
 is also abolished in the same way. 
 
 2. The adoption of a Check-Ledger facilitates the discovery of errors, 
 and thus diminishes the time employed in searching for them. Though 
 this book is called a Check-Ledger, it is not kept ledger-wise. It is ruled 
 with a cash column on each side the page. In the column opposite your 
 left hand you enter, from the cheques themselves, all the dieques paid 
 during the day. In the right-hand column you enter from the Received- 
 Waste-Books all the credits of the day. When you -add up these two 
 columns, they will of course agree with the amounts of the Paid-Waste- 
 Book and the Received-Waste-Book. Thus the accuracy of the Check- 
 Ledger is insured. Now, where the balances of the Current-Account- 
 Ledger are checked every week, you employ the Check-Ledger to test 
 their accuracy in this way. If to the amount of the balances of the Cur- 
 rent-Account-Ledger last week, you add the total credits entered in the 
 Check-Ledger during the week, and deduct the total debits entered in the 
 Check-Ledger during the week, the remainder will show the total amount 
 of the balances of the Current-Account-Ledger for the present week. 
 Each Current-Account-Ledger will have a Check-Ledger, and thus each 
 Ledger will be checked separately, so that when the total balance is 
 wrong, it will at once be seen in which Ledger the error has occurred. 
 
 Time is sometimes lost by a clerk taking up the wrong book, opening 
 it, putting it down, and then taking up the right one. A cashier, "for in- 
 stance, will sometimes take up the Paid-Waste-Book instead of the Re- 
 ceived-Waste-Book. To prevent this, the two books may have covers of 
 different colors, — one white, the other green. Time may be lost by two 
 clerks wanting the same book at the same time. The ledger-keeper may 
 want to post from the Received- Waste-Book when the cashier is using it. 
 To prevent this, there may be two sets of Waste-Books, — one for Mon- 
 days, Wednesdays, and Fridays, and the other for Tuesdays, Thursdays, 
 and Saturdays ; and, to prevent mistakes, the names of the days should 
 be written in large letters on the covers of the books. 
 
 IV. We will now make a comparison between the system of Book- 
 keeping practised by Merchants, and that practised by Bankers. 
 
 The merchants have their Waste-Book, Journal, Ledger. The bank- 
 ers have their Waste-Book, Day-Book, Ledger, 
 
 In both cases, the Waste-Book is the book in which transactions are 
 first entered. But this book is capable of subdivision : it contains a record 
 of various transactions, some of which may be entered in separate books. 
 Bankers have their Received, Paid, and Supplementary Waste-Books ; 
 also their Deposit-Receipt-Book, Discount-Registers, and other books sub- 
 sidiary to the Waste-Book. So, merchants have their Waste-Book sub- 
 divided into various books, according to the nature of the transactions. 
 There is the Invoice-Book, containing an account of all goods purchased ; 
 the Sales-Book, containing an account of all goods sold ; a book for 
 " Bills Receivable," containing a list of all bills in the merchant's hands, 
 which when due he will receire ; another for bills payable, containing a 
 list of all bills he has accepted, and which when due he will have to pay ' 
 
 180
 
 Book-keeping. 
 
 a Cash-Book, containing an account of all cash he receives or pays away ; 
 and several others, varying according to the character and extent of the 
 business. Now all these subdivisions of the merchant's Waste-Book re- 
 semble those of the banker's in two things — first, they are all kept chro- 
 nologically — they contain a record of the transactions in the order of 
 time in which they occurred: and, secondly, all the transactions thus re- 
 corded must afterwards, upon the system of double entiy, pass, either 
 individually or in totals, through the book which merchants call a Journal, 
 and bankers call a Day-Book. 
 
 The words "Journal" and "Day-Book" have the same meaning; 
 and in this instance the use of the two books is similar. But in the mer- 
 chant's Journal individual transactions may be entered, while in the bank- 
 er's Day-Book they are always entered in totals. Thus the total amount 
 of " Bills Discounted," and the total amount of credits and payments on 
 current accounts, are entered in the Day-Book, but not the individual 
 items. Another difference is, that over each entry in the merchant's 
 Journal you state to what account it is to be posted ; for every entry is 
 posted to two accounts — to the debit of one account, and to the credit of 
 the other. And this is denoted by Dr. being placed before the name of 
 the account to be debited. Thus, if a merchant buys some goods for 
 ready money, the Journal entry is preceded by 
 
 Goods Dr. to Cask; 
 
 implying that the account " Goods " is to be debited, and the account 
 " Cash " to be credited. On the other hand, if he sells goods for ready 
 money, the transaction will be journalized thus, 
 
 Cask Dr. to Goods. 
 
 If he sells goods upon credit to John Brown, it will be, 
 
 Jokn Brown Dr. to Goods. 
 
 If he sells goods for a bill of exchange, it will be, 
 
 Bilk Receivable Dr. to Goods. 
 
 If he sends goods abroad as a speculation, in the ship Adventure, he may 
 raise an account for the ship, and say. 
 
 Ship Adventure Dr. to Goods. 
 
 The entries in the banker's Day-Book are made daily, but the entries 
 m the merchant's Journal are generally made once a month. 
 
 The Ledger. — We have stated that in the merchant's Ledger every 
 entry is made twice — one account being debited, and another credited — 
 and these two accounts are indicated in the Journal. This is what is 
 called book-keeping by double entry. If it be asked, whether bankers 
 keep their books by double entry .^ the answer is, that those bankers 
 who have no General-Ledger (and this is the case with not a few of the 
 private bankers) do not keep their books by double entry. The Current- 
 Account-Ledger is not kept by double entry. It contains none but per- 
 sonal accounts, and its accuracy is tested only by the periodical balancings. 
 
 181
 
 A Treatise on Banking. 
 
 The banker's Ledger, that corresponds in this respect with the merchant's 
 Ledger, is not the Current-Account-Lcdgor, but the General-Ledger. 
 This is kept by double entiy. In a ledger kept by double entry, the sum 
 of all the debit balances will be equal to the sum of all the credit bal- 
 ances ; and the sum of all the debit amounts will be equal to the sum of 
 all the credit amounts. When this is not the case there is an error in 
 some of the accounts. This is the case with the banker's General- 
 Ledger. But, as the transactions are not posted individually, but only in 
 totals, the double entry does not appear on the face of the accounts. 
 Thus, if a bill be discounted for a customer, and the amount placed to 
 the credit of his current account, the Journal entry, on the principle of 
 mercantile book-keeping, would stand thus : — 
 
 Bills Discounted Dr. to Current Accounts. 
 
 But the bill discounted is placed to the debit of the account of " Bills Dis- 
 counted," in a total of all the bills discounted on that day. And the 
 amount is placed to the credit of Current Accounts, in the total of all the 
 sums received to the credit of Current Accounts on that day. Thus, the 
 " double entry," though equally real, is not so apparent as though the 
 transactions were posted individually. 
 
 So, again, if a country banker should discount a bill, and the customer 
 ask for a draft on his agent in London, the Journal entry, on the com- 
 mercial system, would stand thus : — 
 
 Bills Discounted Dr. to Drafts on London. 
 
 It would go to the debit of " Bills Discounted," in the total of all the bills 
 discounted that day, and it would go to the credit of " Drafts on London," 
 in the total of all the drafts on London issued on that day. 
 
 The accounts in a merchant's ledger are usually classified into Per- 
 sonal Accounts, Real Accounts, and Profit and Loss Accounts. The 
 Personal Accounts are the accounts of persons who may owe the mer- 
 chant money, or to whom he may owe money. The Real Accounts are 
 accounts denoting property, such as cash, bills receivable, bills payable, 
 merchandise, ship adventure, &c. The Profit and Loss Accounts are 
 rent, commissions, expenses, and all other accounts which are ultimately 
 transferred to the debit or the credit of the Profit and Loss Account. 
 
 The banker's General-Ledger has no Personal Accounts, as these are 
 all kept in the Current-Account-Ledger. The usual accounts are those I 
 have enumerated in page 166, and are all either Real Accounts or Profit 
 and Loss Accounts. 
 
 It would be quite possible (but not desirable) to introduce all the Per- 
 sonal Accounts into the banker's General-Ledger, and thus to form the 
 Currcnt-Account-Ledger and the General-Ledger into one, and keep the 
 whole by double entry. In this case we should omit the totals of Current 
 Accounts, now introduced into the General-Ledger, and insert every 
 transaction individually. If John Brown drew a cheque on the bank, the 
 Journal entry would stand thus : — 
 
 John Brown Dr. to Cash. 
 182
 
 Book-keeping. 
 
 And if he paid in money to his credit, the Journal entry would stand ^ 
 thus : — 
 
 Cash Dr. to John Brown. 
 
 All the entries passed to the Dr. and Cr. of these Personal Accounts 
 would of course pass to the Cr. and Dr. of Cash. Indeed, all the entries 
 to the Dr. and Cr. of Cash would be the same as are now made in the 
 Check-Ledger, except that the debtor column would be called creditor, 
 and the creditor column would be called debtor. By the use of such a 
 Check-Ledger as we have described, page 179, (for there are various 
 kinds of Check-Ledgers,) the Current Accounts are virtually kept by 
 double entry; and we have the additional advantage that, when there are 
 more than one Ledger, we are enabled to check each Ledger separately. 
 
 To accountants in banks where a General-Ledger is not kept, it appeai-s 
 strange that " Cash " should be credited for money which is paid away., 
 and debited for money which is received. But this strangeness will 
 vanish, if for the word " Cash " they would fix in their mind the word 
 " Cashier." If they had an account with a cashier, they would of course 
 debit him, as they do their banker, for all moneys they paid into his hands, 
 and credit him for all moneys they drew out. And the difference between 
 the amounts of these debits and credits would be the balance either in 
 their favor, or against them. 
 
 In thus comparing the commercial and the banking systems of book- 
 keeping, I have hitherto supposed that all merchants keep their books by 
 double entry. But this is not always the case with the smaller houses. 
 And then their system more nearly resembles the system of those bank- 
 ers who do not keep a General-Ledger. 
 
 " In keeping books by single entry, the Daily-Books are kept in the 
 same manner as in double entry, with the exception of a column of ref- 
 erence to the Ledger in each book, which takes the place of a column of 
 reference in the Journal — this book being dispensed with. The entries 
 are posted directly from the Daily-Books into the Ledger. In the Ledger, 
 by single entry, strictly speaking, there ought to be only one kind of ac- 
 counts ; namely. Personal Accounts, including all persons to whom a 
 merchant becomes indebted, and all persons who become indebted to 
 him." {Wallace''s Pocket-Guide to Commercial Book-keeping.) 
 
 It will be seen from this account, that, in mercantile book-keeping by 
 single entry, the merchant's Ledger resembles the Current-Account- 
 Ledger of the banker. In single entry the merchant dispenses altogether 
 with his Journal ; but the banker usually retains his Day-Book, even when 
 he does not keep a General-Ledger. But, in this case, the Day-Book 
 contains only the debits and credits, individually, of the Current Ac- 
 counts, which are posted afterwards into the Current-Account-Ledger. 
 In the horizontal system, as we have stated, the debits and credits of the 
 current accounts are not entered individually in the Day-Book, but the 
 total amounts are taken from the Paid and Received Waste-Books. 
 N 183
 
 A Treatise on Banking. 
 
 Section XIII. — BANKING CALCULATIONS. 
 
 When a bill is discounted, the party is credited for the full amount, and 
 debited for the interest. The interest is calculated from the day on which 
 the bill is discounted to the time it falls due. The shortest way is to 
 make use of an interest book ; but if it be done with the pen, the follow- 
 ing rule may be useful. Multiply the amount of the bill by the number 
 of days. To the product add one third of itself, one tenth of that third, 
 and one tenth of that tenth. From the total strike off four figures to the 
 right for decimals. This will give the interest at 5 per cent., in pounds 
 and decimal parts of a pound. The decimals are to be brought into 
 shillings and pence, by multiplying by twenty and twelve. The interest 
 of any sum at a different rate per cent, ma^ be found in the same way, 
 if you multiply the principal by twice the rate of interest, and strike off 
 five figures for decimals instead of four. 
 
 Example. — It is required to find the interest of £ 500 for ninety days 
 at 5 and 3^ per cent. 
 
 £ £ 
 
 500 principal. 500 principal. 
 
 90 number of days. 7 twice the rate of interest 
 
 l-3d 45,000 3,500 
 
 1-lOth 15,000 90 number of days. 
 
 1-lOth 1,.500 
 
 150 l-3d 315,000 
 
 1-lOth 105,000 
 
 6-1650 1-lOth 10,500 
 
 20 1,050 
 
 3-3300 4-31550 
 
 12 20 
 
 3-9600 6-31000 
 
 12 
 
 Answer — £6 3s. 3d. at 5 per cent. 
 
 " £ 4 6s. 3d. at 34 per cent. 3-72000 
 
 It must be observed, however, that this method of calculation is not 
 exactly correct ; it produces nearly a farthing too much on every 10/. of 
 interest. In calculating large sums, therefore, the amount of these far- 
 things must be deducted. 
 
 This mode of calculation is founded upon the rule, that whenever you 
 have to divide by any number under 100, you may divide by 100 ; after 
 having added to the dividend such a proportion of itself as the difference 
 between the divisor and 100 bears to the divisor, the result will be the 
 same as though you had divided in the usual way. This rule is best e.\- 
 plained by an example. 
 
 Suppose you have to divide 2,.500 by 40. Now if 40 be subtracted 
 from 100, there will remain 60. The proportion which 60 bears to 40 is 
 1^. If then you add to the dividend 1^ times itself, and aivide by 100, 
 you have the quotient required ; thus — 
 
 184
 
 Banking Calculations. 
 
 2500 
 2500 
 1250 
 
 62-50 Answer, 62 i. 
 
 Now then, to find the interest upon any sum for one day, you may di- 
 vide by 7,300, or, striking off the ciphers, by 73. The number required 
 to make up 100 is 27. What is the proportion between 27 and 73 ? If 
 If you take the third of 73, a tenth of that third, and a tenth of that tenth, 
 you have something more than 27. And if you add to 73 one third of 
 itself, one tenth of that third, and one tenth of that tenth, you will have 
 lOOjij, which divided by 100 will give Ijo.oco- As the proportion is not 
 exact, the interest given by the above rule will always be ig.osoth part too 
 much, which is about a farthing in every £ 10 interest. 
 
 In taking the interest for any number of months, it will be useful to re- 
 member that the interest of <£ 1 for one month at 5 per cent, is \d. Thus 
 the interest of <£ 100 for two months is twice a hundred pence, or 16s. 8d. 
 The interest upon shillings and pence is never taken into the account. 
 If the fraction is more than 10s. it is regarded as £ 1 ; and if it be less, 
 it is not noticed. 
 
 The interest for any number of months, at any rate per cent., may be 
 found by multiplying the number of months by the rate of interest : with 
 this sum divide 1,200. By this quotient divide the principal, and you 
 have the interest required. 
 
 Example. — What is the interest of £ 10,000 at 4 per cent, for three 
 months? 4 multiplied by 3 gives 12 — divide 1,200 by 12, and you 
 have 100 ; then divide 10,000 by 100, and you have £ 100, the interest 
 required. 
 
 To find the interest of any sum of money at 6 per cent, for any num- 
 ber of months. This and the subsequent rules may be found illustrated 
 in Crossley''s Intellectual Calculator, in Fryerh Mental Arithmetic, and 
 in similar works. 
 
 Rule. — Multiply the number of pounds by the number of months, cut 
 off the unit figure, and the remainder is the answer in shillings. The 
 unit figure multiplied by 1^ will give the pence. 
 
 Example. — What is the interest of £ 13,476 10s. Sd, for 6 months 
 at 6 per cent, per annum } 
 
 £ s. d. 
 
 13,476 10 8 
 
 6 
 
 20) 80,859 4 
 404 • 5 • 10 
 
 Having obtained the interest of any sum at 6 per cent., it is easy to 
 find the interest at H, 2, 3, or 4 per cent, by taking ^, |, ^, or § the in- 
 terest, as the case may be. 
 
 To find one year's interest at any rate per cent. 
 
 Rule. — Multiply the money lent by double the rate per cent., reject 
 the unit figure,, and you have the answer in shillings. 
 
 185
 
 A Treatise on Banking. 
 
 Example. — What is the interest of £21 10s. for one year at 3 per 
 cent. ? 
 
 £ s. 
 27 10 
 
 6 doable the interest. 
 
 16-5 
 12 
 
 60 Answer, 1 6s. Gd. 
 
 To find the interest of any sum of money at 5 per cent, for any num- 
 ber of months. 
 
 Rule. — Take the pounds as pence, and multiply by the months. 
 Example. — What is the interest of .^120 at 5 per cent, for 8 months ? 
 
 s. 
 120 pence = 10 
 
 8 number of months. 
 
 JE4 Answer. 
 
 To find the interest of any number of days at 5 per cent. 
 
 Rule. — Multiply the days by one third of the pounds, or the pounds 
 by one third of the days, reject the unit figure, and you have the answer 
 in pence. — N. B. As this rule is founded on the assumption that the 
 year consists of only 360 days, you must deduct one penny from every 
 six shillings of interest. 
 
 Example. — What is the interest of .£120 for 21 days at 5 per cent. ? 
 
 £120 Or 21 days. 
 
 7 = J of 21 days. 40 = J of the pounds. 
 
 12) 84,0 12) 84,0 
 
 7 shillings. Answer. 7 shillings. Answer. 
 
 There is often a difference in the amount of interest according to tlie 
 method of calculation, either by months or by days. A month from the 
 10th of February to the 10th of March, is only 28 days ; but from the 
 10th of March to the 10th of April, a month is 31 days. The half year 
 from the 1st of January to the 30th of June, is 181 days ; but from the 
 1st of July to the 31st of December, the half year is 184 days. The 
 interest of £ 10,000 for 6 months is .£250 ; for 181 days it is only i: 247 
 18s. ll<i. ; for 184 days it is <£ 252 Is. \d. Mr. Reader has published a 
 series of Time Tables, showing the number of days from evciy day in 
 the year to any other day in the year. 
 
 Interest tables, calculated at any rate of interest, may occasionally be 
 employed to ascertain the interest on any sum at a different rate. This 
 is done by taking that proportion of the principal, or of the time, which 
 the given rate of interest bears to the rate of the interest tables. For 
 example, if it be necessary to ascertain the discount on a bill of £ 100 
 for 50 days at 4 per cent., and you have interest tables calculated at 
 5 per cent., you may take either four fifths of the time or four fifths of 
 the amount. For, the interest of £ 100 for 40 days, or the interest of 
 
 186
 
 Banking Calculations. 
 
 £SQ for 50 days, at 5 per cent., is equal to the interest of £ 100 for 50 
 days at 4 per cent. 
 
 When a bill is discounted, bankers charge interest on the full amount 
 of the bill, and take it at the time. Thus, if a bill be discounted at 5 per 
 cent., they will obtain more than 5 per cent, on the money actually ad- 
 vanced. This is allowed by law, and is not liable to be set aside on the 
 ground of usury. Should it be necessary in other cases to allow discount 
 or rebate, the mode of calculating it would be thus : — 
 
 Example. — What is the rebate at 5 per cent, on a sum to be received 
 a year hence > Then, as 105 is to 100, so is 100 to the sum required. 
 
 105 : 100 : : 100 Answer £95. 4s. 9/irf. 
 
 100 
 
 105) 10,000 (95 
 945 
 
 550 
 525 
 
 25 
 20 
 
 105) 500 (4 
 420 
 
 80 
 12 
 
 105) 960 { 9 3 
 945 
 
 15 
 
 When you have to find the interest of a large sum for one day, you 
 may strike off two figures from the right hand, and take the interest of 
 the remainder for 100 days. Thus, if you have to find the interest of 
 .£47,863,47 for one day, take the interest of ^47,863 for 100 days, 
 then take the interest of £ 47 for one day, and add the two sums 
 together. The interest of ^ 1 for 100 days is the same as the interest 
 of £ 100 for one day. It may be given as a general rule, that a different 
 time and sum may be employed, provided they yield the same product 
 when multiplied together. Thus, the interest of £ 10,000 for one day 
 is the same as the interest of £ 1,000 for 10 days. 
 
 Bankers differ in their mode of calculating the interest upon current ac- 
 counts. Some have an Interest-Ledger, or cash columns ruled in the 
 Current- Account-Ledger, in which they state the interest upon every indi- 
 vidual item in the account. Thus, for instance, the general balance 
 takes place the 30th of June, and the 31st of December. If a sum of 
 money is paid in on the 1st of May, the interest is calculated on that 
 amount from the 1st of May to the 30th of June, and is then carried to 
 the credit of the party's interest account. On the other hand, if a cheque 
 be drawn on the 1st of May, the interest is calculated and carried to the 
 debit of the interest account. On the 30th of June, the interest account 
 
 187
 
 A Treatise on Banking. 
 
 M balanced, and the balance is carried to the debit or credit of the party's 
 current account. Other bankers take off the balance of the current ac- 
 count into a separate book (or have columns ruled in the ledger for bring- 
 ing out the balances [see p. 158]) for every day, from the Jst of Januaiy 
 to the 30th of June ; add all these amounts together, and then take the 
 interest of the total for one day. To take the interest for one day is a 
 very easy operation. The interest of any sum for one year at 5 per cent, 
 is one twentieth part of the principal, and the interest for one day is the 
 365th part of the interest for a year. Now, 365 multiplied by XJO gives 
 7,300. You have then only to divide any sum by 7,300, and you have 
 the interest of that sum for one day at 5 per cent, per annum. The in- 
 terest of any sum for one day at any other rate than 5 per cent, may be 
 found by multiplying the principal by twice the rate of interest, and divid- 
 ing the product by 73,000. But the best way is to make use of Gilmer's 
 Interest Tables, published by Sims & M'Intyre, of Belfast. Similar 
 Tables have also been published by Mr. Coulthart, manager of the Ashton- 
 under-Lyne Joint-Stock Bank. 
 
 Banks who compound for the stamp duty on their notes and twenty-one 
 day bills on London calculate the sum to be paid, by ascertaining the 
 amount in actual circulation every Saturday night. The amounts for all 
 the Saturdays in the half year being added together, and divided by 26, 
 the number of weeks, the quotient shows the average amount in circula- 
 tion during that period, and the duty paid is at the rate of 3s. 6d. per 
 cent, upon this average amount. This is at the rate of 7s. per cent, upon 
 the average annual amount. 
 
 To ascertain what denomination of notes remains the longest in circu- 
 lation, let the total average circulation for any given period be represent- 
 ed by the number 1,000; and let the amount of each particular denomi- 
 nation be represented by a proportionate part of 1,000. Then let the 
 total amount of notes paid during the same period be represented by 
 1,000, and the amount of each denomination of notes be proportionally 
 ascertained ; then place these two series of numbers in juxta-position, and 
 it will immediately be seen what, denomination of notes remain out the 
 longest. For instance, if the average amount of a banker's circulation 
 consist of £20,000 in .£5 notes; £ 15,000 in £ 10 notes ; £ 10,000 in 
 £ 20 notes ; and £ 5,000 in £ 50 notes, then the proportionate numbers 
 will stand thus : — 
 
 Total Circulation. XT.. £10. £2(1. £50. 
 
 1,000 400 300 200 100 
 
 Then, if during the same period the amount of notes paid of different 
 denominations have been £ 15,000 in £ 5 notes ; £ 15,000 in £ 10 notes ; 
 £ 12,000 in £ 20 notes ; and £ 8,000 in £ 50 notes, the proportional 
 numbers will stand thus : — 
 
 Total Paid. 
 
 £.'5. 
 
 £10. 
 
 £20. 
 
 £50. 
 
 1,000 
 
 300 
 
 300 
 
 240 
 
 160 
 
 By placing these numbers under the preceding ones, it will be per- 
 ceived that the amount of £5 notes paid is less than the proportional 
 amount in circulation ; and, consequently, notes of this denomination re- 
 
 188
 
 Banking Calculations. 
 
 main out the longest ; the .£ 10 notes remain out a less time; the ,£20 
 a still shorter term ; and the £ 50 notes the shortest term of all. 
 
 To ascertain how long a banker's notes remain out, take the average 
 amount in circulation for any given period, say three months ; ascertain 
 the amount of notes paid during that period. If the amount paid during 
 the three months is twice the average amount in circulation, then the 
 notes have remained out six weeks. If the amount paid is three times the 
 amount in circulation, then the notes have remained out one month. The 
 term which any particular denomination of notes remains in circulation 
 can of course be ascertained in the way I have already described. These 
 calculations are easily made by a table of logarithms. 
 
 The following Account shows the Average Amount of Bank of England Notes in Circula- 
 tion, distinguishing the Denominations, together with the number of Days the Notes re- 
 mained out, in the October Quarter 1843, 1844, 1845, 1846, and 1847 : — 
 
 
 October Quarter, 
 
 October Quarter, 
 
 October Quarter, 
 
 October Quarter, 
 
 October Quarter, 
 
 
 1&13. 
 
 
 1844. 
 
 
 1845. 
 
 
 1816. 
 
 
 1847. 
 
 
 
 Amount. 
 
 Days. 
 
 Amount. 
 
 Days. 
 
 Amount. 
 
 Days. 
 
 Amount. 
 
 Days. 
 
 Amount. 1 
 
 Days. 
 
 
 £ 
 
 
 £ 
 
 
 £ 
 
 
 £ 
 
 
 £ 
 
 
 £5 
 
 4,879,000 
 
 88.0 
 
 5,651,000 
 
 86.8 
 
 5,911,000 
 
 77.8 
 
 6,143,000 
 
 80.6 
 
 5,816,000 
 
 74.0 
 
 .£10 
 
 3,440,000 
 
 91.3 
 
 3,881,000 
 
 91.4 
 
 3,992,000 
 
 78.3 
 
 4,046,000 
 
 79.5 
 
 3,759,000 
 
 73.6 
 
 £20 
 
 1,221,000 
 
 67.4 
 
 1,417,000 
 
 66.7 
 
 1,473,000 
 
 58.6 
 
 1,458,000 
 
 58.9 
 
 1,398,000 
 
 54.3 
 
 £30 
 
 302,000 
 
 23.2 
 
 264,000 
 
 23.0 
 
 236,000 
 
 21.1 
 
 228,000 
 
 20.8 
 
 218,000 
 
 19.3 
 
 £40 
 
 2f>l,000 
 
 17.4 
 
 221,000 
 
 17.2 
 
 205,000 
 
 15.5 
 
 193,000 
 
 15.0 
 
 180,000 
 
 13.3 
 
 £50 
 
 1,548,000 
 
 46.2 
 
 1,751,000 
 
 48.5 
 
 1,773,000 
 
 39.8 
 
 1,660,000 
 
 40.1 
 
 1,636,000 
 
 37.0 
 
 £100 
 
 1,894,000 
 
 34.9 
 
 2,249,000 
 
 34.1 
 
 2,383,000 
 
 29.0 
 
 2,243,000 
 
 27.1 
 
 2,294,000 
 
 26.2 
 
 £200 
 
 392,000 
 
 14.8 
 
 399,000 
 
 14.4 
 
 400,000 
 
 12.9 
 
 373,000 
 
 12.3 
 
 362,000 
 
 10.9 
 
 £300 
 
 370,000 
 
 12.2 
 
 397,000 
 
 12.4 
 
 388,000 
 
 10.8 
 
 381,000 
 
 10.8 
 
 354,000 
 
 9.0 
 
 £500 
 
 870,000 
 
 14.1 
 
 827,000 
 
 13.8 
 
 903,000 
 
 12.1 
 
 794,000 
 
 12.0 
 
 803,000 
 
 10.3 
 
 £1,000 
 
 2,924,000 
 
 12.2 
 
 3,082,000 
 
 10.3 
 
 3,432,000 
 
 10.1 
 
 2,921,000 
 
 8.9 
 
 2,355,000 
 
 7.3 
 
 In calculating commissions for 1 per cent., divide by 100 ; for | per 
 cent., by 200 ; for \ per cent., by 400 ; for ^ per cent., by 800. 
 
 In calculating the dividends on stock, if it be in the 4 per cents., the 
 half yearly dividends will be one fiftieth part of the principal. Hence, 
 multiply by 2, and divide by 100. 
 
 If the stock be 3 per cents., the half yearly dividend will be g^g^^ths of 
 the principal. Hence, add to the principal one half of itself, and divide 
 by 100. 
 
 If the stock be 3| per cent., add to the principal one half and one 
 quarter of itself, divide by 100, and you have the half-yearly dividend. 
 
 If the stock be 3^ per cent., add to the principal one half and one 
 eighth of itself, divide by 100, and you have th^ half-yearly dividend. 
 
 Examples. — What is the half-yearly dividend on .£13,476 10s. 8d 
 3 per cents., 3^ per cents., 3| per cents., and 4 per cents. } 
 
 3 PER CENTS. 
 
 £ s. d. 
 
 13,476 10 8 
 
 6,738 5 4 
 
 202.14 16 
 
 3.i PEK CENTS. 
 
 £ s. d. 
 
 13,476 10 8 
 
 6,738 5 4 
 
 1,684 11 4 
 
 218.99 7 4 
 
 3^ PER CENTS. 
 
 £ S. d. 
 
 13,476 10 8 
 
 6,738 5 4 
 
 3,369 2 8 
 
 235,83 18 8 
 
 4 PER CENTS. 
 £ S. d. 
 
 13,476 10 8 
 2 
 
 269.53 1 4 
 
 189
 
 A Treatise on Banking • 
 
 3 PEB CENTS. 
 
 3^ PER CENTS. 
 
 
 3i PER CENTS. 
 
 4 PEB CENTS. 
 
 £ s. 
 202.14 16 
 20 
 
 d. 
 
 
 £ 
 
 218.99 
 20 
 
 s. d. 
 
 7 4 
 
 
 £ s. 
 235.83 18 
 20 
 
 d. 
 8 
 
 £ S. (f. 
 
 269.53 1 4 
 20 
 
 2.96 
 12 
 
 19.87 
 12 
 
 16.78 
 12 
 
 10.61 
 12 
 
 11.52 
 
 
 10.48 
 
 
 
 9.44 
 
 
 7.36 
 
 
 
 Answer. - 
 
 -3 per 
 ^k per 
 3i per 
 4 per 
 
 cent, 
 cent, 
 cent, 
 cent. 
 
 £ s. 
 202 2 
 218 19 
 235 16 
 269 10 
 
 d. 
 
 11 
 
 10 
 
 9 
 
 7 
 
 
 In making calculations respecting the purchase or sale of stock, multiply 
 the amount of stock by the price, and divide by 100. Stock-brokers 
 have seldom any occasion to make these calculations, as there are books 
 published expressly for their use. 
 
 To compute the half-year's dividend on any amount of stock in the 
 3 or the 3^ per cents., within one penny. 
 
 Rule. — Multiply the amount of stock by 3 or 3,^, respectively. Take 
 the unit of the pounds produced by that multiplication for pence, and the 
 remaining figures of the pounds for shillings. But when the unit of the 
 pounds produced by this multiplication is more than 4, and also when 
 there are shillings or pence in this product, then one penny must be added 
 to the result for the unit, and one penny for the shillings and pence. 
 
 Example 1. — What is the half-yearly dividend on £ 13,476 10s. 8rf. 
 in the 3 per cents. .? 
 
 £ s. d. 
 
 13,476 10 8 
 
 3 Multiply by 3. 
 
 20) 4042.9 12 
 
 202 2 9 Add 2 J. as above. £202 2s. 11 rf. 
 
 Example 2. — What is the half-yearly dividend on £ 13,476 10s. Sd 
 in the 3| per cents. .? 
 
 £ s. 
 J 13,476 10 
 
 d. 
 8 
 3 
 
 Add 2c?. as above. 
 
 
 40,429 12 
 3,369 2 
 
 20) 4379.8 14 
 
 
 
 8 
 
 8 
 
 
 £218 19 8 
 
 £218 19s. Wd. 
 
 In passing through the books a purchase of Long Annuities, debit the 
 account of Long Annuities for the purchase money. Then calculate 
 how much per annum the annuity will yield upon the capital invested, 
 recollecting' that the annuity will expire on the first quarter in the yeai 
 
 190
 
 Banking Calculations. 
 
 1860. Supposing this rate to be 4 per cent., you will, when the annuity 
 is received in April or October, debit Long Annuity account 4 per cent, 
 interest on the purchase money, and credit the same account the amount 
 of the annuity received. The first entry will be passed to the credit of 
 Profit and Loss Account. The second entiy will be passed to the debit 
 of Cash Account, as a return of capital. The balance of the Long An- 
 nuity account after each entry is made, will show the amount of caphal 
 that then remains invested in Long Annuities. 
 
 The stock-brokers charge one eighth commission on all purchases and 
 sales of stock ; one shilling per cent, on Exchequer Bills and India Bonds. 
 The charges are made on the amount of stock, not on the amount of 
 money invested. In the purchases or sales of shares in public companies, 
 the usual charge is 5^. per share. In continuation accounts, that is, 
 where a party buys stock for money and sells it for time, the charge is 
 only one sixteenth per cent. Upon terminable annuities, the charge is 
 one eighth per cent, upon the money invested. " One eighth commis- 
 sion" is a charge of 2s. 6d. (the one eighth of a pound sterling) on 
 every £ 100 ; a quarter commission is, of course, 55. The stock-broker 
 usually allows the London banker one half the commission. 
 
 If the stock stands in the name of several persons, any one may re- 
 ceive the dividends, but they must unite to execute a sale. If one or 
 more of the parties die, the stock is transferred by the survivors, without 
 the concurrence of the executors or representatives of the deceased 
 party. Hence, if a father wished to give his son a certain amount of 
 stock at his death, he might place the stock in his own and in his son's 
 name, and upon his death his son would become the actual possessor of 
 the property. Powers of attorney made and executed for the sale or 
 transfer of stock must be deposited at the bank, for examination, before 
 two o'clock, the day previous to being acted upon ; if only for receiving 
 dividends upon stock, it is sufficient to present the power of attorney at 
 the time when the first dividend thereon becomes payable. A power of 
 attorney costs £ 1 Is. 6d. ; but for Bank, India, and South Sea Stock, 
 ^1 Us.6d. 
 
 Expense of a Transfer in £ £ s. d. £ £ s. d. 
 
 Bank Stock, not exceeding . . . 25 . . 9 exceeding 25 . . 12 
 India Stock, " ... 10 . 1 10 " 10 . 1 14 
 
 South Sea Stock, " ... .100 .. 9 6 " 100 . . 12 
 
 t) 
 The dividends on the 3 per Cent. Consols are paid in January and 
 July. The dividends on the 3 per Cent. Reduced, and on the 3| per 
 Cent., are paid in April and October. This last stock bears interest at 
 3^ per cent, only till October, 1854 ; afterwards, 3 per cent. ; but the in- 
 terest cannot be further reduced until October, 1874. 
 
 The United States of America reckon their money in dollars. To 
 turn dollars, at the exchange of 4s. 6rf. per dollar, into pounds sterling, 
 multiply the number of dollars by 9, and divide by 40. To turn pounds 
 sterling into dollars, multiply by 40, and divide by 9. 
 
 The French calculate their stock, not by the amount of the principal, 
 but by the amount of the dividend. Thus, 1,000 francs in the French 
 
 191
 
 A Treatise on Banking. 
 
 rentes, denote 1,000 francs per annum. To calculate the purchase 
 money for any amount of French rentes, first ascertain the principal. 
 For the 5 per Cents, you multiply by 20, and for the 4| per Cents, by 
 22f ; for the 4 per Cents, by 25, and for the 3 per Cents, by 33^. Hav- 
 ing obtained the amount of stock, and the price, proceed in the same 
 way as in calculating the purchase money for English stock. 
 
 The following quotations from Waterston's " Commercial Dictionary " 
 {A CycJop(Kdia of Commerce, Mercantile Laws, Finance, Commercial 
 Geography, and Navigation, by William Waterston, Esq.) will serve to 
 explain the operations connected with foreign bills of exchange : — 
 
 "A foreij^n hill of exchange is an order addressed to a person residin;; ahroad, di- 
 reetinjr him to pay a determinate sum of foreijrn money to the person in whose fovor it 
 is drawn, or to his order. The amount of foreipi money, therefore, to be paid is fixed 
 by the bill ; but the amount of British money (or money of the country in which the 
 drawer resides), to be given for the purchsisc of the bill is by no means fixed, but is 
 continually varying. 
 
 " Of the two terms of comparison between the money of one place and that of 
 another, one is fixed, the other is variable. The place whose money is reckoned at the 
 fixed price is, in commercial language, said to receive the variable price ; the other is 
 said to (jive the variable price. Hence, the higher the exchange between any two 
 places, the more it is in favor of that which receives the variable price ; the lower, the 
 more in favor of that which gives the variable price ; — the exchange being said to be 
 favorable or unfavorable to any place, according as a smaller or larger amount of the 
 currency of that place is required for discharging a given amount of foreign payments. 
 Thus London receives from Paris a variable number of francs and centimes for £> 1 
 sterling; and taking the par at 25 francs 34 centimes for £ 1, exchange will be 5 per 
 cent, in favor of London when it rises to 26 francs 62 centimes, and about 5 per cent, 
 against London when it falls to 24 francs 7 centimes. 
 
 " Bill mercliants study the exchanges, not only between the place at which they re- 
 side and all other places, but also between all those other places themselves, by which 
 means they are generally enabled to realize a profit by buying bills in one place and 
 selling them in another ; — in this way preventing any great fall in the price of bills in 
 those couTitries in which the supply exceeds the demand, and any great rise in those 
 countries in which the supply happens to be deficient. Sometimes exchange opera- 
 tions are conducted with little outlay of capital. Thus, if a bill merchant in London 
 can sell a bill on Amsterdam at half per cent, premium, and buy one at Paris at half 
 per cent, discount, and with the latter buy one at Paris on Amsterdam at par, he will 
 have gained 1 per cent, by the transaction, without the employment of any capit.-vl ; — 
 the bill remitted from Paris to Amsterdam arriving in time to meet the bill drawn 
 there upon his correspondent. Again, a bill merciiant, in order to take advantage of 
 a premium on the exchange, may obtain a credit abroad upon which he may draw 
 bills, under the calculation that at some future and not very distant period he will he 
 able to replace the funds at a lower rate of exchange, and thereby realize a profit by 
 the operation. The central points for such transactions are Hamburgh, Amsterdam, 
 Vienna, Paris, New York, and above all, London, the great money change of the 
 world. 
 
 '' In this country the buying and selling of bills on foreign countries is conducted by 
 brokers, all such transactions centering in the metropolis. In London, the days for the 
 negotiation of foreign bills are Tuesdays and Fridays, the foreign post dai/s. The 
 !)rokers go round to the princi])al merchants, and discover whether they are buyers or 
 sellers ; and a few of the more influential, after ascertaining the state of the market, 
 suggest a price at which the greater part of the transactions are settled, with such de- 
 viations as particular bills may be subject to from their high or low credit. For the 
 bills they buy on one post-day, houses of established credit pay on the following post- 
 day, when they receive the second and third bills of the set ; — foreign bills being usu- 
 ally drawn in sets of three. The brokerage charged on bills is 1 per mille, or one 
 tenth per cent. 
 
 192
 
 Banking Calculations. 
 
 " On the evenings of Tuesdays and Fridays, the market rates for bills on all the 
 principal foreign cities, with the current prices of bullion, are published in Wetenhall's 
 ' Course of the Exchange.' " 
 
 The following are the places to which England gives a certain amount 
 of sterling for a variable amount of foreign money : — 
 
 Amsterdam 
 
 Do. 
 Rotterdam 
 Antwerp 
 Brussels 
 Hamburgh 
 Paris . 
 Do. 
 
 Marseilles . 
 Frankfort 
 Vienna 
 Trieste . 
 Leghorn . 
 Genoa . 
 
 £ Variable according 
 to the Exchanges. 
 
 short 1 for 12 4| Florins and Stivers. 
 
 3 months 1 " 12 7| do. 
 
 do. 1 " 12 8 do. 
 
 do. 1 " 26 5 Francs and Cents. 
 
 do. 1 " 26 5 do. 
 
 do. 1 " 13 14^ Marcs and Schillings, 
 
 short 1 " 25 75 Francs and Centimes. 
 
 3 months 1 " 26 2 do. 
 
 do. 1 " 26 5 do. 
 
 do. 1 "122 J Batzen. 
 
 do. 1 " 10 11 Florins and Kreusers. 
 
 do 1 " 10 12 do. 
 
 do. 1 " 30 37 Lire Tosc. and Cent. 
 
 do. 1 " 26 5 Lire and Centesimi. 
 
 The following are the places to which England gives an 
 amount of sterling for a fixed amount of foreign money : — 
 
 uncertain 
 
 
 
 Variable according 
 
 
 
 
 to the Exchanges. 
 
 
 Madrid 
 
 . 3 months 
 
 36 pence for 
 
 1 Dollar of Plate. 
 
 Cadiz . 
 
 do. 
 
 36^ ' 
 
 a 
 
 1 do. 
 
 Naples 
 
 . do. 
 
 40 
 
 1 (1 
 
 1 Ducat. 
 
 Palermo 
 
 do. 
 
 U9h 
 
 i u 
 
 1 Onza. 
 
 Messina . 
 
 . do. 
 
 120 
 
 ( u 
 
 1 do. 
 
 Lisbon 
 
 . 60 days/d 54 
 
 I 1( 
 
 1 Milreis. 
 
 Oporto 
 
 . do. ' 
 
 53^ 
 
 ' " 
 
 1 do. 
 
 Gibraltar 
 
 do. 
 
 48 
 
 1 11 
 
 1 Hard Dollar. 
 
 Venice 
 
 . do. 
 
 47 
 
 1 (1 
 
 6 Lire Austriachi. 
 
 St. Petersburg 
 
 do. 
 
 38 
 
 ; u 
 
 1 Silver Rouble. 
 
 Rio Janeiro 
 
 . do. 
 
 30 
 
 I 11 
 
 1 Milreis. 
 
 New York 
 
 do. 
 
 47h 
 
 I It 
 
 1 United States Dollar 
 
 Calcutta . 
 
 . do. 
 
 23 
 
 1 11 
 
 1 Company's Rupee. 
 
 To ascertain the amount of English money that ought to be received 
 for a foreign bill, divide the amount of the bill by the rate of exchange. 
 Thus, suppose the following bill, for 300 francs, were negotiated at the 
 rate of 25 francs 65 cents the pound sterling, then divide 300 by 25-65, 
 and the result will be the amount in English money. 
 
 Londres, le 18 Janvier, 1849. B. P. F^ 300. 
 
 Au virtgt Fevrier prochain veuillez payer contre ce Mandat h Tordre de Messieurs 
 la somme de trois cents francs valeur en compte que vous 
 
 passerez de mSme avec ou sans avis de 
 
 A Messieurs 
 
 Banquiers, Paris. 
 
 193
 
 A Treatise on Banking. 
 
 25-65 ) 300 00 ( 11 
 2565 
 
 •4350 
 2565 
 
 1785 
 20 
 
 25-65 ) 35700 ( 13 
 2565 
 
 10050 
 7695 
 
 2355 
 12 
 
 25-65) 28260 (11 
 2565 
 
 2610 
 2565 
 
 • -45 Answer, £ 11 13s. Ud. 
 
 We may observe that all bills are drawn in the money of the country 
 in -which they are to be paid. 
 
 In the cases referred to in the third paragraph of the above quotation, 
 the calculation is more complicated. To ascertain when it is more ad- 
 vantageous to send money from one country to another through a third 
 country, there must be two " rule-of-three " calculations, instead of one ; 
 and if the .number of countries is increased, the number of calculations 
 will be increased. But these calculations may be abridged by what is 
 called " the Cham Rule," or " Conjoined Proportion," or " Compound 
 Arbitration." The rule given by arithmeticians is the following : — 
 Place the numbers alternately, beginning at the left hand, and let the last 
 number stand at the left hand. Then multiply the first row continually 
 for a dividend, and the second for a divisor. 
 
 Example. — If 12 lbs. at London are equal to 10 lbs. at Amsterdam, 
 and 100 lbs. at Amsterdam are equal to 120 lbs. at Paris, how many lbs. 
 at London are equal to 40 lbs. at Paris ? 
 
 Lea. Right. 
 
 12= 10 12X100X40 = 48000 
 
 100 = 120 10 X 120 = 1200) 48000 ( 40 
 
 40 48000 
 
 Answer, 40 lbs. 
 
 This rule is capable of two modifications. The example we have 
 given, is when it is required to find how many of the first sort of coin 
 weight or measure, mentioned in the question, are equal to the last. It 
 may be required to find how many of the last sort of coin, weight or 
 measure mentioned in the question, are equal to the quantity of the first. 
 In this case, the following is the 
 
 Rule. — Place the numbers alternately, beginning at the left hand, and 
 
 191
 
 Banking Calculations. 
 
 let the last number stand on the right hand. Then multiply the first row 
 for a divisor, and the second for a dividend. 
 
 Example. — If 12 lbs. at London make 10 lbs. at Amsterdam, and 
 100 lbs. at Amsterdam make 120 lbs. at Paris, how many lbs. at Paris 
 are equal to 40 lbs. at London ? 
 
 Left. Right, 
 
 12= 10 12 X 100 =1200 
 
 100 = 120 10 X 120 X 40 = 48,000 
 
 40 1200 ) 48,000 ( 40 
 
 48,000 
 
 The above examples will explain the principle of the Chain rule. The 
 following example, taken from Mr. Waterston, will show its application 
 with regard to the transmission of money. 
 
 London and Paris, through Hamburgh. — Find the arbitrated rate be- 
 tween London and Paris when the exchange of London on Hamburgh is 
 13 marcs 12 schillings banco for ^ 1 ; and that of Paris on Hamburgh 
 184 francs 50 centimes, for 100 marcs banco. 
 
 This question comes under the second branch of the rule. It is to as- 
 certain how many francs will be obtained for £ 1 sterling when sent to 
 Paris by way of Hamburgh ; therefore, 
 
 £l =:220 schillings banco =13 marcs 16 schillings. 
 Schillings 16 = 1 marc banco. 
 Marks banco 100 = 18450 cents = 184 francs 50 cents. 
 Cents 100 = 1 franc. 
 1 £ 
 Then 1 X 16 X 100 X 100 = 160,000 divisor. 
 
 220 X 1 X 18450 X 1 XI = 4059,000 dividend. 
 Answer, 25 francs 37 cents. 
 
 It will be seen from the above example, that on the right-hand side the 
 marcs, having also fractional parts, have been reduced to schillings, and 
 the francs to cents ; and hence it has been necessary to introduce on the 
 left-hand, the number of schillings in a marc, and the number of cents in 
 a franc : 16=1, and 100 = 1. 
 
 Although in this case the remittance is said to be through Hamburgh, 
 yet in practice the operation would be made by purchasing in London, 
 bills on Hamburgh, and remitting those bills to Paris, — unless bills on 
 Paris direct could be purchased on more favorable terms. 
 
 The calculations which refer to the transmission of gold from one 
 country to another, are very important. To these we will now refer. 
 
 In England, the precious metals are weighed by the pound Troy. The 
 following is the table : — 
 
 24 Grains .... make 1 Pennyweight. 
 20 Pennyweights . . . .1 Ounce. 
 12 Ounces 1 Pound. 
 
 Standard gold is what is called 22 carats fine ; that is, 22 parts of pure 
 gold are mixed with 2 parts of alloy. This alloy consists chiefly, we be- 
 lieve, of copper. Our silver coins have 18 pennyweights of alloy in the 
 pound. 
 
 A pound weight of gold is coined into 44^ guineas, and in the same 
 
 195
 
 A Treatise on Banking. 
 
 proportion for sovereigns. An ounce of standard gold is worth in Great 
 Britain £S lis. 10 ^d. ; being the twelfth part of £46 Us. 6d., the 
 value of a pound weight of gold. 
 
 A pound weight of silver is coined into 66 shillings ; and in the same 
 proportion for crowns, half-crowns, and sixpenny pieces. 
 
 The specific gravity of gold is 19-360 ; that is, it is 19,360 times 
 heavier than distilled water. 
 
 The specific gravity of silver is 10'474 ; that of copper is 8'878. 
 
 A cubic foot of distilled water weighs 1,000 ounces, or 62*5 pounds 
 avoirdupois, which is equal to 7595 pounds troy. 
 
 Avoirdupois weight is as follows : — 
 
 16 Dracbms . . . make 1 Ounce. 
 
 16 Ounces 1 Pound. 
 
 28 Pounds 1 Quarter. 
 
 4 Quarters .... 1 Hundred. 
 
 20 Hundreds 1 Ton. 
 
 One lb. avoirdupois is equal to 1 lb. 2 oz. 11 dwts. 20 grs. troy. 
 
 A pound avoirdupois is to a pound troy as 1750 to 1440. 
 
 1 lb. avoirdupois of copper is coined into 24 pence, — equal to jf 240 
 out of a ton. The old pennies weighed exactly an ounce avoirdupois ; so 
 that in buying an ounce of any commodity, a poor man might, if he 
 thought he had short weight, use a penny piece for the weight. For some 
 years past, the penny has been only two-thirds of an ounce. 
 
 The amount of gold in circulation in Great Britain, including that in 
 the Bank of England, is variously estimated at from 44,000,000 to 
 60,000,000 sterling. The silver is estimated at 11,000,000, but that in- 
 cludes the coin in the colonies. {Commons, 3,483-3,488.) 
 
 We often find in the City Article of the Times, and sometimes in the 
 Morning Chronicle and the Economist., paragraphs like the following : — 
 
 " The premium on gold at Paris is 7 per mille, which, at the English 
 mint price of <£ 3 17s. lO^d. per ounce for standard gold, gives an ex- 
 change of 25"32i ; and the exchange at Paris on London, at short, being 
 25*25, it follows that gold is 030 per cent, dearer in Paris than in Lon- 
 don. 
 
 By advices from Hamburgh, the price of gold is 435| per marc, which, 
 at the English mint price of <£ 3 17s. 10 id. per ounce for standard gold, 
 gives an exchange of 13*10| ; and the exchange at Hamburgh on Lon- 
 don, at short, being 13'10|, it follows that gold is 0.17 percent, dearer in 
 London than in Hamburgh. 
 
 The course of exchange at New York on London is 108| per cent. ; 
 and the par of exchange between England and America being 109|o per 
 cent., it follows that the exchange is 1-08 per cent, against England ; but 
 the quoted exchange at New York being for bills at 60 days' sight, the 
 interest must be deducted from the above diflference." 
 
 The real par of exchange between two countries is that by which an 
 ounce of gold in one country can be replaced by an ounce ot gold of 
 equal fineness in the other country. In England, gold is the legal tender, 
 and its price is fixed at <£3 17s. lO^d. per ounce. In France, silver is 
 the currency, and gold, like other commodities, fluctuates in price accord- 
 
 196
 
 Banking Calculations. 
 
 ing to supply and demand. Usually, it bears a premium or agio. In the 
 above quotation, this premium is stated to be 7 per mille ; that is, it would 
 require 1,007 francs in silver to purchase 1,000 francs in gold. At this 
 price the natural exchange, or that at which an ounce of gold in England 
 would purchase an ounce of gold in France, is 25.32^. But the commer- 
 cial exchange — that is, the price at which bills on London would sell on 
 the Paris exchange — is 25 francs 25 cents, showing that gold is 0.30 per 
 cent, dearer in Paris than in London. Tables have been constructed to 
 show the results of each fluctuation in the premium of gold in Paris. In 
 the next section we shall insert a table of this kind with reference not 
 only to Paris, but also to Hamburgh and to Amsterdam. 
 
 At Hamburgh, again, the exchange is the other way. The price of a 
 mark of fine gold is 435^ marcs banco, which gives an exchange of 
 13.10^ marcs and schillings against the pound sterling. But the commer- 
 cial exchange is 13. 10|, which makes a difference of f of a schilling; 
 and it follows that gold is 0.17 per cent, dearer in London than in Ham- 
 burgh. 
 
 The Money Table of the United States stands thus : — 
 
 10 Mills make 1 Cent. 
 
 10 Cents 1 Dime. 
 
 10 Dimes 1 Dollar. 
 
 10 Dollars 1 Eagle. 
 
 The following regulations were adopted in the year 1834 respecting 
 gold and foreign coins : — 
 
 " Be it enacted by the Senate and House of Representatives of the United States of 
 America, in Congress assembled, that the gold coins of the United States shall con- 
 tain the following quantities of metal ; that is to say, each eagle shall contain 232 
 grains fine gold, and 258 grains standard gold ; each half eagle, 116 grains fine gold, 
 and 129 grains standard gold ; each quarter eagle shall contain 58 grains fine gold, 
 and 64i grains standard gold; every such eagle shall be of the value of 10 dollars ; 
 every such half eagle sh.all be of the value of 5 dollars ; and every such quarter eagle 
 shall be of the value of 2 dollars and 50 cents ; and the said gold coins shall be 
 receivable in all payments, when of such weight, according to their said respective 
 values ; and when of less than such weight, at less values, proportioned to their re- 
 spective actual weights." 
 
 " Be it enacted, &c., that from and after the 31st day of July next, the following 
 gold coins shall pass current as money within the United States, and be receivable in 
 all payments, by weight, for the payment of all debts and demands, at the rates follow- 
 ing ; that is to say, the gold coins of Great Britain, Portugal, and Brazil, of not less 
 than 22 carats* fine, at the rate of 94 cents and 8-lOths of a cent per pennyweight ; the 
 gold coins of France, 9-IOths fine, at the rate of 93 cents and 1-lOth of a cent per 
 pennyweight ; and the gold coins of Spain, Mexico, and Columbia, of the fineness of 
 20 carats, 3 grains, and 7-16ths of a grain, at the rate of 89 cents and 9-lOths of a 
 cent per pennyweight." 
 
 Under the above Acts of Congress the English sovereign was made a 
 legal tender at the rate of 94^^^,^ cents per pennyweight. Hence, the full 
 weight of the sovereign being 5 dwts. 3.274 grs., it was made equivalent 
 to 4 dollars and 87 cents ; or 487 dollars equal £ 100. But, accord- 
 ing to a rule established in 1789, and ever since retained in exchange 
 
 * This is the usual mode of expressing the fineness of gold. The ounce is divided 
 into 24 carats. If, out of this mass, 2, 3, or 4 parts out of the 24 consist of alloy, the 
 whole is said to be 22, 21, or 20 carats fine. 
 
 197
 
 A Treatise on Banking. 
 
 operations, the par of the dollar is paid at 4s. 6d. sterling, which gives for 
 487 dollars £ 109 lis. 6d. The nominal par thus exceeds the real par 
 £9 lis. 6d.^ or 9|^ per cent. In this way, when the exchange is nomi- 
 nally 9f § premium, it is really at par. The above calculations are sub- 
 ject to some slight modifications by an Act of Congress fixing the amount 
 of alloy in both the gold and silver coins at one tenth ; but commercially 
 the par of exchange between England and America is usually quoted as 
 equal to 109f ^ per cent. 
 
 When we read in the above calculations that gold is so much dearer in 
 one country than the other, we must not infer that gold can therefore be 
 sent thither at a profit. We must take into account the expense of con- 
 veyance. It is generally considered that the charges and loss of interest 
 attendant on sending gold to America, do not amount to much less than 
 2^ per cent. 
 
 Before closing this subject, we will make some remarks on our ex- 
 changes with India. It has been seen, that with this country we give an 
 uncertain amount of sterling for a fixed amount of foreign money ; that is, 
 we give so many pence (say 23 or 24) for a rupee. The lower the ex- 
 change, that is, the fewer pence we give for the rupee, the more favorable 
 is the exchange for England. For, the lower the rate, the more favorable 
 is the exchange to that country in whose currency the rate is reckoned. 
 
 The following is the Table for East India Money : — 
 
 12 Pice make 1 Anna. 
 
 16 Annas 1 Kupee. 
 
 100,000 Rupees 1 Lac. 
 
 100 Lacs 1 Crore. 
 
 Taking the rupee at 2s., a crore of rupees is equal to £ 1,000,000 ster- 
 ling. A lac is, of course, £ 10,000. The figures expressing Indian 
 money are not easily understood by Europeans. The capital of the Bank 
 of Bombay is stated at 52,25,000 rupees, and the capital of the Bank of 
 Bengal at 1,10,13,580 „ 1 „ 7, These figures should be respectively 
 read thus : — Fifty-two lacs, twenty-five thousand rupees ; One crore, ten 
 lacs, thirteen thousand five hundred and eighty rupees, one anna, and 
 seven pice. 
 
 The East India Company in London issue bills on India. They also 
 discount in India, bills drawn on London, taking as collateral security the 
 bills of lading and the policies of insurance of the goods against which the 
 bills are drawn. Their advances are usually to the extent of three fourths, 
 or sometimes three fifths, of the estimated value of the goods. The rate of 
 exchange is publicly announced, and undergoes modification from time to 
 time, according as the Company may have occasion to accumulate funds 
 in London or in India. (See the Evidence of W. P. Paton, Esq., and 
 J. D. Dickenson, Esq., before the Committee of the House of Commons, 
 on Commercial Distress, 1848.) 
 
 In making further observations upon the subject of this section, we may 
 observe, that there is often a great facility acquired in performing arith- 
 metical operations by varying the numbers, and especially if we can sub- 
 stitute ten or a hundred for some other number. And sometimes we 
 
 198
 
 Banking Calculations. 
 
 may change the operation, and use multiplication for addition, or the re- 
 verse. Thus, if we have to multiply by 15, we can multiply by 10 by 
 adding a cipher, and then add half the sum. If we have to take three 
 fifths of a number, we may take the sixth tenths. Instead of dividing by 
 25, we may multiply by 4, and divide by 100 ; or, instead of multiplying 
 by 25, we may multiply by 100 and divide by 4. 
 
 To calculate the interest on large sums at any rate per cent., it is usu- 
 ally best to find the interest at 1 per cent, (as you have only to divide by 
 100), and then multiply by the rate per cent. 
 
 It is useful sometimes to know how many persons enter a bank in the 
 course of a day, and during what hours the greater number arrive. To 
 do this, set a person in the hall, with a paper marked 9 to 10, 10 to 11, 
 and so on. Then, when a person enters a bank between the hours of 9 
 and 10 o'clock, he will make a mark like a figure 1. This mark he will 
 repeat as every additional person enters. He will go on in this way all 
 through the day. When the bank closes, he will ascertain by counting 
 the marks how many persons have entered the bank during each hour, 
 and how many altogether. The cashiers should go to dinner during the 
 hour in which the fewest people come to the counter. And if a clerk 
 wants a day's holiday he should fix on the day on which the fewest people 
 enter the bank. It is in this way that a man standing in the street is able 
 to keep a register of the number of omnibuses that may pass him during 
 the day. 
 
 Occasionally we find that " calculating boys " have been exhibited 
 who have performed arithmetical operations with wonderful rapidity. In 
 some cases they have explained their mode of doing so. It would appear 
 that they have in their mind a large multiplication table, not ending at 12 
 times 12, but extending to 50 times 50, or 100 times 100 ; secondly, they 
 have a great rapidity of finding equivalent numbers by which the ques- 
 tions are more easily worked ; and thirdly, they have a great power of 
 memory, by which they can carry on operations in their mind without 
 committing them to paper. They seemed to have these endowments by 
 nature ; but they may all, in a degree, be acquired by application. A 
 large multiplication table may be learned by perseverance. A facility of 
 finding equivalent numbers may be aquired by study and practice. And 
 even arithmetical operations may be performed by the mernoiy. Let a 
 person try to work a sum in the rule of three in this way, in perfect dark- 
 ness, and he will find it not so difficult as he would at first imagine. But 
 the facilities thus acquired by application would, of course, be vastly infe- 
 rior to the endowments exhibited by these " calculating boys." It is re- 
 markable that these boys are not found to retain this wonderful faculty 
 after they are grown to be men. 
 
 The various systems of artificial memory profess to teach the art of 
 remembering figures. This is done by turning figures into letters, and 
 then forming a word from those letters, or by associating a symbol with 
 the number, or by adding the letters to the end of the word. Thus, sup- 
 pose the floor of the room in which you are sitting were divided into 
 nine compartments, and had a figure and letters in each compartment , 
 thus : — 
 
 199
 
 A Treatise on Banking. 
 
 1. 
 
 B.C. 
 
 2. 
 
 D. F. 
 
 3. 
 
 G. H. 
 
 4. 
 
 J. K. 
 
 5. 
 
 L. 
 
 6. 
 
 M.N. 
 
 7. 
 
 P.Q. 
 
 8. 
 
 R. S. 
 
 9. 
 
 T. V. 
 
 Now, if you wished to remember the number 29, you might form the 
 word " foot," and the consonants / and t would give you 29. If you 
 wished to recollect 86, form the word " room." So, if the number were 
 53, it would be represented by the word " log." The word " book " 
 would represent 17 ; the word " paper," 778 ; and " ledger," 5238. 
 The advantage of having two letters to one figure is, that you can more 
 easily form words ; for if one letter will not form a word, the other may. 
 Besides, if you should forget what letter represents any figure, by running 
 over the alphabet you will call it to mind. 
 
 We have supposed these numbers and figures placed on the floor. 
 Now stand in the centre of the room, with your face toward the window. 
 Divide the wall before you into the same compartments as the floor, and 
 place over the wall on the ceiling the number 10. You have then before 
 you all the numbers, from 10 to 19 inclusive. Divide the wall on your 
 right hand in the same way, and place over it the number 20. Over the 
 wall behind you place 30 ; and over the wall at your left hand place 40 ; 
 and over your head in the centre of the ceiling place the number 50. 
 You have now a local place for all the numbers, from 1 to 50. And if 
 you wish at any time to recollect any one of these numbers, your mem- 
 ory will be assisted by calling to mind its locality in this room. 
 
 You may go further than this. You may place in each of these fifty 
 squares a symbol ; that is, the figure of a tree, a flower, a bird, a beast, a 
 fish, or any thing else. For instance: — In the compartments on the 
 floor you may place trees, the name of each tree beginning with the letter 
 belonging to the compartments. The compartments from 10 to 20 may 
 each have a flower ; from 20 to 30, a bird ; from 30 to 40, a beast ; and 
 from 40 to 50, a fish. And then, if you wish to recollect any matter, 
 you may form some fanciful association between it and the symbol. 
 
 Dr. Grey's system is different from that we have described. He rep- 
 resents the numerals by the following consonants and vowels : — 
 
 1 2 
 
 b d 
 
 a e 
 
 3 4 
 
 t f 
 
 i o 
 
 Then, to recollect a date, you will alter the termination of the word, and 
 
 200
 
 Banking Calculations. 
 
 place those letters that correspond with the figures. Thus, he calls 
 Alexander the Great, Wexita, and the last three letters show that he died 
 331 years before the Christian era. Julius Cftsar is called Julios, showing 
 that he died 46 years before the same period ; and Romput shows that 
 Rome was founded 753 years before the Christian era. 
 
 These systems of artificial memory have not been found in practice to 
 answer the eulogiums of their professors. Nevertheless, they are occa- 
 sionally useful in assisting the recollection of figures. 
 
 The following questions may be instructive or interesting to those 
 young men who may be disposed to work them : — 
 
 When a banker discounts bills having two, three, six, nine, and twelve months to 
 run, charging at the time the discount of 4 per cent., what rate of interest does he ob- 
 tain on the money actually advanced at these respective dates 1 
 
 Suppose a banker should lend £100,000 consols at 90, from the 1st of January to 
 the 13th day of February, at l-16th continuation, and should part with the money at 
 £ 10,000 a day in the discount of bills at 2^ per cent., all of which bills should fall 
 due, in equal proportions, on the 10th, 11th, and 12th of February, what would he gain 
 by the transaction ? 
 
 If a banker buy consols at 90 on the 1st of December, receive the half-yearly divi- 
 dend on the 8th of January, and sell the consols again at 90 on the 1st of February, 
 what interest per cent, per annum does he receive for his money after deducting the 
 income tax 1 
 
 If a Long Annuity (which expires in January, 1860) is bought at 8^ on the 1st day 
 of March, 1849, what rate of interest does it yield after paying the income tax of 
 sevenpence in the pound on the annuity? 
 
 Suppose there were thirty clerks in a bank, the junior had £80 per annum and the 
 senior £ 500, and they increased in arithmetical progression, what is the ratio of their 
 increase, and what is the total amount of their salaries ? 
 
 Suppose you were asked to make an advance on a lease which had twenty years to 
 run, and on which there was a net profit rent of £ 100 per annum, what advance would 
 you make upon it, calculating its present value at 7 per cent., and taking a margin of 
 one third its value 1 
 
 If a bank which has £ 20 paid up on each share, pays a dividend of 6 per cent., how 
 much is that per share ? 
 
 If a bank gives an annual bonus of 7s. per share, on which £ 10 is paid up, how 
 much is that per cent, per annum ? 
 
 One ounce of standard gold is worth £3 17s. lOid. A sovereign is worth twenty 
 shillings. What should be its weight "? 
 
 A poimd weight of silver is coined into sixty-six shillings. What are the respective 
 weights of a sixpenny-piece, a shilling, and a half-crown ? 
 
 A ton weight of copper avoirdupois is coined into £ 240 in penny-pieces : What is 
 the weight of a halfpenny-piece ? 
 
 What is the weight of a cubic foot of gold, and into how many sovereigns may it be 
 coined ? 
 
 What is the weight of a cubic foot of silver, and into how many shillings may it be 
 coined ? 
 
 What is the weight of a cubic foot of copper, and into how many farthings can it be 
 coined 1 
 
 A cubic foot of gold will displace a cubic foot of water, but how much water would 
 be displaced by a cube of silver of the same weight ? 
 
 The gold that came to Solomon in one year was six hundred three score and six 
 talents. Supposing this to be pure gold, how much alloy must be added to reduce it 
 to standard gold, and what then would be the number of talents ? — Supposing this 
 standard gold to be taken to the issue department of the Bank of England, under the 
 Act of 1844, and bank-notes received in exchange at the rate of £3 17s. 9d. per ounce, 
 what amount of bank-notes would be received, taking the Hebrew talent as equal to 
 1 13 lbs. 10 oz. 1 dwt. 10 grs. troy ? — Supposing payment of these notes should after- 
 
 201
 
 A Treatise on Banking. 
 
 wards be demanded in sovereigns, which are coined at the rate of £3 17s. lO^d. per 
 ounce, what would be the total weight of these sovereigns ? 
 
 Find the arbitrated rate of exchange between London and Amsterdam when the ex- 
 change of London on Madrid is 37 pence for one dolhir of plate, and that of Amster- 
 dam on Madrid is 100 florins 75 cents, for 40 ducats of plate. 
 
 Bar gold in London is 77«. 9d. per ounce standard : rec4uired the arbitrated rate of 
 exchange produced by its export to the United States for coinage, at tlie rate of 
 232^ grains of tine gold for the eagle of 10 dollars. 
 
 Bar silver in London is 60 pence per ounce standard; in Amsterdam 104^ florins 
 per pond fine ; required the arbitrated rate of exchange, the Netherlands pond being 
 equal to 1,000 wigties, and 31.1002 wigties equal to one ounce troy.* 
 
 If the premium on gold at Paris is 5^ per mille, and the exchange at Paris on Lon 
 don is 25 27A, how much per cent, is gold dearer in Paris than in London ?t 
 
 If the price of gold at Hamburgh is 435 per marc, and the exchange at Hambnrgh 
 on London is 13.10|, how mucli per cent, is gold dearer iu Hamburgh than in 
 London ? f 
 
 Sect. XIV. — BANKING DOCUMENTS. 
 
 By banking documents, I mean such reports, bonds, deeds, letters, or 
 other writings, as are used in connection with banking. 
 
 I. I shall notice those Documents that are used in the formation of a 
 Joint-stock Bank. 
 
 When any persons propose to form a joint-stock bank in any district, 
 they procure the statistical returns of the district ; such as the tables of 
 the population, — the exports and imports, — the duties paid, — the returns 
 of the sales in the various markets, — and every other information re- 
 specting the trade and wealth of the district. If these prove satisfactory, 
 they take notice of the banks already established there, and observe 
 whether they are joint-stock banks or private banks, — whether strong or 
 weak, — and whether likely to oppose or to join any new establishment. 
 If the existing banks be joint-stock banks, the projectors procure from 
 tlic stamp-office a list of the shareholders, in order to observe the strength 
 of their proprietary, and whether they reside chiefly in the district. 
 
 Having satisfied themselves that a new bank would be successful, the 
 first document drawn up is a prospectus. This document usually sets 
 forth the great advantage of joint-stock banking to both the public and 
 the shareholders, and then points out the facilities of the district in which 
 the bank is proposed to be established. 
 
 Previous to issuing the prospectus, some leading persons in the district 
 are requested to become members of a provisional committee for the for- 
 mation of the bank, and they obtain the assistance of an influential 
 solicitor, to whose oflice the applications for shares are usually addressed. 
 The committee then appoint a secretary, or sometimes the oflice of sec- 
 retary is filled by the solicitor. 
 
 * The livst three questions are taken from Wa(erslon\ Manual of Commerce, where 
 the operations arc performed. t Sec the Table No. 18, in the next section 
 
 202
 
 Banking Documents. 
 
 Attached to the prospectus is the form of an application for shares, 
 similar to the following : — 
 
 BANKING COMPANY. 
 
 HEAD BANK, 
 
 Capital, £ in Shares, of £ each. 
 
 Application for Shares. 
 
 To the Provisional Committee of the _— Banking Company. 
 
 Gentlemen, 
 
 I beg to apply for shares in the above bank, upon 
 
 the conditions of the published prospectus. If the shares be granted, my utmost in- 
 fluence shall be exerted in support of this bank. 
 I am. 
 
 Yours respectfully, 
 
 Name 
 
 Business or Profession 
 Residence .... 
 
 As the applications come in, they are entered in a book prepared for 
 the purpose. In the first column is entered the date of the application ; 
 then follow the name, profession, and residence of the applicant ; then 
 the number of shares applied for, and in a further column the number of 
 shares granted. After the committee have determined what number of 
 shares to allot to each applicant, letters are addressed to the respective 
 parties in the following forms : — 
 
 Sir, 
 
 I am instructed by the Provisional Committee of the 
 
 Banking Company, to inform you, that they have allotted you shares in 
 
 the Company ; and you are requested to pay the sum of upon eaca 
 
 share, to , where you will receive the certificate. 
 
 I am, Sir, 
 
 Your most obedient Servant, 
 
 A. B. Secretary. 
 
 Sib, 
 
 Your application for in the Banking 
 
 Company has been laid before the Provisional Committee, who regret, that in conse- 
 quence of the numerous applications, they are unable to comply with your request. 
 
 I am, Sir, 
 
 Your obedient Servant, 
 
 A. B. Secretary. 
 
 The certificates granted upon receipt of the first payment on the 
 shares are different. Some use the following form : — 
 
 . BANKING COMPANY. 
 
 Deposit Certificate. 
 No. 
 
 . 18 
 
 This is to certify, that the bearer hereof has paid the sum of £ 
 
 203
 
 A Treatise on Banking. 
 
 being the allotment fee of per share upon 
 
 shares of £ each, alloted to him in the capital stock of the above Banking 
 
 Company. 
 
 For the Provisional Committee 
 
 of the _^___ Banking Company. 
 
 Other banks adopt the form of a receipt, thus : — 
 
 BANKING COMPANY. 
 
 Received of 'Mi. on account of the above 
 
 bank, the sum of £ being the deposit of per share on 
 
 his being admitted a holder of shares. 
 
 18 
 
 After the sums have been received, a general meeting of the share- 
 holders is called in the following form : — 
 
 BANKING COMPANY. 
 
 18 
 
 Sib, 
 
 I am instructed by the Provisional Committee to inform you, that the 
 first general meeting of the shareholders in the above Banking Company will be held 
 
 at the on next, for the 
 
 purpose of submitting a report of their proceedings, electing a board of directors, and 
 adopting resolutions for the immediate constitution of the Company. 
 The chair will be taken at twelve o'clock. 
 
 Lest you should be unable to attend, I annex a form of proxy for voting, the blanks 
 of which you must fill up before it is placed in the hands of a shareholder. 
 
 I am, Sir, 
 
 Your obedient Servant, 
 
 Secretary. 
 
 Proxt for Voting. 
 BANKING COMPANY. 
 
 I, the undersigned, a shareholder in the above Banking Company for 
 
 ________ shares, do hereby appoint also a sliarcholder 
 
 therein, to vote for me, and on my behalf, at the first general meeting of shareholders, 
 to be held in on instant. 
 
 Witness my hand this . day of 18 
 
 Name 
 
 Residence .... 
 No. of shares . . . 
 
 At the general meeting the provisional committee make a report of 
 their proceedings. Resolutions are then passed, — 1. That the report be 
 received and printed ; — 2. That certain shareholders then named be ap- 
 pointed directors ; — 3. That the thanks of the meeting be given to the 
 provisional committee. Tlie bank is now formed, and the government is 
 
 204
 
 Banking Documents. 
 
 assumed by the directors. They appoint the manager and other ofFicers ; 
 they prepare the deed of settlement ; and they adopt the measures ne- 
 cessary for the commencement of business. 
 
 II. — The Deed of Settlement. 
 
 This is the deed of partnership, which must be signed by all the share- 
 holders. It fixes the name of the bank, — the places where business is to 
 be carried on, — and the denomination and number of the shares. It 
 regulates the appointment of directors, — the qualifications of share- 
 holders,^ — and the mode of holding meetings, transferring shares, and 
 making dividends. It also provides for the winding up of the affairs of 
 the bank, in case it should not be successful. So many joint-stock banks 
 have printed their deeds of settlement, that any new bank would find no 
 difficulty in procuring a copy. All banks now introduce a clause, pro- 
 viding that if one third or one fourth of the paid-up capital be lost, the 
 bank shall be dissolved : and generally there is a clause authorizing any 
 alteration of the deed by two successive meetings of the shareholders 
 specially summoned for that purpose. 
 
 III. — Bonds of Security by the Officers. 
 The following form may be adopted for a manager : — 
 
 Know all men by these presents, that we, A. B. of . C D. 
 
 of E. F. of and G. //., are held and firmly bound to W- 
 
 X. and Y. Z. in the sum o^ Jive thousand pounds of lawful money of Great Britain, to 
 be paid to the said W. X. and Y. Z. or their certain attorney, executors, administra- 
 tors or assigns, for which payment to be well and truly made, we bind ourselves and 
 each of us, and any three, or two of us, and our and each of our heirs, executors, and 
 administrators, and the heirs, executors, and administrators of any three, or two of us 
 jointly, severally, and respectively, firmly by these presents. Sealed with our seals. 
 
 Dated this day of . in the year of our Lord one 
 
 thousand eight hundred and 
 
 Whereas the above-bounden A. B. has been appointed chief manager of a certain 
 
 public joint-stock banking company, called the , of 
 
 which company, and for the general purposes thereof, the above-named W. X. and Y. 
 Z. have been appointed trustees. And it was agreed, that on the appointment of the 
 said to be such manager as aforesaid, he should with sureties enter into a bond to 
 guarantee his fidelity and honest conduct while in the service of the said company. 
 And whereas each of them, the above bounden C. D., E. F., and G- H. has, at the 
 request of the said A. B. agreed to become surety for him as aforesaid to the extent 
 oi Jive thousand pounds : Now the condition of the above-written bond or obligation 
 is, that if the said A. B. do and shall from time to time while he shall continue in the 
 service of the said company as the chief manager of the said company, diligently and 
 faithfully serve them, and devote the whole of his time and attention to their business, 
 and give such reasonable attendance at their banking-house, as the directors for the 
 time being of the said company shall from time to time require, and do and shall keep 
 all the secrets of the said company, and inform the said directors of the company 
 for the time being of all such letters, writings, papers, and occurrences whatever as 
 shall from time to time come to his knowledge respecting the said business, 
 
 205
 
 A Treatise on Banking. 
 
 and do and shall keep all the cash accounts, ledgers, books, deeds, writings, 
 and papers, belonging or relating to the said concern in a proper and business- 
 like manner, and regularly answer the letters of their correspondents, and do and 
 shall take due care of the moneys, securities for monej', and property belonging 
 to the said company, or placed in their custody, and do and shall from time to time 
 account for, render, and make over to the directors for the time being of the said 
 company, all such cash, bills, notes, and other securities as shall from time to 
 rime come, or without his wilful default might have come to his hands, and shall not 
 embezzle, conceal, or waste, nor permit (as far as in him lies) to be embezzled, con- 
 cealed, or wasted by others any of the property of the said company, or which shall 
 have been intrusted to their care, and do and shall receive all the customers of the 
 said banking-house with civility, and make up the notes or memorandums of their 
 respective affairs when necessary, and do and shall as far as in him lies cause the clerk 
 or clerks of the said company to give full and due attendance at their said banking- 
 house, and there to conduct and demean himself or themselves diligently and faith- 
 fully and in an orderly manner: and also if the said A. D. do and shall in all other re- 
 spects diligently, skilfully, and faithfully demean and conduct himself as the chief man- 
 ager of the said company : and moreover, if they the said C. D., E. F., and G. i/., their 
 heirs, executors, or administrators, or some of them, shall and do well and sufficiently 
 save harmless and keep indemnified the said company and the directors and all other 
 members thereof from and against all losses, costs, charges, and expenses which shall 
 or may happen or come to them for or by reason of any act, deed, matter or thing 
 whatsoever, wilfully and improperly done, or wilfully and improperly omitted to be 
 done by the said A. B. in or during the said service, then the above-written obligation 
 shall be void, but othenvise the same shall be in full force. Provided always and it is 
 hereby declared, that under the said obligation, the said C. D., his heirs, executors, or 
 administrators, shall not be liable to a greater sum in the whole tlian tivo thousand ^five 
 hundred pounds, nor the said E. F. his heirs, executors, or administrators to a greater 
 sum in the whole than one thousand Jive hundred pounds, nor the said G. II- his heirs, 
 executors, or administrators to a greater sum in the whole than one thousand pounds. 
 As witness the hands and seals of the said parties. 
 
 The following is the form for a clerk : — 
 
 Know all men by these presents, that A. B., C. D., and E. F., are held and firmly 
 bound to W. X. and Y. Z., in the penal sum of one thousand pounds of lawful money 
 of Great Britain, to be paid to the said IF. X. and Y. Z-, or their certain attorney, ex- 
 ecutors, administrators, or assigns, for which payment to be well and truly made, we 
 bind ourselves and each of us, and our and each of our heirs, executors, and adminis- 
 trators, and the heirs, executors, and administrators of any tliree or two of us jointly, 
 severally, and respectively firmly by these presents. Sealed with our seals. Dated 
 this 
 
 Whereas the above bounden A. R.has been appointed a clerk in a certain public 
 company, called the _, of which company and for the gen- 
 eral purposes thereof the above-named W. X. and Y. Z. have been appointed trustees. 
 And it was agreed that on the appointment of the said A. B. he should with sureties 
 enter into a bond to guarantee his fidelity and honest conduct. And whereas the 
 above bounden C. D. and E. F. have at the request of the said A. B. agreed to become 
 surety for him as aforesaid to the extent of fire hundred pounds each. Now the con- 
 ditions of the above-written obligation is, that if the said A. B do and shall, while he 
 shall continue in the service of the said company as such clerk, diligently and faith- 
 
 206
 
 Banking Documents. ■ 
 
 fully serve them, and derote the whole of his time and attention to their business, and 
 give such reasonable attendance at their office, as the directors or manager for the time 
 being of the said company sliall from time to time require ; and do and shall keep all 
 the secrets of the said company, and inform the directors of the said company for the 
 time being of all such letters, writings, papers, and occurrences whatsoever, as shall 
 from time to time come to his knowledge respecting the said business ; and do and 
 shall from time to time account for and make over to the directors or manager for the 
 time being all such cash, bills, notes, and other securities as shall from time to time 
 come or without his wilful default might have come to his hands, and shall not em- 
 bezzle, conceal, or waste, nor permit (as far as in him lies) to be embezzled, concealed, 
 or wasted by others, any of the property of the said company, or which shall have 
 been intrusted to their care. And also if the said A. B. do and shall in all other 
 respects diligently, skilfully, and faithfully demean and conduct himself as such clerk 
 of the said company. And moreover, if they the said C. D. and E. F., their heirs, 
 executors, and administrators, or some of them shall and do well and sufficiently save 
 harmless and keep indemnified the said company and the directors and all other mem- 
 bers thereof from and against all losses, costs, charges, damages, and expenses, which 
 shall or may happen or come to them for or by reason of any act, matter, or thing 
 whatsoever wilfully and improperly done, or wilfully and improperly omitted to be 
 done by the said A. B. in or during the said service, then the above-written obligation 
 shall be void, otherwise the same shall be in full force. Provided always, and it is 
 hereby declared, that under the said obligation the said C. D., his heirs, executors, 
 or administrators, shall not be liable to a greater sum in the whole than Jive hundred 
 pounds ; nor the said E. F. his heirs, executors, or administrators, to a greater sum 
 in the whole than Jive hundred pounds. As witness the hands and seals of the said 
 parties. , 
 
 IV. — Declarations of Secrecy. 
 
 The following is the form for the directors and trustees : — 
 
 We, the undersigned persons, being respectively the directors and honorary direct- 
 ors, and trustees of the public Joint-stock Company called 
 
 do severally declare that we will respectively, faithfully, and impartially discharge the 
 several duties devolving on us as such directors as aforesaid, according to the deed of 
 
 settlement of the company, bearing date the day of , 
 
 and any laws and regulations that may be made in pursuance thereof. And we do 
 hereby pledge ourselves, and as inviolably as if we had taken our oaths thereto, that 
 we will observe the strictest secrecy on the subject of all transactions of every descrip- 
 tion of the company, with their customers for the time being, or with any other bodies 
 or persons whatsoever, and on the subject of the accounts of all bodies and individuals 
 
 from time to time having accounts with the said company. Dated this 
 
 day of , 18 
 
 The following is the form for the officers : — 
 
 Declaration of Secrecy by the Managers and Clerks. 
 
 We, the undersigned persons, being respectively managers, accountants, cashiers, 
 tellers, and clerks of the Banking Company, do severally de- 
 clare, that we will respectively, faithfully, honestly, and impartially discharge the sev- 
 eral duties devolving on us as such managers, accountants, cashiers, tellers, and clerks 
 
 207
 
 A Treatise on Banking. 
 
 as aforesaid, according to the directions of the directors of the company, and any laws 
 and regulations that may he made hy them. And we do hcrehy severally pledge oar- 
 selves, and as inviolably as if we had taken our oaths thereto, that we will observe the 
 strictest secrecy on the subject of all transactions of everj' description of the company 
 with their customers for the time being, or with any other bodies or persons whatso- 
 ever, and on the subject of the state of the accounts of all bodies and individuals from 
 
 time to time having accounts with the said company. Dated this day 
 
 of , 18 
 
 V. — Letters of Guarantee,* 
 With reference to Advances or to Bills Discounted. 
 
 Bill-brokers usually give a letter of guarantee, instead of indorsing the 
 bills they have discounted with tlic bankers. And sometimes one party 
 will guarantee to the bank the bills discounted for another. 
 
 (I) 
 
 To the Directors of the Banking Company. 
 
 Gentlemen, 
 
 In consideration of your paying the cheques of Mr. , or 
 
 otherwise advancing him sums of money, I hereby guarantee the repayment thereof 
 upon demand, to the extent of one thousand pounds. 
 
 I am, &c. 
 
 (2.) 
 To the Directors of the Banking Company. 
 
 Gentlemen, 
 
 In consideration of your discounting a bill for £ , drawn by A, B. 
 
 or C. D. dated , at months, I hereby guarantee the due pay- 
 ment of the same at maturity. 
 
 I am, &c. 
 
 (3.) 
 
 Gentlemen, 
 
 In consideration of your discounting the above bills, I hereby guarantee 
 the punctual payment thereof as they respectively fall due. 
 
 I am, &c. 
 
 (4) 
 Gentlemen, 
 
 Mr. John Slender may have occasion to offer you sundry bills for discount. 
 In consideration of your discounting such of them as you approve of, which I request 
 you to do, I hereby guarantee the punctual payment of such bills when due. 
 
 I am, &c. 
 
 "* There are some excellent remarks on this subject, as well as on other matters con- 
 nected with practical banking, in " Chapters on Country Banking" by J. R. Rogers. 
 (K. Wil.son, publisher^) 
 
 208
 
 Banking Documents. 
 
 VI. — A Form of Letter, 
 
 To be signed by a Party lodging Deeds or other Documents as Security for Advances of 
 
 Money. 
 
 (1) 
 
 To the Directors of the Banking Company. 
 
 Gentlemen, 
 
 I have sent you the title deeds, and other writings, relating to my several 
 
 freehold and copyhold estates and properties, in or near , in the 
 
 county of , and which documents I hereby declare are deposited with 
 
 you, as a security for all sums of money now or hereafter to become due from me, 
 either solely, or jointly with others, to the said banking company, either upon banking 
 account, or in any other manner howsoever (including interest, commission, and all 
 other usual banking charges) ; and I hereby engage, upon request, to execute to you, 
 or to the trustees of the said company, a mortgage of the said tenements and premi- 
 ses, for the better securing the said sum or sums of money, intended to be hereby se- 
 cured, such mortgage to contain a power of sale, and all other usual covenants, and to 
 be at my expense. 
 
 I am, &c. 
 
 (2.) 
 Gentlemen, 
 
 Having this day borrowed of you £ , npon a deposit of the under- 
 mentioned securities, which sum is to be repaid to you, with interest at . per 
 
 cent, per annum, on the next, I hereby authorize you, in 
 
 case the said sum of £ shall not be repaid as aforesaid, to sell the said securi- 
 ties, or any part thereof, whenever you may think proper so to do, and repay your- 
 selves the sum of £ and interest, returning to me the surplus (if any), or hold- 
 ing it for my account; and in the event of any deficiency, I hold myself responsible to 
 you and the survivors of you for the same. 
 
 I am, &c. 
 
 (3.) 
 Gentlemen, 
 
 In consideration of the loans, advances, or discounts which may be made 
 to me, or upon my request by you, I hereby charge all or any title deeds or other prop- 
 erty belonging to me, which I may place or leave in your hands, with the repayment 
 of all such loans, advances, or discounted bills, together with all costs, interest, and 
 charges thereon ; and I hereby undertake to make an assignment by way of mortgage, 
 with power of sale, whenever called upon so to do, of the property which I may or 
 shall be entitled to under such title deeds. 
 
 I am, &c. 
 
 VII. — Memorandum of Agreement with reference to the Lodgment of 
 
 Deeds. 
 
 Memorandum, thay)n the day of , in the year of our 
 
 Lord one thousand eight hundred and forty- , 
 
 hath delivered to , at their office in , 
 
 in the county of , the several title deeds and documents men- 
 tioned and comprised in the schedule hereunto annexed, for the purpose of securing to 
 
 209
 
 A Treatise on Banking. 
 
 the proprietors in the said banking company for the time being, of whomsoever the 
 same banking company may from time to time consist, all and every sum and sums 
 
 of money which shall at any time hereafter be due or owing from 
 
 , on the balance of his account current with the said banking com- 
 
 pany, either for money paid or advanced, or to be paid or advanced, by the said bank- 
 ing company unto the said , or at his request, or 
 
 which shall be secured by any bond or bill of exchange drawn or endorsed by the said 
 
 , or by any promissory note or other contract 
 
 whatsoever, with interest for the same respectively, from the several times at which 
 they respectively shall be advanced, or at which the said bonds, bills, notes, or other 
 contracts respectively shall become due, and thenceforth until payment thereof respec- 
 tively after the rate of per centum per annum, with commission and other 
 
 usual banker's charges, so as the same do not exceed in the whole the sum of 
 
 jG . 
 
 And the said - doth hereby promise and agree 
 
 with and to the said banking company that he the said . » 
 
 whenever thereunto required by the said banking company, shall and will effectually 
 convey and assure all and singular the hereditaments and premises comprised in the 
 said deeds and writings unto and to the use of the said banking company, in such 
 manner as shall be lawfully required by them, free from incumbrances ; subject, never- 
 theless, to redemption on paj-ment by the said 
 
 of such sum of money as shall be therein expressed to be secured with interest in 
 manner aforesaid. And in the said indenture of mortgage shall be contained all usual 
 clauses and covenants, with power of sale in case default shall be made in payment of 
 the principal and interest to be thereby secured, or any part thereof As witness the 
 
 hand of the said , the day and year first above 
 
 written. 
 
 (The schedule above re/erred to.) 
 
 VIII, — Cash Credit Bond. 
 
 Almost every bank that grants cash credits has its own form of bond. 
 I think the following as good as any that I have seen : — 
 
 Know all men by these presents, that we, A. B., of , C. D., of 
 
 ., and E. F., of , are jointly and severally held 
 
 and firmly bound to W. X. of , and Y. Z. oi . 
 
 two of the trustees of the society or co-partnership called the 
 
 in the penal sum of pounds of lawful money of Great Britain and Ire 
 
 land, to be paid to the said F. G. and H. /., or their certain attorneys, executors, ad 
 ministrators, and assigns, for which payment, to be well and truly made, we bind our 
 selves, and each and every of us, and our, and each and every of our heirs, executors 
 and administrators, jointly, severally, and firmly by these presents. Scaled with our 
 
 seals. Dated this of . 
 
 Whereas the above-bound A. B. has opened an account with the above-mentioned 
 
 society or co-partnership, called the , at their 
 
 establishment, at , and is desirous of being accommodated 
 
 by the said society or co-partnership, from time to time, in some one or other of the 
 various modes in which bankers are in the habit of affording accommodation, and to 
 induce the said society or co-partnership to take the said account, and to accommodate 
 
 210
 
 Banking Documents. 
 
 him from time to time, in some one or other of the modes aforesaid, the said A. B. and 
 the said C. D. and E. F. as his sureties, have agreed to enter into the above-written 
 bond or obligation with such conditions as hereinafter is expressed. 
 
 Now the condition of the above-written bond or obligation is such, that if the said A. B., 
 C. D., and E. F., or some or one of them, or their, or some or one of their heirs, exe- 
 cutors, or administrators, do and shall, on the demand in writing, under the hand of 
 
 any one of the public officers of the said society or co-partnership, called 
 
 , well and truly pay or cause to be paid to the said society or co- 
 
 partnership, all and every such sum and sums of money as upon the balance of any 
 account current, which now is, or at any time or times hereafter shall be open between 
 the said A. B. and the said society or co-partnership, shall or may, from time to time, 
 be due and owing from or by the said A. B., his executors, or administrators, together 
 with all discount, interest, postage of letters, and commission, according to the usage 
 and course of business, but nevertheless to the extent only of £ prin- 
 cipal money, exclusive of interest and costs, in case such balance shall exceed the sum ; 
 and so that the above-written bond or obligation shall, and may be, a continuing secu- 
 rity to the said society or co-partnership to the amount of £ prin- 
 cipal money, besides such interest and costs as aforesaid, notwithstanding any settle- 
 ment of account, or other matter or thing whatsoever, then the above-written bond or 
 obligation shall be void ; othermse, the same shall remain in full force and virtue. 
 Signed, sealed, and delivered 
 
 in presence of . 
 
 The following is the form of cash credit bond used by one of the 
 banks in Scotland. It will be seen that the latter part has a reference 
 to the peculiar law of Scotland, and hence it is not adapted for the use 
 of banks established in England : — 
 
 We, A. B , CD., and E. F., considering that the directors of the banking company, 
 
 established in Edinburgh, under the title of the , 
 
 have agreed to allow us credit upon a current account, to be kept in the name of the 
 
 said A. B., in the books of the said bank at its branch office in ■. , 
 
 or at such other office or offices of the said bank as the directors thereof may from time 
 
 to time appoint, to the extent of pounds sterling, upon granting these 
 
 presents; therefore we, the said A. B., C. D., and E. F., hereby bind and oblige our- 
 selves conjointly and severally, and our heirs, executors, and successors whomsoever, 
 
 to content and pay to the said , or to , 
 
 the present manager of the said bank, or to his successors in office as manager, for be- 
 hoof of the said bank, and the whole partners therein, or to the assignees of the said 
 bank, or of its said manager, or his foresaid, the aforesaid sum of Jive hundred pounds, 
 or such part or parts thereof as the said A. B. shall receive or draw out by orders or 
 drafts on the said bank, in virtue of the aforesaid credit, and also such sum or sums of 
 money as the said bank or its said manager shall stand engaged for on account of me, 
 the said A. B., by accepted or discounted bills, letters of credit, guarantees, or in any 
 other manner of way not exceeding in all the said sum of _five luwdred Tponnds, over 
 and above what of the proper cash of me, the said A. B., may happen to be lodged on 
 the said cash account ; and that at any time when the same shall be demanded, after 
 six months from the date hereof, with the legal interest thereof from the time of ad- 
 vance until the same be repaid, and a fifth part more of the said principal sum of pen- 
 alty, in case of failure or proportionally effeiring to the sum due, and it is hereby de- 
 clared, that a stated account, made out from the books of the said bank, and signed by 
 
 211
 
 A Treatise on Banking. 
 
 the manager, secrctarr, or accountant thereof, for the time with reference to this pres- 
 ent bond, shall be sufficient ^vithout any other voucher to constitute and ascertain a 
 balance and change against us, and no suspension shall pass upon the change so con- 
 stituted and ascertained, but on consignation only. And we consent to the registra- 
 tion hereof, in the books of council and session, for others competent, that letters of 
 homing, on six days' change and all other necessary execution, may pass upon a de- 
 cree, to be interposed hereto, in common form, and for tliat purpose we constitute our 
 
 Procurators . 
 
 In witness whereof, the present written upon stamped paper by . 
 
 IX. — Letters of Credit^ 
 Granted by the Bank upon its Agents or Brandies. 
 
 (1) 
 BANKING COJIPANY. 
 
 To 
 
 Sir, 
 
 There has this day been lodged at this office by the 
 
 sum of for the credit of whose drafts to that 
 
 amount you will honor, and charge the same to the account of the 
 
 Banking Company. 
 
 I am, Sir, 
 
 Your obedient Servant, 
 
 £ Manager. 
 
 Entered Accountant. 
 
 (2.) 
 BANKING COMPANY. 
 
 No. 
 To 
 
 (Not Transferable.) 
 
 Sib, 
 
 You will be pleased to credit in the sum 
 
 of — — and charge the same to the account of the 
 
 Banking Company, with this branch. 
 
 I am, Sir, 
 
 Your obedient Servant, 
 Manager. 
 
 £ 
 
 Entered Accountant. 
 
 (3.) 
 _ BANKING COMPANY. 
 
 Messrs. 
 
 Paris. 18 
 
 Gentlemen, 
 
 This letter will be presented to you by . to whom 
 
 you will be pleased to pay to the extent of deducting your charges, 
 
 and taking for your reimbursement his drafts on this bank, which will meet with due 
 honor. 
 
 • I am, &c. 
 
 212
 
 Banking Documents. 
 
 (4.) 
 Messrs. 
 
 New York. 
 
 This letter will be presented to you by Mr. , in 
 
 whose favor we beg to establish a credit for pounds sterling. You will 
 
 please hold this sum, or any part thereof at his disposal, less your usual charges, and 
 take in exchange his drafts upon this bank, which will be duly honored. It is under- 
 stood that this credit is to be available for one year from this date, at which period, if 
 
 Mr. has not made use of it, you will consider it cancelled. We 
 
 shall forward you, in our next letter, the signature of Mr. to, 
 
 which we refer. 
 
 I am, &c. 
 
 X. — Deposit Receipts. 
 
 These are receipts for money, upon which the bank allows interest. 
 The following form may be used : 
 
 BANKING COMFAJSY. 
 
 18 
 
 No. £ 
 
 Received from the sum of 
 
 sterling to the credit of his deposit account with the Banking 
 
 Company. 
 
 By Order of the Board of Directors. 
 Entered Accountant. Manager. 
 
 The following form is a much better one, but, unfortunately, it is ille- 
 gal. According to law, we cannot introduce the rate of interest allow- 
 ed, nor the notice required, unless the receipt be stamped. It may be 
 hoped, that in the ne.xt Stamp Act, the Chancellor of the Exchequer will 
 introduce a clause permitting the use of such receipts as the following. 
 It is used by a highly respectable bank in one of the Midland Counties : 
 
 BANKING COMPANY. 
 
 No. 
 
 18 
 
 Received from the sum of 
 
 for which we are accountable with interest at the rate of . per cent 
 
 per annum, on receiving days' notice. Interest to cease from day of 
 
 notice. 
 
 For the Directors and Proprietors of the 
 
 Banking Company. 
 
 Manager. 
 
 No interest allowed unless the money remains three months. 
 XI. — Requisition Notes. 
 
 These are notes or memorandums which are used by some banks to 
 enable their customers to state with less trouble what they require, and 
 
 213
 
 A Treatise on Banking. 
 
 to specify the cash they pay into the bank. They arc usually placed on 
 the counter, to be ready when wanted. The following are the forms 
 most in use : — 
 
 Requisition Note. 
 To btfiUed up by Parties desiring Receipts for Money deposited, Letters of Credit, or Bills 
 
 day of 
 
 "Wanted from the 
 
 the Manager's 
 
 in favor of 
 
 for the sum of 
 Entered £ 
 
 Banking Company 
 
 1 Q I S|)ecificalion of Money 
 ' presented to ihe Cashier. 
 
 Applicant. 
 
 (2.) 
 Letter of Credit. 
 
 Specification of Money. 
 
 Bank of England Notes 
 
 Gold 
 
 Silver and Copper . . 
 Local Notes . . . . 
 Bills 
 
 £ 
 Entered to Credit of . 
 
 Wanted, the 
 
 Letter of Credit on 
 
 in favor of 
 
 for 
 
 Banking Company's 
 
 Applicant. 
 
 (3.) 
 Payment to Credit of Current Account. 
 
 Specification of Money. 
 Bank of England Notes 
 
 Gold 
 
 Silver and Copper . . 
 Local Notes . . • . 
 Bills 
 
 Paid to the , 
 
 Company, the sum of 
 
 to be placed to the credit of 
 
 in current account with said bank. 
 
 By 
 
 Banking 
 
 Entered in the Bank's Cash Book, £ 
 
 (4) 
 
 Teller. 
 
 Application for Account. 
 
 Names of Persona composing the Firm. 
 
 Firm . . 
 Business . 
 Residence 
 
 Probable return . 
 
 Advance required 
 
 Security proposed 
 
 Order of the Board per Minute, 
 
 dated 18 
 
 .£ 
 ,£ 
 
 214
 
 Banking Documents. 
 
 By the 
 
 (5.) 
 Bills Discounted 
 . Banking Company at 
 
 18. 
 
 No. 
 
 When Payable. 
 
 Postage. 
 
 When P'ble. 
 
 Days. 
 
 Amount of Bill. 
 
 Discount. 
 
 Proceeds. 
 
 Xn. — A Letter 
 
 Summoning a General Meeting of the Shareholders. 
 BANKING COMPANY. 
 
 -,18- 
 
 SlR, 
 
 I beg leave to inform you that the Annual General Meeting of the Proprie- 
 tors of this Company, pursuant to the deed of settlement, will be held at twelve o'clock 
 
 on instant, at the in this place, for the purpose 
 
 of electing Directors, and for the despatch of other business. 
 
 A list of all the Proprietors qualified for the direction by holding fifty shares and 
 upwards, is annexed. 
 
 I am, Sir, 
 
 Your obedient Servant, 
 
 _____^ , Manager. 
 
 Most large banks have also a printed form for their letters of ordinary 
 correspondence, as the following : — 
 
 Sir, 
 
 I beg to acknowledge the receipt of your favor of the , 
 
 inclosing sundries £ and undue bills £ for 
 
 the credit of your account. Your advices have due attention. 
 You are credited for the following sums received. 
 
 I am, Sir, 
 
 Your most obedient Servant, 
 
 XIII. — Special Contracts. 
 
 Those joint-stock banks that are not formed under the Act of 7th GJeo. 
 IV. Cap. 46, sue and are sued in the names of their trustees.* And to 
 enable them to do so, those parties who open accounts with the bank 
 
 * These banks obtained in 1844 the power of suing and being sued in the names of 
 their registered public officers. 
 
 P 215
 
 A Treatise on Banking. 
 
 enter into a special contract. Tliis may be done by a letter addressed to 
 the trustees personally, in a form similar to the following : — 
 
 To A.B., C.D.,andE.F. 
 
 Gentlemen, 
 
 You engaging that the Banking Company ^hall pay 
 
 to me whatever sums may be due to me on my current or other accounts with it, I 
 hereby agree, as a separate contract with you, to pay to you or the survivors of you, 
 after demand, the balance, if any, wliich shall at any time hereafter be due by me to 
 the said Banking Company on those accounts or otherwise. 
 I am. Gentlemen, 
 
 Your obedient Servant, 
 
 XIV. — Notices of Calls for further Payment on Shares. 
 BANKING C0:MPANY. 
 
 Sir, 
 
 I beg to inform you that the Board of Directors of this Company, agree- 
 ably to the powers contained in clause No of the deed of constitution of the 
 
 Company, have made a third call of £ per share on each of the shares 
 
 in the Company, and that the same will become payable on the of 
 
 next. 
 
 The certificate for your share is at , and will be delivered to yon 
 
 on payment of £ , and in exchange for that now in your possession. 
 
 You will please to take notice, that all payments for calls must be made free of post- 
 age, and in cash, on or before the of , otherwise they will 
 
 not be received except with interest at the rate of 5 per cent, per annum from that 
 date. 
 
 I am. Sir, 
 
 Your most obedient Servant, 
 , Manager. 
 
 XV. — Certificates of Shareholders. 
 — BANKING COMPANY. 
 
 CENTRAL BANK, 
 
 This is to certify that Mr. . , of , is a pro- 
 prietor of shares in the capital stock of the Banking Com 
 
 pany, on which per share has been paid. And as the proprietor thereof, lie 
 
 is entitled to all benefits and emoluments arising from such shares, agreeably to 
 the deed of settlement of the company, dated tlic day of , 18 . 
 
 As witness our hand this day of , one thousand eight hun- 
 dred and . 
 
 No. i Tioo of the Directors 
 
 J of the Company. 
 
 Registered . 
 
 216
 
 Banking Documents. 
 
 Some banks exchange the old certificates for new ones after every 
 call ; others do not grant new certificates ; and some do not issue certifi- 
 cates at all, unless a party requests to have some evidence that he is a 
 shareholder. 
 
 XVI. — Deed of Transfer. 
 
 This deed is executed by the buyer and seller of any shares in the 
 bank, after the directors have given their consent to the transfer. The 
 following is the form of this instrument : — 
 
 This Indenture, made the day of , 18 , between , 
 
 of , of the first part ; , of _, of the 
 
 second part; and , of the City of , trustees (ap- 
 pointed by the board of directors of the Banking Company) of the 
 
 covenant hereinafter contained, of the third part. 
 
 Whereas the said has become the purchaser, with the approba- 
 tion of the said board of direction, of share in the capital of the said company : 
 
 on each of wliicli shares the sum of pounds still remains unpaid. 
 
 Now this indenture witnesseth, that in consideration of the sum of , at 
 
 or bef9re tlie sealing and delivery of these presents paid by the said . 
 
 to the said , the receipt of which said sum of the said 
 
 . doth hereby acknowledge, and from the same and every part 
 
 thereof doth release and for ever discharge the said , his heirs, ex- 
 ecutors, administrators, and assigns : the said hath bargained, sold, 
 
 and assigned, and by these presents doth bargain, sell, and assign unto the said 
 
 , his executors, administrators, and assigns, all those the said 
 
 shares of his, the said , in the capital of the 
 
 Banking Company, and all benefits, advantages, powers, and privileges attending the 
 same ; to have, hold, receive, and take the said shares hereby assigned, and the said 
 benefits, advantages, powers, and privileges attending the same, unto the said 
 
 _^ , his executors, administrators, and assigns, for his and their own 
 
 use and benefit. 
 
 And the said doth hereby, for himself, his heirs, executors, and 
 
 administrators, covenant, promise, and agree, with and to the said 
 
 and , their executors and administrators, that in respect of the 
 
 share hereby assigned, and all and every other share and shares which the said 
 
 may hereafter purchase in the capital of the said company, he, the 
 
 said , his heirs, executors, or administrators, shall and will, well 
 
 and truly, in all respects, observe, perform, and keep all and singular the covenants, 
 agreements, and provisions, contained in the deed of settlement of the said company, 
 
 bearing date the day of , 18 , so far as the same ought on 
 
 his or their parts to be observed, performed, and kept. 
 
 In witness whereof, the said parties to these presents have hereunto set their hands 
 and seals, the day and year first above-written. 
 
 Witness to the identity and signature of . 
 
 Signed, sealed, and delivered by 
 
 In the presence of 
 
 217
 
 A Treatise on Banking. 
 
 Memorandum. 
 
 It i8 needful that this document should be completed and left at the office of the com 
 pany without delay, when a certificate of the shares will be given to the purchaser, into 
 whose name the shares cannot be placed until this regulation is complied with. 
 
 X\^I. — Circular Notes^ issued by the London and Westminster Bank. 
 
 LOiroON AND WESTMINSTER BANK. 
 
 Ho. . Lettee db Credit Circolaire pour £ Sterls. 
 
 A Messieurs, les Banquiers, Londres, ce __ , 18 . 
 
 designis dans nos Lettres cTIndication. 
 
 Messieurs, 
 
 Cette lettre vous sera remise par M. _, dont 
 
 V0U8 trouverez la signature dans notre Lettre d'Indication susdite. Je vous prie de 
 
 vouloir bien lui compter sans frais quelconques, la valeur de Livres 
 
 Sterlins, au cours a Usance sur Londres contre sa traite ci-jointe sur cette Banque. 
 J'ai I'honneur d'etre, 
 Messieurs, 
 
 Votre tres obeissant Serviteur, 
 
 , Secretaire. , Girant- 
 
 On the other side : — 
 
 LONDON AND WESTMINSTER BANK. 
 
 \dres, re 
 
 .18 . 
 
 
 .4 
 
 re. 
 
 , 18 
 
 A sept jour de vue prefix payez, a I'ordre de M. 
 Livres Sterlins valear recae. 
 
 These Circular Notes are accompanied by the following Letter of In- 
 dication : — 
 
 Lettre dTndication. 
 
 LONDON AND WESTMINSTER BANK. 
 
 Londres, ce , 18 . 
 
 Mebsiexirs, 
 
 Le porteur de cette Lettre, M. , pour Icquel nous r6- 
 
 clamons vos attentions, est muni de nos Billets de Change Circulaires pour son voyage 
 Nous vous prions de lui en fournir la valeur sur son double acquit au cours du change 
 a usance sur notre place, et sans d6ductions de frais, d'apres nos instructions. 
 
 Si la ville ou il en touchera le montant n'a pas de change direct sur Londres, vous 
 voudrez bien en combiner nn avec la place cambiste la plus voisine. 
 
 Vous observcrcz que tout Agio sur especes d'or, ou d'argent, et tous frais extraordi- 
 naires dans le cas d'un rcmboursement indirect, doivcnt f^tre supportcs par le porteur, 
 et nc peuvcnt dtrc a notre charge. 
 
 218
 
 Banking Documents. 
 
 Cette Lettre devant accompagner nos Billets Circnlaires doit rester dans les mains 
 de leur porteur jusqa'k leur tpuisement. 
 
 Nous avons rhonneur d'etre, 
 Messieurs, 
 
 Vous tr^s humble et trcs 
 
 ob6issants Serviteurs, 
 , Gerant. 
 
 , Secrdtaire. 
 
 rules. 
 Abbeville, 
 
 Co rrespo ndans. 
 MM. Gavelle & Cie. 
 
 Aix la Chapelle, 
 
 Do. . . 
 
 Aix en Provence, 
 
 Aleppo, . . . 
 
 Alexandrie, . , 
 Amiens, . . . 
 Amsterdam, . . 
 Ancone, . . . 
 Anvers, . . . . 
 Athenes, . . . 
 Augsbourg, . . . 
 Avignon, . . . 
 Avranches, . . . 
 Baden Baden, • 
 Do. . . 
 
 Barcelone, 
 
 Bareges, 
 Basle, . 
 Bayonne, 
 
 Beirout, , 
 
 Oeder & Cie. 
 Charlier & Schiebler. 
 Guiton Talamel. 
 Wm. & Robt. Black 
 
 &Co. 
 Briggs & Cie. 
 Grimaux &CodevilIe. 
 Hope & Cie. 
 G. Terni & Tils. 
 Osy & Cie. 
 F. 'Strong. 
 P. de Stettin. 
 Thomas Freres. 
 F. HuUin. 
 F. S. Meyer. 
 Augustus Klose. 
 Bagneres de Bigorrfe,Villeneuve & Cie. 
 ' Gerona, Freres Cla- 
 ve, & Cie. 
 Villeneuve & Co. 
 Vischer & Fils. 
 Capt. Graham. 
 Wm. & Robt. Black 
 
 &Co. 
 A. Grieg & Fils. 
 Les Freres Schickler. 
 Marcuard & Cie. 
 Jacquard & Cie. 
 A. Bruere. 
 F. Perotti. 
 Jonas Cahn. 
 Barton & Guestier. 
 i Alexandre Adam & 
 I Cie. 
 . H. Schroder Fils. 
 
 Eichhom & Cie. 
 . F. Du Jardin. 
 ( Freres Lobbecke & 
 ■ i Cie. 
 . J. Herring. 
 
 F. Brugmann & Fils. 
 ( Lonergan Freres & 
 I Cie. 
 , E. Guilberr & Cie. 
 
 Cairo, Briggs & Cie. 
 
 Calais, .... P. Devot & Cie. 
 
 Cambray N. Boniface & Fils. 
 
 Carlsbad, . . . B. Gottl & Fils. 
 
 Bergen, 
 
 Berlin, 
 
 Berne, . 
 
 Besancjon, 
 
 Blois, 
 
 Bologne en Italic, 
 
 Bonn, 
 
 Bordeaux, . . 
 
 Boulogne S | M. 
 
 Bremen, . . . 
 Breslaw, . . . 
 Bruges, . . . 
 
 Brunswick, . . 
 
 BrQnn, . . . 
 Bruxeiles, • . 
 
 Cadiz, .... 
 
 Caeti, 
 
 219 
 
 Villes. 
 Carisruhe, . MM. 
 Cassel (Hesse), . 
 Cette, 
 
 Chambery, . . . < 
 
 Cherbourg, . . . 
 
 Civita Vecchia, . < 
 
 Coblentz, . . . . 
 Cobourg, . . . . 
 Cologne, . . . 
 Constance, . . . 
 
 Constantinople, . < 
 
 Copenhagen, . . 
 Corfu, .... 
 Damascus, . . . 
 Dantzig, .... 
 Darmstadt, . . . 
 Dieppe, .... 
 
 Dijon, 
 
 Dresde, .... 
 Dunkirk, . . . . 
 Dusseldorf, . . . 
 
 Elberfeld, ■ ■ • \ 
 
 Eisineur, . . . 
 
 Emms, 
 
 Florence, . . . 
 Frankfort Sj M., 
 
 Do. . . 
 
 Gand, . . 
 Genes, . . 
 
 Geneve, 
 
 Gibraltar, . 
 Gottingen, 
 Grafenburg, 
 Hague, 
 Hambourg, . 
 Hanovre, . 
 Havre, . . 
 
 Do. . . 
 Heidelberg, . 
 Inspruck, . 
 Interlachen, 
 Jerusalem, 
 Kissingen, . 
 
 Correspondana. 
 Augustus Klose. 
 L. Feidel. 
 F. Durand & Fils. 
 Ve. Python & Ge- 
 
 noud Fils, aine. 
 Manger Freres. 
 John Thomas Lowe, 
 
 jun. 
 
 F. H. Kehrmann. 
 Schraidt & Cie. 
 J. D. Herstatt. 
 Macaire & Cie. 
 Chas. S. Hanson & 
 
 Cie. 
 Frolich & Cie. 
 J. Courage. 
 
 G. H. Gibb & Cie. 
 Gibsone & Cie. 
 
 J. A. Zoeppritz. 
 Quenouille aine. 
 Drevon & Marion. 
 M. Kaskel. 
 Charles Carlier. 
 G. Cleff. 
 Vonder Heydt Ker- 
 
 sten & Fils. 
 N. & C. Fenwick. 
 Deinhard & Jordan. 
 Plowden & Freneh. 
 Gogel, Koch & Cie. 
 M. A. de Rothschild 
 
 & Sons. 
 Bank of Flanders. 
 Gibbs & Co. 
 Lombard, Odier & 
 
 Cie. 
 Archbold & Cie. 
 L. & P. Benfey. 
 Amstein & Eskeles. 
 Scheurleer & Fils. 
 S. Heine. 
 
 L. & A. H. Cohen 
 — Dubois & Cie. 
 Etienne Trotenx. 
 C. A. Fries. 
 Louis J. Mayer. 
 Isidor Jackowskl 
 W. T. Young. 
 Freres Bolzano.
 
 A Treatise on Banking 
 
 vaiea. 
 Konigsberg, 
 Lausanne, 
 Leipsig, . 
 Do., . . 
 Li6ge, 
 Lille, . . 
 
 Linz, . . 
 
 Lisbonne, . 
 Livournc, 
 Lubec, . . 
 Lucerne, . 
 Lucques, . . 
 Do. Bains 
 Lyons, . . . 
 
 Madeira, 
 
 Madrid, . 
 Malaga, . 
 Malta, . . 
 Manheim, 
 Marienbad, 
 
 Marseilles, 
 
 Mayence, . 
 Memel, . 
 Messina, . 
 Metz, . . 
 
 Milan, . . 
 
 Montpellier, 
 Moscow, . 
 Munich, . 
 Nancy, . . 
 Nantes, . 
 Naples, 
 
 Do. . 
 
 Neufchatel, 
 New York, 
 Nice, . . 
 
 Nismes, . 
 
 Nuremberg, 
 Odessa, . 
 Oporto, 
 Orleans, . 
 Ostend, 
 Palermo, 
 Paris, . 
 
 Do. . . 
 
 de 
 
 Parma 
 
 Corresponduns. 
 MM. C. L. Andersch. 
 . . Chas. Bugnion. 
 
 M. Kaskel. 
 . Frege & Cie. 
 
 M. J. Vercour & Cie. 
 . Rouzfe Mathon. 
 ( J. M. Scheibenpogen 
 ( Eidam. 
 . H. G. Scholtz. 
 
 W. Macbcan & Cie. 
 . Fr.:;res Mullcr. 
 
 F. KnoeiT & Fils. 
 . F. Petri. 
 
 Plowden & French. 
 . Ve. Guerin & Fils. 
 ( Murdock,'Shortridge, 
 I & Cie. 
 . H. 0. Shea & Cie. 
 
 John Giro 
 . Jas. Boll & Cie. 
 
 J. G. Ileinhardt. 
 . Bernard Gottl. 
 ( Salavav, Pere, Fils, 
 { & Cie. 
 . Fred. Kom. 
 
 . Cailler & Cie. 
 
 C Carli di Tommaso 
 I & Cie. 
 
 F. Durand & Fils. 
 . J. L. Burckhardt. 
 
 A. E. D'Eichthal. 
 . Elie Bailie. 
 
 P. Ciret & Cie. 
 . W. J. Turner & Co. 
 C C. M. de Rothschild 
 I & Sons. 
 . F. Henri Nicolas. 
 
 J. G. King & Sons. 
 . E. Carlone & Cie. 
 C Vincens Devillas & 
 I Cie. 
 . Leonard Kalb. 
 
 E. Mahs & Cie. 
 . Burmcster & Co. 
 
 Daqu^'t ain6 & Cie. 
 . F. A. Bellcroche. 
 
 G. Wood & Cie. 
 
 . Callaghan & Fils. 
 ( De Rothschild 
 I Friires. 
 . L. Laurent. 
 
 Viltee. 
 Pau, . . 
 Perpignan, 
 Pesth, 
 Pisa, . . 
 Prague, . 
 Presbourg, 
 Rastadt, . 
 Ratisbonne, 
 Renncs, 
 Rhcims, . 
 Riga, . . 
 Rome, . . 
 
 Correspondan*. 
 MM. Mcrillon ain6, 
 , F. Durand. 
 
 C J. Malvieux. 
 , F. Peverada. 
 
 C. A. Feidlcr & Fils. 
 
 Arnstein & Eskeles. 
 
 F. S Mevcr. 
 . G. W. Henle 
 
 C. Le Ray. 
 , Ruinart, Pere & Fils. 
 
 Do. . 
 
 Rouen, 
 
 Rotterdam, 
 
 Salzbourg, 
 Schaff house, 
 Schwalbach, . 
 Seville, . . 
 Smyrna, . 
 St. Gall, . . 
 St. Malo, . 
 St. Omer, . 
 
 St. Pctersburj 
 
 Spa, . . , 
 Stockholm, . 
 
 Stuttgard, 
 
 Strasbourg, 
 
 Tarl)es, . 
 
 Toplitz, . 
 
 Toulon, 
 
 Toulouse, 
 
 Tours, . 
 
 Treves, . 
 
 Trieste, 
 
 Turin, . 
 
 Valenciennes 
 
 Venice, 
 
 Verona, 
 
 Vevcy, 
 
 Viennc, 
 
 Utrecht, . 
 
 Warsaw, . 
 
 Wcinier, 
 
 Wiesbaden, 
 
 Wurzbourg, 
 
 Zurich, 
 
 ;h, 
 
 . Torlonia & Cie. 
 
 c Plowden, Cholmeley, 
 
 I &Co. 
 
 . J. Faucon. 
 
 c D & C. Blanken- 
 
 ^ heyn. 
 
 . — Spath, I'ne. 
 
 Frev & Fils. 
 . M. Berle. 
 
 Cahill, White & Cie. 
 . Lee & Fils. 
 
 J. J. Meyer Fils. 
 . P. Fontan. 
 
 A. Caffieri. 
 C Cavlev, Moberly & 
 I Cie." 
 . J. F. Ilayemal. 
 
 Tottie & Arfwedsoa 
 C Les Fils de G. H. 
 \ Keller. 
 ( Renouard de Bus- 
 l sicre. 
 . Villeneuve & Cie. 
 
 Emanuel MaySr. 
 
 J. Cassaing & Co. 
 . Gouin Frcres. 
 
 Revcrchon &, Cie. 
 . J. Collioud. 
 
 Nigra Freres. 
 . G. Serret & Cie. 
 
 Schielin Frcres. 
 . J. Smania. 
 
 P. Gcnton & Cie. 
 . Arnstein & Eskeles. 
 
 Vlaer & Kol. 
 . S A. Fracnkel. 
 
 J. Elkan. 
 . M. Berle. 
 
 G. Ochninger. 
 ( Gaspard Schulth6s8 
 \ &Co. 
 
 220
 
 Banking Documents. 
 
 XVin. — A Tahle, sJiotoing the Relative Value of Gold in London (at 
 the Mint Price of £'6 17s. lO^d. per Ounce Standard)^ and in tlie 
 Cities of 
 
 
 PARIS. 
 
 
 
 HAMBURGH. 
 
 
 
 AMSTERDAM. 
 
 
 
 
 
 
 Price per 
 m&rc fine. 
 
 
 
 
 
 
 
 
 Premi 
 
 m. 
 
 Cenu. 
 
 Per 
 
 
 Sch. 
 
 Per 
 
 Premium. 
 
 
 Per 
 
 Per mi 
 
 le.Fc«. Ct8 
 
 In the £ 
 
 cent. 
 
 Marcs. 
 
 Mc8. Sch. 
 
 Inthe£. cent. 
 
 Per cer 
 
 t. Flor. Cl«. 
 
 Cents. 
 
 
 . 
 
 . 25 1-1} 
 
 i • • 
 
 •01 
 
 430 . 
 
 . 13 7} 
 
 } . 
 
 •06 
 
 13 
 
 . 11 93} 
 
 i . 
 
 . -02 
 
 i ■ 
 
 . " U,i 
 
 } • • 
 
 •02 
 
 i . 
 
 " 1 
 
 i ■ 
 
 •11 
 
 i 
 
 . " 94i 
 
 } • 
 
 . -Oi 
 
 1 . 
 
 . " 17 
 
 * ■ • 
 
 ■03 
 
 
 " * 
 
 * • 
 
 •17 
 
 i 
 
 . ■' 96 
 
 i . 
 
 . ^06 
 
 IJ. 
 
 . " ISi 
 
 1 . . 
 
 •04 
 
 
 " i 
 
 } • 
 
 •23 
 
 i 
 
 . " 97} 
 
 1 . 
 
 . •OS 
 
 2 . 
 
 . " 19} 
 
 2 . . 
 
 •03 
 
 431 '. 
 
 13 8 
 
 f • 
 
 •29 
 
 } 
 
 . " 9Si 
 
 2 . 
 
 . 17 
 
 2i ■ 
 
 . " 2<ij 
 
 3 . . 
 
 •12 
 
 
 " i 
 
 i . 
 
 •34 
 
 4 • 
 
 . 12 
 
 3 . 
 
 . 25 
 
 3 . 
 
 . " 22 
 
 4 . . 
 
 •16 
 
 
 " i 
 
 i • 
 
 •40 
 
 i • 
 
 . " 01} 
 
 4 . 
 
 . 33 
 
 3i . 
 
 . " 2:)i 
 
 5 . . 
 
 •20 
 
 
 i 
 
 1 . 
 
 •46 
 
 i . 
 
 . " 02J 
 
 5 . 
 
 . -42 
 
 4 . 
 
 . " 24j 
 
 6 . . 
 
 •24 
 
 432 ; 
 
 " i 
 
 2 . 
 
 •92 
 
 14* . 
 
 . " 04* 
 
 6 . 
 
 . •SO 
 
 a- 
 
 • :; ^i 
 
 7 . . 
 
 .•28 
 
 
 " s 
 
 3 . 
 
 1^38 
 
 i . 
 
 . " 05} 
 
 7 . 
 
 . -58 
 
 5 . 
 
 . " 27 
 
 8 . . 
 
 •32 
 
 
 * 
 
 4 . 
 
 1-84 
 
 i . 
 
 . " 064 
 
 8 . 
 
 . ^67 
 
 5i. 
 
 . " 2'^i 
 
 9 . . 
 
 •36 
 
 
 " J 
 
 5 . 
 
 2-30 
 
 i • 
 
 . " 08 
 
 9 . 
 
 . -75 
 
 6 . 
 
 . " 29} 
 
 10 . . 
 
 •40 
 
 433 .' 
 
 13 9^ 
 
 6 . 
 
 2-76 
 
 } . 
 
 . " 09i 
 
 10 . 
 
 . -83 
 
 6i. 
 
 . " 3(iJ 
 
 U . . 
 
 •44 
 
 
 " i 
 
 
 
 1 • 
 
 . " 10} 
 
 11 . 
 
 . 92 
 
 7 . 
 
 . " 32i 
 
 12 . . 
 
 •48 
 
 
 " 1 
 
 
 
 i . 
 
 . " 12 
 
 12 . 
 
 . 1- 
 
 7i. 
 
 . " a3} 
 
 13 . . 
 
 •52 
 
 
 " i 
 
 
 
 i ■ 
 
 . " 13i 
 
 13 . 
 
 . 108 
 
 8 . 
 
 . " 34} 
 
 14 . . 
 
 •56 
 
 434 : : 
 
 " } 
 
 
 
 15 . 
 
 . " 14} 
 
 14 . 
 
 . 117 
 
 8i. 
 
 . " 36 
 
 15 . . 
 
 •60 
 
 
 " i 
 
 
 
 } • 
 
 . ■' 16 
 
 15 . 
 
 1 25 
 
 9 . 
 
 . " 37J 
 
 16 . . 
 
 •64 
 
 
 " i 
 
 
 
 i . 
 
 . " Ui 
 
 16 . 
 
 1-33 
 
 9i. 
 
 . " 3'^ 
 
 17 . . 
 
 •68 
 
 
 " .J 
 
 
 
 i • 
 
 . " 18} 
 
 17 . 
 
 1-42 
 
 10 . 
 
 , " 39* 
 
 18 . . 
 
 •72 
 
 435 ! '. 
 
 13 10 
 
 
 
 } ■ 
 
 . " 20 
 
 18 . 
 
 150 
 
 lOi. 
 
 " 41 
 
 19 . . 
 
 •76 
 
 
 " } 
 
 
 
 1 • 
 
 . " 21i 
 
 19 . 
 
 158 
 
 11 . 
 
 " 42t 
 
 20 . . 
 
 •80 
 
 
 i 
 
 
 
 i . 
 
 . " 22} 
 
 20 . 
 
 1-67 
 
 m- 
 
 " 43} 
 
 21 , . 
 
 •84 
 
 
 " i 
 
 
 
 i ■ 
 
 . " 23* 
 
 21 . 
 
 175 
 
 12 . 
 
 " 44 J 
 
 22 . . 
 
 •88 
 
 436 '. '. 
 
 } 
 
 
 
 \6 . 
 
 . " 25i 
 
 22 . 
 
 1-83 
 
 12J . 
 
 " 46 
 
 23 . . 
 
 •92 
 
 
 " f 
 
 
 
 
 
 23 . 
 
 1-92 
 
 13 . 
 
 " 47i 
 
 21 . . 
 
 •96 
 
 
 " i 
 
 
 
 
 
 24 . 
 
 2- 
 
 13} . 
 
 " 4Si 
 
 25 . . 
 
 1- 
 
 
 " I 
 
 
 
 
 
 25 . , 
 
 208 
 
 14 . 
 
 " 49J 
 
 26 . . 
 
 1-04 
 
 437 ; ; 
 
 13 ir 
 
 
 
 
 
 26 . . 
 
 217 
 
 14} . 
 
 " 51 
 
 27 . . 
 
 ros 
 
 i . . 
 
 " i 
 
 
 
 
 
 27 . . 
 
 2-25 
 
 15 . 
 
 " r,2| 
 
 " 53} 
 
 28 . . 
 
 112 
 
 
 ," * 
 
 
 
 
 
 28 . . 
 
 233 
 
 15i. 
 
 29 . . 
 
 116 
 
 
 
 
 
 
 
 29 , . 
 
 2-42 
 
 16 . 
 
 " &l| 
 
 30 . . 
 
 1-20 
 
 438 : ; 
 
 " k 
 
 
 
 
 
 30 . . 
 
 2-50 
 
 16i. 
 
 " 56 
 
 31 . . 
 
 124 
 
 i • . 
 
 " i 
 
 
 
 
 
 
 
 17 . 
 
 " 57i 
 
 32 . . 
 
 r23 
 
 
 " * 
 
 
 
 
 
 
 
 17}. . 
 
 " 58} 
 
 33 . . 
 
 1-32 
 
 
 " i 
 
 
 
 
 
 
 
 18 . . 
 
 " 59* 
 
 34 . . 
 
 1-36 
 
 439 ; ! 
 
 13 12 
 
 
 
 
 
 
 
 18} . . 
 
 " 61 
 
 35 . . 
 
 1-40 
 
 
 " } 
 
 
 
 
 
 
 
 19 . . 
 
 " 624 
 
 36 , . 
 
 1-44 
 
 
 " i 
 
 
 
 
 
 
 
 19} . . 
 
 " 63} 
 
 37 . . 
 
 1-48 
 
 » ; '. 
 
 " i 
 
 
 
 
 
 
 
 20 . . 
 
 " 64* 
 
 33 . . 
 
 152 
 
 440 . . 
 
 " } 
 
 
 
 
 
 
 
 20} . . 
 
 " 66 
 
 39 . . 
 
 •56 
 
 
 
 
 
 
 
 
 
 21 . . 
 
 " 67i 
 
 40 . . 
 
 1-60 
 
 
 
 
 
 
 
 
 
 211 . . 
 
 " 68} 
 
 
 
 
 
 
 
 
 
 
 
 22 . . 
 
 " 69| 
 
 
 
 
 
 
 
 
 
 
 
 22} . . 
 
 " 71 
 
 
 
 
 
 
 
 
 
 
 
 23 . . 
 
 " 72i 
 
 
 
 
 
 
 
 
 ^ 
 
 
 
 23} . . 
 
 " 73} 
 
 
 
 
 
 
 
 
 
 
 
 24 . . 
 
 " 74f 
 
 
 
 
 
 
 
 
 
 
 
 24}. . 
 
 " 76 
 
 
 
 
 
 
 
 
 
 
 
 25 . . 
 
 " 77} 
 
 
 
 
 
 
 
 
 
 
 
 Method of Use. — (For example, take Paris.) — Ascertain the premium on gold at Paris — say 9 per 
 mille; in the left- hand colun^n, against 9, will be found the rate of exchange per pound sterling produced 
 francs 25-37J. From that rate, deduct the exchange on London at short — say francs 25 27}, leaving a 
 remainder of 9J centimes per pound sterling. In the second column, it will be found that 9J centimes 
 in the pound sterling are equal to 39 per cent. ; consequently, gold is -39 per cent, dearer in Paris than 
 in London. 
 
 Note.— If the rate of exchange produced by gold in Paris be lower than the exchange at short on Lon- 
 don, gold will be dearer in London than in Paris. 
 
 Prussian Coin. — Thaler, Silbergrossch, and Pfenning. 1 thaler = 30 silbgr. ; 
 1 silb. = 12 pfennings. 
 
 Frankfort. — Gulders, Kreutzers, and Hellers. 1 gulder = 60 kreutz. ; 1 kreutz 
 = 4 hell. 
 
 Dutch. — Guilders and Cents. 1 guild. = 100 cents. 
 
 Belgium and France. — Francs and Centimes. 1 franc = 100 centimes. 
 
 221
 
 A Treatise on Banking. 
 XIX. — A Table of English Money* reduced into 
 
 
 
 
 PRUSSIAN 
 
 
 FRANKFORT 
 
 
 DUTCH 
 
 FRENCH 
 
 
 
 
 COIN. 
 
 
 
 ■ 
 
 COIN. 
 
 
 COIN. 
 
 COIN. 
 
 
 
 Al6lh. 20 
 
 sg- 
 
 
 llgul. Mkr. 
 
 
 12 guild. 
 
 25 fr. lOcts. 
 
 £ 
 
 «. d. 
 ... 1 
 
 Tha. 
 
 Sg. 
 
 10 
 
 
 Gul. 
 
 Kr. Ha 
 3 ... 
 
 
 Gld. 
 
 CIS. 
 05 
 
 Ft. CIS. 
 ... 10 
 
 *.• 
 
 ... 2 
 
 
 1 
 
 8 
 
 
 
 6 ... 
 
 
 
 10 
 
 ... 20 
 
 .■* 
 
 ... 3 
 
 
 2 
 
 6 
 
 
 
 9 ... 
 
 
 
 15 
 
 ... 31 
 
 
 ... 6 
 
 
 5 
 
 
 
 
 17 ... 
 
 
 ... 
 
 30 
 
 ... 62 
 
 .•• 
 
 1 ... 
 
 ... 
 
 10 
 
 
 
 
 35 ... 
 
 
 ... 
 
 60 
 
 1 25 
 
 • ■• 
 
 2 
 
 
 
 20 
 
 
 
 1 
 
 11 ... 
 
 
 1 
 
 20 
 
 2 51 
 
 • •• 
 
 3 
 
 
 1 
 
 ... 
 
 
 
 1 
 
 47 ... 
 
 
 1 
 
 80 
 
 3 76 
 
 ..• 
 
 4 
 
 
 1 
 
 10 
 
 
 
 2 
 
 22 ... 
 
 
 2 
 
 40 
 
 5 02 
 
 
 5 
 
 
 1 
 
 20 
 
 
 
 2 
 
 58 ... 
 
 
 3 
 
 
 6 27 
 
 
 10 
 
 
 3 
 
 10 
 
 
 
 5 
 
 57 ... 
 
 
 6 
 
 
 12 55 
 
 
 15 
 
 
 5 
 
 
 
 
 8 
 
 55 ... 
 
 
 9 
 
 
 18 82 
 
 1 
 
 
 
 6 
 
 20 
 
 
 
 11 
 
 54 ... 
 
 
 12 
 
 
 25 10 
 
 2 
 
 ... 
 
 
 13 
 
 10 
 
 
 
 23 
 
 48 ... 
 
 
 24 
 
 
 50 20 
 
 3 
 
 
 
 20 
 
 
 .. 
 
 
 35 
 
 42 ... 
 
 
 36 
 
 ... 
 
 75 30 
 
 4 
 
 
 
 26 
 
 20 
 
 
 
 47 
 
 36 ... 
 
 
 48 
 
 
 100 40 
 
 5 
 
 ... 
 
 
 33 
 
 10 
 
 
 
 59 
 
 30 ... 
 
 
 60 
 
 ... 
 
 125 50 
 
 6 
 
 ... 
 
 
 40 
 
 
 
 
 71 
 
 24 ... 
 
 
 72 
 
 ... 
 
 150 60 
 
 7 
 
 
 
 46 
 
 20 
 
 
 
 83 
 
 18 ... 
 
 
 84 
 
 ... 
 
 175 70 
 
 8 
 
 
 
 53 
 
 10 
 
 
 
 95 
 
 12 ... 
 
 
 96 
 
 ... 
 
 200 80 
 
 9 
 
 
 
 60 
 
 
 
 
 107 
 
 06 ... 
 
 
 108 
 
 
 225 90 
 
 10 
 
 
 
 66 
 
 20 
 
 
 
 119 
 
 
 
 120 
 
 ... 
 
 251 ... 
 
 .20 
 
 ... 
 
 
 133 
 
 10 
 
 
 
 238 
 
 
 
 240 
 
 
 502 ... 
 
 80 
 
 ... 
 
 
 BOO 
 
 
 
 
 357 
 
 
 
 360 
 
 
 7.53 ... 
 
 40 
 
 ... 
 
 
 266 
 
 20 
 
 
 
 476 
 
 
 
 480 
 
 
 1004 ... 
 
 50 
 
 
 
 333 
 
 10 
 
 
 
 595 
 
 
 
 
 600 
 
 ... 
 
 1255 ... 
 
 60 
 
 
 
 400 
 
 
 
 
 714 
 
 
 
 
 720 
 
 
 1506 ... 
 
 70 
 
 ... 
 
 
 466 
 
 20 
 
 
 
 833 
 
 
 
 840 
 
 
 1757 ... 
 
 80 
 
 
 
 533 
 
 10 
 
 
 
 952 
 
 
 
 960 
 
 
 2008 ... 
 
 
 Value at which 
 
 th 
 
 e following Coins are 
 
 generally current. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Bblowm 
 
 
 
 
 
 
 Prussia. 
 
 Frankfort. 
 
 
 Holland. 
 
 and 
 
 
 
 
 
 
 
 
 
 
 
 
 France. 
 
 
 
 
 
 
 Th. 
 
 Sg. 
 
 Gid. 
 
 Kr. 
 
 Guil. Cent. 
 
 Fr. Cent. 
 
 Sovereign, . 
 
 . 
 
 
 
 6 
 
 20 
 
 11 
 
 50 
 
 
 12 ... 
 
 25 ... 
 
 Engli 
 
 sh Shilling, 
 
 
 
 
 
 10 
 
 
 35 
 
 
 ... 58 
 
 1 20 
 
 Dutch 
 
 I 10-guilder piece, 
 
 
 
 5 
 
 20 
 
 9 
 
 54 
 
 
 10 ... 
 
 21 16 
 
 Duca 
 
 • 
 
 . 
 
 
 
 3 
 
 4 
 
 5 
 
 30 
 
 
 5 60 
 
 11 60 
 
 Guilder, 
 
 . 
 
 
 
 
 17 
 
 
 58 
 
 
 1 
 
 2 11 
 
 Fred. 
 
 d'Or, . 
 
 . 
 
 
 
 5 
 
 20 
 
 9 
 
 44 
 
 
 9 80 
 
 21 
 
 Pruss 
 
 an Thaler, 
 
 . 
 
 
 
 . 1 
 
 
 1 
 
 45 
 
 
 1 70 
 
 3 70 
 
 French Crown Thaler, 
 
 
 
 1 
 
 16 
 
 2 
 
 44 
 
 
 
 
 Braband do. 
 
 
 
 
 1 
 
 16 
 
 2 
 
 42 
 
 
 2 65 
 
 
 
 Convention do. 
 
 
 
 
 1 
 
 10 
 
 2 
 
 24 
 
 
 
 ... 
 
 
 Piece of 20 Kreutzers, 
 
 
 
 
 6 
 
 
 24 
 
 
 
 ... 
 
 
 20-franc Piece, 
 
 , 
 
 
 
 5 
 
 12 
 
 9 
 
 30 
 
 
 9 54 
 
 20 
 
 
 5-franc do., 
 
 , 
 
 
 
 1 
 
 10 
 
 2 
 
 20 
 
 
 2 35 
 
 5 
 
 
 I -franc dc 
 
 )•, 
 
 
 
 
 
 8 
 
 
 28 
 
 
 ... 48 
 
 1 
 
 
 The above table has been circulated by the General Steam Navigation 
 Company. On this subject I would refer to Mr. Waterston's " Manval 
 of Commerce : being a Compendium of Mercantile Tables, British and 
 
 * For an account of the Silver and Gold Coins of different Countries, and their 
 Sterling Value, see the New London Mercantile Directory, for 1849. 
 
 222
 
 Banking Documents. 
 
 Foreign Moneys^ Weights, and Measures, and the Theory and Practice 
 of Exchanged (Simpkin, Marshall & Co., publishers.) We think also 
 this is a proper place to introduce the following account of the origin of 
 English Coins : — 
 
 " Pound. — Though a pound is one of the most common denominations for money, 
 it never was a real coin, either in gold or silver, in any age or country. Such large 
 and ponderous coins would have been in many respects inconvenient. But for many 
 ages, both in Britain and in other countries, that number of small coins which was de- 
 nominated a pound in computation, or a pound in sale, really contained a pound of 
 silver, and they might have been and frequently were weighed, as well as numbered, 
 to ascertain their value. If the number of coins that were denominated a pound in 
 sale, did not actually make a pound in weight, an additional number of coins were 
 thrown in to make up the weight. 
 
 " Money was coined in the Temple of Juno Moneta, whence our English word 
 money. 
 
 " Coin. — Coin (cuna, pecunia) seems to come from the French coign, that is, angu- 
 lus, ' a corner ' ; whence it has been held that the ancientest sort of coin was square 
 with corners, and not round as it now is. 
 
 " Cash. — Cash in a commercial style signifying the ready money which a merchant 
 or other person has at his present disposal, and is so called from the French term 
 caisse, that is, ' chest or coffer,' for the keeping of money. 
 
 " Guinea. — This coin took its denomination Guinea, because the gold whereof the 
 first was struck was brought from that part of Africa so called ; for which reason it 
 likewise formerly bore the impression of an elephant. 
 
 " The value or rate of the guinea has varied. It was first struck on the footing of 
 20s. ; but, by the scarcity of gold, was afterwards advanced to 21s. 6d., and again sunk 
 to 21s. 
 
 "Angel. — The angel, called in the French an^feZoi, was a gold coin, value 10s., 
 struck in England, where some few are still to be seen in the cabinets of the curious. 
 It had its name from the figure of an angel represented on it; which figure was 
 adopted, according to Rapin and others, to commemorate a pun of Pope Gregory the 
 Great, which seems to have greatly flattered the vanity of the nation. Struck with the 
 fair complexions and blooming countenances of some Anglo-Saxon captives who had 
 been brought to Rome, he inquired of what nation they were, and what they were 
 called, and being answered Angles, 'Justly be they so called,' quoth he, ' for they have 
 angel-like faces, and seem meet to be made co-heirs with the angels in heaven.' 
 
 " Shilling. — The etymology of the word scylling would lead us to suppose it to 
 have been a certain quantity of uncoined silver ; for whether we derive it from pcylan, 
 ' to divide,' or pceale, ' a scale,' the idea presented to us by either word is the same ; 
 that is, so much silver cut off, as in China, and weighing so much. 
 
 " There were none coined till 1504. Fabian mentions them under their prober 
 names, 34 Henry the Eighth. 
 
 " A Tester. — Tester is derived from the French word tete, ' a head ' ; a piece of 
 money stamped with a head, which in old French was called '■un testion,' and which 
 was about the value of an old English sixpence. ' Tester ' is used by Shakspeare. 
 
 " Tester, sixpence, from teston, French, an old silver coin, formerly worth 12c/., sink- 
 ing by degrees to gilt brass, and sixpence. 
 
 " Groat. — Other nations, as the Dutch, Polanders, Saxons, Bohemians, French. 
 &c., have likewise the groats, groots, grockes, gros, &c. In the Saxon times no silvei 
 
 223
 
 A Treatise on Banking. 
 
 coin hifffjer than a penny was struck in England, nor after the Conquest until Edward 
 tlie Third, wlio, about the year 1351, coined grosses, tliat is, groats, or great pieces, which 
 went for 4c?. ; and so the matter stood till the reign of Henry the Eighth, who, in 
 1504, first coined shillings. 
 
 " Penny, Halfpenny, Farthing. — Camden derives the word ^ penny ^ from the 
 JjHtin pecuuia, 'money.' 
 
 " The ancient English penny, penig, or pening, was the first silver coin struck in Eng- 
 land ; nay, and the only one current among our Saxon ancestors ; as is agreed by 
 Camden. Spelman, Dr. Hicks, &c. 
 
 " The penny was equal in weight to our three-pence ; five of them made one shill- 
 ing, or scilling, Saxon ; thirty, a mark, or mancuse, equal to our 7s. (xl. 
 
 " Until the time of King Edward the First, the penny was struck with a cross so 
 deeply indented in it, that it might be easily broke, and parted, on occasion, into two 
 parts, thence called half-pennies; or into four, thence caXlcA fourthings, or farthings. 
 But tliat prince coined it without indenture ; in lieu of which, he first struck round 
 halfjience and farthings. 
 
 "He also reduced the weight of a penny to a standard; ordering that it should 
 weigh thirty-two grains of wheat, taken out of the middle of the ear. This penny was 
 called the penny sterling. Twenty of these pence were to weigh an ounce ; whence 
 the penny became a weight, as well as a coin. 
 
 " The penny sterling is now used less as a coin, and subsists chiefly as a money of 
 account, containing the 12th part of a shilling, or the 240th part of a pound." (From 
 Notes of a Bookworm.) 
 
 XX. — For7n of Bond of the Guarantee Society. 
 
 Public Companies' Form. Agreement, 
 £ No. 
 
 GUARANTEE SOCIETY. 
 Articles of Agreement made and entered into the day of. 
 
 the year of our Lord one thousajid eight htindred and , between the three di- 
 rectors of the Guarantee Society, whose names are hereunto subscribed, on the part and be- 
 half of the said Society of the first part, and of the second 
 
 part. 
 
 Wliereas the said parties hereto of the second part have applied to 
 
 ream e. ^j^^ ^^.^ Guarantee Society for a guarantee to the extent of 
 
 pounds, against any loss to be sustained by the said , by or 
 
 through any fraud or dishonesty of , of , while 
 
 employed by the said in the capacity of 
 
 And the said society have agreed to enter into such Guarantee accordingly, on the terms 
 
 and subject to the provisions and conditions herein contained and hereunder written. 
 
 Now these presents witness, that in consideration of the premises, and 
 
 of the sum of paid on behalf of the said , 
 
 as a premium for such guarantee from the day . until the 
 
 day of , one thousand eight hundred and forty- , 
 
 both inclusive, being one year and part of another year: It is hereby 
 
 agreed and declared, that from the said day of 
 
 to the last day of , and tlionce for one year, namely, to the last day of 
 
 224
 
 Banking Documents. 
 
 . , one thousand eight hundred and forty- , inchisive, and far 
 
 every successive terra of twelve calendar months for and in respect of which the pre- 
 mium of shall be paid to the said society, and the said society shall agree 
 
 to accept the same (such payment to be made on the last day of in 
 
 each year, or within fifteen days thereafter, at the office of the Guarantee Society) dur- 
 ing the service of the said in the capacity aforesaid, the fundj 
 
 and property of the said society shall, on the terms and subject to the provisions and 
 conditions herein contained and hereunder written, which are to be taken as part of 
 this agreement, and subject also to the provisions of the deed of settlement of the said 
 society, be liable to pay and satisfy unto the said ' , at the expi- 
 ration of three calendar months after satisfactory proofs and full particulars of the loss, 
 and of the nature and extent thereof (verified, if the said society shall so require, by 
 declaration under the statute of 5 and 6 Wm. IV. c. 62) shall have been received at the 
 
 office of the said society. All such loss, not exceeding pounds, (provided 
 
 such loss shall have happened within eighteen calendar months next preceding the re- 
 ceipt of such proofs and particulars,) as the said may sustain 
 
 from any fraud or dishonesty of the said , to be committed after 
 
 the said day of , and during his uninterrupted continuance 
 
 in the said service in the capacity aforesaid. Provided always that the ... 
 
 ,,,.,. , . , ,. . Notice of fraud 
 
 said shall withm ten days after the discovery of to be given with- 
 
 any matter in respect of which any claim may be intended to be made, '" ^®" ^^^" 
 
 give notice, in writing, at the office of the Guarantee Society, of such intended claim, 
 
 and, as far as the case will admit, of all the particulars thereof; and from and after 
 
 such discovery, the guarantee herein contained shall, as to loss by any act of fraud or 
 
 dishonesty subsequent to such discovery, be at an end : Provided, also, 
 
 and it is hereby agreed, that the funds and property of the said society 'given to be the 
 
 for the time being remaining undisposed of, and inapplicable to prior fu"dsand prop- 
 
 " b I ' If f erty of the socie- 
 
 claims and demands, according to tlie provisions of the said deed of set- ty, after dis- 
 
 tlement, shall alone be subject to any claim in respect hereof, and that ^jJ^J^g ^""'^ 
 neither any director executing these presents, nor any proprietor or 
 holder of shares in the capital of the said society, shall be individually liable in respect 
 of any such claim, or under this agreement, beyond so much of the amount of the shares 
 then held by him or her in the said capital, and not subject to prior claims and de- 
 mands, as shall not for the time being have been paid up. Provided, also, „ . , 
 
 " '^ *^ ' ' Society to have 
 and it is hereby agreed and declared, that the said power to prose- 
 shall, in case of making any such claim in writing as aforesaid, forth- '^^^^' 
 with, upon being required by the said society, when lawful, arrest the said 
 
 for any offence or offences that he may have 
 
 committed, in respect of which such claim shall have arisen, and personally appear 
 
 upon any examination or examinations of the said , 
 
 and at his trial ; and in that case the said society shall be at liberty, at their own costs and 
 charges, to carry on any prosecution or prosecutions for such offence or offences, and to 
 commence and carry on, in such name or names as they may be advised, and for their 
 
 own benefit, any actions, suits, or other proceedings against the said , 
 
 for the recovery of any moneys or chattels lost by his fraud or dishonesty, or for dam- 
 ages in respect thereof, being hereby indemnified against 
 
 all costs, charges, damages, and expenses in respect of such prosecutions or other pro- 
 ceedings. And it is further agreed and declared, that when any such j^„y payment on 
 loss shall have been satisfied by or on behalf of the said society, an in- ="="1""^ of fraud 
 dorsement in satisfaction of all claims shall be made hereon, and signed be indorsed here- 
 
 225
 
 A Treatise on Banking. 
 
 on, and these by the person or persons to whom the amourtt of such loss shall be paid 
 upwil^!l)ct"ty. Of satisfied, and thereupon tliese presents shall be given up to and for 
 the benefit of the said society, to he of no further force or effect against 
 them. In witness whereof, the said parties hereto have hereunto subscribed their 
 names the day and year first above written. 
 
 Witness to the signatures of the three Directors. 
 
 Witness to the signatures of above-named 
 
 CONDITIONS OF INSURANCE. 
 
 In the event of any loss for which the society shall be liable, such loss shall be borne 
 by the society, ratably only, and in common with any other person or persons who 
 have already, or shall hereafter during the continuance of this guarantee, become se- 
 curity for the said in the service or employment above mentioned, ac- 
 cording to the amount for which each shall be guarantee. 
 
 The above agreement is subject to the condition that the answers which have been 
 
 given and signed by the said and by the said 
 
 to the questions lettered from A to /, both inclusive, submitted by the society, and con- 
 tained in a paper called " Form of Proposal for Guarantee," and dated . 
 
 are in all respects true and correct, otherwise the said agreement to be void. 
 
 That no premium shall be returned under any circumstances after the signing of the 
 above agreement. 
 
 Examined and registered 
 
 XXI. — Provident Clerks'' Benevolent Fund, 
 
 RULES AND REGULATIONS. 
 
 1. Title. — That this branch of the association be called "The Provident Clerks' 
 Benevolent Fund," in connection with " The Provident Clerks' Mutual Benefit Asso- 
 ciation." 
 
 2. Object- — That the object of this branch of the association is to provide funds, by 
 donations, subscriptions, bequests, or otherwise, for the purpose of granting temporary 
 or permanent relief to distressed clerks, who are or have been members, their widows 
 and families. 
 
 3. Members. — That the following persons shall be members of this branch of the 
 association, and be entitled to vote at all general meetings of this branch of the asso- 
 ciation, viz.: — 
 
 First, — Members of the Benefit Department who were admitted as clerks on joining 
 the association. 
 
 Second, — Clerks employed in any public or private establisliment within Great Brit- 
 ain, who sulvscribe to this fund not less than one guinea annually, or have given a do- 
 nation of not less than ten guineas. 
 
 4. Ilonorarij Members or Subscribers. — That persons Cnot being clerks) may become 
 honorary members, by a donation of not less than ten guineas, or an annual subscrip- 
 
 226
 
 Banking Documents. 
 
 tion of not less than one guinea, and be entitled to vote at elections for annuitants in 
 proportion to the amount of their donations or subscriptions, according to Rule No 
 21. 
 
 5. Management. — That this branch of the association shall be conducted by the same 
 board of management as the benefit department. 
 
 6. Treasurer. — That John Abel Smith, Esq., M. P., is the treasurer, and, by virtue 
 of his office, is also a member of the board of management. In the event of death or 
 resignation, the office of treasurer to be filled up by the board. 
 
 7. Trustees. — That there shall not be less than four trustees, and the funds of this 
 association shall be invested in the names of two or more of the trustees for the time 
 being. The present trustees are, — 
 
 Thomas Baring, Esq. 
 
 Thomson Hankey, jun., Esq. 
 
 William George Prescott, Esq. 
 
 Baron Lionel de Rothschild, M. P. 
 And in case of death or resignation, vacancies to be filled up by the board, subject to 
 the approval of the surviving trustees ; the said trustees, by virtue of their office, to be 
 members of the board of management. 
 
 8. Auditors. — That the following gentlemen be the auditors of this branch of the 
 association, viz. : — 
 
 John Beadnell, Esq. 
 
 James William Gilbart, Esq., F. R. S. 
 
 Sir John Pirie, Bart., Aid. 
 
 George Pollard, Esq. 
 
 William Smee, Esq. 
 any two being competent to act, who shall audit the annual accounts, to be laid be- 
 fore the members at the annual general meeting. Vacancies to be filled up by the 
 board. 
 
 9. Officers. — That the board may appoint such officers to this branch of the associa- 
 tion as may be deemed necessary, with power to remove them and to appoint others, 
 and to fix the amount of their respective salaries or remuneration : the officers to give 
 such security as the board shall require. 
 
 10. Expenses. — That all expenses shall be equitably divided between the benefit de- 
 partment of this branch of the association ; and the proportion to be borne by each 
 shall be settled by the board, previously to making up the annual account. 
 
 1 1 . Special Meeting of the Board of Management. — That a special meeting of the 
 board may be convened on any emergency by a requisition to the chairman, signed by 
 five members thereof; the requisition to state the object of such special meeting ; and 
 the chairman shall call such meeting within one week of receiving the requisition. 
 
 12. Annual General Meeting. — That an annual general meeting of the members of 
 this branch of the association be held in February in each year, on such day as the 
 board may appoint, when the annual report of the state of the funds, together with the 
 acconnt of the receipts and expenditure of the past year, shall be laid before the meet- 
 ing. In case of any questions being submitted to the decision of such meeting, the 
 same to be decided by a majority of votes. 
 
 13. Special Meeting of Members. — That a special meeting of members may be con- 
 vened by a requisition to the chairman, signed by thirty members at the least ; the re- 
 quisition to state the object of such special meeting ; and the chairman shall call such 
 meeting within one month of receiving the requisition- 
 
 14. Permanent Fund. — That the sum of £ 10,000 3 per cent stock, now invested, or 
 
 227
 
 A Treatise on Banking. 
 
 its equivalent, shall constitute the permanent fund of this branch of the association, and 
 shall on no account be reduced below that amount. 
 
 That the board may apply the interest of the invested fund, together with such pro- 
 portion of the annual subscriptions as they may deem fit ("after payment of the ex- 
 penses), to the objects of the association. 
 
 That tlic further increase of the permanent fund shall be at the discretion of the 
 board, except that the amount of all bequests, together with the proportion of the 
 profits to be received from the benefit department every five years, shall be always 
 added to the invested capital. 
 
 15. Casualty Fund. — That the board be empowered to apportion such part of the 
 available income of this branch of the association as may be deemed expedient, as a 
 casualty fund, from which to grant temporarj' relief as hereafter mentioned. 
 
 16. Relief. — That no member, his widow or family, be eligible for permanent relief 
 until he has belonged to the association for three years, unless by the sanction of the 
 annual general meeting. 
 
 17. Temporary Relief . — That temporary relief may be granted from the casualty 
 fund to distressed clerks, who are or have been members, their widows, or families, — 
 regard being had in all cases to the number in fiimily, and the length of time the party 
 may have been a member of the association, — as follows : — 
 
 First, — By loans, on the security of two responsible persons, or other suflScient se- 
 curity, of sums not exceeding £ 10 at one time, without interest, or of sums above £10 
 and not exceeding £25 with interest, to be repaid by quarterly instalments, within 
 two years. 
 
 Secondly, — By gratuities of sums, not exceeding £ 10 at one time, in cases of long 
 and expensive illness, or other serious calamity, together with medical assistance, at 
 the discretion of the board. 
 
 Thirdly, — By weekly allowances of sums not exceeding at the rate of 20 guineas 
 per annum, nor for a longer period at any one time than si.x months. 
 
 Fourthly, — By weekly allowances to orphan children of deceased members, under 
 fourteen years of age (both parents being dead), the amount to be fixed by the board 
 according to the emergency of the case, but in no instance to exceed 20 guineas to one 
 family ; and such allowance, or a proportion of it, to cease as the children respectively 
 attain the age of fourteen years. 
 
 That should any member of the benefit department, who was a clerk at the time of 
 his entrance, and has regularly paid his premium for five years at the least, be unable, 
 from distress or otherwise, to continue his payments, the board may have the power, 
 in their discretion, to continue the payment of his premiums from the casualty fund, 
 by way of loan to such members, upon such security as the board may deem fit ; the 
 policy being deposited with the association, and any bonus declared upon such policy 
 being first applied to the repayment of the loan. 
 
 18. Permanent Relief. — That permanent relief be granted'by way of annuity, to dis- 
 tressed clerks, who are or have been members of this branch of the association, and 
 who from old age, blindness, or other infirmities, are rendered incapable of obtaining 
 their living. 
 
 That the annuitants shall be elected by ballot, as appointed by the subsequent rules, 
 and the annuities be on the following scale, viz. : — 
 
 If been a member 3 to 10 years, . . . £25 per annum. 
 " "10 to 20 years, ... 30 " 
 
 " " 20 years and upwards, . . 35 " 
 
 228
 
 Banking Documents. 
 
 That annuities be granted to widows of members who are incapable of obtaining 
 their living, on the following scale, viz.: — 
 
 If husband been a member 3 to 10 years, . . . £15 per annum. 
 " "10 to 20 years, ... 20 " 
 
 " " 20 years and upwards, . . 25 " 
 
 but such annuities to cease, should such widow marry again. 
 
 That all annuities be paid quarterly. 
 
 That the board have power to increase or decrease, proportionately, the above scales 
 of annuities, according to the amount of funds at their disposal, and such increase or 
 diminution to apply equally to all annuities already granted. 
 
 That should it come to the knowledge of the board that any annuitant has been 
 elected by fraud, or has assigned his or her annuity, or, finally, that his or her means 
 of living has improved, so as not to require the aid of the association, the board shall 
 have the power to suspend the payment of such annuity, or to reduce the same as they 
 may consider fit. 
 
 19. Applications for Relief. — That applications for either temporary or permanent 
 relief, be made according to such forms as the board may require ; and every applicant 
 must be recommended by two respectable parties, who are acquainted with the case ; 
 that applicants for annuities must send in their testimonials and other documents at 
 least two months previous to the election ; and any wilful misrepresentation will in- 
 validate the election of such annuitant. 
 
 That the board shall take into its consideration the cases of the vai-ious applicants, 
 and, where practicable, make personal inquiries into the tmth of their statements, and 
 select such as, in their judgment, are eligible to be balloted for, as well as those deserv- 
 ing of casual relief. 
 
 20. Elections. — That the election of annuitants shall take place once a year, or 
 oftener, at the discretion of the board, and at such times as they may appoint. 
 
 That notice shall be given by public advertisement or otherwise, of the number of 
 annuitants to be elected ; and balloting papers be issued for that purpose, with a list of 
 .the candidates. 
 
 21. Voting. — That all members, defined by the first section of the third rule, whose 
 premiums are duly paid, shall be entitled to one vote for each annuitant to be elected ; 
 and that all members or subscribers who have given a donation of ten guineas, or a 
 subscription of one guinea, to this branch (payable annually or half-yearly), be entitled 
 to one vote for each annuitant to be elected, and an additional vote for every additional 
 donation of ten guineas, or annual subscription of one guinea. That all subscriptions 
 in arrears must be paid up before the party be entitled to vote. 
 
 That clerks, being members of the Benefit Department, as well as subscribers or 
 donors to the Benevolent Fund, be entitled to vote in respect of both qualifications. 
 
 That members and subscribers may give all their votes to any one candidate, or di- 
 vide them as they please, according to the number to be elected ; they may vote by 
 proxy, the polling paper being first signed by them. 
 
 That in the event of an equality of votes for any two candidates, the chairman to 
 give the casting vote ; and should any dispute arise as to the election of any candidate, 
 a scrutiny may be demanded on behalf of such candidate, provided a requisition, signed 
 by six members or subscribers at the least, be addressed to the chairman, demanding 
 such scrutiny, and agreeing to pay the expenses of the same. 
 
 22. Alteration of Rules. — That none of the foregoing rules be altered, amended, or 
 repealed, unless at a special meeting of the board of management, convened for that 
 purpose, who, being so assembled, shall have power to alter, amend, or repeal any o' 
 
 229
 
 A Treatise on Banking. 
 
 the rales, and substitute new ones in lieu thereof; but such alterations, amendment, or 
 repeal of rules, or substitution of new ones, shall not take effect unless they have re- 
 ceived the sanction of the annual general meeting, or of a special general meeting, 
 convened for the purpose. 
 
 23. Situation Book. — That a book shall be kept, to be called " The Situation Book," 
 in which the members who are out of employment may enter their names, particulars 
 of their former emplo)Tnent, and the nature of that which they are now seeking. 
 This book to be open for the gratuitous inspection of merchants, bankers, and others 
 requiring clerks. 
 
 24. Form of Bequest. — "I give and bequeathe unto the treasurer, for the time being, 
 of the ' Provident Clerks' Mutual Benefit Association,' in trust for the purposes of the 
 
 Benevolent Fund of that Association, the sum of £ , to be paid within 
 
 months next after my decease, out of such part of my personal estate as 
 
 may lawfully be bequeathed and appropriated to charitable purposes. 
 
 XXn. — St. Clement Danes Savings'' Bank Government Annuity Insti- 
 tution. 
 Office, 18, Series Place, two doors from Carey Street, LincMs Inn, London. 
 
 The following is the Government Table, and shows the sum required to be paid for 
 an Immediate Annuity of Twenty Pounds, and in proportion for any sum not less 
 than 4Z. nor exceeding 30i. per annum : — 
 
 
 AGE. 
 
 
 £ 
 
 s. 
 
 d. 
 
 
 AGE. 
 
 
 £ 
 
 s. d. 
 
 If 15 and under 16 
 
 377 
 
 15 
 
 6 
 
 If 48 and under 49 
 
 271 
 
 4 
 
 16 
 
 " 
 
 17 
 
 374 
 
 4 
 
 1 
 
 49 
 
 11 
 
 50 
 
 265 
 
 1 4 
 
 17 
 
 (1 
 
 18 
 
 370 
 
 16 
 
 7 
 
 50 
 
 « 
 
 51 
 
 259 
 
 4 
 
 18 
 
 II 
 
 19 
 
 367 
 
 14 
 
 6 
 
 51 
 
 II 
 
 52 
 
 252 
 
 18 11 
 
 19 
 
 II 
 
 20 
 
 364 
 
 19 
 
 11 
 
 52 
 
 II 
 
 53 
 
 247 
 
 1 8 
 
 20 
 
 II 
 
 21 
 
 362 
 
 12 
 
 2 
 
 53 
 
 II 
 
 54 
 
 241 
 
 5 11 
 
 21 
 
 IC 
 
 22 
 
 360 
 
 10 
 
 5 
 
 54 
 
 II 
 
 55 
 
 235 
 
 12 7 
 
 22 
 
 II 
 
 23 
 
 359 
 
 
 
 4 
 
 55 
 
 II 
 
 56 
 
 230 
 
 1 5 
 
 23 
 
 II 
 
 24 
 
 357 
 
 12 
 
 6 
 
 56 
 
 II. 
 
 57 
 
 224 
 
 11 8 
 
 24 
 
 II 
 
 25 
 
 356 
 
 4 
 
 7 
 
 57 
 
 II 
 
 58 
 
 219 
 
 3 8 
 
 25 
 
 II 
 
 26 
 
 354 
 
 15 
 
 3 
 
 58 
 
 CI 
 
 59 
 
 213 
 
 15 9 
 
 26 
 
 II 
 
 27 
 
 353 
 
 3 
 
 
 
 59 
 
 II 
 
 60 
 
 208 
 
 6 2 
 
 27 
 
 II 
 
 28 
 
 351 
 
 1 
 
 8 
 
 60 
 
 II 
 
 61 
 
 202 
 
 14 4 
 
 28 
 
 II 
 
 29 
 
 348 
 
 17 
 
 1 
 
 61 
 
 II 
 
 62 
 
 196 
 
 17 5 
 
 29 
 
 II 
 
 30 
 
 346 
 
 9 
 
 5 
 
 62 
 
 II 
 
 63 
 
 190 
 
 14 11 
 
 30 
 
 II 
 
 31 
 
 343 
 
 18 
 
 10 • 
 
 63 
 
 " 
 
 64 
 
 184 
 
 8 
 
 31 
 
 It 
 
 32 
 
 341 
 
 5 
 
 5 
 
 64 
 
 II 
 
 65 
 
 178 
 
 1 
 
 32 
 
 11 
 
 33 
 
 338 
 
 9 
 
 5 
 
 65 
 
 II 
 
 66 
 
 171 
 
 14 2 
 
 33 
 
 II 
 
 34 
 
 335 
 
 9 
 
 11 
 
 66 
 
 II 
 
 67 
 
 165 
 
 7 5 
 
 34 
 
 II 
 
 35 
 
 332 
 
 6 
 
 9 
 
 67 
 
 II 
 
 68 
 
 159 
 
 9 1 
 
 35 
 
 II 
 
 36 
 
 328 
 
 19 
 
 11 
 
 68 
 
 II 
 
 69 
 
 153 
 
 12 
 
 36 
 
 II 
 
 37 
 
 325 
 
 9 
 
 11 
 
 69 
 
 l( 
 
 70 
 
 147 
 
 16 2 
 
 37 
 
 II 
 
 38 
 
 321 
 
 17 
 
 7 
 
 70 
 
 II 
 
 71 
 
 142 
 
 2 6 
 
 38 
 
 II 
 
 39 
 
 318 
 
 2 
 
 11 
 
 71 
 
 IC 
 
 72 
 
 136 
 
 11 9 
 
 39 
 
 II 
 
 40 
 
 314 
 
 6 
 
 7 
 
 72 
 
 II 
 
 73 
 
 131 
 
 3 7 
 
 40 
 
 II 
 
 41 
 
 310 
 
 7 
 
 9 
 
 73 
 
 II 
 
 74 
 
 125 
 
 14 8 
 
 41 
 
 II 
 
 42 
 
 306 
 
 5 
 
 10 
 
 74 
 
 II 
 
 75 
 
 120 
 
 1 5 
 
 42 
 
 II 
 
 43 
 
 301 
 
 18 
 
 6 
 
 75 
 
 II 
 
 76 
 
 114 
 
 4 7 
 
 43 
 
 
 44 
 
 297 
 
 7 
 
 10 
 
 76 
 
 « 
 
 77 
 
 108 
 
 4 3 
 
 44 
 
 II 
 
 45 
 
 292 
 
 12 
 
 6 
 
 77 
 
 II 
 
 78 
 
 101 
 
 7 5 
 
 45 
 
 II 
 
 46 
 
 287 
 
 12 
 
 6 
 
 78 
 
 II 
 
 79 
 
 94 
 
 11 10 
 
 46 
 
 " 
 
 47 
 
 282 
 
 7 
 
 10 
 
 79 
 
 (I 
 
 80 
 
 88 
 
 1 10 
 
 47 
 
 " 
 
 48 
 
 276 
 
 16 
 
 
 
 80 or 
 
 anygr 
 
 eater ag 
 
 c 81 
 
 14 10 
 
 230
 
 Banking Documents. 
 
 XXni. — Comparative View of the Expectation of Life according to the 
 different Tables of Mortality. 
 
 Age. 
 
 North- 
 ampton. 
 
 Carlisle. 
 
 Goverment Annuitants. 
 Male. Female. 
 
 Age. 
 
 North- 
 ampton. 
 
 Carlisle.^'^ 
 
 (vernment . 
 Male. 
 
 Annuitan 
 Female. 
 
 
 
 25.18 
 
 38.72 
 
 50.16 
 
 55.51 
 
 40 
 
 23.08 
 
 27.61 
 
 27.02 
 
 31.12 
 
 1 
 
 32.74 
 
 44.68 
 
 50.13 
 
 55.59 
 
 41 
 
 22.56 
 
 26.97 
 
 26.39 
 
 30.46 
 
 5 
 
 40.84 
 
 51.25 
 
 48.93 
 
 54.23 
 
 42 
 
 22.04 
 
 26.34 
 
 25.74 
 
 29.81 
 
 10 
 
 39.78 
 
 48.82 
 
 45.57 
 
 51.05 
 
 43 
 
 21.54 
 
 25.71 
 
 25.08 
 
 29.14 
 
 15 
 
 36.51 
 
 45.00 
 
 41.76 
 
 47.19 
 
 44 
 
 21.03 
 
 25.09 
 
 24.42 
 
 28.48 
 
 20 
 
 33.43 
 
 41.46 
 
 38.39 
 
 43.99 
 
 45 
 
 20.52 
 
 24.46 
 
 23.75 
 
 27.81 
 
 25 
 
 30.85 
 
 37.86 
 
 35.90 
 
 40.81 
 
 50 
 
 17.99 
 
 21.11 
 
 20.30 
 
 24.35 
 
 30 
 
 28.27 
 
 34.34 
 
 33.17 
 
 37.57 
 
 55 
 
 15.58 
 
 17.58 
 
 17.15 
 
 20.79 
 
 31 
 
 27.76 
 
 33.68 
 
 32.59 
 
 36.91 
 
 60 
 
 13.21 
 
 14.34 
 
 14.39 
 
 17.32 
 
 32 
 
 27.24 
 
 33.03 
 
 32.00 
 
 36.26 
 
 65 
 
 10.88 
 
 11.79 
 
 11.63 
 
 14.00 
 
 33 
 
 26.72 
 
 32.36 
 
 31.40 
 
 35.61 
 
 70 
 
 8.60 
 
 9.18 
 
 9.22 
 
 10.99 
 
 34 
 
 26.20 
 
 31.68 
 
 30.79 
 
 34.96 
 
 75 
 
 6.54 
 
 7.01 
 
 7.12 
 
 8.46 
 
 35 
 
 25.68 
 
 31.00 
 
 30.17 
 
 34.31 
 
 80 
 
 4.75 
 
 5.51 
 
 4.94 
 
 6.50 
 
 36 
 
 25.16 
 
 30.32 
 
 29.54 
 
 33.68 
 
 85 
 
 3.37 
 
 4.12 
 
 3.12 
 
 4.84 
 
 37 
 
 24.64 
 
 29.64 
 
 28.91 
 
 33.04 
 
 90 
 
 2.41 
 
 3.28 
 
 1.95 
 
 2.83 
 
 38 
 
 24.12 
 
 28.96 
 
 28.28 
 
 32.40 
 
 95 
 
 0.75 
 
 3.53 
 
 1.18 
 
 1.55 
 
 39 
 
 23.60 
 
 28.28 
 
 27.65 
 
 31.76 
 
 100 
 
 
 2.28 
 
 
 0.50 
 
 Q
 
 PART SECOND. 
 OF BANKING INSTITUTIONS 
 
 I The Bank op England. — II. London Private Banks. — III. Joint-Stock Banks in London. — 
 IV. Country Private Banks. — V. Country Joint Stock Banks. — VI. The Banks op 
 Scotland. — Vn. The Banks of Ireland. — VIII. Moral and Religious Duties op Bankino 
 Companies. — IX. Ten Minutes' Advice about Keeping a Banker. — X. Summary. 
 
 Section L — THE BANK OF ENGLAND. 
 
 The Act of Parliament by which the bank was estabHshed, is entitled 
 " An Act for granting to their Majesties, several duties upon tonnage of 
 ships and vessels, and upon beer, ale, and other liquors, for securing cer- 
 tain recompenses and advantages in the said Act mentioned, to such per- 
 sons as shall voluntarily advance the sum of £ 1,500,000 towards carry- 
 ing on the war with France." After a variety of enactments relative to 
 " the duty upon tonnage of ships and vessels, and upon beer, ale, and 
 other liquors," the Act authorizes the raising of £ 1,200,000 by volun- 
 tary subscription, the subscribers to be formed into a corporation, and be 
 styled, " The Governor and Company of the Bank of England." The 
 sum of £ 300,000 was also to be raised by subscription, and the contrib- 
 utors to receive instead, annuities for one, two, or three lives. Towards 
 the £ 1,200,000 no one person was to subscribe more than £ 10,000 be- 
 fore the first day of July next ensuing, nor at any time more than £ 20,- 
 000. The corporation were to lend their whole capital to Government, 
 for which they were to receive interest at the rate of <£ 8 per cent, per 
 annum, and £ 4,000 per annum for management ; being £ 100,000 per 
 annum in the whole. They were not allowed to borrow or owe more 
 than the amount of their capital ; and if they did so, the individual mem- 
 bers became liable to the creditors, in proportion to the amount of their 
 stock. They were not to trade in any " goods, wares, or merchandise 
 whatsoever" ; but they were allowed to deal in bills of exchange, gold or 
 silver bullion, and to sell any goods, wares, or mercliandiso, upon which 
 they had arlvanced money, and which had not been rectcemed within 
 three months after the time agreed upon. The whole subscription hav- 
 ing been filled in ten days, a charter was issued on the 27th day of July, 
 1694. This charter has been repeatedly renewed. 
 
 232
 
 The Bank of England. 
 
 The charter granted in 1708 prohibited any other bank having more 
 than six partners, issuing notes in any part of England. 
 
 The charter of 1833 continued the privileges of the bank until the ex- 
 piration of one year's notice, lo be given witliin six months after the ex- 
 piration of ten years from August 1, 1834. But if such notice should 
 not be given, then the charter was to be continued until the ex[)iration of 
 twelve months' notice, to be given after the 1st day of August, 1855. 
 
 According to this charter, no other bank, having more than six partners, 
 can issue notes payable on demand in London, or whhin sixty-five miles 
 thereof. Bank-notes are to be a legal tender, except at the bank or 
 branch banks. The amounts of the notes in circulation, and of the de- 
 posits, and of the bullion and securities in the bank, are to be sent weekly 
 to the Chancellor of the Exchequer for the time being. These accounts 
 are to be consolidated every month, and an average state of the bank ac- 
 counts for the preceding three months to be published in the London Ga- 
 zelle. Any joint-stock bank that does not issue notes may carry on busi- 
 ness in London. The following is the clause relating to this subject : — 
 
 "And whereas the intention of this Act is, that the Governor and Company of the 
 Bank of England should, during the period stated in this Act, (subject, nevcrtiielcss, 
 to such redemption as is described in this Act,) continue to hold and enjoy all the ex- 
 clusive privileges of banking given by the said recited Act of the 39th and 4()th years 
 of the reign of his Majesty King George III. aforesaid, as regulated by the said recited 
 Acts of the 7th year of his late Majestv King George IV. or any prior or sul)sequent 
 Act or Acts of Parliament, but no other or further exclusive privilege of banking : 
 And whereas doubts have arisen as to the construction of the said Acts, and as to the 
 extent of such exclusive privilege, and it is expedient that all such doubts should be 
 removed : Be it therefore declared and enacted, that any body politic or corporate, or 
 society, cm.' company, or partnership, although consisting of more than six persons, may 
 carry on the trade or business of banking in London, or within sixty-tive miles there- 
 of, provided that such body politic or corporate, or society, or company, or partnership, 
 do not borrow, owe, or take up, in England, any sum or sums of money on their bills 
 or notes payable on demand, or at any less time than six months from the borrowing 
 thereof, during the continuance of the privileges granted by this Act to the said Gov- 
 ernor and Company of the Bank of England." 
 
 In the year 1844 the bank charter was again renewed until the expi- 
 ration of twelve months to be given after the 1st day of August, 1855. 
 The following are the principal provisions of this important Act (7 & 8 
 Vict. c. 32) : — 
 
 Bank to establish a Separate Department for the Issue of Notes. 
 
 " I. "\Micreas it is expedient to regulate the issue of bills or notes payable on de- 
 mand : and whereas an Act was passed in the fourth year of the reign of his late 
 Majesty King William the Eourth, entitled ' An Act for giving to the Corporation of 
 the Governor and Company of the Bank of England certain Privileges for a limited 
 Period, under certain Conditions ' ; and it is expedient that the privileges of exclusive 
 banking therein mentioned should be continued to the said Governor and Company 
 of the Bank of England, with such alterations as are herein contained, upon certain 
 conditions : may it therefore please your Majesty that it may be enacted ; and be it en-^ 
 acted by the Queen's most excellent Majesty, by and with the advice and consent of 
 the Lords Spiritual and Temporal, and Commons, in this present Parliament assem- 
 bled, and by the authority of the same, that from and after the thirtij-Jirst do;/ of Au(/ust, 
 one thousand eigld hundred and fortij-foHr, the issue of promissory notes of the Governor 
 and Company of the Bank of Eiigland, pavablc on demand, shall be separated and 
 
 23*3
 
 A Treatise on Banking. 
 
 thenceforth kept wholly distinct from the general banking business of the said governor 
 and company ; and the business of and relating to such issue shall be thenceforth con- 
 ducted and carried on by the said governor and company in a separate dc]iartment, to 
 be'called 'The Issue Department of the JJaiik of I-^ngiand,' subject to tlie rules and 
 regulations hereinafter cont;iined ; and it shall be lawful for the court of directors of 
 the said governor and comj)any, if they shall think lit, to appoint a committee or com- 
 mittees of directors for the conduct and management of such issue department of the 
 Bank of England, and from time to time to remove the members, and define, altei and 
 regulate the constitution and powers of such committee as they shall think tit, subject 
 to any by-laws, rules, or regulations, which may be made for that purpose : Provided, 
 nevertheless, that the said issue department shall always be kept separate and distinct from 
 the banking department of the said governor and company. 
 
 Management of the Issue by Bank of England. 
 
 " II. And be it enacted. That upon the thirty-first day of August, one thousand 
 eight hundred and forty-four, there shall be transferred, appropriated, and set apart by 
 the said governor and company to the issue department of tiie Hank of England secu- 
 rities to the value oi fourteen million pounds, wliereof tlie debt due by tlie jmblic to the 
 said governor and company shall be and be deemed a part ; and there shall also at the 
 same time be transferred, appropriated, and set ajiart hy the said governor and com- 
 pany to the said issue department so much of tlic gold coin and gold and silver bullion 
 then held by the Bank of England as shall not be required by the banking department 
 thereof; and thereupon there shall be delivered out of the said issue department into 
 the said banking department of the Bank of England such an amount of Bank of 
 England notes as, together with the Bank of England notes then in circulation, shall 
 be equal to the aggregate amount of the securities, coin, and bullion so transferred to 
 the said issue department of the Bank of England ; and the whole amount of the 
 Bank of England notes then in circulation, including those delivered to the banking 
 department of the Bank of England as aforesaid, shall be deemed to be issued on the 
 credit of such securities, coin, and bullion so appropriated and set apart to the said 
 issue department ; and from thenceforth it shall not be lawful for the said governor 
 and company to increase the amount of securities for the time being in the said issue 
 department, save as hereinafter is mentioned, but it shall be lawful for the said governor 
 and company to diminish the amount of such securities, and again to increase the same 
 to any sum not exceeding in the whole the sum of fouiieen million pounds, and so from 
 time to time as they shall see occasion ; and from and after such transfer and appro- 
 priation to the said issue department as aforesaid it shall not be lawful for the said 
 governor and company to issue Bank of England notes, either into the banking de- 
 partment of the Bank of England, or to any person or persons whatsoever, save in ex- 
 change for other Bank of England notes, or for gold coin or for gold or silver bullion 
 received or purchased for the said issue department under the ])rovisions of tliis Act, 
 or in exchange for securities acquired and taken in the said issue department under 
 the provisions herein contained : Provided always, that it shall be lawful for the said 
 governor and company in their banking department to issue all such Bank of England 
 notes as they shall at any time receive from the said issue dejiartment or otherwise, in 
 the same manner in all respects as such issue would be lawful to any other person or 
 persons. 
 
 Proportion of Silver Bullion to he retained in the Issue Department. 
 
 " III. And whereas it is necessary to limit the amount of silver bullion on wliicli it 
 shall be lawful for the issue department of the Bank of England to issue Bank of 
 England notes ; be it therefore enacted. That it shall 7iot be lawful for the Bank of 
 England to retain in the issue department of the said bank at any one time an amount 
 of silver bullion erceedinf/ one fourth part of the (/old coin and bullion at such time held by 
 the Bank of England in the issue department. 
 
 All Persons may demand of the Issue Department Notes for Gold Bullion. 
 
 " IV. And be it enacted. That from and after the thirty-first day of August, one 
 thousand eight iiundred and forty-fuur, all persons shall be entitled to demand from 
 
 234
 
 The Bank of England. 
 
 the issue department of the Bank of Eng:lan(] Bank of England notes in exchange for 
 gohl bullion, at the rate of three pounds scvetiUen sliilli)i(/s and ninepence per ounce of 
 standard gold ; Trovidcd always, that the said governor and tompany siiall in all 
 cases be entitled to require such gold i)ullion to be melted and assayed by jiersons ap- 
 proved by the said governor and company, at the expense of the parties tendering such 
 gold bullion. 
 
 Power to increase Securities in the Issue Department, and issue additional Notes. 
 
 " V. Provided always, and be it enacted, That if any banker who on the sixth day 
 of ^ray, one thousand eight hundred and forty-four, was issuing his own bank notes, 
 shall cease to issue his own bank notes, it shall be lawful for her Majesty in Council, at 
 any time after the cessation of such issue, upon the application of the said governor 
 and company, to authorize the said governor and company to increase the amount of se- 
 curities in the said issue department beyond the total sum or value of fourteen million 
 pounds, and thereupon to issue additional Bank of England notes to an amount not 
 exceeding such increased amount of securities specified in such Order in Council, and 
 so from time to time : Provided always, that such increased amount of securities speci- 
 fied in such Order in Council shall in no case exceed the proportion of tico thirds the 
 amount of bank notes which the banker so ceasing to issue may have been authorized to 
 issue under the provisions of this Act ; and every such Order in Council shall be pub- 
 lished in the next succeeding London Gazette. 
 
 Account to be rendered by the Bank of England. 
 
 " VI. And be it enacted, That an account of the amount of Bank of England note.s 
 issued by the issue department of the Bank of England, and of gold coin, and of gold 
 and silver bullion respectively, and of securities in the said issue department, and also 
 an account of the capital stock, and the deposits, and of the money and securities be- 
 longing to the said governor and company in the banking department of the Bank of 
 England, on some day in every week, to be fixed by the Commissioners of Stamps 
 and Taxes, shall be transmitted by the said governor and company weekly to the said 
 commissioners in the form prescribed in the schedule hereto annexed marked (A), and 
 shall be published by the said commissioners in the next succeeding London Gazette in 
 which the same may be conveniently inserted. 
 
 Bank of England exempted from Stamp Duty upon their Notes. 
 
 " VII. And be it enacted. That from and after the said thirty-first day of August, 
 one thousand eight hundred and forty-four, the said governor and company of the 
 Bank of England shall be released and discharged from the payment of any stamp duty, 
 or composition in respect of stamp duty, upon or in respect of their promissory notes 
 payable to bearer on demand ; and all such notes shall thenceforth be and continue 
 free and wholly exempt from all liability to any stamp duty whatsoever. 
 
 Bank to allow £180,000 per Annum. 
 
 " VIII. And be it enacted, That from and after the said thirty-first day of August, one 
 thousand eight hundred and forty-four, the payment or deduction of the annual sum of 
 one hundred and twenty thousand pounds, made by the said governor and company 
 under the provisions of the said Act, passed in the fourth year of the reign of his late 
 Majesty King William the Fourth, out of the sums payable to them for the charges of 
 management of the public unredeemed debt, shall cease, and in lieu thereof tlic said 
 governor and company, in consideration of the privileges of exclusive banking, and 
 the exemption from stamp duties, given to them by this Act, shall, during the continu- 
 ance of such privileges and such exemption respectively, but no longer, deduct and 
 allow to the public, from the sums now payable by law to the said governor and com- 
 pany for the charges of management of the public unredeemed debt, the annual sum of 
 one hundred and eighty thousand pounds, any thing in any Act or Acts of Parliament, or 
 in anv agreement, to the contrary notwithstanding: Provided always, that such deduc- 
 tion shall in no respect prejudice or aflect the rights of the said governor and company 
 to be paid for the management of the public debt at the rate and according to tho 
 
 235
 
 A Treatise on Banking. 
 
 terms provided in an act passed in the forty-eiglitli year of the reitrn of his late Majesty 
 King George the Third, entitled ' An Act to autiiorize the advancing for the Public 
 Service, upon certain Conditions, a Proportion of tiie Balance remaining in the Bank 
 of England, for the Payment of Unclaimed Dividends, Annuities, and Lottery Prizes, 
 and for regulating the Allowances to be made for the INIanagement of the "National 
 Debt.' 
 
 Bank to allow the Pttblic tlie Profits of increased Circulation. 
 
 "IX. Andi)e it enacted. That in case, under the provisions hereinbefore contained, 
 the securities held in the said issue department of the Bank of England shall at any 
 time be increased beyond the total amount of fourteen million pounds, then and in 
 each and every year in which the same shall happen, and so long as such increase 
 shall continue, the said governor and company sliall, in addition to the said annual 
 sum of one hundred and eighty thousand pounds, make a further payment or allow- 
 ance to the public, equal in amount to the net prujit derived in the said issue department 
 during the current year from such additional securities, after deducting the amount of the 
 expenses occasioned by the additional issue during the same period, which expenses 
 shall include the amount of any and every compo.sition or payment to be made liy the 
 said governor and company to any banker in consideration of the discontinuance at any 
 time hereafter of the issue of bank notes by such banker ; and such further payment or 
 allowance to the public by the said governor and company shall, in every year while 
 the public shall be entitled to receive the same, be deducted from the amount by law 
 payable to the said governor and company for the charges of management of the unre- 
 deemed public debt, in the same manner as the s;ud annual sum of one hundred and 
 eighty thousand pounds is hereby directed to be deducted therefrom." 
 
 Bank to enjoy Privileges subject to Redemption. 
 
 " XXVII. And be it enacted. That the said Governor and Company of the Bank of 
 England shall have and enjoy such exclusive privilege of banking as is given by this 
 Act, upon such terms and conditions, and subject to the termination thereof at such 
 time and in such manner as is by this Act provided and specified ; and all and every 
 the powers and authorities, franchises, privileges, and advantages, given or recognized 
 by the said recited Act passed in the fourth year of the reign of his Majesty King Wil 
 Ham the Fourth, as belonging to or enjoyed by the said Governor and Company of the 
 Bank of England, or by any subsequent Act or Acts of Parliament, shall be and the 
 same are hereby declared to be in full force, and continued by tiiis Act, except so far 
 as tiie same are altered by this Act; subject nevertheless to redemption upon the terms 
 and conditions following ; that is to say, at am/ time upon twclce months' notice to hi 
 given after the first day of August, one thousa7}d eight hundred and Ji fly-five, and upon re- 
 payment by Parliament to the said governor and company or their successors of the 
 sum of eleven million fifteen thousand and one hundred pounds, being the debt now 
 due from the public to the said governor and company, witliout any deduction, dis- 
 count, or abatement whatsoever, and upon payment to the said governor and comjjany 
 and their successors of all arrears of the sum of one hundred thousand pouiuls per an- 
 num, in the last-mentioned Act mentioned, together with the interest or annuities pay- 
 able upon the said debt or in respect thereof, and also upon repayment of all the prin- 
 cipal and interest which shall be owing unto the said governor and company and their 
 successors upon all such tallies, exchequer orders, exchequer bills, or parliamentary 
 funds which the said governor and company or their successors shall have remaining 
 in their hands or be entitled to at the time of such notice to be given as last aforesaid, 
 then and in such case, and not till then, the said exclusive privileges of banking 
 granted by this Act shall cease and determine at the expiration of such notice of twelve 
 months ; and any vote or resolution of the House of Commons, signified under the 
 hand of the Speaker of the said house in writing, and delivered at the public office of 
 the said governor and company, shall be deemed and adjudged to be a sufficient no- 
 tice." 
 
 We have noticed the provisions of this Act in a former part of our 
 
 236
 
 The Bank of England. 
 
 work. We shall here only give a summary of the business operations of 
 the bank. 
 
 The Bank of England is a bank of issue. She can issue to the extent 
 of £ 14,000,000 against that amount of securities set apart for that pur- 
 pose. She can issue to any further amount against lodgments of gold 
 and silver, as regulated by the above Act. This amount of £ 14,000,000 
 may be issued either at the office in London or at the branches. Were 
 she to reduce the number of her branches she would not be /equired to 
 issue less than this £ 14,000,000 ; and were she to increase her branches, 
 she could issue no more. If other banks discontinue their circulation, she 
 may upon application receive permission to extend her issues to two thirds 
 the sum thus withdrawn ; but all the profit of this increase must go to the 
 Government. She cannot issue any note for a less amount than five 
 pounds. All the notes are payable in gold on demand. The payment 
 of those issued in London can be demanded only at the London office. 
 But the payment of those issued at the branches may be demanded either 
 at the London office or at the branches where they were respectively is- 
 sued. Bank of England notes are a legal tender in all cases, except 
 when tendered by the bank herself. 
 
 The Bank of England is also a Bank of deposit, of loan, and of dis- 
 count. She allows no interest on any portion of her deposits, nor per- 
 mits any account to be overdrawn. She charges various rates on the 
 bills she discounts, but does not go below the rate she announces to be 
 her minimum. She does not act as the London agent of country banks ; 
 but is the agent of the Bank of Ireland, and the Royal Bank of Scotland. 
 She does not accept any bills that may be drawn by those banks, or by 
 her own branches, — they are all drawn without acceptance. She does 
 not issue any circular notes on foreign countries, nor grant letters of 
 credit on foreign banks. She remits money to and from her branches, 
 and from one branch to another. She issues at the London office bank- 
 post bills, drawn at seven days' sight. 
 
 The Bank of England is also the banker of the Government. She has 
 always a large amount of public deposits, on which she allows no interest. 
 She receives the public revenue, and pays the dividends on the National 
 Debt. 
 
 The profits of the bank are derived from her capital, her rest, public 
 and private deposits, the seven-day bills, her agencies, and her circulation. 
 From these funds she makes investments in public securities and private 
 securities. These bring dividends and interest. She also has a profit on 
 the £ 14,000,000 of notes in circulation. This profit is the difierence be- 
 tween the expense of maintaining the circulation, and the interest re- 
 ceived on the securities set apart to meet this circulation. The bank has 
 an annual payment from the Government for managing the National 
 Debt. She also receives a commission from those banks to which she is 
 the London agent. A profit is also obtained on bullion transactions. The 
 bank buys gold at <£ 3 17s. 9rf. an ounce and sells it at <£3 17s. 10|rf. an 
 ounce. Against these profits the bank has to place the expense of con- 
 ducting the establishment, and the losses incurred by bad debts, forgeries, 
 and unfortunate investments. 
 
 237
 
 A Treatise on Banking. 
 
 The Branches of the Bank of England. 
 
 The Act of 1826, which permitted the formation of joint-stock banks in 
 England, also authorized the Bank of England to establish branches in 
 the provincial towns. Their mode and terms of transacting business were 
 thus described at the time in a W'clsh newspaper, called the Cambrian : — 
 
 •' The branch bank is to be a secure place of deposit for persons having occasion to 
 make use of a bank for that purpose ; sucli accounts are termed drawing accounts. The 
 facility to the mercantile and trading classes of obtaining discounts of good and unex- 
 ceptionable bills, founded upon real transactions, two approved names being required 
 upon every bill or note discounted ; these are called discount accounts. The ajiplication 
 of parties who desire to open discount accounts at the branch, are forwarded every 
 Saturday to the parent establishment for approval, and an answer is generally received 
 in about ten days. When approved, good bills may be discounted at the brunch with- 
 out further reference to London. Bills payable at Swansea, London, or any other 
 place where a branch is established, are discounted under this regulation. The divi- 
 dends on any of the public funds, which are payable at the Bank of England, may be 
 received at the branch here, by parties who have opened 'drawing accounts,' after sign- 
 ing powers of attorney for that purpose, which the branch will procure from London. 
 No charge is made in this case, except the expense of the power of attorney and its 
 postage. Purchases and sales of every description of Government securities are effect- 
 ed by the branch at a charge of one quarter per cent., which includes brokerage in 
 London, and all expenses of postage, &c. A charge of one quarter per cent, is also 
 made on paying at the Bank of England, bills accepted by persons having drawn ac- 
 counts at Swansea, such bills to be advised by the branch ; also for collecting payment 
 of bills at the other branches, and on granting letters of credit on London, or on the 
 other branches. The branch grants bills on London, payable at twenty-one days' date 
 without acceptance, for sums of ten pounds and upwards. Persons having drawing 
 accounts at Swansea, may order money to be paid at the bank in London, to their 
 credit at this place, and vice vers/i, without any expense. The branch may be called 
 upon to change any notes issued and dated at Swansea, but they do not change the 
 notes of the bank in London, nor receive them in payment, unless as a matter of cour- 
 tesy where the parties are known. Bank post bills wliich are accepted and due, are 
 received at the branch from parties having drawing accounts, and taken to account 
 without any charge for postage ; but unaccepted bank post bills, which must be sent 
 to London, arc subject to the charge of postage, and taken to account when due. Ko 
 interest is allowed on deposits. No advance is made by the branch upon any descrip- 
 tion of landed or other property, nor is any account allowed to be overdrawn. The 
 notes of Messrs. Walter's Bank at this place, of Messrs. Williams «& Kowland, Neath 
 Bank, and of the Brecon Old Bank, are received in payment at the branch. Any 
 other country bankers mSy open an account for the like purpose. The notes are tiie 
 same as those issued by the parent establishment, except being dated Swansea, and 
 made payable there and in London. No note issued exceeds the sum of £500, and 
 none are for a less amount than £ 5." 
 
 The Bank of England has opened fourteen branches. But the Exeter 
 branch was removed, in the year 1844, to Plymouth ; and the Gloucester 
 branch has recently been closed. The following tables will show the cir- 
 culation in notes, and bank j)ost bills, of each branch : — 
 
 238
 
 The Bank of England. 
 
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 239 
 
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 t^ 
 
 m
 
 A Treatise on Banking. 
 
 The Gloucester branch has recently been closed. At one time the 
 Gloucestershire Banking Company issued only the notes of this branch : 
 but previous to 1844, they resumed the circulation of their own notes, 
 and hence in the years 1843, and 1844, the circulation of this branch de- 
 clined. Whether it be from this cause, or from the operation of the Act 
 of 1844, that the branch has been discontinued, we do not know. It is 
 clear, that under this Act, the Bank of England has few motives for ex- 
 tending her branches. She cannot increase her circulation of notes ex- 
 cept under especial circumstances, and then all the profit must go to the 
 Government. 
 
 The Bank of England consented to establish branches in the year 
 1826, at the suggestion of Lord Liverpool, in order to extend to the prov- 
 inces the advantage of a secure circulation. This was considered the 
 grand desideratum at that time, in consequence of the numerous failures 
 that had recently taken place among the country bankers. This object 
 was effected, and effected with greater facihty, in consequence of the 
 establishment of joint-stock banks, who made arrangements for issuing 
 Bank of England notes. 
 
 These branches were not merely banks of circulation. They were 
 banks of deposit, of discount, and of remittance. In these respects they 
 came into competition with the country bankers. This, in some cases 
 reduced the charges previously made on banking transactions. As banks 
 of discount, they charged the same rate which was charged at the London 
 office, — a charge usually below that of the country banks. As banks 
 of remittance, they granted letters of credit at a shorter term. As banks 
 of deposit, they charged no commission. But, on the other hand, they 
 allowed no interest on the balance, and they allowed no account to be 
 overdrawn ; and they would not receive from their depositors any country 
 notes, unless the banks had previously opened an account with them, and 
 made a lodgment to meet their notes. 
 
 While, therefore, the branches have obtained a large circulation, and 
 have transacted a good business as banks of discount and of remittance, 
 they have not made much progress as banks of deposit. The deposits at 
 all the branches amount to only <£ 1,200,000. When it is considered that 
 the branches are established in large towns, and that many of them have 
 existed for above twenty years, this amount is far from considerable. 
 
 Here. is another anomaly of the Act of 1844. The Bank of England 
 is placed in a position in which it is her interest to withdraw some of her 
 branches. At the same time, the banks of issue in the neighbourhood 
 of those branches are not allowed to extend their issues so as to fill up 
 the vacuum which is »thus occasioned in the amount of the local circu- 
 lation. 
 
 The Laios of the Currency loith Reference to the Bank of England. 
 
 In March, 1841, I was, at the request of the joint-stock banks, ex- 
 amined as a witness before a Select Com.mittee of the House of Com- 
 mons " appointed to inquire into the effects produced on the circulation of 
 the country by the various banking establishments issuing notes payable 
 
 240
 
 The Bank of England. 
 
 on demand." The charge advanced at the time against the issuing joint- 
 stock bar>]\s, and generally against all banks of issue was, that they did 
 not make the amount of their circulation correspond with the amount of 
 the circulation of the Bank of England. With reference to this accusa- 
 tion, I laid before the committee a variety of tables, designed to show the 
 laws which regulated the circulation of the Bank of England, of the 
 country banks, of the banks of Ireland and of Scotland, respectively. 
 The inference was designed to show that no correspondence could exist 
 between the circulation of these several banks. These tables cannot be 
 introduced here. But the following is a summary of my evidence on 
 this subject, taken from an article on " The Laws of the Currency," 
 which I published in the " Foreign and Colonial Review " of April, 
 1844 : — 
 
 " We have before us two reports from the Committee on Banks of 
 Issue, laid before the House of Commons in the years 1840 and 1841. 
 The committee report the evidence, and abstain from giving any opinion 
 upon the great questions involved in the inquiry. They, however, recom- 
 mended the passing of the Act 4 & 5 Vict. c. 50, requiring a monthly 
 registry of the circulation of the Bank of England, and of the other 
 banks of issue, with the amount of bullion, to be published in the Royal 
 Gazette. It may therefore be expected, that, in a course of years, a suf- 
 ficient number of facts will be recorded to enable future generations to 
 form ' well-grounded opinions ' on this important subject. 
 
 " In the mean time we will make use of the information we already 
 possess. We will take the monthly returns of the circulation for the 
 period that is past, that is, from September 1833 to the end of 1843, and 
 endeavour, by observing their various revolutions, to discover if they are 
 governed by any fixed causes or principles, — to ascertain if those prin- 
 ciples are uniform in their operation ; and if we should discover that the 
 revolutions of the currency are regulated by any uniform principles, we 
 shall call those principles the Laws of the Currency. 
 
 " We shall begin with that portion of the currency which consists of 
 notes issued by the Bank of England. On looking over the monthly cir- 
 culation of the Bank of England, given in the Table, No. 34, in the Ap- 
 pendix to the Report of 1840,* we observe, that the circulation of the 
 months in which the public dividends are paid is higher than in the sub- 
 sequent months. Thus, the average circulation of Januaiy is higher than 
 that of February or March. The circulation of April is higher than that 
 of May or June. The circulation of July is higher than that of August 
 or September. And the circulation of October is higher than that of No- 
 vember or December. This, then, we may consider as one law of the 
 circulation of the Bank of England, — that it ebbs and flows four times 
 in the year, in consequence of the payment of the quarterly dividends. 
 This law does not apply to any other bank, as all the Government divi- 
 dends are paid by the Bank of England. 
 
 " Again, the purchase and sale of Government stock and exchequer 
 
 * This table, extended to the latest return, is published in the Banking Almanac 
 for 1849, p. 24. It will be seen that the laws of the circulation of the Bank of Eng- 
 land remain the same as before the passinjj of the Act of 1844. 
 
 241
 
 A Treatise on Banking. 
 
 bills by the Bank of England affects the amount of licr circulation. If 
 the bank purcliase Government stock or exchequer bills, she 'pays for 
 ihem in her own notes, and thus increases her circulation. If, on the 
 other hand, she sell Government stock or exchequer bills, she receives 
 payment in her own notes, and thus her circulation is diminished. An- 
 other law, then, and one peculiar to the Bank of England is, that her 
 circulation is affected by the purchases and sales of Government se- 
 curities. 
 
 " As the payment of the public dividends puts into circulation the notes 
 of the bank, the receipt of^ the public revenue will of course withdraw 
 her notes from circulation. A large amount of the public revenue is 
 paid at the latter part of the year, and this probably is the main cause 
 why the amount of the Bank of England circulation is always the lowest 
 in the month of December. Although the circulation ebbs and flows four 
 times in the year, yet the December* point is always the lowest point 
 throughout the year ; and this is the case in every year, although the 
 Bank of England is always open in December for short loans, the 
 granting of which increases her circulation. This, then, is another law 
 of the circulation. 
 
 " If the bank purchase bullion with her notes, that will of course in- 
 crease her circulation ; if she sell bullion, that will diminish her circula- 
 tion ; and, as the bank is always open for the purchase of bullion at a fixed 
 price, and as gold may at all times be withdrawn from her in payment 
 of her notes, her circulation is subject to considerable fluctuation from 
 this cause. There is not, however, any uniform correspondence between 
 the amount of her circulationt and the amount of her bullion ; for when 
 she pays the public dividends, she increases her notes, but diminishes her 
 bullion; and when she receives the public revenue, as in December, her 
 circulation is diminished, but the bullion is increased. These contrary 
 fluctuations are occasioned by that portion of our currency which is under 
 £fi consisting of the precious metals; but they do not impugn the law 
 which states that the purchase of gold increases, and the sale of gold di- 
 minishes, the amount of her circulation. 
 
 " We have thus traced those peculiar laws which regulate the monthly 
 revolutions of the circulation of the Bank of England. We shall now 
 proceed to its annual revolutions. 
 
 " Any of the causes of the monthly fluctuations of the circulation of 
 the Bank of England, if called into operation more in one year than in 
 another, may become causes of annual fluctuations. But the most uni- 
 form and permanent cause of annual fluctuation appears to be made by 
 the purchases and sales of bullion. The word ' bullion,' in the bank returns, 
 means gold and silver, whether coined or uncoined, and whether lying at 
 the head oflice or at the branches. When the forcijrn exchanges are in 
 
 ♦ There was an exception to diis law in December, 184.3, in consequence of the 
 callin;^ in of the li{{ht soverci;j^ns. 
 
 t The word " circuhvtion " means of course the amount of notes in the hands of the 
 puhlic. Since tiie jiassing of tiic Act of 1844, the word lias been sometimes used in a 
 more extended sense, so as to include also the notes in the banking department of the 
 IJank of England. 
 
 242
 
 The Bank of England. 
 
 favor of this country, bullion is iinported and sold to the Bank of Eng- 
 land ; and when the exchanges are unfavorable, gold is exported, and 
 the exporters obtain the gold from the Bank of England, either by pur 
 chase or by demanding payment of her notes. In most cases, however, 
 the circulation does not fluctuate so much as the bullion. For when notes 
 are issued against a large importation of bullion, money becomes abun- 
 dant and cannot be employed, and hence it is lodged by bankers and others 
 in the Bank of England, on deposit. But so long as the bank keeps her 
 securities of the same amount, the increase of the bullion will always be 
 about equal to the increase of the circulation and the deposits added to- 
 gether. And, on the other hand, when an adverse exchange draws bul- 
 lion from the bank, the deposits decrease as well as the circulation ; and 
 the decrease in both together will be equal to the amount of gold with- 
 drawn ; that is, supposing the securities to remain the same. 
 
 " By ' securities ' is meant Government stock, exchequer bills, loans, 
 discounted bills, or any thing else on which the bank may have advanced 
 money. It is a principle of management by the bank, to keep the total 
 amount of their securities equal, or nearly so ; and so long as this rule is 
 acted upon, the tendency of exportations or importations of bullion to 
 produce the variations we have described, must be considered as one of 
 the laws of the circulation." 
 
 One Bank of Issue. 
 
 Mr. Cotton, who was the Governor of the Bank of England when the 
 Act of 1844 was passed, stated in the evidence before a Committee of 
 the House of Commons, in 1848, that the ultimate object of that Act was 
 the establishment of one bank of issue. (Cotmnoiis, 4561.) I was ex- 
 amined on this subject before the committee on banks of issue, in the year 
 1841. The following is a summary of my evidence : — 
 
 1. If we had only one hank of issue we should have sometimes too 
 much money and sometimes too little for the wants of trade. — "I think it 
 is one of the inconveniences of a metallic currency, and would, in fact, be 
 one of the inconveniences of a sole bank of issue, that at one part of the 
 year we should have too much money, and at another part too little ; be- 
 cause, as money would not fluctuate in amount, and the demands of trade 
 would fluctuate, the amount of money would not be proportionate through- 
 out the year to the demands of trade." "I have shown from 
 
 Appendix 34, that even taking the whole circulation together, there is a 
 difference varying from two to four millions, in the total amount of the 
 circulation ; and, therefore, after supposing all these transfers to have 
 taken place, if they could have taken place at all, and that the surplus 
 of one district was to supply the wants of another, still there would be a 
 very great inequality in the amount of money, as compared with the de- 
 mands of trade." 
 
 " It appears from Appendix 34, that the total amount of notes in Eng- 
 land, Scotland, and Ireland, varies very considerably in different months 
 of the year. Supposing, then, that you had one bank, and that all the 
 notes in circulation were the notes of that one bank, which did nothing 
 
 243
 
 A Treatise on Banking. 
 
 but issue notes against gold, and gold against notes, how would you em- 
 ploy those notes which were not wanted in the slack periods of the sea- 
 son ? " " It is evident from Appendix 34, that during some part 
 
 of the year there is not employment for the entire amount of money that 
 is required in another season of the year ; and if you had one bank 
 of issue, as you could not contract the circulation, you would have a 
 surplus circulation, which wouUl have the effect of lowering the rate of 
 interest, and promoting speculation." 
 
 2. One bank of issue would reduce the means of the country hankers 
 to afford assistance to their customers, and hence cause great distress, 
 especially in the agricultural districts. — " What would be the effect 
 
 which you think it would produce upon country bankers ? " "I 
 
 think the banks, in the first place, having to pay off their notes, it would 
 reduce their funds, from which they now give accommodation to their 
 customers ; and in order to find funds to pay off those notes, they would 
 have to recall loans, and to reduce discounts to such a degree as to cause 
 considerable distress throughout the country, and more especially in the 
 agricultural districts." 
 
 3. The hankers would he compelled to increase their charges. — 
 " What effects do you imagine would ensue when the measure had once 
 
 been carried into effect .^ " " After the meaure had once been 
 
 carried into effect, the charges which the country bankers would be com- 
 pelled to make upon that accommodation which they would still have the 
 power of affording, must be considerably increased." 
 
 " Why .? " " Because they would then get no profit upon the 
 
 notes ; at present they can afford to advance money at a low rate of in- 
 terest when issued in their own notes, because of the profit upon those 
 notes. When 1 was in Ireland, I discounted bills at the same rate whi-ch was 
 charged by the Bank of England here, and for the same reason, because 
 I issued my own notes ; but if the country bankers had to bring the money 
 from a distance and lend it to their customers, they must get a greater in- 
 terest from their customers than they could get by employing in London 
 or elsewhere, and hence they must make, either in the form of interest, 
 or in the form of commission, heavier charges than they made before." 
 
 4. One hank of issue would cause some of the smaller hanking cstah- 
 lishments to he discontinued. — " The profit on the circulation being thus 
 reduced, there would be a further effect by the limitation of banking es- 
 tablishments ; for some of those establishments are so small, and estab- 
 lished in remote places, that they would scarcely pay the expense of con- 
 ducting them, unless for the profits of the circulation ; and yet the with- 
 drawal of those establishments, though connected with no great profit to 
 the bank, would be attended with very considerable loss and incon- 
 venience to the inhabitants of those places, because those banks act as 
 receivers of the surplus capital, and hence they are useful to persons who 
 have money to place in those banks ; they act as discounters and grantors 
 of lorms, and hence they are useful to the productive industry of the 
 country ; they are also useful as banks of remittance, for the purpose of 
 making payments from those places elsewhere, and hence they are usrful 
 to traders ; and those useful purposes, as fur as many small banks are 
 
 244
 
 The Bank of England. 
 
 concerned, would be altogether annihilated, if those establishments did 
 Hot issue their own notes." 
 
 " In your opinion, the suppression of their circulation would render it 
 necessary for them to charge a higher commission upon their operations, 
 or a higher interest upon the loans which they make ? " " With re- 
 gard to those small establishments, I do not think any rate of commission 
 could pay the expense : with regard to the larger establishments, you 
 might make up for the deficiency of profit upon the circulation by an in- 
 creased charge of commission ; but with regard to small establishments, in 
 remote places, the business is not sufficient, even with the charge of com- 
 mission, to pay the expense without the profits of the circulation : annihi- 
 lation of the circulation would lead to annihilation of the bank." 
 
 5. One hank of issue would lead to the suhstitution of bills of exchange, 
 or some other form of credit currency. — " Do you conceive that it would 
 have any effect upon what you have called the amount of the circulation, 
 
 which in your opinion is required at different times of the year ? " 
 
 " I think it would have a considerable effect generally in the reduction of 
 the circulation ; because if the circulation were issued by one single bank, 
 the local bankers in the respective districts would have no interest in in- 
 creasing the amount of that circulation, and hence, in places where it 
 could be done, the bankers would most likely have recourse to a bill cir- 
 culation, and they would substitute bills for the circulation of this one 
 bank of issue. We know that at Manchester and Liverpool, and in other 
 places in that district, a bill circulation, a short time ago, was almost the 
 entire circulation ; and it was not till the Bank of England established 
 branches in those places, that the bill circulation became considerably re- 
 duced ; and even then the bank obtained a circulation in those places only 
 by offering their notes to country bankers at a reduced rate of interest. 
 Now, if you had only one bank of issue, it is not to be supposed that the 
 country bankers would obtain those notes at a i-educed rate of interest, 
 and consequently they would have no advantage in getting them into cir- 
 culation ; they would fall back upon their bill circulation, upon which they 
 got a profit, and the amount of note circulation would, I think, be consid- 
 erably reduced." 
 
 6. With one hank of issue, the reactions of the Foreign Exchanges 
 would produce great and universal distress, and yet not accomplish thai 
 constant conformity hetween the London and country circulation u'hich is 
 sought to he attained. — " Do you conceive that such a change as has 
 been contemplated, namely, the abolition of country bank-notes, would 
 
 produce any effect upon the foreign exchanges ? " " The effect 
 
 upon the foreign exchanges would depend upon the principle upon which 
 the single bank of issue was conducted. If conducted merely by issuing 
 gold for notes and notes for gold, I consider that when the foreign ex- 
 changes were favorable, and brought in a large amount of gold, then there 
 would be a large amount of notes put into circulation. I think that was 
 the case in 1837 and 1838, although the Bank of England did not issue 
 to such an extent, as, upon the principle assumed, this one bank of issue 
 would be compelled to do. I consider that thus this large amount of notes 
 put into circulation against the importation of gold would reduce the rate 
 
 245
 
 A Treatise on Banking. 
 
 of interest, would excite speculation, and lead to foreign investments ; that 
 a reaction would then take place, and the amount of contraction would be 
 very considerable, so as to produce ver}' great distress." 
 
 " Now, whether you have dilTorent banks, or whether you have only 
 one bank, if there is a certain amount of circulation in the country, and a 
 certain amount in London, and the Bank of England, or the central bank, 
 purchase a large amount of bullion in London, that immediately disturbs 
 the proportion that existed between the London circulation and the country 
 circulation ; and, on the other hand, if there is a demand for bullion to go 
 abroad, and bullion is sold at the central office, that will contract the circu- 
 lation, and contract it much more than it could be immediately contracted 
 in the country. If, therefore, the liability to a disproportion in amount be- 
 tween the country and the London circulation is a defect in the existing 
 system, it is a defect which the establishment of only one bank of issue 
 will not remedy." 
 
 7. The eslablishment of one hank of issue would embarrass the Fiscal 
 operations of the Government. — " I may now state, with reference to the 
 payment of the public dividends, that the Bank of England advances 
 loans in December, before the dividends are paid, which loans are dis- 
 charged after the dividends are paid, and thus the fluctuation in the cur- 
 rency is very considerably diminished from what it otherwise would be. 
 Now, if we had a bank that could not do this, if the currency were issued 
 upon what have been called currency principles, then the Chancellor of 
 the Exchequer must have the whole amount of the January dividends in 
 his strong room before he could pay those dividends. Out of the circula- 
 tion of England and Wales, consisting of about £ 28,000,000, you must 
 collect eight millions and a half, and lock them up in the custody of the 
 Government previously to the payment of the dividends ; then you pay 
 out in a mass these eight millions and a half, and that in a state of con- 
 tracted currency ; and thus you go on, four times in the year, producing 
 the most violent and most extravagant fluctuations : whereas now, by 
 the excellent plan adopted by the Bank of England, in issuing her notes 
 before the payment of the dividends, by means of loans, which are dis- 
 charged after the payment of the dividends, notwithstanding you pay eight 
 millions and a half of dividends, you produce a fluctuation in the currency 
 of only two millions and a half." 
 
 8. The principle of one bank of issue cannot be applied to the various 
 currencies of the United Kingdom. — "What is the general conclusion 
 
 which you propose to draw from the tables you have put in .-^ " 
 
 " The general conclusion I would draw is, that the Bank of England is 
 governed by certain laws which do not apply to the country circulation ; 
 that the country circulation of England is also governed by laws pecu- 
 liar to itself; that the circulation of Ireland is also governed by laws pe- 
 culiar to itself; that the circulation of Scodand is also governed by laws 
 peculiar to itself; that those respective circulations are all governed by 
 uniform laws, as is shown by their arriving at nearly the same point at the 
 same period of the year ; and therefore that you cannot introduce any 
 system by which all those various circulations, governed by different laws, 
 can be amalgamated into one system ; that such a system would be at 
 
 246
 
 The Bank of England. 
 
 variance with itself, and would tend to destroy that beautiful system of 
 country banking which now exists in this country, — a system which 
 has tended very much to the prosperity of this country, which, by receiv- 
 ing the surplus capital of different districts, and giving out the capital for 
 the encouragement of trade, calls forth all the natural resources of the 
 country, and puts into motion the industry of the nation, and at the same 
 time supplies a circulation which expands and contracts in each district 
 according as it is required by the trade or agriculture of the district. 
 Those expansions or contractions take place at different periods of the 
 year in different districts ; the circulation expands when the wants of 
 trade require it, and when no longer wanted it again returns ; and I think 
 this beautiful system, in the language of the resolutions passed by the 
 deputies from the joint-stock banks, ' has greatly promoted the agricul- 
 ture, trade, mining, and general industry of the nation, and that equal ad 
 vantages cannot be produced by one bank of issue.' " 
 
 We shall conclude this section by copying the correspondence between 
 the First Lord of the Treasury and the Chancellor of the Exchequer and 
 the Bank of England, respecting the suspension of the Act of 1844. 
 
 " Gentlemen, ^'-Downing Street, 2oth October, 1847. 
 
 " Her Majesty's Government have seen with tlie deepest regret the pressure 
 which has existed for some weeks upon the commercial interests of the counti-y, and 
 that this pressure has been aggravated by a want of that contidence which is necessary 
 for carrying on the ordinary dealings of trade. 
 
 " They have been in hopes that the check given to transactions of a speculative char- 
 acter, the transfer of capital from other countries, the influx of bullion, and the feeling 
 which a knowledge of these circumstances might have been expected to produce, 
 would have removed the prevailing distrust. 
 
 " They were encouraged in this expectation by the speedy cessation of a similar 
 state of feeling in the month of April last. 
 
 '■ These hopes have, however, been disappointed, and her Majesty's Government 
 have come to the conclusion, that the time has arrived when they ought to attempt, by 
 some extraordinar}^ and temporary measure, to restore confidence to the mercantile 
 and manufacturing community. 
 
 " For this purpose, they recommend to the directors of the Bank of England, in the 
 present emergency, to enlarge the amount of their discounts and advances u])on ap- 
 proved security ; but that, in order to retain this operation within reasonable limits, a 
 high rate of interest should be charged. 
 
 " In present circumstances, they would suggest that the rate of interest should not 
 be less than 8 per cent. 
 
 " If this course should lead to any infringement of the existing law, Her Majesty's 
 Government will be prepared to propose to Parliament on its meeting, a Bill of In- 
 demnity. They will rely upon the discretion of the directors to reduce as soon as pos- 
 sible the amount of their notes, if any extraordinary issue should take place, within 
 the limits prescribed by law. 
 
 '• Her Majesty's Government are of opinion that any extra profit derived from this 
 measure should be carried to the account of the public, but the precise mode of doing 
 60 must be left to future aiTangement. 
 
 '' Her Majesty's Government are not insensible of the evil of any departure from the 
 law wliich has placed the currency of this country upon a sound basis ; but they feel 
 confident that, in the present circumstances, the measure Avhich they have proposed 
 may be safely adopted, and at the same time the main provisions of that law, and the 
 vital principle of preserving the convertibility of the bank-note, may be firmly main- 
 tained. 
 
 "We have the honor to be, Gentlemen, 
 
 " Your obedient humble Servants, 
 " The Governor and Deputy Governor (Signed,) "J. Russell. 
 
 of the Bank of Englandr '' Charles Wood. 
 
 R 247
 
 A Treatise on Banking. 
 
 " Gentlemen, " Bank of England, 25ih October, 1847. 
 
 " We have the honor to acknowledge your letter of this day's date, which 
 we hare submitted to the Court of Directors, and we inclose a copy of its resolutions 
 thereon. 
 
 " We have the honor to be', Gentlemen, 
 
 "Your most obedient Servants, 
 
 " James Morris, Governor. 
 " II. J. Pkescott, Deputy Governor. 
 " To the First Lord of the Treasury and the 
 Chancellor of the Exchequer." 
 
 " At a Court of Directors, at the Bank of England, Monday, 25th October, 1847 : 
 Resolved, — 
 
 " 1. That this Court do accede to the recommendation contained in the letter from 
 the First Lord of the Treasury and the Chancellor of the Exchequer, dated this day, 
 and addressed to the Governor and Deputy Governor of the Bank of England, which 
 has just been read. 
 
 " 2. That the minimum rate of discount on bills not having more than 95 days to 
 run be 8 per cent. 
 
 " 3. That the advances be made on bills of exchange, on stock, exchequer bills, and 
 other approved securities, in sums of not less than two thousand pounds, and for a pe- 
 riod to be fixed by the Governors, at the rate of 8 per cent, per annum." 
 
 " Gentlemen, " Downing Street, 23d Novejnber, 1847. 
 
 " Her Majesty's Government have watched, with the deepest interest, the 
 gradual revival of confidence in the commercial classes of the country. 
 
 " They have the satisfaction of believing that the course ado])ted by the Bank of 
 England, on their recommendation, has contributed to produce this result, whilst it has 
 led to no infringement of the law. 
 
 " It appears, from the accounts which you have transmitted to ns, that the reserve 
 of the Bank of England has been for some time steadily increasing, and now amounts 
 to £ 5,000,000. This increase has, in a great measure, arisen from the return of notes 
 and coin from the country. 
 
 " The bullion exceeds JE 10,000,000, and the state of the exchanges promises a fur- 
 ther influx of the precious metals. 
 
 " The knowledge of these facts by the public is calculated to inspire still further con- 
 fidence. 
 
 '' In these circumstances, it appears to her Majesty's Government that the purpose 
 which they had in view in the letter which we addressed to you on the 25th October 
 has been fully answered, and that it is unnecessary to continue that letter any longer 
 in force. 
 
 " We have the honor to be, Gentlemen, 
 
 " Your obedient humble Servants, 
 
 (Signed,) "J. Rpssell. 
 
 ' The Governor and Deputy Governor " Charles Wood. 
 
 of the Bank of England." 
 
 " Gentlemen, " Bank of England, 2.3d November, 1847. 
 
 " We have the honor to acknowledge the receipt of your letter of this day's 
 date, in which you communicate to us that in consequence of the gradual revival of 
 confidence in the commercial classes of the country, it appears to her Majesty's Gov- 
 ernment tliat the object they had in view in the letter they addressed to us on the 25th 
 October has been fully answered, and that it is unnecessary to continue that letter any 
 longer in force. 
 
 " We have the honor to be, Gentlemen, 
 
 " Your most obedient Servants, 
 
 "James Morris, Governor 
 " H. J. Pkescott, Deputy Governor. 
 " To the First Tjord of the Treasunj and the 
 Chancellor of the Exchequer." 
 
 248
 
 Of Banking Institutions. 
 
 Section II. — THE LONDON PRIVATE BANKERS. 
 
 By the last Bank Charter Act (7 & 8 Vict. c. 32, s. 21), passed in the 
 session of 1844, it was enacted " that every banker in England and Wales, 
 who is now carrying on, or shall hereafter carry on, business as such, 
 shall, on the first day of January in each year, or within fifteen days 
 thereafter, make a return to the Commissioners of Stamps and Taxes at 
 their head oflice in London, of his name, residence, and occupation, or in 
 the case of a company or partnership, of the name, residence, and occ\i- 
 pation of every person composing or being a member of such company or 
 partnership, and also the name of the firm under which such banking 
 company or partnership carry on the business of banking, and of every 
 place where such business is carried on ; and if any such banker, com- 
 pany, or partnership, shall omit or refuse to make such return within fif- 
 teen days after the said first day of January, or shall wilfully make oilier 
 than a true return of the persons as herein required, every banker, com- 
 pany, or partnership so offending, shall forfeit and pay the sum of <£ 50 ; 
 and the said Commissioners of Stamps and Taxes shall, on or before the 
 first day of March in every year, publish in some newspaper circulating 
 within each town or county respectively, a copy of the return so made by 
 every banker, company, or partnership carrying on the business of bank- 
 ers within such town, or respectively, as the case may be." 
 
 This was the first time that any of the banking companies in London 
 were required to make returns to Government of the number or names of 
 their partners. All banks that issued notes were required when they ap- 
 plied for a license, to name tneir partners ; but as none of the London 
 bankers issued notes, they required no license, and made no return. Nor 
 did the joint-stock banks established in London, make any returns to the 
 Government of their partners. For as they did not possess, until the 
 year 1844, the power of suing and being sued in the name of their public 
 officers, they did not register, at any Government office, the names of 
 their partners, though, in some cases, these names were appended to the 
 Annual Reports of the directors. This Act (7 & 8 Vict. c. 32) came 
 into operation in January, 1845, and we have now, therefore, for the first 
 time, the means of obtaining the names of all the partners in all the bank- 
 ing establishments througliout England and Wales. (These are inserted 
 every year in the Banking Almanac.) 
 
 The Act not only requires that the bankers shall make these returns 
 between the first and fifteenth of January in each year, it requires also, 
 that the Commissioners of Stamps and Taxes shall publish them before 
 the firet of March following, in some newspaper that circulates within the 
 town or county in which the bankers making the return carry on their 
 business. The returns from the London banks are published in supple- 
 ments to the London Gazette., which we presume is considered to be a 
 newspaper within the meaning of the Act. 
 
 The particulars required to be returned by the Act, and stated in the 
 Gflz^'Z/e, are, the name of the firm or company; the name, residence, 
 and occupation of the persons of whom the company or partnership con- 
 
 249
 
 A Treatise on Banking. 
 
 sists ; and the name of the place or places where the business is carried 
 on. 
 
 The London banking establishments, according to the last retnrn, con- 
 sist of fifty-eight partnerships, each not having more than six partners ; 
 and of five public companies which are usually styled joint-stock banks. 
 The former may be divided into three classes : — 
 
 I. Those who are members of the Clearing-house. 
 
 II. Those located west of Temple-bar, but are not members of the 
 
 Clearing-house. 
 
 III. Tliose located east of Temple-bar. 
 
 1. A List of tliose London Banking Firms who attend tlie Clearing-house. 
 
 No. of 
 Name of the Firm. Pari iters, 
 
 1 . Barclay, Bevan, Tritton, & Co. . . . five 
 
 2. Barnard, Dimsdale, & Co. . . . two 
 
 3. Barnctt, Hoare, & Co five 
 
 4. Bosanquet, Franks, & Whatman . . three 
 
 5. Brown, Janson, & Co six 
 
 6. Curries & Co four 
 
 7. DcMison, Heywood, Kennard, & Co. . . four 
 
 8. Fullers & Co three 
 
 9. Glyn, Halifax, Mills, & Co six 
 
 10. Hanburys, Taylor, & Lloyd . . . five 
 
 11. Hankey & Co four 
 
 12. Jones, Lloyd, & Co five 
 
 13. Lubbock, Forster, & Co three 
 
 14. Martins, Stones, & Martins . . . four 
 
 15. Masterman, Peters, Mildred, Masterman, 
 
 Co 
 
 16. Prescott, Grote, Cave, & Co. . . ' four 
 
 17. Price, Marryatt, & Co two 
 
 18. Robarts, Curtis, & Co four 
 
 19. Rogers, Olding, & Co four 
 
 20. Sapte, Muspratt, Banbury, & Co. . . three 
 
 21. Smith, Payne, & Smith six 
 
 22. Spooner, Atwoods, & Co. . . . two 
 
 23. Stevenson, Salt, & Sons .... three 
 
 24. Williams, Deacon, Labouchere, & Co. . five 
 
 25. Willis, Percival, & Co six 
 
 Total, 104 partners. 
 
 I s. I 
 
 Residences. 
 54, Lombard-street. 
 50, Cornliill. 
 62, Lombard-street. 
 73, Lombard-street. 
 32, Abchurch-lane. 
 29, Cornhill. 
 4, Lombard-street. 
 65, Moorgate-street. 
 
 67, Lombard-street. 
 60, Lombard-street. 
 7, Fenchurch-street. 
 43, Lotlibury. 
 
 11, Man.-iion-House-street. 
 
 68, Lombard-street. 
 
 34 & 35, Nicholas-lane, Lom- 
 bard-street. 
 62, Threadneedle-street. 
 3, King William-street. 
 15, Lombard-street. 
 29, Clement's-lane. 
 77, Lombard-street. 
 1, Lombard-street. 
 27, Graccchurch-strcet. 
 20, Lombard-street. 
 20, Birchiu-lane. 
 76, Lombard-street. 
 
 2. A List of those Banking Firms West of Temple Bar, who are not Members of the Clearing- 
 house. 
 
 Name of the Firm. 
 
 1 . Bouverie, Norman, & Murdock 
 
 2. Call, Marten, & Co. . 
 
 3. Cocks, Biddulph, & Co. 
 
 4. Coutts & Co. 
 
 5. Messrs. Drummond 
 
 6. Hallctt, Robinson, & Co. . 
 
 7. Herrics, Farquhar, & Co. 
 
 8. Charles liopkinson & Co. 
 
 9. Ransom & Co. 
 
 10. Sir Samuel Scott «&, Co. . 
 
 250 
 
 No. of 
 Partners. JZesidences. 
 
 three 11, Hay market, 
 
 three 25, Old Bond-.>^treei. 
 
 five 43, Ciiaring-Cross. 
 
 four 58 & 59 Strand, 
 
 five 49, Charing Cross, 
 
 four 14, Great George-street, 
 
 four 16, St. James's-street. 
 
 two 3, Regent-street. 
 
 four 1, Pall Mall East, 
 
 three 1, Cavcndish-square
 
 London Private Bankers. 
 
 No of 
 Name of the Firm. Partners. 
 
 n. Strahan, Pauls, & Bates .... four 
 
 12. Kichard Twining & Co six 
 
 Total, 47 partners. 
 
 3. A List of the Banking Firms East of 
 
 No. of 
 Name oft fie Firm. Partners. 
 
 1 . Abraham Bauer & Co one 
 
 2. William ami John BijrgerstafF . . . two 
 
 3. James Bult, Son, & Co. .... two 
 
 4. Child & Co four 
 
 5. Roger Cunliffc one 
 
 6. Cunlifics, Brooks, & Co two 
 
 7. Robert Davies & Co two 
 
 8. Dixon, Brooks, & Dixon .... three 
 
 9. Drewett & Fowler two 
 
 10. John Feltham & Co. .... two 
 
 11. Goslings & Sharpe five 
 
 12. C. Hill & Sons two 
 
 13. Messrs. Hoare five 
 
 14. Hugh & John Johnston & Co. . . . three 
 
 15. Sir C. S. Kirkpatrick, Dalrymple, MacGre- > r 
 
 gor, Twigg" & Co. ... . i ^'^"^ 
 
 16. Pocklington & Lacy .... two 
 
 17. Praed, Fane, & Co four 
 
 18. Puget, Bainbridge, & Co four 
 
 19. John Shank one 
 
 20. John & W. S. Stride .... two 
 
 21. Thomas G. Tisdale one 
 
 Total, 54 partners. 
 
 Residences. 
 217, Strand. 
 215, Strand. 
 
 Temple Bar. 
 
 Residences. 
 71, King William-street. 
 8, West Smithfield. 
 85 & 86, Cheapside. 
 1, Fleet-street. 
 24, Bucklersbury. 
 
 24, Lombard-street. 
 
 187, High-st., Shoreditch. 
 
 25, Chancery-lane. 
 4, Princes-street. 
 42, Lombard-street. 
 19, Fleet-street. 
 
 17, West Smithfield. 
 37, Fleet-street. 
 15, Bush-lane. 
 
 29, Gracechurch-street. 
 
 60, West Smithfield. 
 189, Fleet-street. 
 12, St. Paul's Churchyai-d. 
 76, West Smithfield. 
 41, West Smithfield. 
 15, West Smithfield. 
 
 The Clearing Banks are banks of deposit and of discount, and they act 
 as agents to the country banks. The banks in Fleet-street and in West- 
 minster do not usually discount bills for their customers, nor act as agents 
 to country banks. Their connections embrace chiefly the clergy, the 
 gentry, and the nobility. Their loans to their customers are chiefly upon 
 landed security, and they are supposed to hold a large amount of exche- 
 quer bills and other Government securities. None of the London bankers 
 allow interest on deposits, or charge commission on town accounts. Those 
 who act as agents to country banks charge a commission on the debit side 
 of the account, and some of them allow interest on the daily balance. In- 
 stead of a 7;ro rata commission, some country banks pay their agent by a 
 fi.xed annual payment, or by keeping in his hands a certain balance with- 
 out interest. None of the present London bankers have ever issued notes, 
 though, until the year 1844, they had legally the power of doing so. 
 Several of them issue " Circular Notes,'' for the use of travellers on the 
 continent. 
 
 The following is a summary of part of the evidence delivered before 
 the Bank Committee of 1832, by George Carr Glyn, Esq., respecting the 
 London bankers : — 
 
 " There are sixty-two private bank.s in the metropolis, none of which for the last fift> 
 years have issued notes of their own, though it would seem that such of them as con- 
 sist of fewer than six partners might lawfully circulate their own paper if they i)leased. 
 As they act entirely with the Bank of England paper, it is doubtful whether there bo 
 
 251
 
 A Treatise on Banking. 
 
 any limit to the number of partners of which London private banks may consist 
 They receive deposits, upon which they pay no interest. The system of allowing in- 
 terest on deposits was formerly tried in London ; but the houses that attempted it in- 
 variably failed. The deposits held by the London bankers are generally composed of 
 very large sums, which are necessarily payable on demand ; and hence they cannot be 
 made use of to the same extent as those which are intrusted to country bankers, and 
 which, whenever interest is allowed, are usually left with them for a stipulated period. 
 On the other hand, in all ordinary transactions, the London banks charge no commis- 
 sion to their customers. 
 
 " The London banks, in order to be able to meet their engagements, usually keep a 
 large deposit, nearly eijual, perhaps, to half of what they hold in reserve, in the Bank 
 of England ; a portion of their current funds they necessarily hold at home in bank 
 paper, and a small amount in gold. Their deposit in the bank they (consider as so 
 many notes in their drawer, liable to be called out by the daily fluctuations m the ac- 
 counts of their customers. The balances in their hands, often very large, arc frecjuently 
 withdrawn without notice ; hence their intercourse is almost hourly with the Bank of 
 England, from which they receive every facility. 
 
 '• In order to turn their funds to prolit, the London bankers employ as much money 
 as they can amongst their customers. They invest a considerably larger proportion 
 of their deposits in bills of exchange and promissory notes, than in public securities. 
 The city banker is, however, under a disadvantage in this resj)ect, which is not felt by 
 the banker at the west end of the town. The latter may, to a certain extent, depend 
 upon the use of the money deposited with him, as liis accounts are usually those of 
 country gentlemen, and individuals out of trade ; whereas the former, whose accounts 
 are principally those of persons actively engaged in commercial or money operations, 
 can hardly know three days beforehand what the amount of his deposits may be at any 
 given period. The London bankers are obliged to emplo\' their money occasionally 
 at a very low rate of interest. In some cases, it may have been within the last twelve 
 months, 2^ per cent.; but the average has been from 3 to 3.J, and it has fairly, kept at 
 that rate. The highest rate has been 4 for short bills, but 5 has been chargeil for bills 
 of twelve or eighteen months." 
 
 We sliall now describe the mode of conducting the clearing, or tlie way 
 in which many of the London bankers make their exchanges with each 
 other. These exchanges are made at tlie Clearing-house. At this house, 
 which is situated in Lombard-street, in a part of the old Post-office, a 
 clerk attends from each banking-house twice a day. First, he goes at 
 eleven o'clock with those bills which he has upon other bankers. Each 
 bill is receipted by the house through whom it is presented, and the 
 cheques have the name of the house written across them. He drops the 
 bills payable at each house in a separate drawer provided for the purpose, 
 and he enters in his book, under separate accounts, those bills that may 
 be dropped into his drawer. At about twelve he returns home. He goes 
 again at three o'clock with a fresh quantity of bills and cheques, which he 
 delivers in the several drawers as before. He then enters in his book 
 those cheques that may have been delivered in his drawer. From three 
 to four he receives further supplies of cheques brought to him from home 
 by other clerks. These cheques he enters in his book, and they are then 
 delivered in the proper drawers. As soon as the clock strikes four, no 
 further cheques are taken. He then casts up each account, and strikes 
 the balance. These balances are then transferred to the b;ilancc-shcet. 
 The balance-sheet is a half sheet of paper, with a list of clearing bankers 
 printed alphabetically in a row down the middle. On the loft-liand side 
 is a space for the debtors. On the right-hand side is a space for the cred- 
 itors. The clerk begins with the house at the top of the list. If this 
 house owes him money, he places the balance on the left side of the 
 
 252
 
 Hie Clearing-House. 
 
 name. Tf lie owes money to this house, he places the amount on the 
 right side. Thus he proceeds throush the vphole list. He then goes to 
 the clerk of each house, and calls the balance to hira ; and if they both 
 agree, they mark it with a pen. If they differ, they examine where the 
 error lies, and make the accounts agree. He then casts up each side of 
 the balance-sheet, and strikes the balance. If the total amount of debits 
 exceeds the total amount of credits, he will have to receive the amount of 
 the difference. If the credits exceed the debits, he will have to pay the 
 difference. 
 
 If a banker does not choose to pay a bill or draft brought home from 
 the Clearing-house, it is sent back, and dropped in the drawer of the house 
 by whose clerk it was presented. On the bill or draft is stated the reason 
 for its non-payment: this is usually, "no effects," or "no advice"; some- 
 times, " not sufficient effects," or " refer to the accepter." If this draft 
 was delivered, in the first instance, in the morning clearing (that at twelve 
 o'clock), it is usually returned before four o'clock ; but in all cases, it 
 must be returned before five o'clock, or else it will not be taken back, and 
 the banker is considered to have paid it. If returned after four o'clock, 
 it is debited and credited on the back of the bilance-sheet. 
 
 All this is usually done by five o'clock, when the clerks go home for a 
 short time for two purposes : one purpose is, to fetch the money they 
 nave to pay ; and the other is, to see if their balance on the sheet agrees 
 with the balance of the books at home. At about a quarter or half-past five 
 they return, and any clerk who has money to pay, pays it to any clerk 
 who has money to receive. It is common, however, for three or four 
 clerks to form a sort of club, and pay principally among themselves. 
 Hence, when one member of the club has money to pay, he will pay it 
 to some member of the same club who has money to receive, in prefer- 
 ence to paying it to any one else; by this means his friend obtains his 
 money earlier than he otherwise might, and gets off sooner. It is obvious 
 that all the money that is to be paid must be equal to all the money that 
 is to be received. If this should not appear to be the case, there must be 
 some error ; and the Clearing-house is then said to be wrong. Two in- 
 spectors are appointed with salaries, to detect errors of this kind by ex- 
 amining and marking off the sheets. Their signature is also neces.sary be- 
 fore any money can be paid from one clerk to another. 
 
 All the articles in the clearing are entered at home in a book called the 
 Clearing-Book. On the left-hand are entered the bills and drafts upoa 
 other bankers. These are called the "clearing-out." On the right-hand 
 are entered the drafts which are drawn upon the house, and which have 
 come in from the clearing. These are called the " clearing-in." If the 
 "<;Iearing-out" is a greater sum than the "clearing-in," the clerks say, 
 "the clearing brings in"; that is, the clearing clerk will bring in money 
 from the Clearing-house. In the other case, they say, " the clearing 
 takes out"; that is, he will takeout money from the Banking-house to 
 pay away at the Clearing-house. The balance of this book should agree 
 with the clearer's balance-sheet, excepting the diff^'rences of the preceding 
 night, which he may have settled. When this is the case, the clearer is 
 right ; if not, he is wrong, and he must discover the error. The cleare^' 
 
 253
 
 A Treatise on Banking 
 
 may be wrong through errors made either in his own book at the Clear- 
 ing-house, or in the Clearing-Book at home. The error at home may be 
 either in the " clearing-in" or in the " clearing-out." If the error be in 
 the clearing-out, it will make the Banking-house wrong; if in the clear- 
 ing-in, it will not. Suppo.so, for instance, the clearing-out is wrong, cast 
 £1,000 ton much, the house will be £ 1,000 over, and the clearer will 
 be £1,000 short. But if the clearing-in be wrong, cast £1,000 too 
 much, it will not effect the balance of the house, because the Cash-]5nok 
 will, conse(|uontly, be £ 1,000 less; and these two amounts, those of the 
 Cash-Book and the Paid-Day-Book, (into which the amount of the Clcar- 
 ing-In-Book is entered,) are placed on the same side of the trial-paper. 
 But this error will make the clearer wrong. The way in which the 
 clearer discovers his errors is, by marking off his book against the Clear- 
 ing-Book, and by recasting both the books. An error may have occurred 
 at the Clearing-house. If the clearer has placed a wrong balance on his 
 sheet, or has wrong cast his balance-sheet, the Clearing-house will be 
 wrong, and the inspectors will make it their business to discover the error. 
 But if the clearer has entered an article wrong in his book, and the clerk 
 of the house upon whom the draft is drawn has entered it wrong also, 
 then the Clearing-house will be right, and both these clearers will be 
 wrong ; one being as much over as the other is short. 
 
 All the articles in the clearing-out must mark against either the jour- 
 nals, the Received Waste-Books, or the Lists. To secure greater accuracy, 
 the clearing-in is entered not only in the regular Clearing-Book, but also 
 in another book by itself, which for distinction is called the Clearing-In- 
 Book. The amount of the clearing-in is entered in the Paid-Day-Book 
 previous to the daily balance. On the following morning, the Clearing 
 In-Book is marked against the debit side of the Ledger, and the Ledger 
 Folio placed against each entry. 
 
 No gold, silver, or copper, is taken to the Clearing-house ; the differ- 
 ences under £ 5, that may be left between the clerks who receive and pay 
 with each other are carried to account on the following day. 
 
 Country notes are not paid at the Clearing-house, but are taken round 
 to the bfinking-houses, and exchanged for tickets called memorandums, 
 which are passed through the afternoon clearing. The following is the 
 form of these memorandums : — 
 
 London, Ist May, 1827. 
 Due to Messrs. Steady ^- Co. 
 
 One Thousand Pounds. 
 For Country Notes, to be paid iii the clearing of this day. 
 
 For Messrs. Hope, Rich ^ Co. 
 £ 1,000. A Clerk. 
 
 Drafts that are paid into the Banking-house after four o'clock are taken 
 to the houses upon whom they are drawn " to be marked"; that is, it is 
 asked if these drafts will be paid in the clearing of the next day. If so, 
 cue of the clerks marks the cheque by placing his initials upon it. If the 
 
 254
 
 The Clear inij House. 
 
 cheque is refused to be marked, it is returned as dishonored, on the 
 following day, to the person who has paid it in. Had it not been sent 
 to be marked, the draft would not have been refused payment until the 
 next day, and it could not be returned to the customer till the day after- 
 wards. 
 
 The operations on the Stock Exchange cause a great number of 
 cheques to be drawn on bankers, and thus increase the operations at the 
 Clearing-house. 
 
 • A person who wants to buy £ 100 consols, gives his order to a broker, 
 and pays him possibly by a cheque on his banker, which the broker takes 
 and pays to his own banker. He then buys the £ 100 consols from a 
 jobber, and pays him by a cheque. The jobber possibly replaces this 
 stock by buying a £ 100 consols from another broker who is ordered by 
 his principal to sell that amount of stock. The jobber gives the broker 
 bis cheque upon his banker, and the broker probably will give his princi- 
 pal the produce of the stock by a cheque. No money has passed between 
 the parties, and the result of the whole is, that the buyer of the stock has 
 £90 less in the hands of his banker, and the seller has £90 more. Four 
 cheques have been drawn, and these have caused transactions with five 
 different bankers. The total number of credit and debit operations in all 
 the banks is eight. 
 
 1. The banker of the buyer of the stock pays his cheque through the 
 clearing, and debits his customer. 
 
 2. The banker of the broker who buys the stock, credits him with the 
 purchaser's cheque, and debits him for the cheque he gives to the jobber. 
 
 3. The banker of the jobber credits him for the cheque he has received 
 from the buying broker, and debits him for the cheque he gives to the 
 selling broker. 
 
 4. The banker of the broker who sells the stock credits him for the 
 jobber's cheque, and debits him for the cheque he gives to his customer 
 who is the seller. 
 
 5. The banker of the seller credits him for the cheque of the broker, 
 who has sold the stock, and will debit him for any cheque he may draw 
 against it. 
 
 Should neither the buyer nor the seller of the stock keep a banker, then 
 only three cheques would be drawn. 
 
 Besides these daily transactions arising out of real business, the brokers 
 have large transactions in what are called "time bargains." This is 
 ■what is usually meant by "gambling in the funds." The parties buy or 
 sell consols against the next settling day. No real purchase or sale is 
 ever intended. When the settling day arrives, the losing party has to pay 
 the difference that has arisen from the fluctuations in the price. A settle- 
 ment takes place among the brokers in a way somewhat resembling the 
 settling between the bankers at the Clearing-house. All the differences 
 are paid by cheques. A broker may give twenty, thirty, or forty cheques 
 to as many different brokers, and he may receive an equal number from 
 other brokers. All these cheques are paid by the respective bankers 
 through the Clearing-house. Besides settling days for consols, there are 
 also settling days for foreign funds, and for shares in railway companies. 
 
 255
 
 A Treatise on BanTcing. 
 
 The differences in these cases are also settled by cheques upon the clear- 
 ing bankers. 
 
 Mr. Thomas, inspector of the Cleariug-house, stated to the Bullion 
 Committee, in the year 1810, that the average amount of drafts paid 
 every day at the Clearing-house was £ 4,700,000 ; anil the average 
 amount of the balance paid in bank notes -was £ 2*20,000. Sometimes 
 the bank notes brought to the Clearing-house of an evening exceeded 
 £500,000, and on settling days at the Stock Exchange, the amount 
 of drafts paid was above £ 14,000,000, At that time the Clearing-house 
 had been established thirty -five years, and the number of clearing bankers 
 was forty-six. 
 
 The following is a copy of a Clearing Balance-Sheet, and a List of the 
 Bankers who clear. TLa name of the house to whom each sheet belongs 
 is placed at the top, and is then, of course, omitted in the alphabetical 
 list : — 
 
 Debtors. 
 £. s. d. 
 
 
 Creditors. 
 
 £ 8. d. 
 
 1 
 1 
 
 
 1 
 
 Barclay. 
 
 Barnard 
 
 Barnetts 
 
 Bosanquet 
 
 Brown 
 
 Curries 
 
 Fullers 
 
 Glyn 
 
 Hanbury 
 
 Hankey 
 
 Jones 
 
 Lubbock 
 
 Masterman 
 
 Prescott 
 
 Price 
 
 Roberts 
 
 Rogers 
 
 Smith 
 
 Spooner 
 
 Stevenson 
 
 Stone 
 
 Vcre 
 
 Williams 
 
 Willis 
 
 
 
 \ 
 
 The following is the amount of transactions passed through the clearing 
 by each banking-house, during the year 1840 : — 
 
 £ 
 
 107,000.(100 
 12.0(10,000 
 .00,000,000 
 
 :i,500 000 
 
 7,000.000 
 17,.')00,()llO 
 20,oU0.U0C 
 
 Barclay. 
 
 Barnard. 
 
 Barnetts. 
 
 Bosanquet. 
 
 Brown. 
 
 Curries. 
 
 Dcnnison. 
 
 256 
 
 £ 
 
 8,000,000 
 7,500,000 
 10,5,.300,000 
 24,000,000 
 1.0,000,000 
 10-1,000,000 
 24,200,000 
 
 Dorrien. 
 
 Fullers. 
 
 Glyn. 
 
 Hanbury. 
 
 Hnnkcy. 
 
 Jones. 
 
 Ladbroke,
 
 The Clearing- House. 
 
 33.700.00n Lubbock. 
 
 90,000.000 MiisterinaD. 
 
 30.000.000 Prescott, 
 
 15,300.000 Price. 
 
 80.880,000 
 9,000,000 
 
 16,000.000 
 64,000,000 
 
 Robarts. 
 
 Rogers. 
 
 Stevenson. 
 
 Spooner. 
 
 Smith, 
 
 £ 
 .^7,000,000 
 10,400.000 
 
 50,000.000 
 20,500,000 
 
 974,580,000 
 
 Stone. 
 
 Vere. 
 
 Wo.stnn. 
 
 Whitmore. 
 
 Williams. 
 
 Willis. 
 
 The following is an account of the ap^grogate demands made through the 
 Clearing-house, and the amount of bank notes with which they were dis- 
 charged, during the year 1839 : — 
 
 January 
 
 February 
 
 March . 
 
 April . 
 
 May 
 
 June 
 
 July 
 
 Demanfls. 
 
 £82.702.400 
 70.104.700 
 75.879.200 
 Sj.8.?P.200 
 80.587.000 
 
 Bank Notes. 
 — £fi,.S4S.500 
 
 — 4,900,200 
 
 — 5.621.500 
 
 — 5.S.".6,000 
 
 — 5.615.000 
 
 67.413.900 — 6,060,000 
 
 • Bomanrls. 
 Anffust £87.610.500 
 September 74.237,700 
 October 87.478.200 
 
 November 81.729.200 
 December 70,833,800 
 
 Bunk Notos. 
 —£6.164.900 
 
 — 5.129.800 
 
 — 5.706,800 
 
 — 4.793,100 
 
 — 4,755,000 
 
 83,865,200 
 
 6,284,800 
 
 £954,401,600 £66,275,600 
 
 A kind of clearing takes place between the Bank of England and some 
 of the London bankers. 
 
 Most of the London bankers keep a drawing account with the TJank of 
 England. And when cheques or bills are presented to a banker for pay- 
 ment by the bank, he pays them by a cheque, which is pa.ssed to the 
 debit of his account. It is also said that some bankers have an ajreement 
 with the bank that no cheque shall be posted to their debit until after three 
 o'clock in the afternoon. Hence, if the bankers draw large cheques in 
 the morning, they can provide for them in vhe course of the day. This 
 so far resembles a clearing, that no notes pass in settling the daily trans- 
 actions. But it is merely an arrangement between the Bank of England 
 and each banker individually, and has no reference to any settlement of 
 accounts among the bankers themselves. The following is the evidence 
 on this subject given before the Committee of the House of Commons, by 
 the Governor of the Bank of England, in reply to questions put by Mr. 
 Glyn, a London banker : — 
 
 " Mr. Glyn. — Do not the private banks clear with the Bank of England, by the use of 
 cheques upon the Bank of England ? — They have the option of doing so, 
 
 " That is a substitute for the notes which would be used, and that so far economises the 
 bank-notes ? — Yes. 
 
 " Does not that observation also apply to joint-stock banks? do not they clear, through 
 the medium of cheques, upon the Bank of England? — Yes; but as far as regards clearing, 
 it is a question between the joint-stock banks and the private bankers. 
 
 " But so far as regards the private banks and the Bank of England, the economy of 
 bank-notes between them is carried to the greatest possible extent, inasmuch as the 
 private banks use cheques upon the Bank of England? — Yes." {Oommnns, 3266- 
 3270.) 
 
 The banks of Newcastle on Tyne adopted a somewhat similar, but a 
 more extensive plan of clearing, through the means of the branch of thu 
 Bank of England. The plan was thus described in a letter addressed to 
 me, about two years ago, in reply to my inquiries on the subject : 
 
 257
 
 A Treatise on Banking. 
 
 " The banks here do not clear. They used to do so, and for that pur- 
 pose had a room at Messrs. Ridley's bank ; but, from some objection 
 raised by Messrs. Lambtons, the system was discontinued. 
 
 " They have, however, adopted a plan of cxclianges, which, from the 
 facilities granted by the branch bank, answers nearly the same purpose as 
 a clearing, without the expense. I must inform you that they all have 
 drawing accounts with the brafich bank, and the plan now adopted is as 
 follows, namely : — 
 
 " At two o'clock every day, each bank pays in, to its credit with the 
 branch bank, all bills and cheques on other banks received up to that 
 hour. The amounts so paid in are passed to credit in totals, and the bills 
 and cheques arc then sorted into charges upon the respective banks, and 
 presented at their counters by the Bank of England, who receive in pay- 
 ment a cheque upon themselves. So that, in fact, each bank is credited 
 in total with what it pays in, and debited with the cheque given for what 
 it has to pay ; thus obviating the necessity of any bank-notes passing. 
 
 " This of course gives the branch bank some trouble, and they there- 
 fore strictly confine the facility to those banks issuing Bank of England 
 paper ; and as the Union Bank issues its own paper, it is consequently ex- 
 cluded, and is obliged to exchange separately with the other bankers." 
 
 Several of the bankers at the West-end of London keep an account 
 with a City bank. They do not, however, in all cases pass the whole of 
 their transactions through the Clearing-house. They pay and receive 
 with the clearing bankers individually, and sometimes leave their unpaid 
 bills with their city agent. They occasionally pay into the City bank the 
 cheques they may have on the clearing bankers, and on the other bank- 
 ers too. 
 
 The stock-brokers usually write across every cheque they draw, the 
 name of the banker of the party in whose favor it is drawn ; and if they 
 
 do not know the name of the banker, they write " & Co." The 
 
 banker on whom it is drawn will then pay it only in the clearing. If a 
 broker intends a cheque to be paid in bank notes across the counter, he 
 writes on it the word " cash " ; such cheques are given only to persons 
 who do not keep bankers. 
 
 Many persons now cross the cheques they draw with the name of a 
 banker, to guard against fraud in case the cheques should be lost or 
 stolen. The cheque can then only be paid to the banker whose name is 
 on the cheque. If it be crossed with the names of two bankers it will be 
 refused payment to either, unless the matter be satisfactorily explained. 
 
 Clearing bankers never make payments to each other, except through 
 the clearing. 
 
 The effects of the clearing-house are thus described by Mr. M'CuUoch, 
 in his Commercial Dictionary : — 
 
 " By far the largest proportion liotli of the inland bills in circulation in tlie country, 
 and also of the foreij^u l)ills drawn upon Great Britain, are made payable in London, 
 the grand focus to which all the [)ecuniary transactions of the empire are ultimately 
 brouf^ht to he adjusted. And in order still further to economise tiie use of money, the 
 principal hankers of the metropolis are in the hahit of sendin>^ a clerk eadi (hiy to the 
 Clearinir-house in ijomoard IStreet who carries with him the various bills in the pos- 
 
 258
 
 The London and Westminster Bank. 
 
 session of his house, that are drawn upon otlicr bankers ; and, having exchanged them 
 for the bills in the possession of those others that arc drawn u])on his constituents, the 
 balance on the one side or the other is paid in cash or Bank of England notes. By 
 this contrivance tlie bankers of London are enabled to settle transactions to the extent 
 of several millions a day, by the employment of not more, at an average, than 
 £ 200,000 to £ 300,000 of cash or bank-notes. 
 
 " In consequence of these and other facilities afforded by the intervention of bankers 
 for the settlement of pecuniary transactions the money required to conduct the busi- 
 ness of an extensive country is reduced to a trifle only, compared with what it would 
 otherwise be. It is not, indeed, possible to form any very accurate estimate of the total 
 saving that is thus effected ; but, supposing that fifty or sixty millions of gold and silver 
 and bank-notes are at present required, notwithstanding all the devices that have been 
 resorted to for economizing money for the circulation of Great Britain, it may, one 
 should think, be fairly concluded, that two hundred millions would, at the very least, 
 have been required to transact an equal amount of business, but for those devices. 
 If this statement be nearly accurate, and there are good grounds for thinking that it is 
 rather under than over-rated, it strikingly exhibits the vast importance of banking in a 
 public point of view. By its means fifty or sixty millions are rendered capable of 
 performing the same functions, and in an infinitely more commodious manner, that 
 would otherwise have required four times that sum ; and, supposing that twenty or 
 thirty millions are employed by the bankers as a capital in their establishments, no 
 less than 120 or 130 millions will be altogether disengaged, or cease to be employed 
 as an instrument of circulation, and made available for employment in agriculture,' 
 manufactures, and commerce." 
 
 Section III. — THE JOINT-STOCK BANKS IN LONDON. 
 
 London is the head-quarters of several joint-stock banks, who conduct 
 their business operations in the provinces, in Ireland, or in the colonies. 
 But we purpose here to notice only those joint-stock banks who carry on 
 business as London bankers. These are five : — The London and West- 
 minster Bank ; the London Joint-Stock Bank ; the Union Bank of London ; 
 the Commercial Bank of London ; the London and County Banking Com- 
 pany. 
 
 I. — The London and Westminster Bank. 
 
 I. Its History. — In the Act for renewing the Bank of England Char- 
 ter, passed in 1833, it was declared to be the law, that companies or part- 
 nerships consisting of more than six persons might carry on the business 
 of banking in London. Immediately after the passing of this Act, a pros- 
 pectus was issued, proposing to form the London and Wcstininstcr Bank. 
 The shares, however, were taken up but tardily, and the bank did not 
 coiTimence business until March 10th, 1834, and then only with a paid-up 
 capital of £ 50,000, and of this capital a large portion is said to have 
 been subscribed by shareholders who resided in the country. 
 
 As the Bank Charter Act did not prescribe the way in which companies 
 of more than six persons were to sue or be sued, the directors of the London 
 and Westmmster Bank brought a bill into Parliament, in the session of 
 1834, to authorize them to sue and be sued in the names of their public 
 officers, in the same manner as those banking companies that were locat- 
 
 259
 
 A Treatise on Banking. 
 
 ed beyond sixty-five miles from London. This bill was carried by large 
 majorities through the House of Commons, although opposed by the influ- 
 ence of the Bank of England, and by Lord Althorp, then Chancellor of 
 the Exchequer. The bill, however, was lost in the Lords. In conse- 
 quence of this failure, the bank followed the plan of suing and being sued, 
 through the medium of trustees. 
 
 Previous to the commencement of business, the directors applied to the 
 Committee of Private Bankers for admission to the Clearing-house. This 
 was refused. The directors also applied for permission to have a drawing 
 account at the Bank of England. This, too, was refused. 
 
 Notwithstanding these difficulties, the bank continued to advance, and, 
 by the date of the First Annual Report, March 4th, 1835, the paid-up 
 capital, increased by two calls of <£5 each upon the shareholders, amount- 
 to ^244,945. 
 
 At the commencement of the year 1835, the Bank of England institut- 
 ed legal proceedings to prevent the London and Westminster Bank ac- 
 cepting bills drawn at less than six months after date. Supported, how- 
 ever, by the legal opinions of Sir .lohn Campbell, Sir William Follett, and 
 Mr. Pemberton, the trustees continued to accept such bills, and resisted 
 the proceedings of the Bank of England. 
 
 By the end of December, 1835, the number of shares issued had in- 
 creased to 17,818. Soon afterwards the directors made a fourth,call of 
 £b per share, payable the following April. This made <£20 paid upon 
 each share, and the whole paid-up capital exceeded <i' 400,000. The div- 
 idend on the year ending December, 1835, was at the rate of 4 per 
 cent. 
 
 At the commencement of the year 1836, the bank extended its branch- 
 es. In addition to the branch at Waterloo-place, Pall Mall, opened on the 
 same day as the head office in Throgmorton Street, the bank opened, on 
 the 4th of January, a branch at 213 High Ilolborn, and another at 87, 
 Whitechapel ; and on the 29th of Februar}^, another was opened in Wel- 
 lington Street, Southwark. In the following .lunc a branch was opened at 
 155 Oxford Street. In this year the bank obtained a large accession of 
 country business, in consequence chiefly of the formation of a great num- 
 ber of new joint-stock banks throughout the country. In this year, too, 
 the directors issued 9,333 shares at a premium of i?4 lOs. per share, by 
 which the sum of .£41,998 10.s. was realized as premiums. The total 
 paid-up capital on December 31st, 1836, amovmted to .£597,225, on 
 which a dividend was paid at the rate of 5 per cent. 
 
 In the beginning of the year 1837; the suit brought by the Bank of 
 England was terminated, by the Master of the Rolls granting an injunc- 
 tion to restrain the London and Westminster Bank from accepting bills at 
 less than six months after date. The country joint-stock banks then 
 adopted the practice of drawing upon the London and Westminster Bank 
 " without acceptance," in the same way as the Bank of Ireland draws 
 upon the Bank of England. No practical difficulty was experienced, and 
 the London and Westminster Bank lost none of its connections in conse- 
 quence of this adverse decision. At the end of the year the directors de- 
 .'lared the usual dividend of 5 per cent. 
 
 260
 
 The London and Westminster Bank. 
 
 m 
 
 On the 26th of December, 1838, the bank removed its business from 
 No. 38 Throgmorton Street, to their new building in Lothbury. In the 
 report delivered in Marcli, 1839, the directors refer in the following terms 
 to the then condition of the bank : — 
 
 " The pleasure which the directors feel in making their Fifth Annual 
 Report is augmented by the circumstance of its being delivered to the 
 proprietors in their own building, an event that seems to justify a glance 
 at the past history of the bank. 
 
 " When the directors consider, that during the five years of the existence 
 of this establishment, they have had to contend against the fears and prej- 
 udices of the public mind, the uncertainties and the intricacies of the law, 
 and the opposing influence of existing interests ; and that this conflict has 
 been carried on in seasons of great commercial embarrassment, and under 
 circumstances of peculiar difhculty ; and that, amid all these disadvan- 
 tages, they have nevertheless acquired a paid-up capital of nearly six hun- 
 dred thousand pounds, between eight and nine' hundred respectable pro- 
 prietors, a large and increasing business in London, and a country con- 
 nection that embraces one hundred and fifty banks and branches, they do 
 feel that the result of the first experiment of establishing a joint-stock bank 
 in London has been highly satisfactory, and that the confidence they ex- 
 pressed in their First Annual Report has been abundantly confirmed." 
 
 The same report makes the following allusion to the other joint-stock 
 banks established in London : — 
 
 " It may be expected that some notice should be taken in this report of 
 the extension of the system of joint-stock banking in London. This will 
 not, in the opinion of the directors, militate against our interests, as those 
 principles, which we were the first to advocate, will be thus more widely 
 disseminated. Hence all banking companies that may be respectably and 
 honorably conducted will be regarded by this bank, not as rivals, but as 
 allies. At the same time, the shareholders should bear in mind, that as 
 joint-stock banks multiply in London, each bank will have to depend 
 mainly upon the support of its own proprietary. And the London and 
 Westminster Bank having been first in the field, ought not to sufl"er itself 
 to be passed in the course by later and more youthful competitors. But 
 if the exertions of our shareholders be at all proportionate to their num- 
 bers, their wealth, and their respectability, the London and Westminster 
 Bank will not only have the honor of being the first joint-stock bank in 
 London in the order of time, but in other respects also will be enabled to 
 maintain the preeminence." 
 
 In March, 1840, the dividend was raised to 6 per cent, upon the profits 
 of the preceding year ; and this rate has since been constantly main- 
 tained. In 1841 the directors issued ten thousand of the unappi'opriated 
 shares at par to the existing shareholders, in the proportion of one new 
 share to the holder of three shares. This raised the number of shares 
 issued to 40,000, and the paid-up capital to £ 800,000. In February, 
 1842, the bank opened a drawing account with the Bank of England. 
 
 In the report delivered March, 1841, the directors observe, — "During 
 tlie past year the banking institutions of the country have occupied a large 
 portion of public attention. The directors trust that the events and dis- 
 
 261
 
 J, A Treatise on Banking. 
 
 cussions that have taken place will have the efTect of diffusing a correct 
 knowledge of the principles of joint-stock banking, and that institutions 
 like the London and Westminster Bank will be allowed to exercise the 
 same legal rights and privileges which are accorded to other banking es- 
 tablishments." In the same year, Mr. Gilbart, the general manager, was 
 examined for four days before a Select Committee of the House of Com- 
 mons, at the request of a meeting of deputies from the joint-stock banks. 
 In the report of March, 1844, we read, — "As the speech from the 
 throne has called the attention of Parliament to ' the state of the law with 
 regard to the privileges of the Bank of England and to other banking es- 
 tablishments,' the directors have cooperated whh the representatives of 
 other joint-stock banks in bringing under the consideration of the Govern- 
 ment the defects of the laws relating to banking companies, which they 
 feel sure the Legislature will not refuse to remedy." In this year the 
 bank obtained the power to draw, accept, or indorse any bills of exchange 
 not payable to bearer on demand ; and immediately commenced accept- 
 ing the bills drawn by its country connections, and issuing circular letters 
 of credit for the use of travellers and residents on the continent. In the 
 same year the bank obtained the power of suing and being sued in the 
 names of its public officers, and accordingly registered the names of its 
 trustees for that purpose. 
 
 In addition to the usual dividend of 6 per cent., the directors gave in 
 March, 1847, a bonus of 2 per cent out of the profits of the preceding 
 year. At the same time they announced the distribution of the remain- 
 ing ten thousand unappropriated shares at par among the existing share- 
 holders, in tlie proportion of one new share to every four shares pre- 
 viously held. This raised the paid-up capital of the bank to .one million 
 sterling. 
 
 On the 31st of December, 1847, Messrs. Young & Sons (formerly 
 Messrs. Weston & Young), of South wark, retired from business, and the 
 customers of the bank, according to the wishes of Mr. Young, transferred 
 their accounts to the Southwark Branch of the London and Westminster 
 Bank. 
 
 At a general meeting held on the 1st of March, 1848, the report an- 
 nounced that, with the exception of outstanding instalments amounting to 
 £ 3,273, the paid-up capital of the bank was one million sterling. A divi- 
 dend at the usual rate of 6 per cent, was declared, and .£4,223 4s'. \0d. 
 was added to the surplus fund. 
 
 The chairman stated that, in the week preceding the letter of the Gov- 
 ernment suspending the act of 1844, the bank had sold Government secu- 
 rities to a large amount, which could not afterwards be replaced but at an 
 advanced price. The loss thus occasioned amounted to nearly £ 20,000. 
 The following is the paragraph in the report referring to this sub- 
 ject : — 
 
 " From the severe pressure oil the money market during the latter part 
 of the year, it was deemed advisable to realize some portion of our Gov- 
 ernment securities ; and although the profits of the year have, conse- 
 quently, been curtailed, yet the directors feel assured that the liberality 
 which they were thus enabled to exercise towards its customors will tend 
 
 262
 
 The London and Westminster Bank. 
 
 to the advantage of the bank. The whole of the stock that was sold has 
 since been replaced." 
 
 At this meeting the proprietors recommended to the directors that the 
 general meetings should be held half-yearly, and that the first meeting 
 should be held earlier in the year. The directors accordingly called a 
 special meeting on the 19th of July, for the purpose of receiving a half- 
 yearly report, and for making such alterations in the deed of settlement as 
 would enable the proprietors to meet on the third Wednesday in January, 
 instead of the first Wednesday in March. The result of this resolution is, 
 that the annual general meeting of the bank will in future be held, under 
 the deed, on the third Wednesday in January, and a half-yearly meeting 
 may be called specially by the directors either on the third Wednesday in 
 July, or on any other day, whenever it shall be deemed necessary or ex- 
 pedient. 
 
 From this half-yearly report it appeared, that, from losses in the pre- 
 vious year, it had become necessary to take <£ 5,161 3s. \d. from the sur- 
 plus fund to make up the half-yearly dividend. But in the second half- 
 year the profits exceeded the dividend by <£ 7,237 3s. 2d., making on the 
 whole of the year 1848 an addition to the surplus fund of .£2,076 Os. Id., 
 after paying the dividend of 6 per cent, on the increased paid-up capital 
 of £ 1,000,000. 
 
 II. Its Principles. — At the time the London and Westminster Bank 
 was announced, it was contended by the advocates of the previous system 
 that the principles of joint-stock banking were wholly inapplicable to the 
 wants and habits of the population of London. Had the founders of this 
 bank possessed zeal without discretion, they would probably have disre- 
 garded the peculiarhies of the field of their operations, and have adopted 
 entirely the system of banking so long acted upon in Scotland. They 
 seem, however, to have combined the enlightened views of statesmen 
 with the caution and practical knowledge of men of business. Hence, 
 they followed or discarded the principles of Scotch banking according as 
 they found them adapted, or otherwise, to the local circumstances of the 
 London population. They seemed not so anxious to introduce a new sys- 
 tem of banking, as to guard against the imperfections of the one previous- 
 ly in existence. From the original prospectus and other documents issued 
 by the company, we learn that the following principles were those ulti- 
 mately adopted. 
 
 1. That the bank should consist of avv jnlimited number of partners. 
 This is essential to its character as a joint-stock bank. It was ascertained 
 that within the previous twenty years about twenty private banking houses 
 had stopped payment in London ; that by most of these failures the public 
 had sustained considerable losses, and that great difficulties and embar- 
 rassments had been occasioned by the interruption to business and the 
 want of confidence which these failures had occasioned. A bank com- 
 posed of several hundred partners, all of whose property would be an- 
 swerable for its obligations to the public, seemed the most effectual way 
 of preventing the recurrence of these evils. To show the strength of the 
 company and the extent of the confidence to which they are entitled, a 
 list of the shareholders is published with the annual repoit of the directors. 
 S 263
 
 A Treatise on Banking. 
 
 Since the Act of 1844, these names have also been published at the 
 commencement of each year in a Supplement to the Royal Gazette. 
 The following is an analysis of those published in the year 1847 : — 
 Spinsters, 140 ; married women, 16 ; widows, 66 ; clergymen, 34 ; medi- 
 cal men, 13; naval and military officers, 45 ; solicitors, barristers, and 
 writers to the signet, 9 ; men of title, 12 ; gentlemen and others, 731 : 
 making a total of 1,066. These are resident as follows : — 
 
 In London, and -within fifteen miles I In Ireland, II 
 
 thereof, 675 | In otlicr countries, . . . 18 
 
 In other parts of England, . . 320 
 
 In Scotland, 42 | Total, . . 1,066 
 
 2. A second principle adopted was, that the bank should have a large 
 paid-up capital. 
 
 It was observed that the London bankers did not carry on business 
 with their own capital, but merely upon their credit: they were supposed 
 to be men of property, and, in some cases, this supposition constituted the 
 whole of their working capital. Hence, in some instances, London bank- 
 ers had stopped payment who were perfectly solvent ; but their property 
 was not engaged in their business, and could not suddenly be realized to 
 pay their debts. To obviate these inconveniences, to be prepared at all 
 times for a withdrawal of its deposits, to be able to give adequate accom- 
 modation to its customers, and to support public confidence in seasons of 
 extreme pressure, a large paid-up capital was deemed requisite. No idea 
 seems to have been entertained of remaining satisfied with a small capital 
 in order to pay larger dividends. The directors do not appear to have 
 regarded themselves as mere agents, employed to obtain the most rapid 
 return for a sum of money ; but they acted as the founders of an estab- 
 lishment destined to take a high rank among the national institutions of 
 the country. The capital of the bank was fixed at <£ 5,000,000 sterling, 
 divided into 50,000 shares of £ 100 each. All these shares are in 
 the hands of the partners, and the paid-up capital of the bank is thus 
 £ 1,000,000, with a power in the directors of calling up an additional sum 
 of £ 4,000,000 sterling. 
 
 3. It was observed that the London private banks were adapted only 
 for the rich. An indispensable condition of having an account was that a 
 certain sum should be kept unproductive in the banker's hands. Thus the 
 middle class of society, who had the means of employing the whole of 
 their capital in their respective occupations, were altogether excluded from 
 the advantages of banking. To remedy this defect, the London and 
 Westminster Bank determined to open accounts with persons who had 
 not the means of keeping large balances unemployed, but who were 
 willing to pay the bank a small commission for conducting their ac- 
 counts. The principle of commission is not practised in Scotland with 
 regard to current accounts, as the banks look for payment chiefly by the 
 issue of their notes. In this country the priiK;iple is adopted in the provin- 
 ces, and even by the London bank(>rs in regard to their country accounts. 
 The application of this principle to London accounts was an improvcnnent 
 introduced by the London and Westminster Bank, and it brought the ad- 
 
 264
 
 The London and Westminster Bank. 
 
 vantages and conveniences of banking within the grasp of a large class of 
 the community to whom they were previously denied. The expense of 
 keeping a banking account was also reduced by the prohibition of pres- 
 ents or Christmas boxes to the clerks. Although the system of Christmas 
 boxes is sanctioned by the Bank of England as well as by the private 
 bankers, it is, we consider, a practice more honored in the breach than in 
 the observance. Whether these presents are regarded as taxes upon the 
 customers, oc as charitable donations to the clerks, they were deemed to 
 be equally objectionable. 
 
 4. A further attempt was made to popularize the system of banking in 
 London, by allowing interest upon small sums of money lodged on de- 
 posit receipts. All the witnesses examined before the Parliamentary 
 Committees of 1826 had borne testimony as to the beneficial effects of 
 this system in Scotland. And although the London and Westminster 
 Bank, not being a bank of issue, could not regard these small deposits as 
 an instrument of increasing its circulation of notes, yet it was thought that 
 the system might be rendered a source of profit to the bank, and certainly 
 an advantage to the community. The savings banks could receive no 
 more than .£30 from a depositor in each year, and only .£150 in the 
 whole. Those parties who had further sums they wished to deposit in a 
 place of security upon the principle of receiving interest on the sums thus 
 lodged, were provided with such a place in the London and Westminster 
 Bank. Sums from £ 10 to <£ 1,000 are received on deposit, and interest 
 allowed at a known rate, and they are at all times repayable upon demand 
 without notice. 
 
 The London and Westminster Bank have not adopted the system of 
 cash credits as practised in Scotland. These credits are valued by the 
 Scotch banks chiefly as an instrument for the issue of their notes ; and it 
 may be questioned whether the system can be rendered a source of profit 
 to a non-issuing bank without imposing heavy charges in the form of in- 
 terest and commission upon the customers. 
 
 5. While, however, the founders of the bank were thus regardful of the 
 industrious classes of the community, they were not inattentive to the in- 
 terests of the wealthy. Professional men, merchants, and gentlemen of 
 fortune have often large sums of money in their hands for a short time, 
 waiting favorable seasons of investment. For these sums the private 
 bankers would allow no interest. The London and Westminster Bank 
 determined to take temporary or permanent lodgments of sums of £ 1,000 
 and upwards, upon special agreement as to the rate of interest and time 
 of repayment. The rate of interest is usually governed by the state of 
 the money market, and the principal is repaid at a fixed time, or at a few 
 days' notice, as may be agreed upon. Parties may lodge money upon an 
 interest account who have no current account, and those who have cur- 
 rent accounts may transfer any portion of their balance to an interest ac- 
 count ; but the bank allows no interest on the balance of a current ac- 
 count. It is considered that a large portion of the fluctuating balance of a 
 current account must be kept in the till to meet the daily cheques drawn 
 by the customers ; that the remainder must be invested in the most avail- 
 able, and therefore the least productive securities ; and that considerable 
 
 265
 
 A Treatise on Banking. 
 
 expense is incurred by books, cheques, salaries, d:c., in conducting these 
 accounts ; and hence that the bank could not afford to grant any rate of 
 interest which it would be worth while for the customers to receive. A 
 person, therefore, may have two accounts, — a current account, and a de- 
 posit account. Upon one he receives interest, upon the other the re- 
 ceives none. The London and Westminster Bank think it better to keep 
 these two accounts distinct, than to adopt any system of amalgamation. 
 
 6. Another principle of the bank — not announced in the prospectus, 
 but adverted to in some of the Annual Reports — is that of keeping a 
 large portion of its funds at all times in a convertible state. In the Re- 
 port of March, 1839, the directors state, "Although a low rate of in- 
 terest prevailed during the last year, the directors did not allow the desire 
 of making large profits to tempt them into advances upon inferior securi- 
 ties, or to lock up their funds in inconvertible investments ; they feel as- 
 sured, that any departure from sound principles in banking, even when 
 attended with immediate profit, must always result in loss to the proprie- 
 tors, and danger to the establishment.". Again, in the Report delivered 
 in March, 1844, we read, " Throughout the whole of last year money 
 was exceedingly abundant, and, consequently, cheap. But although a low 
 value of money affects most severely those banks that have the largest 
 paid-up capital, and which have been so managed as to retain the full com- 
 mand of their funds, yet the directors did not suffer the desire of obtaining 
 a higher rate of interest to betray them into advances upon doubtful or in- 
 convertible securities." In conformity with this principle, we find, from 
 the account of assets and liabilities attached to the Annual Reports of the 
 directors, that the amount invested in Government securities is consider- 
 ably more than the whole capital of the bank. The propriety of such a 
 course must have been abundantly evident during the existence of the 
 bank, for it would be impossible to find so many "pressures" on the 
 market, or so much fluctuation in the value of money, within any similar 
 period in the history of banking. It may be presumed that the directors 
 spoke from their own experience, when they stated in their Report of 
 March, 1840, " The years 1837 and 1838 were remarkable for the 
 abundance and cheapness of money, and the year 1839 for scarcity and 
 pressure. Neither of these extremes is favorable to large banking profits : 
 a state in which money is easy without being abundant, and valuable 
 without being scarce, is most conducive to the welfare of both the banking 
 and the commercial interests of the country." 
 
 7. The last principle we shall mention as adopted by the London and 
 Westminster Bank is the system of branches. 
 
 This system, to the extent to which it is now carried, does not seem to 
 have been contemplated by the original founders of the bank. The first 
 prospectus announced merely that a bank would be established in the 
 City, with a branch at the West-end of the town. But a power to estab- 
 lish other branches was inserted in the deed of settlement, and it was soon 
 observed, that, from the increasing extent and business of London, there 
 were districts which were inadequately supplied with banking accommo- 
 dation. In these districts the inhabitants were compelled cither to forego 
 all banking facilities, or to submit to the inconvenience of keeping their 
 
 266
 
 The London and Westminster Bank. 
 
 account with a bank at a distance from their habitation. It was to meet 
 the public wants, more, perhaps, than with any sanguine expectation of 
 reaping any large amount of immediate profit, that the directors extended 
 their branches. Peradventure, too, it was feared that unless the London 
 and Westminster Bank occupied these districts, the inhabitants might be 
 induced to form among themselves small joint-stock banks with inade- 
 quate capital, and thus have impaired the respectability of the system. 
 In one instance this in fact actually occurred. The mode of conducting 
 business is the same at the branches as at the City-office. A customer's 
 cheque can be paid only at the branch on which it is drawn, but he may 
 have money placed to his credit with that branch at any of the other es- 
 tablishments. Those country notes that are made payable at the London 
 and Westminster Bank, are, as matter of courtesy, paid at any of the 
 branches. Each branch makes both daily and weekly returns of its 
 transactions, which are laid before the directors ; and the affairs of all the 
 branches are subjected to the personal inspection of the general manager : 
 at the same time all the arrangements tend to localize the branches, so as 
 to give them as much as possible the character of independent banks. 
 The managers are selected for their experience in banking, and they give 
 immediate replies to the inquiries of both their customers and the public. 
 They are ready to afford every facility to the parochial and other authori- 
 ties, in conducting the financial arrangements of the districts. They al- 
 low the same rate of interest on deposits which is allowed at the City- 
 office : and in making advances or discounts, they are not restricted to the 
 amount which their own funds can supply. Thus each district has, in a 
 branch bank, all the advantages that could be derived from an independent 
 local bank, combined with the additional security and accommodation to 
 be obtained from a more extended and wealthy establishment. 
 
 Most of the branches have, since their establishment, transferred their 
 business to other premises. 
 
 The Westminster Branch was opened on the 10th of March, 1834, at 
 No. 9, Waterloo-place, Pall Mall, and was removed to its present premises. 
 No. 1, St. James's-square, on the 30th of December, 1844. 
 
 The Bloomsbury Branch was opened on the 4th of January, 1836, at 
 No. 213, High Holborn; and the adjoining house, No. 214, was added 
 for transacting business with the public on the 1st of October, 1838. 
 
 The Southwark Branch was opened on the 29th of February, 1836, at 
 No. 12, AVellington-street, in the Borough, and was removed to No. 3, in 
 the same street, on the 26th of December, 1839. 
 
 The St. Marylebone Branch was opened on the 15th of June, 1836, at 
 No. 155, Oxford-street, and was removed to No. 4, Stratford-place, Ox- 
 ford-street, on the 23d of April, 1844. 
 
 Though the system of branches appears to be an extension of the orig- 
 inal views of the Directors, yet the principles on which the business is 
 conducted have undergone no change. It is a proof of the consideration 
 and practical knowledge brought to bear upon the subject, in the first in- 
 stance, that no alteration or improvement has since been found necessary. 
 The success of the company has been attributed more to the general ap- 
 probation with which these views have been received than to any extended 
 
 267
 
 A Treatise on Banking. 
 
 system of private solicitation. This, if correct, must be the more gratify- 
 ing to the directors, as the prosperity of the bank is thus a pubhc homage 
 to the soundness of its principles. 
 
 III. Its Government. — The government of the bank is in a board of 
 directors, consisting of not fewer than twelve members. Three go out 
 annually by rotation, but are eligible for reelection. The present number 
 is fifteen, but it can be increased at any time by a vote of the general 
 meeting of proprietors. There is no governor, or deputy-governor, or 
 permanent chairman. Five of the directors are trustees, and are also 
 registered as the public officers of the company, in whose names, or any 
 one of them, the bank may sue and be sued. The payment of the direc- 
 tors is fixed by the shareholdei's at their general meetings. This sum 
 was voted annually until the year 1839. Up to that year inclusive the 
 annual profits are stated in the reports before the payment to the directors 
 is deducted. In subsequent years these payments are deducted first, and 
 the profits are announced " after defraying the whole expense of manage- 
 ment, including payment to directors." 
 
 By the resolutions of the general meetings appended to the Annual Re- 
 ports, it appears that the first payment to the directors was a sum of 
 £2,500, voted at the general meeting in March, 1836, for the services 
 rendered in the two preceding years. In subsequent years, the payment 
 was <£ 2,500 annually, until March, 1847, when the sum of £4,500 was 
 voted for the year 1846, and the same amount was to be continued in 
 each future year.*' 
 
 A Table, shoioing the amount of Paid-up Capital, Annual Profits, DirJidends, and Surplus 
 Fund, of the London and Westminster Bank, on the 3lst of December in each Year, 
 from the Opening of the Bank. 
 
 Date. 
 
 Paid-up Capiial. 
 
 Profits of the "i 
 
 I'ear t 
 
 Dividends 
 
 1. 
 
 Surplus Fund. 
 
 
 £ 
 
 £ S. 
 
 d. 
 
 £ 
 
 s. 
 
 d. 
 
 £ s. d. 
 
 1834 
 
 182,255 
 
 3,540 6 
 
 6 
 
 2,334 
 
 18 
 
 1 
 
 1,205 8 5 
 
 1835 
 
 267,270 
 
 11,520 10 
 
 
 
 10,818 
 
 12 
 
 
 
 1,907 6 5 
 
 1836 
 
 597,255 
 
 32,483 14 
 
 1 
 
 29,864 
 
 
 
 
 
 4,527 6 
 
 1837 
 
 597,280 
 
 32,404 10 
 
 8 
 
 29,864 
 
 
 
 
 
 7,067 H 2 
 
 1838 
 
 597,280 
 
 43,635 12 
 
 11 
 
 29,864 
 
 
 
 
 
 20,839 4 1 
 
 1839 
 
 597,280 
 
 48,098 3 
 
 
 
 35,836 
 
 16 
 
 
 
 33,100 11 1 
 
 1840 
 
 597,280 
 
 48,951 8 
 
 10 
 
 35,836 
 
 16 
 
 
 
 46,215 3 11 
 
 1841 
 
 786,300 
 
 51,300 
 
 9 
 
 41, .507 
 
 8 
 
 
 
 56,007 16 8 
 
 1842 
 
 800,000 
 
 55,118 14 
 
 2t 
 
 48,000 
 
 
 
 
 
 63,126 10 10 
 
 1843 
 
 800,000 
 
 51,696 5 
 
 7 
 
 48,000 
 
 
 
 
 
 66,822 16 5 
 
 1844 
 
 800,000 
 
 51,081 18 
 
 11 
 
 48.000 
 
 
 
 
 
 69,904 15 4 
 
 1845 
 
 800,000 
 
 66,344 1 
 
 
 
 48,000 
 
 
 
 
 
 88,248 16 4 
 
 1846 
 
 800,000 
 
 72,175 15 
 
 9 
 
 48,000 
 
 
 
 l\ 
 
 98,424 12 1 
 
 (Bonus) 
 
 
 
 
 16,000 
 
 
 
 
 1847 
 
 988,882 
 
 58,223 4 
 
 10 
 
 54,000 
 
 
 
 
 
 100,647 16 11 
 
 1848 
 
 998,768 
 
 62,076 
 
 
 
 60,000 
 
 
 
 
 
 102,723 16 11 
 
 Totals, 
 
 998,768 
 
 688,650 7 
 
 
 
 585,926 
 
 10 
 
 1 
 
 102,723 16 11 
 
 * The ahove article was prefixed to a volume of the Keports and other public docu- 
 ments printed (not puhlished) in 1847, tinder the title of " A Record of the Proeceding;s 
 of the First Thirteen Years of the London and Westminster Bank, with Portraits of 
 its Principal Officers." 
 
 t These are the niH profits after makin? all deductions, including the payment to directors, the in- 
 come-tax, and £ I.OOf) idward-f the preluninary expenses. 
 
 I Tina ainaual Jiiclu ies a sum of il l.iitKj arisiii'.' fr mm premiums on shares .sold. 
 
 268
 
 The London and Westminster Bank. 
 
 Mr. James William Gilbart has been the General Manager of the Bank 
 from its commencement. He was previously the manager of the Water- 
 ford Branch of the Provincial Bank of Ireland. 
 
 The Prospectus of the Bank, January 1, 1849 : — 
 
 LONDON AND WESTMINSTER BANK. 
 
 Established lOth March, ]83i, — under the Act of Parliament, 3^4 Will. IV. c. 98,— 
 and Registered under the Act 7^8 Vict. c. 113. 
 
 Directors. — Henry Bosanquet, Esq.; Henry Buckle, Esq.; Frederick Burmester, 
 Esq.; John Garratt Cattley, Esq. ; Thomas Chapman, Esq., F. R. S.; James Denis 
 de Vitre, Esq. ; Joseph Esdaile, Esq. ; Thomas Farncombe, Esq., Aid. ; Charles 
 Gibbes, Esq. ; William Haiffh, Esq. ; George Hanson, Esq. ; Henrj' Harvey, Esq , 
 F. R. S. ; David Salomons, Esq., Aid. ; John Stewart, Esq. ; Joshua Walker, Esq. 
 
 Trustees and Registered Public Officers. — Henry Bosanquet, Esq. ; Fred- 
 erick Burmester, Esq. ; Joseph Esdaile, Esq. ; Charles Gibbes, Esq. ; Henry Harvey. 
 Esq. 
 
 General Manager. — James William Gilbart, Esq., F. R. S. 
 
 City Office. — Lothbury ; W. T. Henderson, Manager. 
 
 Westminster Branch.' — 1, St. Jamcs's-square ; Oliver Vile, Manager. 
 Bloomshury Branch. — 214, High Holborn ; William Ewings, Manager. 
 Southwurk Branch. — 3, Wellington-street, Borough ; Edward Kingsford, Manager. 
 Eastern Branch. — 87, High-street, Whitechapel ; W. D. Asperne, Manager. 
 St. Marylebone Branch. — 4, Stratford-placc, Oxford-street ; George M. Mitchell, Man- 
 ager. 
 
 The capital of the bank is £ 5,000,000 sterling, in 50,000 shares of £ 100 each. The 
 sum of £20 has been paid on each share, so that the paid-up capital is .£ 1,000,000 ster- 
 ling. This presents the most perfect security to the public, and gives the bank the 
 most ample means for affording to its customers every reasonable accommodation. 
 
 The bank has above eleven hundred partners, whose names are registered at the 
 Stamp Office, and are printed with the Annual Report of the Directors. The advan- 
 tage obtained by a joint-stock proprietary is, that those partners who are customers to 
 the bank participate in tlie profits made by their own accounts. 
 
 Current accounts are received on the same principles as those observed by the Lon- 
 don bankers. Every person connected with the establishment signs a declaration of 
 secrecy as to the accounts of individuals. No Christmas boxes or other gratuities are 
 allowed to be taken by the officers of the bank. 
 
 Parties who are desirous of having current accounts, without being under the neces- 
 sity of keeping a balance, are charged a small commission, proportionate to the amount 
 of'their transactions. This extends the advantage of a banking account to parties 
 having moderate incomes, or who in the course of their business find ample employ- 
 ment for their capital. 
 
 Sums from £ 10 to £ 1,000 are received on deposit, at a rate of interest to be fixed 
 at the time, and they are repayable upon demand, without notice. For these sums re- 
 ceipts are granted, called deposit receipts. By allowing interest for small sums, the 
 benefit of the deposit system, as practised in Scotland, is extended to all classes of the 
 community. 
 
 Sums of £ 1,000 and upwards are also received on deposit receipts, upon such terms 
 as may be agreed upon, with regard to the rate of interest and the time of repayment. 
 Trustees, and others who have money which they cannot immediately employ, may 
 thus obtain an interest for it until an opportunity occurs for its permanent investment. 
 Parties may lodge money upon an interest account who have no current account, and 
 those who have current accounts may transfer any portion of their balance to an in- 
 terest account. 
 
 Circular notes and letters of credit are issued for the use of travellers and residents 
 on the Continent and the United States. These notes are payable at every important 
 
 269
 
 A Treatise on Banking. 
 
 place in Europe or in the United States, and thus enable a traveller to vary his route 
 without inconvenience. No expense whatever is incurred, and when cashed no charge 
 is made for commission. These notes may be obtained at the City-Othce in Lotlibury, 
 or at any of the bi'anches. 
 
 The bank Uikes the agency of joint-stock banks, private bankers, and other parties 
 residing at a distance. By the Act 7 & 8 Victoria, c. 32, this bank obtained the right 
 of accepting bills drawn at a less period than si.>i months after date, and by the Act 
 7 & 8 Victoria, c. 1 13, it accjuircd the privilege of suing and being sued in the name 
 of any one of its registered public officers. 
 
 II. — The London Joint-Stock Bank. 
 
 The Joint-Stock Bank was formed in the year 1836. That year was 
 one of great excitement in favor of the principle of joint-stock banking 
 both in London and in the country. The shares of the new bank were 
 readily taken by a very respectable proprietary, most of whom were resi- 
 dent in London. The bank had also from its commencement the ad- 
 vantage of an influential commercial directory. A new feature in London 
 banking was announced. The bank agreed to allow interest at 2 per 
 cent, on the minimum balance of a current account. At the end of each 
 month interest was allowed on the lowest balance that had a[)peared to the 
 party's credit at the close of any day during the month. Previous to the 
 commencement of business, the bank engaged as manager Mr. George 
 Pollard, who had for many years been the chief clerk in the private bank 
 of Messrs. Williams, Deacon, & Co. 
 
 The capital of the bank was fi.xed at .£3,000,000, divided into 60,000 
 shares of £ 50 each. 
 
 The bank was opened on the 21st of November, 1836, at temporary 
 ofiices in Coleman-street. The shares subscribed for, and upon which 
 the deposit of £ 2 per share had been paid, then exceeded £ 30,000. 
 Soon afterwards the bank removed to their present premises in Prince's- 
 street. 
 
 The first annual meeting of the proprietors was held on the 13th of De- 
 cember, 1837, at the bank premises in Princes-street. The number of 
 shares on which the £2 deposit and the first call of £b per share had 
 been paid was then 31,080, making a paid-up capital of =£217,560. 
 Upon this capital a dividend was declared at the rate of 4 per cent, and 
 £2,932 Os. 9d. carried to the credit of" the Guarantee Fund." 
 
 In the year 1838 the directors made a call of .£3 a share, payable the 
 21st of May, 1838, which increased the paid-up capital to £ 10 a share. 
 And in this year the dividend was raised to 5 per cent. 
 
 At the meeting in June, 1839, the directors stated that the deed of set- 
 tlement required all the effects of the bank to be taken strictly at the mar- 
 ket value of the day on which the accounts are made up. The half year's 
 profits were consequently lower, from the exchequer bills held by the 
 bank being valued at their then low price in the market. 
 
 It was resolved at this meeting that the time of balancing the books of 
 the company be in future the 30th day of June and the 31st day of De- 
 cember in each year, instead of the 20th day of May and the 20th day of 
 November ; and that the half-yearly meetings of the company be in fu- 
 ture held in the months of January and July. 
 
 270
 
 The London Joint- Stock Bank. 
 
 At the general meeting held on the 11th of January, 1840, the direc- 
 tors announced their intention to issue 12,43*2 of the reserved shares, in 
 the proportion of two to every five held by each shareholder. The shares 
 were issued aX £ \ premium, and these premiums were added to the 
 guarantee fund. At the meeting on the 11th of July, 1840, the report 
 stated that out of these 12,432 shares, 12,254 had been claimed, and the 
 remaining 178 had been sold on account of the bank at a premium of <£ 3 
 each. The report further stated, that " the manager, Mr. Pollard, having 
 claimed for his nominees the 1,000 shares at par to which they were 
 entitled by his agreement when originally engaged, the same have been 
 issued to them, which increases the number of paid-up shares entitled to 
 participate in the present dividend to 32,080." 
 
 In the latter end of the year 1840, Messrs. Wright & Co., a very old 
 banking-house, having many connections among the Roman Catholics, 
 stopped payment. The London Joint-Stock Bank determined to open a 
 branch at the West-end of London, and appointed two of Mr. Wright's 
 partners to be their managers. 
 
 The directors made the following announcement of this event to the 
 shareholders at the meeting held the 13th of January, 1841 : — 
 
 " Circumstances having occurred which appeared to present a favora- 
 ble opportunity to establish another joint-stock bank in the western part 
 of the metropolis, the directors resolved to open a branch of this bank in 
 the premises recently occupied by Messrs. Wright & Co., No. 6, Henri- 
 etta-street, Covent-garden. 
 
 " Business was commenced at the branch in question, which is called 
 ' The Western Branch of the London Joint-Stock Bank,' on Saturday the 
 5th ultimo, and the directors have every reason to expect that it will ma- 
 terially contribute to the prosperity of this establishment." 
 
 At the same meeting the directors announced their intention to issue 
 the remainder of their shares : — 
 
 " On reference to the statement of assets and liabilities, the proprietors 
 will perceive that the number of shares has been increased, by the issue 
 of reserved shares during the past year, to 44,512 ; and the directors are 
 of opinion that the time has now arrived when it is expedient to complete 
 the number originally contemplated, by the issue of the remainder, which 
 they have accordingly resolved to do. 
 
 " As the directors have learned, with much satisfaction, that the princi- 
 ple adopted on the former occasion was very generally approved of, they 
 have decided, in the present instance, to follow the same plan, as nearly 
 as possible, by issuing at a premium of ^ 1 each, one for every three 
 shares held by the present proprietors, and by dividing the payment for 
 the shares into four instalments of ^2 10s. each, payable on the 15th of 
 April, 31st of May, 29th of July, and 15th of September next. The pre- 
 mium to be received on the said shares will again be carried to the credit 
 of the guarantee fund. 
 
 " There will then remain to complete the number of 60,000 shares the 
 small excess of 651, which will be disposed of by the directors to the best 
 advantage for the benefit of the bank." 
 
 At the meeting in July the directors stated that, having been unable to 
 
 271
 
 A Treatise on Banking. 
 
 agree with the assignees of Messrs. Wright & Co. upon terms for the 
 purchase of tlie premises in Henrietta-street, and the opportunity ofTering 
 of obtaining the premises tliat liad recently been occupied by Messrs. 
 Hammersley &; Co. (who had also failed) in Pall Mall, the directors de- 
 termined upon removing the business of their Western Branch to the lat- 
 ter house. The house in Henrietta-street was taken by the Commercial 
 Bank of London, who then opened a Western Branch. 
 
 At the general meeting held on the 12th of January, 1842, the direc- 
 tors announced, that the instalments on the last issue of shares having 
 been received, the paid-up capital was .£589,700, and as they considered 
 it desirable to complete the issue of the whole 60,000 shares, they in- 
 tended to dispose of the remaining 1,030 to the public. These shares 
 were afterwards sold at a premium of o£ 3,025 12s. 6d., which amount 
 was added to the guarantee fund. 
 
 At this meeting the dividend was raised to 6 per cent., at which rate it 
 has since remained. 
 
 At the July meeting in 1843, the directors announced that, in conse- 
 quence of the abundance of money and the low rate of interest, the profits 
 were only £ 12,183 17s. bd., and they had recourse to the guarantee fund 
 for a sum equal to pay the usual half-yearly dividend, at the rate of 6 per 
 cent, per annum, — .£5,817 2s. Id. 
 
 In January, 1844, the directors took .£ 1,529 3s. 4.d. from the guaran- 
 tee fund, to make up the amount of the usual dividend. 
 
 At the meeting held in July, 1844, the directors announced a change 
 in their allowance of interest on current accounts. They had come to a 
 resolution in February last, " that on and after the 1st of March, the in- 
 terest allowed by the bank to customers on their minimum balance be one 
 per cent., except on accounts the monthly minimum balance of which 
 on the average of the half-year shall be under two hundred pounds." 
 <£ 1,959 12s. lOd. was taken from the reserved fund to make up the half- 
 yearly dividend. 
 
 In January, 1847, the directors announced the following plan for the 
 future regulation of the guarantee fund : — 
 
 " In meeting the shareholders at the usual period, the directors have 
 satisfaction in laying before them accounts which show that during the 
 last six months the bank has realized a net profit of c£ 31,580 17s. 
 
 " The question how this profit ought to be appropriated has necessarily 
 brought under the serious consideration of the directors the present state 
 of the guarantee fund, and the amount to which it should attain in order 
 to carry out fairly the design for which it was instituted. And the result 
 of their deliberations has been a resolution that it will not be expedient 
 that it should at present exceed £ 120,000 except by the accumulation of 
 its own interest, and such sums as may be too small to apply to a bonus. 
 But that at the end of each year, in addition to the dividend of 6 per cent, 
 the surplus profit should be divided among the shareholders, provided 
 such surplus amount to 2s. per share in the capital of the company, other- 
 wise that h should be added to the guarantee fund. 
 
 " In accordance with this decision, the board will have on this occasion 
 the pleasure of paying to the shareholders a bonus of 2s. per share, in ad- 
 
 272
 
 The London Joint-Stock Bank. 
 
 dition to the usual dividend, and the guarantee fund will then amount to 
 £ 120,117 14s. 3d:' 
 
 In January, 1848, the directors declared a bonus of 7s. 6d. a share, in 
 addition to the usual dividend of 6 per cent. ; after sustaining a loss of 
 £ 6,000 by the defalcation of one of their clerks on the establishment of 
 the Western Branch. 
 
 In January, 1849, the directors declared a bonus of 75. a share, in ad- 
 dition to the usual dividend of 6 per cent. 
 
 A Statement of the Paid-up Capital, Profits, Dividend, and Surplus Fund, of the Londok 
 Joint-Stock Bank, on the 3Is< December in each Year. 
 
 Date. 
 
 Paid-up Capital. 
 
 Profits of the Year. 
 
 Amount of Div 
 
 idend. 
 
 Surplua Fund. 
 
 
 £ 
 
 £ s. d. 
 
 £ 
 
 s. 
 
 d. 
 
 £ 
 
 s. 
 
 d. 
 
 1837 
 
 217,560 
 
 11,634 8 9 
 
 8,702 
 
 8 
 
 
 
 2,932 
 
 
 
 9 
 
 1838 
 
 310,800 
 
 21,243 12 6 
 
 13,209 
 
 
 
 
 
 10,966 
 
 13 
 
 4 
 
 1839 
 
 310,800 
 
 27,068 6 10 
 
 17,285 
 
 11 
 
 3 
 
 20,749 
 
 8 
 
 10 
 
 1840 
 
 445,120 
 
 47,922 3 10* 
 
 19,148 
 
 
 
 
 
 49,523 
 
 12 
 
 8 
 
 1841 
 
 589,700 
 
 61,027 5 4t 
 
 28,819 
 
 
 
 
 
 81,731 
 
 18 
 
 
 
 1842 
 
 600,000 
 
 48,671 19 2% 
 
 36,000 
 
 
 
 
 
 94.403 
 
 17 
 
 2 
 
 1843 
 
 600,000 
 
 31,420 16 6 
 
 36,000 
 
 
 
 
 
 89,824 
 
 13 
 
 8 
 
 1844 
 
 600,000 
 
 37,041 14 4 
 
 30.000 
 
 
 
 
 
 90,856 
 
 8 
 
 
 
 1845 
 
 600,000 
 
 41,440 14 6 
 
 36,000 
 
 
 
 
 
 96,297 
 
 2 
 
 6 
 
 1846 
 (Bonus) 
 
 600,000 
 
 65,820 11 9 
 
 36,000 
 6,000 
 
 
 
 
 l\ 
 
 120,117 
 
 14 
 
 3 
 
 1847 
 (Bonus) 
 
 600,000 
 
 62,131 7 4 
 
 36,000 
 22.500 
 
 
 
 
 l\ 
 
 123,759 
 
 1 
 
 7 
 
 1848. 
 (Bonus) 
 
 600,000 
 
 62,005 18 11§ 
 
 36,000 
 21,000 
 
 388,663 
 
 
 
 
 19 
 
 3 
 
 3 
 
 128,765 
 128,765 
 
 
 
 
 6 
 
 Totals, 
 
 600,000 
 
 517,428 19 9 
 
 6 
 
 *This sum includes £, 12,778 8s. %d. received from premiums on shares sold. 
 
 t " £ 14,466 Os. Od. ditto ditto. 
 
 I " £ 3,025 12s. e,d. ditto ditto. 
 
 § These annual amounts of profits include the sums applied as intere.it of the surplus fund. 
 
 Prospectus for 1849 : — 
 
 THE LONDON JOINT-STOCK BANK. 
 Head Office. — Princes-street, Mansion House. 
 
 Western Branch. — 69, Pall Mall. 
 Capital, £ 3,000,000 in 60,000 Shares of £ 50 each. 
 The business of the bank is conducted on the following principles : — 
 
 Accounts of parties, properly introduced, are received agreeably to the present cus- 
 tom of London bankers, with tliis advantage, that interest is allowed on current ac- 
 counts kept at the Head Office. 
 
 Interest at the rate of £ 1 per cent, per annum will be allowed on the smallest bal- 
 ance which may appear to the credit of each account, kept at the Head Office, at the 
 close of any day during the preceding month : provided the monthly minimum balance, 
 on the average of the half-year, shall not be under £200. 
 
 Sums of money received on deposit, at such rate of interest, and for such periods, as 
 may be agreed upon, reference being had to the state of the money market ; and, if 
 required, bills or promissory notes, at not less than six months' date, will bo deliv- 
 ered to depositors, in lieu of receipts, for sums of not less tlian £ 100. 
 
 The agency of joint-stock, and other country and foreign banks, undertaken on such 
 terms as may be agreed iii)on. 
 
 Investments in, and sales of, all descriptions of British and foreign securities, bul- 
 
 373
 
 A Treatise on Banking. 
 
 lion, specie, &c., effected, dividends received, and every other description of bank- 
 ing business and money agency transacted. 
 
 The board of directors meets weekly, when a full statement of the affairs of the 
 bank is laid before them. 
 
 Circular Letters of Credit granted on the Continent, and on the chief commercial 
 towns of the world. 
 
 January I8th, 1849. 
 
 III. — The Union Bank of London. 
 
 The Union Bank of London was fornned chiefly by gentlemen who 
 were, bv birth or otherwise, connected with Scotland. The capital was 
 fi.xed at '<£ 3,000,000 in 60,000 shares of <£50 each. 
 
 The bank adopted the principle of allowing 2 per cent, interest on the 
 minimum balance of a current account : — " Parties keeping current or 
 drawing accounts will be credited on the first day of every month, on the 
 smallest balance at the credit of their account at the close of business on 
 any day during the past month, provided that such balance shall not be 
 less than £ 100. The total amount of interest will be passed to account 
 every six months." 
 
 The bank was opened on the 4th of February, 1839, at No. 8, Moor- 
 gate-street ; and a branch was opened on the 25th of March following, 
 at temporary offices in Argyle-street, Regent-street, until a bank-house 
 should be erected on the freehold ground which the directors had pur- 
 chased for that purpose. 
 
 Previous to the opening of the bank the directors engaged, as general 
 manager, Mr. William Wilson Scrimgcour, one of the principal officers 
 in the discount department of the Bank of England. 
 
 The first meeting of shareholders was held on the 8th of July, 1840. 
 The report stated that on the 30th June the paid-up capital was .£210,025, 
 being £ 5 per share paid on 42,005 shares, held by 738 proprietors. A 
 dividend was declared at the rate of 5 per cent. ; and, after liquidating 
 a portion of the preliminary expenses, .£ 2,000 was set apart as the 
 foundation of a surplus or guarantee fund. 
 
 In the Second Annual Report, made to the general meeting of pro- 
 prietors the 12th of July, 1841, the directors stated they had made an 
 additional call of <£ 5 per share, which had been most promptly re- 
 sponded to by the proprietors ; and the paid-up capital then amounted to 
 i: 422,700. 
 
 The report also stated that, a favorable opportunity having offijred itself 
 for opening a branch at Charing-cross, the directors availed themselves of 
 it, by purchasing the premises No. 4, Pall Mall East, lately occupied by 
 the Metropolitan Bank, which had withdrawn from business. Mr. Wight, 
 the manager of the Metropolitan Bank, was appointed the manager of 
 the branch. 
 
 At the general meeting held in July, 1844, the directors stated that, 
 " the premises now occupied by the bank having bCcome inadequate for 
 the convenient transaction of its extended business, the directors had 
 availed themselves of the opportunity of purchasing from the Grea* 
 Western Railway Company, their extensive freehold premises in Princet- 
 
 274
 
 The Union Bank of London. 
 
 street, which will secure a permanent position for the bank in the most 
 convenient situation in the city." 
 
 The directors state in their report of July 1847 : — 
 
 " The directors consider they are justified in increasing the rate of 
 dividend, and they have therefore declared a dividend for the last six 
 months of 3| per cent., which, with 2| per cent, paid in January, will 
 make the dividend 6 per cent, clear of income-tax, for the whole year." 
 
 The report also states : — 
 
 " The directors have considered the subject of the appropriation of the 
 reserved shares, and have resolved that they shall be offered in the first 
 instance to the shareholders only, in ratable proportion to the shares 
 held by them, and on such terms as shall be equivalent to a liberal bonus. 
 And the proprietors may rely on the directors giving ample notice of, and 
 selecting such period for, this appropriation as shall be most desirable for 
 the interests of the bank, and advantageous to the proprietors individ- 
 ually." 
 
 In the report of July, 1848, the directors again refer to this subject : — 
 
 " With respect to these shares, which were alluded to in the last an- 
 nual report, it is almost superfluous to refer to the unprecedented mer- 
 cantile crisis which has marked the eventful period since the last general 
 meeting, as having rendered it inexpedient to appropriate them at a time 
 when it might be inconvenient to many proprietors to avail themselves 
 even of so advantageous an investment." 
 
 Table of the Paid-up Capital, Annual Profits, Dividends, and Amount of Surplus Fund, 
 of the Union Bank of London, during each Year ending the 30th of June. 
 
 Date. 
 
 Paid-up Capital. 
 
 Profits of the \ 
 
 'ear. 
 
 Amount of Divii 
 
 Jend. 
 
 Surplus Fund. 
 
 
 £■ 
 
 £. 
 
 s. 
 
 d. 
 
 £. 
 
 s. 
 
 d. 
 
 £. s. 
 
 d. 
 
 1840 
 
 210.025 
 
 12.501 
 
 5 
 
 
 
 10,501 
 
 5 
 
 
 
 2.000 
 
 
 
 1841 
 
 422,700 
 
 17,851 
 
 5 
 
 
 
 15,851 
 
 5 
 
 
 
 4,000 
 
 
 
 1842 
 
 422,900 
 
 23,145 
 
 
 
 
 
 21,145 
 
 
 
 
 
 6,000 
 
 
 
 1843 
 
 422,900 
 
 23,145 
 
 
 
 
 
 21,145 
 
 
 
 
 
 8.000 
 
 
 
 1844 
 
 422,900 
 
 24,613 
 
 16 
 
 1 
 
 21,145 
 
 
 
 
 
 11,468 16 
 
 1 
 
 1845 
 
 422,900 
 
 28,630 
 
 12 
 
 2 
 
 21,145 
 
 
 
 
 
 18,954 8 
 
 3 
 
 1846 
 
 422.900 
 
 23,145 
 
 
 
 
 
 21,145 
 
 
 
 
 
 20,954 8 
 
 3 
 
 1847 
 
 422,900 
 
 42,070 
 
 5 
 
 5 
 
 25,374 
 
 
 
 
 
 37,650 13 
 
 8 
 
 1848 
 
 422,900 
 
 34,474 
 
 
 
 
 
 25,374 
 
 
 
 
 
 46,750 13 
 
 8 
 
 9tals, 
 
 422,900 
 
 229,576 
 
 3 
 
 8 
 
 182,825 
 
 10 
 
 
 
 46,750 13 
 
 8 
 
 Present Prospectus : — 
 
 UNION BANK OF LONDON. 
 
 Capital £ 3,000,000, in Shares of £50 each. 
 
 Directors. — Sir Peter Laurie, Alderman, Governor; William Mountford Nurse, 
 Esq., Deputy Governor ; George Webster, Esq. ; John Barnes, Esq. ; J. W. Sutherland, 
 Esq. ; James Farquhar, Esq. ; Peter Laurie, Esq.: John Conneil, Esq. ; Charles Lyall, 
 Esq. ; John Chapman, Esq. ; Henry Hulbert, Esq. ; Archibald Boyd, Esq. ; Lieut. 
 Col. Matheson, M. P. ; John Scott, Esq, 
 
 Principal Office. — 2, Princes-street, Mansion-house. 
 
 William Wilson Scrimgeour, General Manager. 
 
 Regent-street Branch Office. — Argyll-place ; Henry T. Clack, Manager. 
 
 Charing Cross Branch Office. — 4, Pall-mall, East; Alexander Wight, Manager. 
 
 Secretary. — Walter Laurie. 
 
 275
 
 A Treatise on Banking. 
 
 The capital of the bank is £ 3,000,000 sterling, in 60.000 shares of .£ 50 each ; 42,290 
 of these shares (on each of which £10 has been paid, making the paid-up capital 
 £422,900) are held by nearly 600 proprietors, whose names are published periodically. 
 
 Current Accounts. — Parties keeping current or drawing accounts will be credited on 
 the first day of every month with a month's interest, at the rate of 2 per cent, per 
 annum, on the smallest balance at the credit of their account at the close of business 
 on any day during the past month, provided that such balance shall not be less than 
 £ 100. The totivl amount of interest will be passed to account every six months. 
 
 Deposit Accounts. — The rate of interest at present allowed on money placed on de- 
 posit at ten days' notice, is £2 per cent., but which will rise or fall, pro ratd, with the 
 Bank of England rate of discount for first-class bills, being always one per cent, under 
 that rate. The maximum not to exceed 5 per cent. Receipts for the sums so de- 
 posited will be granted to the parties ; or, for the convenience of depositors going 
 abroad, bills or promissory notes, at not less than six months' date, including interest 
 till maturity, will be issued. 
 
 GENERAL BUSINESS. 
 
 The agency of country and foreign banks, whether joint-stock or private. 
 
 Circular notes and letters of credit issued for all parts of the continent of Europe 
 and elsewhere. « 
 
 Purchases and sales effected in all the British and foreign stocks and seeurities, and 
 the dividends received without charge. 
 
 The half-pay, &c., of officers, being customers, also received without charge. 
 
 W. W. ScRiMGEOUR, General Manager 
 
 IV. — The Commercial Bank of London. 
 
 This bank commenced at No. 3 Moorgate Street, Lothbury. Its shares 
 were £ 1.000 each. The fir.st manager was Mr. Sparkes, who had been 
 a private banker at Exeter. The present manager, Mr. Alfred R. Cutbill, 
 was sub-manager of the London and County Bank. 
 
 A Statement of the Paid-up Capital, Profits, Dividend, and Surplus Fund, of the Com- 
 mercial Bank of London, on the 3lst of December in each Year. 
 
 Date. Paid-up Capital. Profits of tiie Ye;ir. Amount of Dividend. Surplus Fund. 
 
 £ £ s. d. £ s. d. £ s. d. 
 
 1841, . . . 80,000 3,619 19 .5 2,684 14 3 935 5 2 
 
 1842, . . 80,000 4,584 4 3 4,000 1,519 9 5 
 
 1843, . . . 80,000 3,249 3,200 1,568 9 5 
 
 1844, . . 80,000 4,945 12 2 4,000 2,514 1 7 
 
 1845, . . . 100,000 6,981 16 8 4,987 6 9 4,508 11 6 
 
 1846, . . 122,860 12,600 16 8 7,042 8 6 10,066 19 8 
 
 1847, . . . 128,280 12,382 13 2 7,624 7 2 14,825 5 8 
 
 1848, . . 128,280 10,257 19 4 7,696 16 17,386 9 
 
 Totals, . . 128,280 58,622 1 8 41,235 12 8 17,386 9 
 
 The first annual meeting was held on the 30th of June, 1841, when 
 the paid-up capital amounted to £ 80,000, on which a dividend was paid 
 at the rate of 4 per cent, per annum. The bank liad opened a Western 
 Branch in Henrietta Street, Covcnt Garden, in the premises formerly oc- 
 cupied by the private bank of Messrs. Wright & Co., who had become 
 bankrupts. 
 
 276
 
 The London and County Bank. 
 
 At the annual meeting in 1842 the dividend was raised to 5 per cent. 
 
 In the year 1843 the dividend declared was 4 per cent., and in 1844 it 
 was 5 per cent. 
 
 At a special meeting, held on the 3d of June, 1844, it was resolved to 
 reduce the shares from £ 1,000 to £ 100 each. 
 
 In July, 1845, the directors met their proprietors for the first time in 
 their new house, in Lothbury. The rate of interest was advanced to six 
 per cent. 
 
 Present Prospectus : — 
 
 COMMERCIAL BANK OF LONDON, 
 
 J LOTHBDRy, AND 6, HENRIETTA STREET, COVENT GARDEN. 
 
 Capital, £2,000,000, in 20,000 Shares, of £100 each. 
 
 Directors. — John Taylor, Esq., Chairman. Thomas Barnewall, Esq., Deputy 
 Chairman. Charles Dickson Archibald, Esq. ; William Beresford, Esq., M. P. ; William 
 SprottBoyd, Esq.; John Alfred Chowne, Esq.; William Cooper, Esq.; James Alex- 
 ander Douglas, Esq. ; Charles Hill, Esq. ; Jonathan Hopkinson, Esq.; Edward Ox- 
 enford, Esq. ; John Savage, Esq. ; Joseph Thompson, Esq.; Joseph Underwood, Esq. ; 
 Richard Walker, Esq., M. P. ; Thomas Winkworth, Esq. 
 
 Manager. — Mr. Alfred R. Cutbill. 
 
 Solicitors. — Messrs. Amory, Nelson, Travers, & Wynn, and Messrs. Norris & Sons. 
 
 Accounts of parties received and kept on the plan generally adopted by London 
 bankers. 
 
 Parties having current accounts with this bank have the advantage of transferring 
 any surplus balance to a deposit account bearing interest ; and sums of money are re- 
 ceived on deposit from parties not keeping current accounts, at such rate of interest, 
 and for such periods, as may be agreed upon. 
 
 The agency for country and foreign banks undertaken on such terms as may be 
 agreed upon. 
 
 Purchases and sales of British and foreign securities, &c., effected, dividends re- 
 ceived, and every description of banking business transacted. 
 
 V. — The London and County Bank. 
 
 This bank was originally called the Surrey, Kent, and Sussex Bank, 
 and it was intended that its head office should be fixed in Southwark. It 
 afterwards assumed the above title, and took the premises formerly occu- 
 pied by the private bank of Messrs. Lees, Brassey, & Co., at No. 71 
 Lombard Street. From thence it removed to No. 21 Lombard Street, 
 the premises formerly occupied by the private bank of Messrs. Esdaile & 
 Co. It has forty-five branches, all in the country. 
 
 The following Private Banks have been absorbed in the London and 
 County Bank : — 
 
 I.Aylesbury, J. & T. Chapman. I 5. Petersfield, Hector & Co. 
 
 2. Chatham, Jeffreys & Hill. | 6. Sandwich, Emmerson & Co. 
 
 3. Cranbrook, Wilniluii-st & Co. I 7. Pctworth, John Stoveld. 
 
 4. Oxford, Davenport & Co. | 
 
 277
 
 A Treatise on Banking. 
 
 The branches at Abingdon, Arundel, Cambridge, Canterbury, Chiches- 
 ter, Romford, St. Alban's, and Stoney Stratford, were established in con- 
 sequence of the failure of private banks in those places. 
 
 Present Prospectus : — 
 
 THE LONDON AND COUNTY JOINT-STOCK BANiaNG COMPANY. 
 
 Subscribed Capital £500,000, in Shares of £50 each; £20 paid. 
 
 Parent Establishment, 21 Lombard Street. 
 
 Directors. — John Sadieir, Esq., M. P., CJiairman. John Griffith Frith, Esq., 
 Deputy Chairman. William Cory, Esq. ; James William Deacon, Esq. ; J. A. Durham, 
 Esq. ; Swynfen Jcrvis, Esq. ; John Cuthbert Joyncr, Esq. ; J. H. Lance, Esq. ; Richard 
 Springett, Esq. ; Clement Tabor, Esq. ; John Wheelton, Esq.; James Rhodes, Esq., 
 Inspecting Director. 
 
 Tbdstees. — Wm. Cory, Esq. ; James William Deacon, Esq. ; Swynfen Jervis,- Esq. 
 
 General Manager. — Henry Luard, Esq. 
 
 Standing Counsel. — Sir John Jervis, M. P., Attorney General; Russell Gumey, 
 
 Esq., Q. C. 
 
 Secretary. — R. P. Nichols, Esq. 
 
 Solicitors. — Messrs. Wilkinson & Gumey. 
 
 Abingdon and Wantage, 
 Arundel and Worthing, 
 Ashford, 
 
 Aylesbury and Thane, 
 Banbury, 
 
 Bishop's Stortford and Saf- 
 fron Walden, 
 Braintree, 
 Brighton, 
 Buckingham, 
 Cambridge, 
 Canterbury, 
 Chatham, 
 Chelmsford, 
 Chichester, 
 Coggeshall, 
 Cranbrook, 
 
 Branch Banks of the Company 
 Croydon, 
 Dorking, 
 Dover, 
 Gravesend 
 Greenwich, 
 Hal stead, 
 
 Hastings and Battle, 
 Hertford, 
 Horsham, 
 Huntingdon, St. Ive's, and 
 
 St. Neot's, 
 Leighton Buzzard, 
 Lewes, Hailsham, and NeW' 
 
 haven, 
 Luton, Dunstable, and 
 
 Hitchin, 
 Maidstone, 
 
 Maldon, 
 
 Oxford and Witney, 
 
 Petersfield, 
 
 Petworth and Midhurst, 
 
 Romford and Chipping 
 
 Ongar, 
 Rye, 
 
 Sandwich, 
 Seven Oaks, 
 St. Alban's, 
 Stoney Stratford, 
 Tenterden, 
 Tunbridge, 
 Tunhridge Wells, 
 Woolwich, 
 Wrotham. 
 
 '• I look upon the principle of joint-stock companies as one of the great discoveries 
 of modern times. I regard them, when made responsible to public opinion, as the 
 ground on which all successful enterprise must be founded. I say further, that if there 
 be any one description of business to which the principle of a joint-stock company can 
 be more applicable than anotlier, it is, under due restrictions, the business of banking." * 
 
 The history of joint-stock banks is short, — they sprang from necessity. The panic 
 of 1825 provoked an inquiry into the banking system, and the result was the en- 
 actment of the 7th Geo. IV., the statute to which they owe their origin in this 
 country. 
 
 Their success has been extraordinary. Establislied in Scotland, Ireland, and Eng- 
 land, their shares command high premiums, in many cases exceeding 100 per cent, on 
 the paid-up capital. Their stability and prosperity in Scotland, from the date of their 
 original foundation up to the present hour, are notorious : it is beyond a question, that 
 no principle of banking which has yet been subjected to the test of experience has af- 
 forded an equal extent of credit witli equal security. 
 
 They have been tendered by the Legislature as a safe medium of commercial trans- 
 
 * Extract from the Speech of the Cliancellor of the Exchequer, 1835 
 278
 
 The London and County Bank. • 
 
 actions; they have been accepted by the lcadin<^ capitalists; and they have received 
 the stamp of approbation and implicit contidencc from the great mass of the population 
 of the three kingdoms. 
 
 The primary advantage of joint-stock banks is their undoubted stability. They 
 ofler to individuals the opportunity of becoming their own bankers. As shareholders, 
 they participate in the protits of their own accounts. If they require accommodation, 
 a part of the consideration they pay for it returns to them ; if they deposit, the amount 
 is doubly fruitful : first, they receive from the bank, interest on the sum deposited ; and 
 secondly, they share in the profit -which the bank itself makes by the use of their in- 
 vestment. In a word, private individuals, instead of giving the profit of their accounts 
 to private bankers, by becoming shareholders in joint-stock banks divide it amongst 
 themselves. 
 
 As a short summary, it may be said, that joint-stock banks owe the public approba 
 tion bestowed on them, and the public confidence they enjoy, to the numl>er and 
 wealth of their proprietors, to the publicity of their transactions, to their actually sub- 
 scribed capital, to the security which they offer for the fulfilment of their engagements. 
 to the almost unlimited credit of a large and rich proprietary, to the power thence de- 
 rived to afford to the public the greatest accommodation consistent with prudence, to 
 the individual influence of each member of the company, whose exertions secure to it 
 considerable business at the outset, and to their perfect freedom from a dread of the 
 sudden and ruinous checks to which private banks, however solvent and honorable the 
 partners, are liable in those panics which seem to occur periodically in great trading 
 communities. These advantages are found to be obtainable from banking companies 
 founded on the joint-stock principle, and from them alone. 
 
 The London and County Bank was established with the avowed object of introduc- 
 ing these advantages amongst the inhabitants of the surrounding districts of London, 
 within sixty-five miles ; and whatever the difficulties of prejudice and opposition which 
 the directors had to encounter in the first instance, such has been the growing favor of 
 the joint-stock system of banking, engendered by the inquiring spirit of the age, and 
 confirmed by the disastrous results consequent upon the failure of private banks, that 
 the London and County Banking Company can now triumphantly point to upwards 
 of forty branches which have, one after the other, been raised into existence, and 
 which, nurtured by the wants of their various localities, are steadily and progressively 
 increasing in profit and importance. 
 
 The London and County Bank is protected from one of the most active causes of 
 loss to a bank, — panic; by not being a bank of issue, it does not coin a circulation 
 of its own ; it confines its payments to that which has ever merited public confidence, 
 the coin of the realm, and the notes of the most powerful joint-stock bank in the world, 
 — the Bank of England. 
 
 The company at the parent bank and its branches open accounts with commercial 
 houses and private individuals, either upon the plan usually adopted by the London 
 bankers, or by charging a small commission to those persons to whom it may be more 
 convenient to use the whole of their capital. 
 
 They allow interest at the rate of 1 per cent, per annum on the amount of the 
 monthly minimum balance exceeding £100, which is passed to the customer's credit 
 at the expiration of the quarter. 
 
 They receive deposits at such rate of interest and for such periods as may be agreed 
 upon, reference being had to the state of the money market. 
 
 They obtain letters of credit for all the principal cities and towns of foreign 
 countries. 
 
 They receive dividends ; army, navy, and civil pay, and pensions; proceeds of ec- 
 clesiastical property, and rents ; effect transfers and sales of stock and shares ; and 
 transact financial business generally. 
 
 The following are the leading features in the deed of settlement on which the com- 
 pany has been constituted : — 
 
 \. The shares of the London and County Bank are £.50 each, and they are dis- 
 persed amongst upwards of 400 proprietors, mostly residing in the immediate localities 
 of its branches. 
 
 2. As regards the liability of the shareholder, the deed of settlement contains a 
 
 clause, which, while it leaves unimpaired that great principle of the law on which the 
 
 ftabilitv of joint-stock banks is founded, and which secures to them "unlimited'' 
 
 public "confidence, namelv, the "unlimited" liability of each shareholder for the obli- 
 
 T ' 279
 
 • A Treatise on Banking. 
 
 gations of the company, at the same time efficiently protects him, by providing, that if 
 ever the losses of the company siiall amount to one third of the paid-up capital, a 
 meetinj^ shall he called to consider the projiricty of dissolviiii; it ; and that if, in opposi- 
 tion to the views of any shareholder, it be detetermined, notwithstandin}; the loss, to 
 continue the company in existence, he may call on those shareholders who so resolve 
 to purchase his shares, and thus release him from all future responsibility. 
 
 3. A proportion of the profits is reserved to form a ])ermanent guarantee fund ; and 
 after a sufficient accumulation, the entire future profits will be divided among the 
 shareholders. 
 
 4. A balance-sheet, clearly showing the state of the financial affairs of the company, 
 will be open to the inspection of the shareholders seven days previous to each annual 
 meeting. 
 
 5. Shareholders are entitled to one vote for five shares ; to two votes for twenty 
 shares ; to three votes for fifty shares ; and to five votes for one hundred shares and 
 upwards. 
 
 By order of the Directors, 
 
 R. P. Nichols, 
 21, Lombard Street. Secretary. 
 
 The total number of places at which business is carried on in London 
 by joint-stock banks is fourteen, of which seven are to the east, and seven 
 to the west of Temple-bar. 
 
 No. I. — Analysis of the Returns made to the Commissioners of Stamps and Taxes by the 
 Joint-Stock Banks of Ijondon^ in January, 1849. 
 
 London and 
 
 Westminster 
 
 Bank. 
 
 London 
 
 Joint-Stock 
 
 Bank. 
 
 Union Bank 
 of London. 
 
 Commercial 
 
 Bank 
 of London. 
 
 London and 
 County 
 Bank. 
 
 Total. 
 
 Parties resident in London and 
 
 
 
 
 
 
 
 within 1.5 miles, . . .761 
 
 624 
 
 
 373 
 
 no 
 
 99 
 
 1,967 
 
 Do. in other parts of England, 361 
 
 177 
 
 
 109 
 
 53 
 
 263 
 
 963 
 
 Do. in Scotland, ... 44 
 
 17 
 
 
 80 
 
 5 
 
 — 
 
 146 
 
 Do. in Ireland, ... 14 
 
 1 
 
 
 1 
 
 1 
 
 1 
 
 18 
 
 Do. abroad, .... 19 
 
 9 
 
 
 • 7 
 
 10 
 
 — 
 
 45 
 
 1,199 828 570 179 363 3,139 
 
 No. II. — Abstract of the Affairs of the Joint-Stock Banks, from their last Reports. 
 
 Name of Bank. gCaP'tal^ 
 
 Capital 
 Paid-up. 
 
 Amount of 
 Deposits. 
 
 Reserved 
 Fund. 
 
 Amount 
 of Shares. 
 
 Paid-up 
 per Shr. 
 
 Dividend 
 per Cent. 
 
 London and Westmin- £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 sterBank, . . 5,000,000 
 
 1,000,000 
 
 3,089,659 
 
 102,723 
 
 100 
 
 •^0 
 
 6 
 
 London Joint-Stock 
 
 
 
 
 
 
 
 Bank, . . . 3,000,000 
 
 600,000 
 
 2,323,056 
 
 128,765 
 
 50 
 
 10 
 
 6&3JBo. 
 
 Union Bank of London, 3,000,000 
 
 422,900 
 
 2,644,723 
 
 46,750* 
 
 5r) 
 
 10 
 
 6 
 
 Commercial Bank of 
 
 
 
 
 
 
 
 London, . . .641,400 
 
 128,280 
 
 406,217 
 
 17,386 
 
 100 
 
 20 
 
 6 
 
 London and County 
 
 
 
 
 
 
 
 Bank, . . . 500.000 
 
 199,800 
 2,3.W,9S0 
 
 1,354,730 
 
 9,823,390 
 
 27,550 
 
 50 
 
 20 
 
 6 
 
 £12,141,400 
 
 325,174 
 
 
 * This is the amount transferred from the Profit and Loss Account, without the accumulations. 
 With these, it amounts to £ 50,000, which is invested in Bank Slock. 
 
 Two joint-stock banks have been discontinued in London. 1. "The 
 Metropolitan Bank," which was formed in 1839, and wound up in 1841. 
 The manager, the premises, and the customers were transferred to the 
 Union Bank of London, who then opened a branch at Charing-cross. 2. 
 
 280
 
 The Clearing-House. 
 
 " The St, Marylebone Bank," opened in 1836, was wound up in 1841. 
 The business of the bank was transferred to the St. Marylebone Branch 
 of the London and W^estminstcr Bank. 
 
 The Clearing-House. 
 
 The joint-stock banks are not admitted into the Clearing-house. This 
 exclusion puts them to some inconvenience, and to considerable expense. 
 There are certain classes who cannot conveniently keep their account 
 with a bank that docs not clear. The banks have to keep a larger 
 amount of money in their tills, and thus there is a loss of interest. They 
 have to employ more clerks, to present their bills and cheques at the 
 houses of the clearing bankers, and thus there is a greater expenditure in 
 salaries. In lending money on the Stock Exchange they have to sti{)u- 
 late for payment in bank notes, and not by a clearing cheque. In selling 
 stock they have to make the same agreement. In these cases they have 
 sometimes to submit to less favorable terms, as it is not always conve- 
 nient, and never agreeable, to the stock-brokers to supply bank notes 
 in the middle of the day. Other inconveniences are also occasionally 
 experienced. 
 
 The exclusion of the joint-stock banks inflicts also some inconvenience 
 and loss on the clearing bankers. The joint-stock banks present all their 
 bills and cheques at the counters of the respective clearing bankers three 
 times a day, and receive payment in bank notes. On the other hand, 
 each clearing banker presents his bills and notes at the same hours on the 
 several joint-stock banks, at their respective counters, and receives pay- 
 ment in bank notes. To meet the claims made upon them daily by the 
 private banks, the joint-stock banks have to keep in their tills a larger 
 amount of bank notes than they would keep were they members of the 
 Clearing-house. And, on the other hand, each clearing banker has also 
 to keep a larger amount of bank notes to meet the claims made upon him 
 at his counter by the joint-stock banks. The customer of the private 
 banker must also make provision the day before they fall due for any 
 bills he may have made payable at his banker's. For should those bills 
 be in the hands of the joint-stock bank who will present them early in the 
 morning, and if provision is not previously made, the bills will be dishon- 
 ored. Stock-brokers, too, have sometimes sustained annoyance. from this 
 cause. They have sold stock for parties who keep their account whh a 
 joint-stock bank, and when their cheque has been presented for payment 
 by the joint-stock bank, it has not been paid. The answer given has 
 been that it must come through the clearing ; and as the joint-stock bank 
 could not pass it through the clearing, it has been returned dishonored to 
 the broker's customer. These inconveniences and annoyances to all par- 
 ites will necessarily multiply as the business of the joint-stock banks shall 
 increase. 
 
 The Clearing-house was established about seventy-five years ago, by 
 some of the London bankers, for the purpose of facilitating their exchan- 
 ges with each other. It was at first by no means generally approved, and 
 some of the principal bankers refused to have recourse to it. After 
 the number of clearing bankers had increased, a committee was formed 
 
 281
 
 A Treatise on Banking. 
 
 lor Its government. This committee is composed of five or six of the 
 leading bankers, and any new bank that desires to have the privilege of 
 clearing, must now apply for permission to the committee. 
 
 The object the clearing bankers had in view was to exchange bills and 
 cheques against bills and cheques, and thus be enabled to carry on their 
 business with a less amount of capital. But while the bankers endeav- 
 oured to promote their own interest, they promoted at the same time the 
 interest of the public. The sums liberated from employment in this way 
 became available for employment in agriculture, manufactures, and com- 
 merce. Whenever any banker, therefore, is excluded from the Clearing- 
 house, and is consequently obliged to keep a larger amount of cash in his 
 coffers, his available capital is so far reduced, and thus the agriculture, 
 manufactures, and commerce of the country receive less encouragement. 
 
 The establishment of the Clearing-house has led to new arrangements 
 in several branches of business. The stock-brokers, for instance, now 
 settle all their receipts and payments by cheques, to be paid through the 
 Clearing-house. The cheques a broker draws on his banker are paid at 
 the Clearing-house by cheques of other brokers, which he lodges to his 
 credit. The colonial brokers also, and other clascs of commercial men, 
 have fixed days for settling their accounts, and on these days draw 
 cheques on their bankers in the morning, and pay in cheques to meet 
 them at a subsequent part of the day. Thus the institution of the Clear- 
 ing-house has become entwined with the commerce of the country, and 
 could not be discontinued without deranging every branch of business. 
 It has also received the sanction of the law of the land, the courts of law 
 having decided that the presentment of a bill of exchange at the Clear- 
 mg-house is a legal presentment. In this case, as in many others, the 
 custom of bankers and merchants has become law. Many of our com- 
 mercial laws have had the same origin. They have at first been mere 
 regulations established by merchants for their own convenience ; these 
 regulations have been adopted by other classes of the community ; they 
 have been followed for a number of years ; and then the law has recog- 
 nized them as a portion of the commercial institutions of the country. 
 Such was the origin of allowing three days' grace upon bills of exchange, 
 and such has been the case with the Clearing-house. The Clearing- 
 house is no longer, therefore, a private subscription-room, from which the 
 parties admitted may exclude whomsoever they please at their own ca- 
 price. They may exclude improper banking companies, as the Edinburgh 
 banks refuse to exchange with any bank that is not respectable ; but they 
 are bound in justice to admit all respectable banks who may apply for 
 admission. 
 
 " Another amendment which I would propose as connected with the 
 currency of London, would be a regulation of the Clearing-house by the 
 Legislature. Although the Clearing-house was a voluntary association 
 of bankers at first, yet it has now existed for 60 years, and has become 
 interwoven with several branches of London trade ; it is therefore for all 
 practical purposes a public institution, and, like a market or any other 
 public institution, might become the subject of legislative interference. 
 The exclusion of banks in London from the Clearing-house whose capi 
 
 282
 
 The Clearing- House. 
 
 tal now amounts to about two millions sterling, and who have about 2,000 
 partners, is not only a great inconvenience and a great loss to those 
 banks, but is a great inconvenience also to the public in general, and such 
 an interference with the freedom of trade, as carried on by individual 
 companies in London, as alone would justify the interference of the Leg- 
 islature ; and, besides, it is quite unreasonable that an association of om 
 nibus proprietors should be indicted and tried for a conspiracy because 
 they have tried to run a rival omnibus off the road, and yet that a body 
 of bankers may conspire for a similar object without any interference of 
 the Legislature at all." (Evidence of J. W. Gilbart before the Commit- 
 tee on Banks of Issue, March, 184L) 
 
 The following evidence was given by the Governor of the Bank of 
 England, before the Committee on Commercial Distress, in answer to 
 questions from Sir William Clay : — 
 
 " It must be known to you, I suppose, that the joint-stock banks of London are e:i 
 eluded from the Clearing-house ? — Yes. 
 
 •' Are you of opinion that that exclusion (which of course it is perfectly within the 
 right and discretion of private banks to insist upon, if they please) tends to public in- 
 convenience, inasmuch as it lessens, pro tanto, that economy of the circulating medium 
 which the Clearing-house is calculated to produce ? — Allowing joint-stock banks to 
 clear with other bankers, I have no doubt would produce an economy in the use of 
 bank notes. 
 
 " And economy in the circulating medium ? — And economy in the circulating me- 
 dium. 
 
 " Have you any means of ascertaining the amount to which the admission to the 
 Clearing-house of joint-stock banks would economize the amount of circulation now 
 required for the use of London ? — I have not ; I have heard it stated at half a mil- 
 lion, but I cannot say if that is correct. 
 
 "I believe that the chairman of one large London joint-stock bank, namely, the 
 London and Westminster, did state publicly that they were under the necessity of 
 keeping a reserve of £ 1.50,000 in bank notes, more than it would have been necessary 
 for them to keep if they had been admitted to the Clearing-house ? — I know that he 
 made some statement of that sort ; I cannot say what it was. 
 
 '• Tliat must imply, not perhaps the necessity of a con'esponding amount being kept 
 by all private banks, but something approaching to it, inasmuch as all cheques on 
 such banks held by joint-stock banks must be presented in the course of the morning 
 at the banks, instead of being brought to the Clearing-house in the evening? — Yes. 
 
 " It is, therefore, not merely the amount of notes which the joint-stock banks are 
 obliged to keep in reserve, but tj^ amount of extra bank notes which the private bank- 
 ers are obliged to keep in reserve 1 — Yes. 
 
 " There are, besides the London and Westminster, four other joint-stock banks in 
 London ; I believe their capital, from the published reports, amount to £ 2,645,000 
 paid-up capital, and their deposits to £ 8,864,000, together £ 1 1,509,000, of which these 
 joint-stock banks have the control? — I cannot say whether those figures are correct 
 or not. 
 
 " But assuming that those figures are correct, and that it is also correct that one of 
 these banks, namely, the London and Westminster, is compelled to keep £ 150,000 
 more of notes in reserve, because they are not admittted to the Clearing-house, is it 
 not probable that the sum you have mentioned of £500,000 is not too large an esti- 
 mate of the increased quantity of circulating medium, which is rendered necessary by 
 the circumstance of these joint-stock banks not being admitted to the Clearing-house ? 
 — Assuming as a fact, that the London and Westminster Bank keep £150,000 of 
 notes more than they would otherwise keep in consequence of not being able to clear, 
 probably, I should say, that that statement is correct. 
 
 "But at all events, without assuming that these figures are exactly correct, is it not 
 true, that that exclusion must, in reality, produce the necessity for a larger amount of 
 circulating medium to supply the daily necessities of the public "? — Yes." 
 
 283
 
 A Treatise on Banking. 
 
 Section IV. — THE COUNTRY PRIVATE BANKS. 
 
 These banks cannot have more than six partners. They are banks of 
 deposit, of loan, and of discount. As banks of deposit, they usually al- 
 low interest on both deposits and balances of current accounts, and 
 charge a commission on the amount of the transactions. In commercial 
 or manufacturing districts their advances are usually made by way of dis- 
 count ; in agricultural districts, frequently by loans. They remit money 
 by issuing bills or letters of credit on London, or they direct their agents 
 to make payments to bankers or other parties resident in London. As 
 banks of circulation, they have at various times occupied a large portion 
 of public attention, and have been the subject of much legislation. 
 
 Those bankers who wish to issue notes must take out a license, which 
 will cost <£ 30 and must be renewed every year. They may re-issue 
 any notes not above the value of <£ 100 as often as they think proper. 
 And should any of the firm die or remove from the business, the notes 
 may be issued by the remaining partners. But they cannot be re-issued 
 by a new firm, which does not include any member belonging to the firm 
 by whom the notes were first issued. 
 
 If the half of a note be lost or stolen, a banker cannot be compelled to 
 give a new note in exchange for the remaining half. But if it can be 
 proved that one half of a note is burnt, or otherwise destroyed, then the 
 holder may perhaps recover the note from the banker. 
 
 In such cases, the bankers always pay the value of the note on receiv- 
 ing a respectable indemnity. 
 
 Bankers may be compelled to pay whole notes that have been lost or 
 stolen, provided the holder has given actual value for them. 
 
 The stamp duty on country notes is as follows : — 
 
 £ s. £ s. s. d. 
 
 Notes not exceeding 11 ... ... ... 05 each. 
 
 Exceeding 1 1 and not exceeding 2 2 10 ' 
 
 Ditto "22 " " 5518 
 
 Ditto « 5 5 « « ■ 10 19 
 
 Ditto " 10 " " 20 2 
 
 Ditto " 20 " " 30 3 
 
 Ditto " 30 " " 50 5 
 
 Ditto " 50 « " 100 8 6 
 
 Country banks are allowed to compound for the stamp duties on their 
 notes, at the rate of seven shillings per cent, per annum upon the amount 
 in circulation, and to include, on the same terms, their bills drawn on 
 London at twenty-one days after date. But whether a country banker 
 compounds for the stamp duties or not, he must make a return to the 
 Government of the amount of his notes in circulation eveiy Saturday 
 night. These returns are consolidated, and the result published in the 
 London Gazette. 
 
 The following are the enactments respecting country bankers in the 
 Act 7 & 8 Vict. c. 32, passed in 1844 : — 
 
 284
 
 Country Private Banks. 
 
 No New Bank of Issue. 
 
 " X. And be it enacted, Tliat from and after the passing of this Act, no person other 
 than a banker, who, on the sixth day of May, one thousand eight hundred and fortv-four, 
 was lawfully issuing his own bank notes, shall make or issue bank notes in any pari of the 
 United Kingdom." 
 
 Restriction against Issue of Bank Notes. 
 
 " XI. And be it enacted, That from and after the passing of this Act, it shall not be 
 lawful for any banker to draw, accept, make, or issue, in England or Wales, any bill 
 of exchange, or promissory note, or engagement for the payment of money payable 
 to bearer on demand, or to borrow, owe, or take up, in England or Wales, any sums 
 or sum of money on the bills or notes of such banker payable to bearer on demand, 
 save and except that it shall be lawful for any banker who was on the sixth day of 
 May, one thousand eight liundred and forty-four, carrying on the business of a banker 
 in England or Wales, and was then lawfully issuing, in England or Wales, his own 
 bank notes, under the authority of a license to that effect, to continue to issue such 
 notes, to the extent and under the conditions hereinafter mentioned, but not further or 
 otherwise; and the right of any company or partnership to continue to issue such 
 notes shall not be in any manner prejudiced or affected by any change which mn\ 
 hereafter take place in the personal composition of such company or partnership, 
 either by the transfer of any shares or share therein, or by the admission of any new 
 partner or member thereto, or by the retirement of any present partner or member 
 therefrom : Provided always, that it shall not be lawful for any company or partnership 
 now consisting of onli/ six or less than six persons to issue bank notes at any time after the 
 number of partners therein shall exceed six in the whole." 
 
 Bankers ceasing to i$sue Notes may not resume. 
 
 " XIT. And be it enacted. That if any banker in any part of tlie United Kingdom 
 who. after tlie passing of this Act, shall be entitled to issue bank notes, sliall become 
 bankrupt, or shall cease to carry on the business of a banker, or shall discontinue the 
 issue of bank notes, cither by agreement with the Governor and Company of the Bank 
 of England or otherwise, it sliall not be lawful for such banker at any time thereafter tc 
 issue any such notes." 
 
 Existing Banks of Issue to continue under certain Limitations. 
 
 "XIII. And be it enacted, That every banker claiming under this Act to continue 
 to issue bank notes in England or Wales shall, within one month next after the pass- 
 ing of this Act, give notice in writing to the Commissioners of Stamps and Taxes, 
 at their head office in London, of such claim, and of the place, and name, and firm, at 
 and under which such banker has issued such notes during tlie twelve weeks next preced- 
 ing the twenty-seventh day of April last ; and thereupon the said commissioners shall as- 
 certain if such banker was on the sixth day of May, one thousand eight hundred and 
 forty-four, carrying on the business of a banker, and lawfully issuing his own bank 
 notes in England or Wales, and if it shall so appear, then the said commissioners shall 
 proceed to ascertain the average amount of the bank notes of such banker which were 
 in circulation during the said period of twelve weeks preceding the twenty-seventh 
 day of April last, according to the returns made by such banker in pursuance of the 
 Act passed in the fourth and fifth years of the reign of her present Majesty, entitled 
 ' An Act to make further Provision relative to the Returns to be made by Banks of 
 the Amount of their Notes in circulation ' ; and the said commissioners, or any two 
 of them, shall certify under their hands to such banker the said average amount, when 
 so ascertained as aforesaid ; and it shall be lawful for every such banker to continue 
 to issue his own bank notes after the ])assing of this Act : Provided nevertheless, that 
 such banker shall not at any time after the tenth day of October, one thousand eight hundred 
 and forty-four, have in circulation upon tlie average of a period of four weeks, to be ascer 
 lained us hereinafter mentioned, a greater amount of notes than the amount so certifed. 
 
 Provision for United Banks. 
 
 " XIV. Provided always, and be it enacted. That if it shall be made to appear to 
 the Commissioners of Stamps and Taxes that any two.«r more banks have, by written 
 
 285
 
 A Treatise on Banking. 
 
 contract or agreement (which contract or agreement shall be produced to the said com- 
 missioners), become united within the twelve weeks next preceding such twenty- 
 seventh day of April as aforesaid, it shall be lawful for the said commissioners to as- 
 certain the "average amount of the notes of each such bank in the manner hereinbefore 
 directed, and to certify the average amount of the notes of the two or more banks so 
 united as the amount which the united bank shall thereafter be authorized to issue, 
 subject to the regulations of this Act. 
 
 Duplicate Certificate to he published in the Gazette. Gazette to be Evidence. 
 
 " XV. And be it enacted, That the Commissioners of Stamps and Taxes shall, at 
 the time of certifying to any banker such particulars as they are hereinbefore required 
 to certify, also publish a duplicate of their certificate thereof in the next succeeding 
 London Gazette m which the same maybe conveniently inserted; and the gazette in 
 which such publication shall be made shall be exclusive evidence in all courts what- 
 soever of the amount of bank notes which the banker named in such certificate or 
 duplicate is by law authorized to issue and to have in circulation as aforesaid. 
 
 In case Banks become united, Commissioners to certify the Amount of Bank Notes which each 
 Bank was authorized to issue. 
 
 " XVI. And be it enacted, That in case it shall be made to appear to the Commis- 
 sioners of Stamps and Taxes, at any time hereafter, that any tivo or more banka, each 
 such bank consisting of not more than six persons, have, by written contract or agreement 
 (which contract or agreement shall be produced to the said commissioners), become 
 united subsequently to the passing of this Act, it shall be lawful to the said commis- 
 sioners, upon the application of such united bank, to certify, in manner hereinbefore 
 mentioned, the aggregate of the amounts of bank notes which such separate banks 
 were previously authorized to issue, and so from time to time ; and every such cer- 
 tificate shall be published in manner hereinbefore directed ; and from and after such 
 publication the amount therein stated shall be and be deemed to be the limit of the 
 amount of bank notes which such united bank may have in circulation : Provided al- 
 ways, that it shall not be laiufulfor any such united bank to issue bank notes at any time after 
 the number of partners therein shall exceed six in the whole. 
 
 Penalty on Banks issuing in Excess. 
 
 "XVII. And be it enacted, That if the monthly average circulation of bank notes 
 of any banker, taken in the manner hereinafter directed, shall at any time exceed the 
 amount which such banker is authorized to issue and to have in circulation under the 
 provisions of this Act, such banker shall in every such case forfeit a sum equal to the 
 amount by which the average monthly circulation, taken as aforesaid, shall have ex- 
 ceeded the amount which such banker was authorized to issue and to have in circula- 
 tion as aforesaid. 
 
 Issuing Banks to render Accounts. 
 
 " XVIII. And be it enacted, That every banker in England and Wales who, after 
 the tenth day of October, one thousand eight hundred and forty-four, shall issue bank 
 notes, shall on some one day in every week after the nineteenth day of October, one 
 thousand eight hundred and forty-four (such day to be fixed by the Commissioners of 
 Stamps and Taxes) transmit to the said commissioners an account of the amount of 
 the bank notes of such banker in circulation on every day during the week ending on 
 the next preceding Saturday, and also an account of the average amount of the bank 
 notes of such banker in circulation during the same week ; and on completing the 
 first period of four weeks, and so on completing each successive period of four weeks, 
 every such banker shall annex to such account the average amount of bank notes of 
 such banker in circulation during the said four weeks, and also the amount of bank 
 notes which such banker is authorized to issue under the jirovisions of this Act; and 
 every su(;h account shall be verified by the signature of such banker or his chief 
 eashicr, or, in the case of a company or partnership, iiy the signature of a managing 
 director, or partner, or chief cashier of such company or partiiersliip, and shall be 
 made in the form to this Act annexed marked (H.) ; and so much of the said return 
 as states the weekly average amount of the notes of such bank shall be published by 
 
 286
 
 Country Private Banks. 
 
 the said commissioners in the next succeeding London Gazette in which the same may 
 be conveniently inserted ; and if any such banker shall neglect or refuse to render any 
 such account in the form and at the time required by this Act, or shall at any time 
 render a false account, such banker shall foifeit the sum of one hundred pounds for 
 every such oflfence. 
 
 Mode of ascertaining the Average Amount of Bank Notes of each Banker in circulation 
 during the first Four Weeks after 10 th October, 1844. 
 
 " XIX. And be it enacted, That for the purpose of ascertaining the monthly aver- 
 age amount of bank notes of each banker in circulation, the aggregate of the amount 
 of bank notes of each such banker in circulation on every day of business dur-ing the 
 first complete period of four weeks next after the tenth day of October, one thousand 
 eight hundred and forty-four, such period ending on a Saturday, shall be divided by 
 the number of days of business in such four weeks, and the average so ascertained 
 shall be deemed to be tlie average of bank notes of each such banker in circulation 
 during such period of four weeks, and so in each successive period of four weeks, and 
 such average is not to exceed the amount certified by the Commissioners of Stamps 
 and Taxes as aforesaid." 
 
 Bankers to take out a separate License for every Place at which they issue Notes or Bills. 
 Proviso in Favor of Bankers who had Four such Licenses in force on the 6lh of May, 
 1844. 
 
 " XXII. And be it enacted, That every hanker who shall he liahlc by law to take 
 out a license from the Commissioners of Stamps and Taxes to authorize the issuing 
 of notes or bills shall take out a separate and distinct license for every town or place at 
 which he shall, by himself or his agent, issue any notes or bills requiring such license 
 to authorize the issuing thereof, any thing in any former Act contained to the contrary 
 thereof notwithstanding : Provided always, that no banker who on or before the sixth 
 day May, one thousand eight hundred and forty-four, had taken out four such licenses, 
 which on the said last-mentioned day were respectively in force, for the issuing of any 
 such notes or bills at more than four separate towns or places, shall at any time here- 
 after be required to take out or to have in force at one and the same time more than 
 four such licenses to authorize the issuing of such notes or bills at all or any of the 
 same towns or places specified in such licenses in force on the said sixth day of May, 
 one thousand eight hundred and forty-four, and at which towns or places respectively 
 such bankers had on or before the said last-mentioned day issued such notes or bills 
 in pursuance of such licenses or any of them respectively." 
 
 It will be seen from these extracts that the provisions of the Act re- 
 quire : — 
 
 1. That no new bank of issue be established in the United Kingdom. 
 
 2. That the maximum of each bank of issue in England shall be the 
 average of the notes in circulation during the four weeks ending the 27th 
 of April, 1844. 
 
 3. That if any bank having not more than six partners should exceed 
 that number, it would lose its issue. This tends to prevent private banks 
 merging into joint-stock banks. 
 
 4. That no union can take place between a joint-stock bank and a pri- 
 vate bank, or between two joint-stock banks of issue, without one of them 
 at least losing its circulation. 
 
 5. Every new branch at which notes shall be issued must take out a 
 separate license. Hitherto no bank had been obliged to take out more 
 than four licenses, however numerous its branches. This tends to check 
 the opening of new branches of issue. 
 
 It has been stated that the object of this Act was to pave the way for 
 the establishment of one bank of issue. These provisions are certainly 
 
 287
 
 A Treatise on Banking. 
 
 not ill adapted for such an end. They will reduce the amount of the 
 country circulation. They will produce other ill effects. The formation 
 of large banks will be retarded. In some places it would be for the pub- 
 lic advantage tliat a private bank should become a joint-stock bank. In 
 other districts, it might be desirable that two small joint-stock banks of 
 issue should unite and form a large one. The restrictions imposed by this 
 Act will tend to prevent such unions. Perhaps in other respects its effects 
 may be beneficial. It may lead a larger number of persons to keep cur- 
 rent accounts with bankers, and to make their payments with cheques. 
 A smaller amount of notes will then be necessary for the purposes of the 
 country. The advantages of. having a banker will be extended to the 
 middle and lower classes, and will not as much as heretofore be confined 
 to the wealthy. The Act, too, may have the effect of exempting the 
 banks of issue from those accusations to wiiich they have always been 
 subjected on the occurrence of any national calamity. The whole Act of 
 
 1844 is formed upon the notion tliat the country bankers can extend their 
 issues as much as they please, — " a vulgar error," that has over and over 
 again been abundantly refuted. Yet, had the Act not been passed, and 
 had the country circulation increased a million or two, as possibly it might, 
 from the increased transactions of the country, the railway speculations of 
 
 1845 and 1846 would doubtless have been ascribed to the excessive issues 
 of the country banks. The following language, which I addressed in 
 1844 to the joint-stock banks, may not be considered inapplicable to all 
 banks of issue : — 
 
 " Another advantage is, that the joint-stock banks of issue will be de- 
 livered from those unjust accusations to which they have hitherto been ex- 
 posed. Almost every evil that has befallen the country for the last ten 
 years has been ascribed by different writers to the reckless issues of the 
 joint-stock banks ; and though the charge has been oft refuted, yet such 
 has been the talent, zeal, and perseverance with which it has been re- 
 vived, that it has doubtless in some degree prejudiced the public mind. 
 But now this charge can be made no more. Our assailants are compelled 
 to observe at least a ten years' truce. During this period wc shall have 
 no bank directors publishing pamphlets to show that their efforts to regu- 
 late the exchanges have been counteracted by the imprudent issues of the 
 juint-stock banks. Our notes will not again be classed by the authors of 
 'prize essays ' among the causes of national distress, and philosophical 
 writers will no longer declaim, in eloquent metaphor, against ' the wild 
 democracy of rival issuers.' It is no small matter to be put into a position 
 wherein we shall be sheltered from the peltings of unjust accusations." 
 { Letters of Nehemiah, p. 11.) 
 
 Some banks had ceased to issue their notes before the passing of the 
 Act, by virtue of agreements with the Bank of England. The twenty- 
 third section of the Act contains a special provision with reference to these 
 banks. 
 
 Compensation to certain Bankers named in the Schedule. 
 
 " XXIII. And whereas the several bankers named in the schedule hereto annexed 
 marked (C) have ceased to issue their own bank notes under certain agreements with 
 the governor and company of the Bank of England ; and it is expedient that such 
 
 288
 
 Country Private Banks. « 
 
 agreements should cease and determine on the thirty-first day of December next, and 
 that such hankers should receive by way of compensation such composition as hereafter 
 mentioned ; and a list of such bankers, and a statement of the maximum sums in re- 
 spect of which each such banker is to receive compensation, hath been delivered to the 
 Commissioners of Stamps and Taxes, signed by the chief cashier of the Bank of Eng- 
 land ; be it therefore enacted, That the several agreements subsisting between the said 
 governor and company and the several bankers mentioned in the schedule hereto re- 
 lating to the issue of Bank of England notes shall cease and determine on the thirty- 
 first day of December next; and from and after that day the said governor and coni- 
 pauy shall pay and allow to the several bankers named in the schedule hereto marked 
 (C), so long as such bankers shall be willing to receive the same, a composition at and 
 after the rate of one pound per centum per annum on the average amount of the Bank 
 of England notes issued by such bankers respectively and actually remaining in circu- 
 lation, to be ascertained as follows ; that is to say, on some day in the month of April, 
 one thousand eight hundred and forty-five, to be determined by the said governor and 
 company, an account shall be taken of the Bank of England notes delivered to such 
 bankers respectively by the said governor and company within three months next pre- 
 ceding, and of such of the said Bank of England notes as shall have been returned to 
 the Bank of England, and the balance shall be deemed to be the amount of the Bank 
 of England notes issued by such bankers respectively and kept in circulation ; and a 
 similar account shall be taken at intervals of three calendar months ; and the average 
 of the balances ascertained on taking four sudi accounts shall be deemed to be the 
 average amount of Bank of England notes issued by such bankers respectively and 
 kept in circulation during the year one thousand eight hundred and forty-five, and on 
 •which amount such bankers are respectively to receive the afi)resaid composition of 
 one per centum for the year one thousand eight hundred and forty-five ; and similar 
 accounts shall be taken in each succeeding year ; but in each year such accounts shall 
 be taken in different months from those in which the accounts of the last preceding 
 year were taken, and on dificrent days of the month, such months and days to be de- 
 termined by the said governor and company ; and the amount of the composition pay- 
 able as aforesaid shall be paid by the said governor and company out of their own 
 funds ; and in case any difference shall arise between any of such bankers and the 
 governor and company of the Bank of England in respect of the composition payable 
 as aforesaid, the same shall be determined by the Chancellor of the Exchequer for the 
 time being, or by some person to be named by him, and the decision of the Chancellor 
 of the Exchequer, or his nominee, shall be final and conclusive : Provided always, that 
 it shall be lawful for any banker named in the schedule hereto annexed marked (C) 
 to discontinue the receipt of such composition as aforesaid, but no such banker shall 
 by such discontinuance as aforesaid thereby require any right or title to issue bank 
 notes." 
 
 The following are the Banks named in the schedule : — 
 
 Bank of Liverpool Liverpool. 
 
 J. Barned & Co ditto. 
 
 Biddulph, Brothers, & Co Pembroke. 
 
 Birmingliam Banking Company .... Birmingham 
 Birmingham Town & District Bank .... ditto. 
 Birmingham and Midland Banking Company . . ditto. 
 
 Burgess & Son Ramsgate. 
 
 Coopers & Purton Bridgenorth. 
 
 Cunliffes, Brookes, & Co Blackburn. 
 
 Deane, Littlehales, & Deane Winchester. 
 
 Dendy, Comper, & Co. . . . . . . Chichester. 
 
 Devon and Cornwall Banking Company . . . Plymouth. 
 
 Grants & Gillman Gosport. 
 
 Hampshire Banking Company Southampton. 
 
 James W. R. II.iU Ross. 
 
 J. M. Head & Co Carlisle. 
 
 Henty, Upperton, & Olliver Arundel. 
 
 Thomas Kinnersly & Sons Newcastle-under-Line. 
 
 R. J. Lambton & Co Newcastle-on-Tync- 
 
 289
 
 d 
 
 A Treatise on Banking. 
 
 Liverpool Commercial Banking Company 
 
 Liverpool Union Bank 
 
 Liverpool Borouixh Bank 
 
 Manchester and Liverpool District Banking Company 
 Manchester and Salford Banking Company 
 Monmouth and Glamorgan Banking Company 
 
 Moss & Company 
 
 Mangles, Brothers 
 
 Newcastle Commercial Banking Company . 
 Newcastle-on-Tyne Joint-Stock Banking Company . 
 North of England Joint- Stock Banking Comparty 
 Northumberland and Durham District Bank 
 Portsmouth and South Hants Bank Company 
 
 T. & 11. Raikes & Co 
 
 Robinson & Broadhurst 
 ShelKcld Union Bank 
 
 John Stoveld 
 
 Sunderland Joint-Stock Banking Company 
 
 Tugwell & Co 
 
 Union Bank of Manchester 
 
 Vivian, Kitson, & Co 
 
 Watts, Whitewav, «& Co 
 
 J. & J. C. Wright & Co 
 
 Webb, Holbrook, & Spencer 
 
 Liverpool. 
 Liverpool. 
 
 ditto. 
 Manchester. 
 
 ditto. 
 Newport. 
 Liverpool. 
 Guildford. 
 Newcastle-on-Tyne. 
 
 ditto. 
 
 ditto. 
 
 ditto. 
 Portsmouth. 
 Hull. 
 
 Mansfield. 
 Sheffield. 
 
 Sunderland. 
 Bath. 
 
 Manchester. 
 
 Torquay. 
 
 Newton. 
 
 Nottingham. 
 
 Ledbury. 
 
 The following account of the state of the fi.xed issue under this Act is 
 taken from the " Banking Almanac " for 1849, page 37 : — 
 
 At Oct., 1848. 
 Fixed issue of the Private Banks (England and Wales) by the Act of 
 
 1844, £5,153,407 
 
 Deduct 21 Private Banks, since ceased to issue, 330,919 
 
 Amount of Private Banks' issue, 
 Fixed issue of Joint-stock Banks, by same Act, 
 Deduct 6 Joint-stock Banks, since ceased to issue, 
 
 £3,495,446 
 85,459 
 
 £4,822,488 
 
 Amount of Joint-stock Banks' issue, £3,409,987 
 
 Fixed issue of Private and Joint-stock Banks, . . . £8,232,475 
 
 Present State of the Fixed Issues. 
 
 1. Fixed issue in England and Wales, 
 
 2. " Bank of England, . 
 
 3. " Banks in Scotland, 
 
 4. " Banks in Ireland, 
 
 Fixed issue in the United Kingdom, at 7th October, 1848, 
 
 .£ 8,232,475 
 
 14.000,000 
 
 3,087,209 
 
 6,354,494 
 
 .£31,674,178 
 
 NUMBER OF BANKS OF ISSUE IN THE UNITED KINGDOM. 
 
 At October 7, 1848. 
 1 Bank of Enpland in England and Wales, having . . . .14 Banks. 
 184 Private Bankinjr Firms in England and Wales, having . . 375 " 
 66 Joint-stock Banking Companies in England and Wales, having . 407 " 
 
 251 Firms and Companies in England and Wales, having 
 18 Joint-Stock Banking Companies in Scotland, having 
 8 " " " in Ireland, having . 
 
 277 Firms and Companies in the United Kingdom, having 
 
 290 
 
 796 Banks. 
 
 403 
 
 155 " 
 
 1354 Banks.
 
 Country Private Banks. 
 
 REDUCTION m THE FIXED ISSUES IN ENGLAND AND WALES. 
 
 Hie Maximum Circulation of the Private and Joint-Stock Banks was reduced at the under- 
 mentioned dates, by thefollomng Banks having ceased to issue their own Notes: — 
 
 Date of last 
 Return. 
 
 Prior to the 
 12th Oct., 
 1844, when 
 the Act 
 came into 
 operation. 
 
 NAMES. 
 
 C I. Bristol Old Bank. — Baillie, Ames, & Co. . . Bank of Eng. Notes. 
 
 2. Bishop Waltliam, Hampshire. — Gunner & Co. Ditto. 
 
 3. Cambridge Bank. — Fisher & Sons. . . Ditto. 
 
 4. Ditto. — Humphrey &. Son. . . Closed, 1845. 
 
 5. Margate Bank. — Cobb & Co. . . . Bank of Eng. Notes. 
 
 6. Oxford Univ. and City Bank. — Sir J. Locke & Co. Ditto. 
 
 7. Staines Bank. —Thos. Ashley & Co. . . . Ditto. 
 
 8. Wrexham and N. Wales Bank. — R. M. Loyd. Ditto. 
 1. Western District Joint-Stock Banking Company. Dissolved. 
 
 No. of 
 Banks. 
 
 April 12, 
 Sept. 13, 
 April 11, 
 July 4, 
 Oct. 10, 
 Dec. 5, 
 May 29, 
 Oct. 9, 
 
 Oct. 16, 
 Oct. 23, 
 
 Oct. 30, 
 
 Nov. 6, 
 Nov. 27, 
 July 29, 
 Oct. 7, 
 
 1845 
 1846 
 
 1847 
 
 9. Whitby Bank. — Frankland & Wilkinson. . York City and C'nty 
 
 2. Suffolk Joint-Stock Banking Company. . . Dissolved. 
 
 10. Dover Union Bank. — Latham & Co. . . Bankrupts, 
 
 3. Stockton & Durham County Joint-Stock Bank. Dissolved. 
 
 11. Romsey & Hamp. Bank. — Wm. Footner & Sons.Bank of Eng. Notes 
 
 4. Leeds & West Riding Joint-Stock Banking Co. . Dissolved. . 
 
 5. Leeds Commercial Joint-Stock Bank. . . Ditto. . 
 
 12. Abingdon & Wantage. — Henry Knapp. . .Bankrupt. 
 
 13. Penzance Union Bk. — Ricketts, Enthoven & Co. 
 
 14. Leek & Conglelon. — Fowler, Gaunt, & Co. . Bank of Eng. Notes, 
 
 15. Salisbury & Fordingbridge Bk. — Brodie & Co. Bankrupts. 
 
 16. Shaftesbury & Hendon Bank. — Brodie & King. Closed. . 
 
 17. Shrewsb'y & Market Drayton. — Adams & Warren. Bankrupts. . 
 
 18. Honiton Bank. —Flood &Lott. . . . Ditto. . 
 
 19. Bridport Bank. — Gundry & Co. . . . Ditto. 
 
 20. St. Alban's & Herts Bank. — Gibson & Sturt. . Closed. . 
 
 21. Grantham Bank. — Kewney & King 
 
 22. Sheffield & Retford Bank Closed. . 
 
 Amount. 
 
 £ 
 
 89,540 
 
 1,993 
 8,753 
 2,615 
 9,996 
 
 15,705 
 9,244 
 4,464 
 
 18,125 
 
 £ 160,435 
 
 2,076 
 
 7,449 
 
 9,577 
 
 8,290 
 
 3,875 
 
 18,937 
 
 13,914 
 
 29,316 
 
 31,461 
 
 4,009 
 
 23,335 
 
 9,813 
 
 9,700 
 
 19,015 
 
 24,69.3 
 
 2,333 
 
 19,401 
 
 18,744 
 
 Total Reduction in the Circulation, under Act 7 and 8 Vict. c. 32, to Oct. 7, 1848, . £416,378 
 
 21 Private Banking Firms, having 34 Banks, . . . £330,919 
 6 Joint-Stock Banking Companies, having 18 Banks, . 85,459 
 
 £416,378 
 
 All banks of issue are still excluded from receiving accommodation, by 
 discount or otherwise, from the Bank of England. There seems, how- 
 ever, to be a difference of opinion among the directors as to the propriety 
 of continuing this exclusion. Mr. Morris thinks that under the Act of 
 1844, the rule may be relaxed : — 
 
 "Do you not refuse discounts to all banks of issue ? — "We have always refused dis- 
 count accounts to hanks issuing their own notes. 
 
 " Upon what ground? — The ground upon which I understand it has been refused 
 is, that, previous to the Act of 1844, the hank made arrangements with certain joint- 
 stock hanks, to induce them to adopt the Hank of England circulation ; and after the 
 Act of 1844 had been passed, it was thought tiiat it would be hard not to continue the 
 same facilities to those banks which they had obtained from the bank before the pass- 
 ing of the Act ; that arrangement having licen made for our mutual convenience." 
 
 " It is, however, a complaint, that you have a stringent rule, by which you refused 
 discounts or accommodation to all banks of issue ? — I have no objection to state, 
 speaking individually, that now that the Act of 1844 has been passed, I do not see any 
 reason why they should not be placed on the same footing as the others ; but the rea- 
 son the court has not acceded to that, is in consequence of those parties having 
 
 291
 
 A Treatise on Banking. 
 
 worked with ns at a period when it was useful to us that they should do so." (Cbm- 
 mons, 2996 to 3000.; 
 
 But Mr. Cotton entertains different sentiments : — 
 
 " Can you inform the committee of the reasons why the Rank of England refuses 
 accommodation to parties wlio i.ssue notes ? — There are, in my opinion, good reasons 
 for that; those reasons appear in tlie following paper, whieh I have drawn up: 'Issu- 
 ing banks, were the right of discounting conceded to them, would keep an insufficient 
 reserve of their own notes, of Bank of England notes, or coin, perhaps none, relying 
 on discounting with the bank on every demand, and most jjressing on the bank when 
 it was restricting its issues. — There are about 300 banks of issue in England and 
 Wales, for all of which the bank would have to provide gold. — The measure would 
 tend to frustrate one of the olyects of Act 7 and 8 Vict. c. 32 (the ultimate establish- 
 ment of a single bank of issue), by withdrawing a motive to banks of issue to adopt 
 Bank of England circulation. It would give some ground of complaint to those bank- 
 ers who have already abandoned their circulation, by placing their issuing competitor."? 
 on a level with themselves as to discounting. It would, as respects Manchester and 
 Liverpool, be inoperative, there being no banks of issue at those places. It would be 
 difficult in times of pressure or adverse exchanges to control the discounts ; and such 
 contraction, if enforced, would be obnoxious to such issuing banks as had been in the 
 habit of discounting. The banks would consider they had acquired a right to dis- 
 counts, and would probably ascribe to the capricious action of the Bank of England 
 any losses consequent on a necessary contraction of accommodation.' " — ( Commons, 
 4312.) 
 
 The Laws of the Currency with Reference to the Country Banks. 
 
 These are thus stated in the article previously quoted, in the Foreign 
 and Colonial Review : — 
 
 " It will readily occur to every reader, that the laws which regulate the 
 circulation of these country banks must be different from those which reg- 
 ulate the London circulation of the Bank of England. They do not pay 
 the public dividends ; they cannot issue their notes in purchasing bullion, 
 or Government stock, or E.xchequcr bills, as all these operations take 
 place in London, where their notes do not circulate. They are also sub- 
 ject to certain restrictive laws to which the notes of the Bank of England 
 arc not subject. Their notes are not only legally payable on demand, 
 but payment is constantly demanded ; while no one demands payment of 
 a Bank of England note, unless he has occasion to export the gold. 
 There is also a system of exchanges between country bankers, by which 
 all notes that are paid into any of the banks are immediately brought back 
 for payment to the banks that issued them. It is the practice, too, 
 throughout the country, to allow interest on deposits ; and thus all notes 
 not required for the actual wants of the community are promptly with- 
 drawn from circulation, and lodged with a bank upon interest. 
 
 " On inspecting the monthly returns of the country circulation for the 
 last ten years, we find that the highest amount is in the month of April ; 
 thence it descends, and arrives at the lowest point by the end of August, 
 which is the lowest point in the year. It gradually increases to Novem- 
 ber ; a slight reaction takes place in December ; but it then advances, 
 until it reaches the highest point in April. The general law is, that the 
 country circulation always makes one circuit in the year ; being at its 
 low(;st point in August, and advancing to December, and continuing to 
 
 292
 
 Country Private Banks. 
 
 advance to its highest point to the month of April, and then again de- 
 scending to its lowest point in August. 
 
 " The laws which regulate the circulation of the country banks are ae- 
 rived from the state of trade in the respective districts in which the banks 
 are established. As these banks are chiefly located in agricultural dis- 
 tricts, the operations of agriculture have a very considerable influence in 
 their regulation. Hence the advance in the spring, and the advance 
 again after August, in consequence of the harvest. It is clear that the 
 laws must be uniform in their operation, because the fluctuations of circu- 
 lation in each year are uniform, and constantly recur with the return of 
 the season. The slight reaction in December is probably occasioned by 
 the collection of the public revenues and of landlords' rents in the coun- 
 try districts, and the general dulness of trade in that month. 
 
 " It may also be observed, that the issues of the joint-stock banks, and 
 of the private banks, are subject to the same laws. The issues of both 
 classes of banks rise together and fall together, and they have maintained 
 nearly the same relative amount during the last seven years. 
 
 " The laws which regulate the annual fluctuations of the country circu- 
 lation, that is, which determine the variations in the amounts of the coun- 
 try circulation, not within the year, but taking corresponding periods of 
 difl^erent years, are also dependent on the state of trade in those years. 
 If there be an increase of trade without an increase of prices, more notes 
 will be required to circulate the increased quantity of commodities. If 
 there be an increase of commodities, and also an advance of prices, a 
 still larger amount of notes would be required. There are also other cir- 
 cumstances that may permanently affect the amount of the country circu- 
 lation. 
 
 " During the last five years there has been a gradual reduction in the 
 annual amount of the country circulation, as appears from the following 
 Table, which shows the average amount in each year, from 1839 to 
 1643, both inclusive : — 
 
 1839, 
 1840, 
 1841, 
 
 £11,715,527 
 
 10,457,057 
 
 9,671,643 
 
 1842, 
 1843, 
 
 £8,249,052 
 7.667,916 
 
 " We attribute this extensive reduction in the country circulation to the 
 following causes; — First, The great dulness of trade which has taken 
 place in every part of the country. Secondly, The fall in the price of 
 corn in connection with bad harvests. Thirdly, The introduction of the 
 penny postage, and the system of registered letters. The uniform penny 
 post was commenced on the 10th of January, 1840, and the registry of 
 letters on the 6th of January, 1841. In consequence of these arrange- 
 ments, every banker sends ofl^ every night, either to London or elsewhere, 
 for payment, all the notes of other banks he may have received during 
 the day, excepting those issued in the same town. This must have occa- 
 sioned a large reduction in the amounts returned as notes in circulation. 
 The amount in the hands of the public is the same, but the amount in the 
 hands of other bankers is considerably reduced. Fourthly, The practice; 
 of keeping banking accounts has extended very much of late years. In- 
 
 293
 
 A Treatise on Banking. 
 
 stead of carrying notes in tlieir pockets as formerly, people now lodge 
 the notes with tlieir banker, and make their payments by giving cheques 
 on the bank. The facilities of travelling by railways and otlier means 
 have also tended to diminish the amount of notes in circulation, and to 
 cause them to be returned more rapidly for i)ayment to the bankers. 
 Fifthly, the circulation of the private bankers has been reduced by fail- 
 ures, and by merges into joint-stock banks ; and, on the other hand, sever- 
 al joint-stock banks have withdrawn their own notes, and made arrange- 
 ments for issuing the notes of the Bank of England." 
 
 It will be seen by the following Table, that the country circulation is 
 governed by the same laws since the passing of the Act of 1844: : — 
 
 An Account of the average Circulation of the Private and Joint-Stock Banks of Issue, 
 during the last Week in the Months of April, August, and December, for the Yeais 1845, 
 1846, 1847, an(f 1848. 
 
 Private Banks. Joint-Stock Banks. 
 
 Date. 
 
 No. of Banks. 
 
 Authorized 
 Issue. 
 
 Cirfulatl. No. of Banks. 
 
 Authorized 
 Is;sue. 
 
 Actual 
 Circulation. 
 
 1845. 
 
 
 £ 
 
 £ 
 
 
 £ 
 
 £ 
 
 April 26 
 
 199 
 
 5,011,097 
 
 4,655,636 
 
 71 
 
 3,477,321 
 
 3,272,034 
 
 Aug. 30 
 
 199 
 
 5,011,097 
 
 4,369,458 
 
 71 
 
 3,477,321 
 
 3,129.952 
 
 Dec. 27 
 
 197 
 
 5,009,021 
 
 4,481,038 
 
 70 
 
 3,469,872 
 
 3,160,010 
 
 1846. 
 
 
 
 
 
 
 
 April 25 
 
 197 
 
 5,009,021 
 
 4,700,170 
 
 70 
 
 3,469,872 
 
 3,229,744 
 
 Aug. 29 
 
 197 
 
 5,009,021 
 
 4,384,136 
 
 70 
 
 • 3,469.872 
 
 3,085,200 
 
 Dec. 26 
 
 196 
 
 4,999,444 
 
 4,528,208 
 
 67 
 
 3,418,277 
 
 3,145,702 
 
 1847. 
 
 
 
 
 
 
 
 April 24 
 
 196 
 
 4,999,444 
 
 4,700,169 
 
 67 
 
 3,418.277 
 
 3,228,717 
 
 Aug. 28 
 
 196 
 
 4,999,444 
 
 4,150,688 
 
 67 
 
 3,418,277 
 
 2,927,462 
 
 Dec. 25 
 
 187 
 
 4,880,389 
 
 3,525,157 
 
 65 
 
 3,261,906 
 
 2,417,528 
 
 1848. 
 
 
 
 
 
 
 
 April 29 
 
 187 
 
 4,880,389 
 
 3,919,739 
 
 67 
 
 3,409,987 
 
 2,834,799 
 
 Aug. 26 
 
 187 
 
 4,880,389 
 
 3,473,t!39 
 
 67 
 
 3,409,987 
 
 2,455,664 
 
 Dec. 30 
 
 184 
 
 4,822.488 
 
 3,492,340 
 
 66 
 
 3,409,987 
 
 2,529,498 
 
 From the pressure in the year 1847, the country circulation in Decem- 
 ber was less than in August. Will they who contend that country bank- 
 ers can extend their issues as they please, have the kindness to inform us 
 why those bankers did not increase their issues when money was so val- 
 uable .'' 
 
 1 cannot better state my own views of the principles of the country 
 circulation, than by transcribing a portion of my evidence given before 
 the Committee on Banks of Issue, in March, 1841, when examined by 
 Sir Robert Peel : — 
 
 " Sir Robert Peel. — Would you recommend that the paper thus is- 
 sued should be convertible into gold at the will of the holder ? — Yes. 
 
 " You think that is an absolutely necessary check against excessive 
 issues .'' — I think it is a necessary check. 
 
 " What reference is made in the issue of paper to the quantity of gold 
 m the country, and to the ultimate ability of the parties to discharge their 
 paper engagements in gold ? — The bankers in issuing their notes do not 
 make any reference to the quantity of gold in the country, but they make 
 
 294
 
 Country Private Banks. 
 
 reference to their ability to discharge those notes when returned to them 
 for payment. 
 
 " What is the nature of the reference which they make ? — By keep- 
 ing securities available for the purpose of being sold in order to discharge 
 those notes whenever presented to them for payment. 
 
 " They have no reference whatever to the state of the exchanges } — 
 No ; when I say no, I mean not with the view of regulating the amount 
 of notes by the exchanges ; but bankers, whether banks of issue or not, no- 
 tice the exchanges as naturally as they would notice the prices of the funds, 
 in order that they may be able to judge as to the future value of money, 
 so as to exercise their discretion with reference to their investments. 
 
 " They do not notice the state of the exchanges with a view to deter- 
 mine the policy of contracting or increasing their issues .'' — No ; not 
 with a view of making the amount of their issues correspond. If they 
 see that the exchange is likely to become unfavorable, bankers will natu- 
 rally be more cautious in making advances, and more cautious of com- 
 ing under engagements, than they would be when they found that the ex- 
 changes were favorable ; but there is no intention on the part of the coun- 
 try banks to make their notes correspond with the amount of the bullion 
 in the Bank of England. 
 
 " A country banker would rely upon the sale of his securities, and 
 that only in case of a demand for gold? — In case of a general run, he 
 would depend upon the stock he had in hand, and the further stock he 
 might realize by a sale of securities. 
 
 " If all parties continued to issue, none of them having reference to 
 the state of the exchanges, but relying upon the available resources which 
 a sale of securities might supply, do not you think that there might be a 
 danger of a sudden demand for gold, and of an inability on the part of 
 those issuers to discharge their engagements in gold } — I do not think 
 there would be any danger of that at all, because each bank would take 
 care of itself; if you suppose that the whole circulation of the countiy 
 comes in at once and demands gold, it is quite clear that gold cannot be 
 found to pay it off, and that is equally the case with the Bank of England 
 and any other bank, and it is equally the case with us who are banks of 
 deposits ; if all the depositors were to come together at the same time 
 and require their deposits, we should be unable to pay them, but we 
 could realize our securities, and pay them off, if they were to come 
 gradually. 
 
 " Suppose there was one bank which had the charge of the paper cir- 
 culation of the countiy, and had the means, therefore, by constant refer- 
 ence to the state of the exchanges, of determining the amount of the pa- 
 per circulation, do not you think that there would be a greater security 
 against a sudden demand for gold, and an inability to pay that gold, than 
 there is when there are a great many issuers, none of whom, according 
 to your own statement, pay the slightest regard to the state of the exchan- 
 ges ? — No, I think not. 
 
 " What then supplies the check ? — The check upon the private bank- 
 ers is, that their circulation cannot be issued to excess ; whereas, if you 
 had a bank which should issue notes for so much gold, then every time 
 U 295
 
 A Treatise on Banking. 
 
 there was a favorable coarse of exchange, there would be a large issue 
 of notes, winch notes would necessarily reduce the rate of interest, lead 
 to speculation, and turn the exchanges again by causing investments to be 
 made in foreign countries. Now, as issues are at present conducted, 
 bankers arc under several checks which would not apply to such a bank ; 
 for instance, the check of the interchange with each other of their differ- 
 ent notes once or twice a week, and the check of having their notes pay- 
 able on demand ; whereas the notes of such a bank as you suppose would 
 not be diminished except when gold was wanted to be sent abroad. 
 Another check is the practice of giving interest upon deposits, by which 
 all the surplus circulation is called in and lodged with the banks ; now, 
 such a bank as you have supposed would not be under the control of 
 those checks, and it would be under the necessity of increasing the cir- 
 culation whenever the exchange became favorable ; and we know by ex- 
 perience, that the most sure way of making the exchanges unfavorable is 
 a previous excessive issue ; that previous excessive issue would necessari- 
 ly arise, on the principle you have supposed, every time the exchange was 
 favorable. 
 
 " You think that there is some cause in operation which applies equally 
 to all issuers of paper, and prevents any undue issue of paper, and dis- 
 penses with the necessity of any reference, on the part of each issuer, to 
 the state of the exchanges ? — That is the case with all country issuers of 
 paper. With regard to the Bank of England, who have the power of is- 
 suing their notes in exchange against bullion, in the purchase of Excheq- 
 uer bills and Government stock, it is quite clear that notes put into opera- 
 tion in that way, being thrown in a mass upon the previously existing 
 state of trade, will have the effect of raising prices and reducing interest, 
 and turn the exchanges ; but if notes are issued merely to pay for trans- 
 actions that have previously taken place, and are drawn out by the oper- 
 ations of trade, those notes will have no such effect. 
 
 " Supposing, at present, the Bank of England observed that the ex- 
 changes continued unfavorable for a long period, and that there was a 
 progressive diminution in the amount of their bullion, and supposing that 
 they saw that in the course of two years their bullion was reduced from 
 ten millions to four millions ; do you think it would be desirable that the 
 Bank of England should take any step whatever to guard against the ul- 
 timate consequences of that state of things, by restricting the paper cir- 
 culation .'' — I think such a case may occur, but I think in ordinary times 
 the Bank of England might hold foreign securities, by which they would 
 bring back gold to this country, and thus prevent any necessity for a con- 
 traction of the circulation ; at the same time, I do not at all question the 
 possibility of such a case occurring as may render a contraction necessa- 
 ry ; nor do I at all question the influence of a contraction to have some 
 effect upon the exchanges ; but I contend that, as an ordinary principle 
 of action, the bank ought not to expand their circulation, so as to cause 
 the exchanges to be unfavorable, nor calculate upon a contraction of the 
 circulation for the purpose of remedying the exchanges. 
 
 " Then you do think that the expansion of the circulation of the Bank 
 of England may cause unfavorable exchanges ? — Yes. 
 
 296
 
 Country Private Banks. 
 
 " Why should not the expansion of the circulation on the part of the 
 country issuers produce the same effect ? — Because the country circula- 
 tion is under checks, whereas the Bank of England circulation is not ; the 
 country circulation can be issued only in consequence of transactions 
 which have taken place, and to the extent only required by the wants 
 of the district ; whereas it is obvious that the Bank of England has the 
 power of increasing the circulation by the purchase of exchequer bills 
 or stock, or by purchasing bullion, and throwing a mass of notes on the 
 market when the state of trade does not require them." 
 
 Chairman. — " Have you any further observations to make to the com- 
 mittee ? — When the first question was asked of me, at the commence- 
 ment of my examination, I stated that I appeared before the committee 
 as the representative of the joint-stock banks, and that, therefore, in ex- 
 pressing any opinions consistently with the resolutions which they had 
 passed, I wished to be considered as speaking the sentiments of the joint- 
 stock banks, but, should the committee ask me any question not connect- 
 ed with the circumstances of country issues, that I wished to be consid- 
 ered as speaking my own individual opinions. The points upon which I 
 wish to be considered as speaking the sentiments of the joint-stock banks 
 are as follows : I speak the opinions of the joint-stock banks, in saying 
 that their circulation cannot be made to fluctuate in exact conformity with 
 the circulation of the Bank of England, or with the stock of gold in the 
 Bank of England ; that the country issue is drawn out by the demands 
 of trade, and is subject to checks to which the circulation of the Bank of 
 England is not liable ; that the countiy bankers have not the power of is- 
 suing their notes to excess ; that they cannot contract their circulation or 
 expand it as they please ; and also, that the country circulation does not 
 influence the prices of commodities, and that it cannot be regulated by 
 the principles of the foreign exchange. I speak the opinions of the joint- 
 stock banks when I say that the abolition of the country circulation would 
 cause very considerable distress ; would limit the power of the country 
 banks to grant the same accommodation to their customers ; would com- 
 pel many of their customers to sell their property, thus lessening the val- 
 ue of real property ; that country bankers would be compelled to increase 
 their charges to their customers ; and, in some cases, that those banking 
 establishments would be altogether abolished, in consequence of not be- 
 ing able to supply sufiicient profit for carrying them on ; that, in some 
 other cases, however the country circulation would be substituted or super- 
 seded by a bill circulation, nevertheless considerable distress would exist 
 throughout the country, and that not only country banks themselves, but 
 their customers and the public in general, would be subject to very con- 
 siderable loss and inconvenience. In other opinions which I have ex- 
 pressed with regard to the regulation of the currency, and the principles 
 upon which the Bank of England ought to be managed, also, as regards 
 the extracts which have been made from my own works, and other mat- 
 ters I need not particularly specify, I wish to be understood as giving my 
 own opinions, without saying whether those opinions do or do not meet 
 the concurrence of the joint-stock bankers. I take the responsibility of 
 these entirely upon myself." 
 
 297
 
 A Treatise on Banking. 
 
 The country bankers residing in the same neighbourhood usually make 
 their exchanges once a week, and pay tiie ditlerence in London on the 
 following day. This arrangement is of considerable advantage to all par- 
 ties. Suppose I as a country banker receive in the course of a week the 
 sum of £ 10,000 in the notes of a neighbouring bank, and that bank re- 
 ceives the same amount of my notes ; if we exchange notes, there is an 
 end of the transaction. I pay the notes that bank has upon me by the 
 notes I have upon that bank, and each of us has £ 10,000 less in circula- 
 tion. But suppose we refuse to exchange notes with each other, then I 
 take his notes and demand Bank of England notes and sovereigns, and 
 he does the same with me. Hence each of us must keep a balance of 
 £ 10,000 more in gold or Bank of England notes, and also an additional 
 sum to answer any sudden emergency that may arise at any time from 
 that banker having more than the usual amount of notes, and to meet any 
 run that he may be disposed to make upon me. Tiius it is that country 
 banks, by exchanging notes, and receiving payment of the difference in 
 London, are enabled to carry on their business with a less amount of 
 ready cash, and to prevent the danger that might arise from being run 
 upon by each other. Those banks only exchange which are in the same 
 neighbourhood. Were I to receive the notes of a bank at some distance 
 off, I should send these notes to London, and that banker would send my 
 notes to London, and they would be paid by our London agents. We 
 should not exchange with each other, because it would cost more to send 
 a messenger with the notes to be exchanged, than it would cost postage to 
 London. Here I have to pay the postage of these notes to London, and 
 I have also to pay the expense of having my notes which have been paid 
 in London sent down to me. 
 
 The exchange between any two banks established in the same place, 
 will be regulated by the character and extent of the business they may 
 respectively carry on. The balance may for a considerable length of 
 time be uniformly in favor of one of these banks, and then for a consider- 
 able period in f^ivor of the other ; or it may fluctuate weekly, and at the 
 year's end be found to be neither favorable nor unfavorable. 1 shall en- 
 deavour to investigate the causes which govern those changes. In the 
 first place, I shall presume that each bank is a bank of deposit, of discount, 
 of remittance, of agency, and of circulation. The claims upon each bank 
 will then consist of, — 1. Cheques drawn against deposit accounts. 2. Its 
 own notes. 3. Notes issued by its agents or other branches. 4. Letters 
 of credit granted by agents or branches. These claims or obligations will 
 get into the possession of the rival bank by some of the following ways : 
 — 1. As lodgments on deposit accounts. 2. In payment of local bills. 
 3. For bills or letters of credit on agents or branches. 4. Received for 
 collection by post from some agents or branches. The exchanges will 
 now be more or less favorable according to the following circum- 
 stances : — 
 
 1. The discounting of bills not payable in the place where the banks 
 are established, has a tendency to render the exchanges unfavorable. 
 
 If, for example, a country banker discounts bills payable in London, he 
 issues his own notes for the amount at the time the bill is discounted, and 
 
 298
 
 Country Private Banks. 
 
 some of these notes will get into the rival bank and render the exchanges 
 unfavorable. When the bills are due, the London agent receives the 
 amount from the accepters ; but this has no effect on the local exchange. 
 Hence a bank that discounts a large amount of London bills must expect 
 to have large sums to pay in the exchanges. There are some cr-ses, 
 however, in which the discounting of London bills will not affect the local 
 exchange : these are, — L When the amount of the bill is not taken in 
 notes, but in a draft on the London -or some other agents. 2. When the 
 amount of the bill is placed to the party's current account, the exchanges 
 will not be affected so long as it remains on that account. 3. The ex- 
 changes will not be affected, if the notes issued for the London bill should 
 be retired either by the bank that issued them, or by any of its agents. 
 
 2. If a bank has to pay a large amount, or letters of credit, issued upon 
 it by its agents or branches, the exchanges may become unfavorable. 
 
 The exchange between any two banks may be affected by other cir- 
 cumstances than local connections. If one bank is drawn upon by agents 
 or branches, or has to pay notes issued by agents or branches, and the 
 other has no such connections, then the exchange will be unfavorable to 
 the former bank and favorable to the latter. Some of these notes or let- 
 ters of credit, and some of the notes issued for the letters of credit, will 
 probably get into the possession of the rival bank, and appear in the ex- 
 change, 
 
 3. If a bank issues a large amount of bills, or letters of credit upon its 
 agents or branches, the tendency is to render the exchange favorable. 
 
 The bank receives the money for these bills or letters at the time it 
 issues them. This money will often be composed of the notes chiefly in 
 circulation, and a part of them will consist of the notes or obligations of 
 the rival bank, and will be paid in the exchange : or if the bank receive 
 from its agents or branches any claims upon the rival bank, or even any 
 bills to be collected, the effect will be to render the exchange favorable in 
 the same way as the granting letters of credit upon those agents or 
 branches. 
 
 4. The increase of lodgments on current accounts has a tendency to 
 render the exchanges favorable. 
 
 On these accounts money is received and money is paid out daily. 
 The receipts of money tend to throw the exchange in favor of a bank, be- 
 cause some portion of these receipts will consist of the obligations of the 
 rival bank. The payment of money tends to render the exchange unfa- 
 vorable, because some of the notes issued in payment will find their way 
 into the other bank. When therefore the receipts are more in amount 
 than the payments, the exchanges are likely to be favorable. When the 
 total deposits lodged in a bank continue to increase, the exchange will 
 probably be favorable during the progress of such increase ; but after the 
 deposits have ceased to increase, the exchange will not be more favorable 
 than before the increase began. As long as the amounts of the deposits 
 in the respective banks remain stationary, the operations on those ac- 
 counts will not affect the exchanges, although the deposits in one bank 
 may be twice the amount of those in the other. But if from a transfer of 
 accounts or from other causes the deposits increase in one bank and di- 
 
 299
 
 A Treatise on Banking. 
 
 minish in the other, the exchanges during these operations will be in favor 
 of the bank whose deposits are on the increase. But let the progress of 
 increase be over, and the amounts of the respective lodgments become 
 permanently fixed, then as fiir as the operations on the current accounts 
 are concerned the exchanges will again be equal. 
 
 5. An increase in the amount of local bills under discount has a ten- 
 dency to render the exchanges unfavorable. Local bills are bills payable 
 in the place where the bank is established. The operations on the local 
 bill account are similar to those on the deposit account. When these bills 
 are discounted, notes are issued, — when the bills are paid, notes are re- 
 ceived. When the amount of local bills paid is greater than that dis- 
 counted, the tendency is to render the exchanges favorable. Thus, to re- 
 duce the amount of local bills under discount, is to render the exchanges 
 favorable ; and to increase the amount, is to render them the reverse. 
 But though the operations on the local bill account are similar in their 
 nature to those on the current accounts, yet the effect is different as to 
 their influence on the exchanges. For as the amount of the local bills 
 under discount increases, the exchanges become unfavorable : but as the 
 deposits increase, the exchanges become advantageous. In the increase 
 of local bills, the issue of notes will be more than the receipts ; but in the 
 increase of the deposits, the receipts will be more than the issues. 
 
 As the laws of the country circulation are the same, whether the notes 
 are issued by private or by joint-stock banks, I have introduced the subject 
 into this section on the Private Country Banks, and have altogether omit- 
 ted it in the following section on the Country Joint-Stock Banks. 
 
 Section v. — COUNTRY JOINT-STOCK BANKS. 
 
 By a clause in the charter of the Bank of England, no partnership 
 formed for carrying on the business of banking could consist of more 
 than six persons, but by an Act passed in the year 1826, copartnerships 
 of more than six in number are permitted to carry on business as bankers 
 in England, sixty-five miles from London, provided they have no house 
 of business or establishment as bankers in London, and that every mem- 
 ber of such copartnership shall be responsible for all the debts of the 
 company. They must also deliver to the Stamp-office the names and 
 places of abode of all their members, and also a list of their officers. 
 These lists are to be copied into a book, which any person is entitled to 
 see on paying one shilling, and to obtain a copy for ten shillings. The 
 banks may sue and be sued in the name of their public officer, and exe- 
 cution upon judgment may be issued against any member of the copart- 
 nership. 
 
 We take the following account of these banks from a Ilci)ort of a Com- 
 mittee of the House of Commons, appointed in the year 183G to inquire 
 into the operation of the Act 7 Geo. IV. c. 46, for permitting the estab- 
 lishment of Joint-Stock Banks : — 
 
 300
 
 Country Joint- Stock Banks. 
 
 " The evidence taken before your committee, and the returns from the Stamp-office, 
 establish the fact that tliese banks are rapidly extending in all directions ; that new 
 companies are daily forming, and that an increased number of branches and agencies 
 are spreading throughout England, even in small towns and villages ; that a principle 
 of competition exists, which leads to the extinction of all private banks, and to their 
 conversion into banking companies. The mode in which this is effected, and the prin- 
 ciple on which the issue of transferable shares acts at once on private banks, and gen- 
 erally on commercial credit, is fully developed in the evidence. 
 
 '•Your committee have had before them the deeds of settlement of the greater num- 
 ber of the existing joint-stock banks, and they proceed to submit to the House an 
 analysis of some of their leading provisions. 
 
 " Though the general objects of these establishments are much alike, yet there 
 are some variations in their deeds of settlement which it may be material to point 
 out. 
 
 " First, hs to the power of altering the regulations of the company. 
 
 "The active duties are generally delegated to a small body .called the directors, 
 while the main body of proprietors reserve to themselves the power of selecting the di- 
 rectors, and of altering from time to time the rules by which the directors are to be 
 governed. Indeed, it might have been expected that the proprietors would always 
 have reserved to themselves this power ; nor should this general rule have been no- 
 ticed, had it not been necessary to point out a single exception to it, in the case of one 
 particidar company, in which all the powers of the company are vested in the directors 
 of the central bank, till January, 1838, and even after that date this authority is only to 
 be controlled by the ' general board of directors,' consisting of the central directors 
 themselves, and of the local directors of branch banks, appointed by them. The deeds 
 of all the other companies expressly give a power to the shareholders to make new 
 laws and regulations. 
 
 " Secondly, as to the mode of conducting the business of banking. 
 
 " This is for the most part set out in general terms. Some banking companies con- 
 tent themselves with defining the business to be 'banking in all its branches ' ; in other 
 cases, it is called ' the business of bankers.' 
 
 " Advancing money on real security is in no instance forbidden. The deeds of three 
 companies are silent on the subject ; the rest expressly allow it. 
 
 " The majority of the deeds are silent on the subject of the purchase of land. The 
 
 Banking Company expressly allows it. The Banking 
 
 Company and the Union Banking Company expressly forbid it. 
 
 " An advance of money on mining concerns is in no instance expressly allowed ; in 
 many it is expressly forbidden ; in the majority, it is passed over in silence. 
 
 " Advances of money upon any ' public foreign government stock, or the stock of 
 any foreign chartered public company.' is directly sanctioned in the deeds of four 
 banking companies. Investment in foreign government stock or funds is allowed by 
 the deed of another bank. Such advances are expressly forbidden by many of the 
 deeds, and are passed over in silence by many othei's. 
 
 " In no instance is the company forbidden to become the purchaser of its own 
 shares ; but, on the contrary, power is expressly given to do so by means of the deeds, 
 and that to any amount. The only modifications of this power which your committee 
 have found are in the case of one banking company, in which the directors are au- 
 thorized to purchase shares in the case only of a refusal to admit as a proprietor the 
 person proposing to buy ; and in the case of another bank, the number of shares to 
 be bought in by the directors is restricted to forty. 
 
 "Thirdly, as to the degree of publicity to be given to the proceedings. 
 
 " No principle seems to be more attended to, or prominently put forward, than that 
 of preserving secrecy as to the state of the accounts of the customers of the banks. 
 To this principle there does not appear to be an exception. 
 
 " The directors are in general required to sign a declaration pledging themselves to 
 observe secrecy as to the transactions of the bank with their customers, and the state 
 of the accounts of individuals. In some of the companies, this declaration is also to 
 be signed by all the clerks and officers. One banking company goes so far as to re- 
 quire an oath to this effect. If the proprietors are dissatisfied with the statement of 
 accounts made by the directors, a power is generally reserved to appoint auditors or 
 inspectors for the examination of the books ; but these auditors or inspectors are re 
 quired to sign a similar declaration of secrecy. 
 
 30 i
 
 A Treatise on Banking. 
 
 "No proprietor, not being a diicctor, is entitled to inspect any of the books of the 
 company. 
 
 " The directors are in pcneral bound to exhibit to the general meeting of the share- 
 holders a summary or balance-sheet of tlieir all'airs, and to make such further state- 
 ment or report as the directors may deem expedient and conducive to the interests of 
 the company. In the case of one of tliese banks, even this is not obligatory by the 
 terms of tiie' deed, which leave it to the discretion of the directors wliether they do 
 or do not exhibit a balance-slicct. In a very extensive bank, the proprietors annually 
 appoint auditors to examine the affairs of the company, and to report therein. 
 
 •• In some of the companies the principle of secrecy is earned still further : two of 
 the directors, selected from the rest, are the exclusive depositors of the power of in- 
 specting the private accounts of customers. These persons are sometimes called 
 ' confidential directors.' This provision is stated to be made ' in order that the credit 
 and private transactions of individuals may be preserved inviolate.' Sometimes they 
 are called ' managing directors ' ; sometimes ' special directors.' In other companies, 
 though all the directors have the power of inspection of the accounts of customers, 
 two of the directors are selected to inspect bills and notes, ' in order to prevent the 
 exposure of such bills of exchange and promissory notes as may pass through the 
 bank. These two directors are called ' the bill committee.' In two of the com- 
 panies, a single person, called ' the manager,' has tlie exclusive power of inspecting 
 bills and notes. 
 
 " Fourthly, as to the terms on which the company is to be dissolved. 
 
 " The deeds of all these companies contain some provision for dissolution in certain 
 contingencies. It is in general provided that a dissolution of the company shall take 
 place by reason either of a certain amount of loss, or of a voluntary agreement. Dis- 
 solution by reason of loss in the great majority of the deeds is provided for in the fol- 
 lowing manner. 
 
 " It is necessary to premise that the directors of each of these companies are bound 
 to set aside a certain portion of the profits to form a fund to meet extraordinary de- 
 mands, which fund is sometimes called the ' surplus fund,' sometimes the ' reserve fund.' 
 but more usually the 'guarantee fund.' The ordinary provision for dissolution is to 
 this eftect : — That if the losses sustained shall at any time have absorbed the whole 
 of this guarantee fund, and also one fourth of the capital paid up, then any one share- 
 holder may require the dissolution of the company, which shall take place accordingly, 
 unless two thirds in number and value of the shareholders shall be desirous of con- 
 tinuing the company, and shall purchase the shares of those proprietors who wish to 
 withdraw. In one bank the dissolution of the company takes place upon a loss of 
 one fifth instead of one fourth of the capital. In two other banks no mention is made 
 of the guarantee fund. 
 
 " The provision of the great majority of deeds, as above stated, is, that in the event 
 of a given amount of loss, any one shareholder may pi-opose the dissolution. In some, 
 three shareholders are required. In the Banking Company A. the recjuisition for dis- 
 solution must be made by ten shareholders holding 200 shares ; in the Bank B. by 
 one fourth of the company ; but if the loss amount to one half the capital, then by 
 any single shareholder. 
 
 '• Bv the general provisions of the great majority of deeds, the dissolution of the 
 company, though duly proposed, may be averted by two thirds of the proprietors ; but 
 in some there exists no such restriction ; and on the occurrence of a given amount of 
 loss, the dissolution, if projiosed, must necessarily take place. In other instances, on 
 the appearance of a given amount of loss, the dissolution is to take place immediately, 
 even though no partner should propose it." 
 
 LIST OF COUNTRY JOINT-STOCK BANKS. 
 
 The following Tables contain a complete exhibit of the Country Joint- 
 Stock Banks, as in existence, July, 1849, arranged in alphabetical order, 
 and showing, — I. The location of the Head Office. II. Wiicn established. 
 III. Number of Branches. IV. Paid-up Capital. V, Reserved Fund. 
 VI. Last Dividend. VII. Amount of Authorized Issue. VIII. Name 
 of Manager. 
 
 302
 
 Country Joint- StocK Banks. 
 
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 303
 
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 305
 
 A Treatise on Banking. 
 
 We have no official return of the j)resent amount of the paid-up capita] 
 of all the joint-stock banks. But from the best information that has been 
 collected on the subject, it would appear tliat the number of partners in 
 all the banks in England (including those of London) is about 23,000, the 
 paid-up capital about £ 14,000,000, and the reserved funds i: 2,000,000. 
 
 The following country Joint-stock Banks in England have stopped pay- 
 ment. As we have elsewhere discussed the causes of the failure of joint- 
 stock banks generally, we need make no observations on them individu- 
 ally. 
 
 Date of 
 Establishment. 
 
 Mar. 1837 
 Sept. 1836 
 May, 1835 
 Oct. 1835 
 Mar. 1836 
 Mar. 1829 
 
 Aug. 1834 
 
 Dec. 1836 
 Julv, 1836 
 Dec. 1832 
 Aug. 1839 
 Dec. 1836 
 
 Aug. 1835 
 Aug. 1836 
 
 Date of 
 Stoppage 
 
 1840 
 1844 
 1837 
 1846 
 1847 
 1842 
 
 1840 
 
 1839 
 1846 
 1847 
 1846 
 1841 
 
 1840 
 1843 
 
 1 . Birmingham — Birmingham Borough Bank 
 
 2. Devonport — Western J)istrict Bank 
 
 3. Leamington — Leamington Bank 
 
 4. Leeds — Leeds and West Riding Bank 
 
 5. Liverpool — Liverpool Banking Company 
 
 6. Manchester — Bank of Manchester . 
 
 7. Manchester — Commercial Bank of Eng- ? 
 
 land 5 
 
 8. Manchester — Imperial Bank of England 
 
 9. Newcastle — Newcastle Joint-Stock Bank 
 
 10. Newcastle — North of England Bank 
 
 11. Sheffield— Sheffield andlletford Bank 
 
 12. Southampton — Southern District Bank 
 
 13. Walsall — Walsall and South Stafford- 
 
 shire Bank 
 
 14. York — Yorkshire Agricultural and Com- ) 
 
 mercial Bank ) 
 
 No. 1 was formed out of the remnants of a branch of the Northern and 
 Central Bank of England. No. 4 was formed on the private bank of 
 Messrs. Smith & Son. No. 5 was at first called the Tradesman's Union 
 Bank, and under that title made returns to the Joint-stock Banking Com- 
 mittee of the House of Commons in 1S36. No. 10 is now winding up its 
 affairs under " The Joint-stock Companies' Winding-up Act, 1848." 
 
 The following Joint-Stock Banks wound up their affairs without stop- 
 ping payment : — 
 
 1 Ipswich — Suffolk Banking Company 
 
 2. Leeds — Yorkshire District Bank . 
 
 3. Leeds — Commercial Bank of Leeds . 
 
 4. Liverpool — Albion Bank 
 
 5. Liverpool — Phrenix Bank 
 
 6. Manchester — Northern and Central Bank 
 
 of England 
 
 7. Manchester — South Lancashire Bank . 
 
 8. Manchester — Alliance Bank 
 
 9. Oldham — Oldham Bankhig Company . 
 
 No. 2 was discontinued, and the shareholders formed a new bank, 
 called the Yorkshire Banking Company, taking all the premises and offi- 
 cers of the old bank. No. 3 was formed on the private bank of Messrs. 
 Bywater & Co. No. 4, Tlie Tradesman's Bank of Liverpool merged in 
 this bank. Afterwards it wound up, paying back to its proprietors all the 
 
 806 
 
 Date of 
 EstaOlis/imcnt. 
 
 Date of 
 Winding up. 
 
 April, 1842 
 Aug. 1834 . 
 July, 1836 
 May, 1836 . 
 Jan. 1837 
 
 1845 
 . 1843 
 
 1846 
 . 1842 
 
 1838 
 
 Mar. 1834 . 
 
 . 1836 
 
 May, 1836 
 Oct. 1839 . 
 Sept. 1836 
 
 1843 
 
 . 1841 
 
 1847
 
 Country Joint- Stock Banks. 
 
 capital and a bonus besides. No. 5 was formed out of the remnants of a 
 branch of the Northern and Central Bank ; it existed only a short time. 
 No. 8, The Northern and Central Bank, realized about 10s. in the pound 
 of its capital. Some of the shareholders with that portion of their capital 
 formed this bank. It never did much business, and after a while its capi- 
 tal was lent to the Bank of Manchester, upon the promissory notes of that 
 bank, at two or three years' date, bearing interest at 5 per cent. No. 9 ; 
 ^well-managed bank, but having only a small caphal, the directors deter 
 mined, after the pressure of 1847, to wind up its affairs. 
 Banks which stopped, and soon afterwards resumed : — 
 
 Dale of 
 Establishment. 
 
 Dale of 
 Stoppage. 
 
 May, 1836 
 May, 1836 . 
 July, 1836 
 
 1847 
 
 . 1847 
 
 1847 
 
 1. Liverpool — Royal Bank of Liverpool 
 
 2. Liverpool — North and South Wales Bank 
 
 3. Newcastle — Union Bank of Newcastle 
 
 4. Nottingham — Nottingham and Nottingham- ) . -i loo. lo^n 
 
 shire Banking Company . ^ .$ April, 1834 . . . 1842 
 
 Nos. 1 and 2 stopped during the pressure of 1847, but soon afterwards 
 resumed. No. 3 stopped at the same period, but have resumed at three of 
 their branches, and are about to resume at Newcastle. No. 4 was stop- 
 ped in 1842 by their London agent. They changed their agent, and re- 
 sumed. 
 
 The following Joint-stock Banks have merged in other Joint-stock 
 Banks : — 
 
 Banks into which Date of Whpn 
 
 Banks. they merged. Establishment, merged. 
 
 I.Birmingham — Bank of Blrming- > Birmingham Banking ) . ,„„„ ,„„_ 
 
 ham 5 Company . . 5 ^"S- 1»32 . 18o/ 
 
 2. Lichfield — Lichfield, Rugeley, and > National Provincial ( ■„■ ,„„, ,„„„ 
 
 Tam worth Banking Company 5 Bank . . _ ^ inov. i»cia . ii<JS 
 
 3. Newport -Isle of Wight Banking? j^. _ _ May, 1842 . 1844 
 
 Company . . . . ) •" 
 
 4 Norwich — "Norwich and Norfolk > -c t <•-!? i at, i nr ioot loor 
 -D u i East of England Bank Mar. 1827 . 1836 
 
 5. Stockton — Stockton and Durham ) National Provincial ) t-. looo ■•om 
 County Bank .... 5 Bank . . .] ^^''^ ^^^^ ' ^^^^ 
 
 " Return of the Joint-stock Banks which have been established under 
 the provision of the Act 7 Geo. IV. c. 46, stating the period when, and 
 the place where, established, and likewise the dates at which any such 
 banks, once established, had ceased to exist." Besides those we have 
 mentioned, this list contains the following : — 
 
 The Period irhen The Places where 
 Name of the Bank. established. established. Date of ceasing. 
 
 1. Bank of South Wales . Feb. 26, 1835 Carmarthen Last license, Oct. 1836. 
 
 2. Bristol Old Bank . June 16, 1826 Bristol Last license, Oct. 1840. 
 3 Bury and IleywoodBank- ) Cg„f 17 1036 ^ ^"'T ^^'^ J Last and only return, 
 
 ing Company . • j ( Hey wood \ Sept. 1836. 
 
 4. Cental Bank 6f Liver- J j^^^ 3 ^ ggg Liverpool Last return, April, 1 839 . 
 
 ■' ^'' CitrSnk °""'^ """^ \ ^^"^^ ^^' ^^■'^•^ Gloucester Last return, June, 1836 
 
 307
 
 A Treatise on Banking. 
 
 The Period tehen The Places tchere 
 Name of the Bank. eatablUhtd. established. Date of ceasing. 
 
 ^ ^ wiS ^''"^' ■^''''^ I Nov. 11, 1834 [ ^^"ll^f ''°'^ \ Last license, Oct. 1835. 
 7 Leicestershire and War- i 
 
 wickshire Joint-stock > Sept. 14, 1840 Hinckley . Last license, Oct. 1840. 
 
 BankinfT Company ) 
 
 8. Leith Biinkinj; Company Nov. 23, 1837 Carlisle . Last license, Oct. 1836 
 
 9. Nantwich & South Che- ) j i oc i oon xt„«»,.,;„», 
 
 shire Bank . . J July 25, 1839 Nantwich. 
 
 No. 1 is the private bank of Messrs. Watkins & Co. The number of 
 partners exceeding six, the firm was registered as a joint-stock bank. 
 The number has been reduced by death, and therefore the registry is no 
 longer required. The head office is at Brecon. No. 2. This is the pri- 
 vate bank of Messrs. EUon, Baillie, & Co., who, having eight partners, 
 registered as a joint-stock bank. Three of the partners have since died, 
 so that the number is reduced to five. Since the year 1844 they have 
 discontinued the issue of their own notes. No. 3. This bank was in ex- 
 istence only a few months. No. 4. This was a small, ill-regulated bank, 
 that brought itself to a close. No. 5. This bank was formed by Mr. 
 Charles Cripps, who had been the agent of the Bank of England branch 
 at Gloucester. It existed for a short time, and then became a branch of 
 the County of Gloucester Bank. No. 6. This bank had seven partners. 
 It is presumed to have been the private bank of Messrs. Douglas, Swalley, 
 & Co., who stopped payment in the year 1839. No. 7. This bank was 
 formed on the private bank of Messrs. Homing & Needham, at Hinckley. 
 It continued only a very short time. No. 8. The Leith Banking Com- 
 pany had a branch at Carlisle, and consequently registered as an English 
 bank. No. 9. This was a small, but respectable bank, that transferred 
 its business, on the 1st of January, 1845, to the Manchester and Liverpool 
 District Bank. 
 
 Two joint-stock banks have failed in the Isle of Man. 
 
 1. The Isle of Man Joint-stock Bank. This bank was formed on the 
 private bank of Messrs. Forbes & Co. They were largely in debt to their 
 London agent, and their affairs have led to much litigation. 
 
 2. The Isle of Man Commercial Banking Company. The business of 
 this bank has been taken up by the City of Glasgow Bank, who have 
 opened a branch in the island — called the Bank of Mona — under the 
 management of Mr. John Stanway Jackson, who was formerly manager 
 of the Manchester and Liverpool District Bank. 
 
 The following are the provisions of the Act 7 & 8 Vict. c. 113, passed 
 in 1844, to regulate Joint-stock Banks in England : — 
 
 No Joint-Stock Bank established after (jth May last to cany on business unless by virtue of 
 Jjtiters Patent granted according to this Act ; out Com/xinics previously establis/ied not 
 restrained /rom carrying on business until Letters Patent have been granted. 
 
 " Whereas the laws in force for the regulation of copartnerships of hankers in Eng- 
 land need to be amended : Be it enacted by the Queen's most excellent Majesty, by 
 and with the advice and consent of the Lords Spiritual and Temporal, and Commons, 
 in this present Parliament assembled, and by the authority of the same. That it shall 
 not be lawful for any company of more than six jiersons to carry on the trade or busi- 
 ness of bankers in England, after the passing of this Act, under any agreement or cov- 
 
 308
 
 Country Joint- Stock Banks. 
 
 enant of copartnership made or entered into on or after the sixth day of May last 
 passed, unless by virtue of letters patent to be granted by her Majesty according to the 
 provisions of this Act ; but nothing herein contained shall be construed to restrain any 
 such company established before the said sixth day of May, for the purpose of carrying 
 on the said trade or business of bankers in England, from continuing to carry on the 
 same trade and business as legally as they might have done before the passing of this 
 Act, until letters patent shall have been granted to them severally on their application, 
 as hereinafter provided, to be made subject to the provisions of this Act. 
 
 Company to Petition for a Charter. 
 
 " II. And be it enacted, That before beginning to exercise the said trade or business 
 every such company shall present a petition to her Majesty in council, praying that 
 her Majesty will be graciously pleased to grant to them letters patent under this Act ; 
 and every such petition shall be signed by seven at least of the said company, and shall 
 set forth the following particulars ; that is to say, — 
 
 " First, The names and additions of all the partners of the company, and the name 
 of the street, square, or other place, where each of the said partners reside. 
 
 " Second, The proposed name of the bank. 
 
 " Third, The name of the street, square, or other local description of the place or 
 places where the business of the bank is to be carried on. 
 
 " Fourth, The proposed amount of the capital stock, not being in any case less than 
 one hundred thousand pounds, and the means by which it is to be raised. 
 
 " Fifth, The amount of capital stock then paid up, and where and how invested. 
 
 "Sixth, The proposed number of shares in the business. 
 
 " Seventh, The amount of each share, not being less than one hundred pounds each. 
 
 Charter to he granted on Report of Board of Trade. 
 " III. And be it enacted, That every such petition shall be referred by her Majesty 
 to the Committee of Privy Council for Trade and Plantations ; and so soon as the 
 Lords of the said committee shall have reported to her Majesty that the provisions of 
 this Act have been complied with on the part of the said company, it shall thereupon 
 be lawful for her Majesty, if her Majesty shall so think fit, with the advice of her Privy 
 Council, to grant the said letters patent. 
 
 Deed of Settlement. 
 
 " IV. And be it enacted, That the deed of partnership of every such banking com- 
 pany shall be*prepared according to a form to be approved by the Lords of the said 
 committee, and shall, in addition to any other provisions which may be contained 
 therein, contain specific provisions for the following purposes ; that is to say, — 
 
 " First, For holding ordinary general meetings of the company once at least in evei*y 
 year, at an appointed time and place. 
 
 " Second, For holding extraordinary general meetings of the company, upon the 
 requisition of nine shareholders or more, having in the whole at least twenty-one 
 shares in the partnership business. 
 
 " Third, For the management of the affairs of the company, and the election and 
 qualification of the directors. 
 
 " Fourth, For the retirement of at least one fourth of the directors yearly, and for 
 preventing the reelection of the retiring directors for at least twelve calendar months. 
 
 " Fifth, For preventing the company from purchasing any shares, or making ad- 
 vances of money, or securities for money, to any person on the security of a share or 
 shares in the partnership business. 
 
 " Sixth, For the publication of the assets and liabilities of the company once at least 
 in every calendar month. 
 
 " Seventh, For the yearly audit of the accounts of the company, by two or more au- 
 ditors, chosen at a general meeting of the shareholders, and not being directors at the 
 time. 
 
 " Eighth, For the yearly communication of the auditors' report, and of a balance- 
 sheet, and profit and loss account, to every shareholder. 
 
 " Ninth, For the appointment of a manager, or other officer to perform the duties of 
 manager. 
 
 " And such deed, executed by the holders of at least one half of the shares in the 
 
 309
 
 A Treatise on Banking. 
 
 said business, on which not less than ten pounds on each such share of one hundred 
 pounds, and in proi)ortion for every share of hirgcr amount, sliall have been then paid 
 up, shall be annexed to the petition ; and the provisions of such deed, with such others 
 as to her Majesty shall seem fit, shall be set forth in the letters patent. 
 
 No Company to commence Business till Deed executed and ail tlie Shares subscribed for, ana 
 at least Ualftlie Amount paid up. 
 
 " V. Provided always, and be it enacted, That it shall not be lawful for any such 
 company to commence business until all the shares shall have been subscribed for, and 
 until the deed of partnership sliall have been executed, personally or by some person 
 duly authorized by warrant of attorney to execute the same on behalf of such holder or 
 holders, by the holders of all tlie shares in the said business, and until a sum of not less 
 than one half of the amount of each share shall have been paid up in respect of each 
 such share ; and it shall not be lawful for the company to repay any part of the sura 
 so paid up without leave of the Lords of the said committee. 
 
 Company to he Incorporated. 
 
 " VI. And be it enacted, That it shall be lawful for her Majesty, in and by such let- 
 ters patent, to grant that the persons by whom the said deed of partnership shall have 
 been executed, and all other persons who shall thereafter become shareholders in the 
 said banking business, their executors, administrators, successors, and assigns respec- 
 tively, shall be one body politic and corporate, by such name as shall be given to them 
 in and by the said letters patent, for the purpose of carrying on the said banking busi- 
 ness, and by that name shall have perpetual succession and a common seal, and shall 
 have power to purchase and hold lands of such annual value as shall be expressed in 
 such letters patent ; and such letters patent shall be granted for a term of years, not 
 exceeding twenty years, and may be made subject to such other provisions and stipu- 
 lations as to her Majesty may seem fit. 
 
 Incorporation not to limit the Liability of the Shareholders. 
 
 '• VII. Provided always, and be it enacted. That notwithstanding such incorporation 
 the several shareholders for the time being in the said banking business, and those who 
 shall have been shareholders therein, and their several executors, administrators, suc- 
 cessors, and assigns, shall be and continue liable for all the dealings, covenants, and 
 undertakings of the said company, subject to the provisions hereinafter contained, as 
 fully as if the said company were not incorporated." 
 
 By the 48th section of this Act, " Every company of more than six 
 persons carrying on the trade or business of bankers in England, shall be 
 deemed a trading company within the provisions of an Act passed in this 
 session of Parliament, entitled ' An Act for facilitating the winding up the 
 affairs of Joint-stock Companies unable to meet their pecuniary engage- 
 ments.' " 
 
 This Act is the 7 and 8 Vict. cap. Ill (September, 1844), and it ren- 
 ders all joint-stock companies subject to the law of bankruptcy. No joint- 
 stock bank has ever been made bankrupt. It is presumed, from the num- 
 ber of regulations prescribed by the Act, that the process of bankruptcy 
 would, in the case of a banking company, be both tedious and expen- 
 sive. 
 
 In the year 1848 an Act was passed (11 and 12 Vict. cap. 45), to 
 amend the Acts for facilitating the winding-up the affairs of joint-stock 
 companies unable to meet their pecuniary engagements, and also to facil- 
 itate the dissolution and winding-up of joint-stock companies and other 
 partnerships. The legal tide of tliis Act, to distinguish it from other Acts 
 is " The Joint-stock Companies' Winding-up Act, 1848." 
 
 The object of this Act is to enable the directors of an insolvent coni- 
 
 310
 
 The Banks of Scotland. 
 
 pany to compel the shareholders individually to pay their proportion of the 
 loss. There was previously much difBculty in doing this. If all the nom- 
 inal capital had been called up, the directors could make no further calls. 
 In cases where they had the power of making calls these calls could not 
 be enforced without an appeal to the Court of Chancery. It was therefore 
 customary for the directors to " confess judgment " to some creditor, and 
 this creditor brought actions against the refractory shareholders for the 
 whole amount of his claim, but granted a release on receiving that sum 
 which the shareholders ought justly to pay, in proportion to their shares. 
 
 By this Act the directors or any shareholder of a company that has 
 stopped payment, may present a petition to the Lord Chancellor, or to the 
 Master of the Rolls, in a summary way, for the dissolution and winding-up 
 of the company. If the order be granted, it is referred to a ]\Iaster in 
 Chancery, who will appoint an official manager to wind up the affairs of 
 the company. The official manager is to collect all the debts due to the 
 company, and to pay all its creditors. With the consent of the Master he 
 can make calls on the shareholders, for such amounts, and payable at 
 such times, as the Master may direct. The company is to sue and be 
 sued in the name of the official manager. The object of the Act, how- 
 ever, is rather to settle disputes and claims of the shareholders among 
 themselves, than to protect them against their creditors. Clause 58 has 
 an especial provision with reference to this subject : — 
 
 Act not to affect Rights of Creditors nor existing Contracts. 
 
 " LVIII. Provided always, and be it enacted, That, except as is by this Act ex- 
 pressly provided, nothing in this Act contained, nor any petition or order under the 
 same for the dissolution and winding up or for the winding up of any company, shall 
 extend or enlarge, diminish, prejudice, or in any wise alter or affect the rights or reme- 
 dies of creditors, or other persons not being contributories of the company, or the rights 
 or remedies of creditors being also contributories, but being creditors of the company 
 upon a distinct and independent account, whether against the company or against any 
 of the contributories of the same, nor the rights or I'emcdies of the company against 
 any contributories or other persons, nor shall alter or affect any contracts or engage- 
 ments entered into by or with the company, or any person acting on behalf of the 
 same, previously to any such petition, nor any actions, suits, or other proceedings 
 pending at the date of such petition." 
 
 Section VI. — THE BANKS OF SCOTLAND. 
 
 In this Section we shall consider the following topics : — 
 
 I. The Law of Scotland with reference to Banking. 
 
 II. The Existing Banks of Scotland. 
 
 m. A Comparison between the Banks of Scotland and those of England. 
 
 IV. The Laws of the Currency with reference to Scotland. 
 
 V. Those operations of the Scotch Banks that refer to the System of Cash Credits, 
 
 Interest on Deposits, Remittances to India, and the Settlement of t)h Ex 
 changes. 
 
 VI. The Exchange Banks and Exchange Companies 
 
 V 311
 
 A Treatise on Banking. 
 
 I. — The Law of Scotland v>ith Reference to Banking. 
 
 The general provisions of the law of Scotland bearing upon this sub- 
 ject, are calculated to promote the solidity of banking establishments. 
 
 1. There is no limitation to the number of partners. 
 
 2. The private fortune of every partner is answerable for the debts of 
 the bank. 
 
 3. Land, as well as other property, may he attached for debt. 
 
 4. In Scotland all land is registered ; so it is easy for any indi- 
 vidual, by referring to the records, to ascertain what landed property is 
 possessed by the partners of the bank, and also whether or not it be mort- 
 gaged. The following is the language of the Report of the Committee of 
 the House of Commons, appointed in 1826 to consider the expediency of 
 abolishing all notes under ^ 5 : — 
 
 " There is no limitation upon the number of partners of wliich a banking company 
 may consist ; and, excepting in the case of the Bank of Scothind and the two char- 
 tered banks, which have very considerable capitals, the partners of all banking compa- 
 nies are bound jointly and severally, so that each partner is liable to the whole extent 
 of his fortune for the whole debts of the company. 
 
 " A creditor in Scotland is empowered to attach the real and portable, as well as the 
 personal estate of his debtor, for payment of personal debts, among which may be 
 classed debts due by bills and promissory notes : and recourse may be had for the pro- 
 curing payment to each description of property at the same time. Execution is not 
 confined to the real property of a debtor merely during his life, but proceeds with equal 
 effect upon that property after his decease. 
 
 " The law relating to the establishment of records gives ready means of procuring 
 information with respect to the real and heritable estate of which any person in Scot- 
 land may be possessed. No purchase of an estate in that country is secure until the 
 seisine (that is, the instrument certifying that actual delivery has been given) is put on 
 record ; nor is any mortgage effectual until the deed is in like manner recorded. 
 
 " In the case of conflicting pecuniary claims upon real property, the preference is 
 not regulated by the date of the transaction, but by the date of its record. Tliese rec- 
 ords are accessible to all persons ; and thus the public can with ease ascertain the 
 effective means which a banking company i>ossesses of discharging its ol)lig.ations, and 
 the partners in that comp.any are enabled to determine with tolerable accuracy the de- 
 gree of risk and responsibility to which the private property of eacli is exposed. 
 
 " There are other provisions of the law of Scotland, which it is not necessary mi- 
 nutely to detiiil, the general tendency of which is the same with those above men- 
 tioned." 
 
 The following Acts of Parliament have been passed in reference to 
 banking in Scotland : — 
 
 " The first notice of banking in Scotland which occurs in the statute-book, is an act 
 of King William the Third, passed in the year 1695, under wliich the Bank of Scot- 
 land was establishe<l. By this Act an exclusive privilege of banking was conferred 
 upon that bank, it being provided ' that for the period of twenty years from the 1 7th 
 July, 169,5, it should not be lawful for any other person to set up a distinct company 
 or bank within the kingdom of Scotland, besides those persons in whose favor this Act 
 was granted.' No renewal of the exclusive privilege took place after the expiration 
 of the twenty-one years. 
 
 " The Bank of Scotland first issued notes of 20s. in the year 1704; but the amount 
 of notes in circulation previous to the Union was very limited. 
 
 " 'f he Bank of Scotland continued the only bank from the date of its establishment 
 in 1695, to the year 1727. ^ ■ 
 
 " In that year a charter of incorporation was granted to certain individuals named 
 therein, for carrying on the business of banking under the name of the Itoyal Bank ; 
 
 312
 
 Scotch Banking. 
 
 nnd subsequent charters were granted to tliis establishment, enlarging the capital, 
 which now amounts to one million and a half. 
 
 "An Act passed in the year 1765 is the first and most important Act of the Legis- 
 lature which regulates the issue of promissory notes in Scotland. 
 
 " It appears from its preamble, that a practice had prevailed in Scotland of issuing 
 notes which circulated as specie, and which were made payable to the bearer on de- 
 mand, or payable at the option of the issuer at the end of six months, with a sum 
 equal to the legal interest from the demand to that time. 
 
 " The Act of 1765 prohibits the issue of notes in which such an option as that be- 
 fore mentioned is reserved to the issuer. It requires that all notes of the nature of a 
 bank-note, and circulating like specie, should be paid on demand ; and prohibits the 
 issue of any promissory note of a sum less than 20s. 
 
 " With respect to the issue of promissory notes ■ in England, an Act was passed in 
 1775, prohibiting the issue of any such notes under the sum of 20s. And in the year 
 1777, restraints were imposed by law on the issues of notes between the sum of 20s. 
 and £ 5, which were equivalent to the prohibition of such notes circulating as specie. 
 
 "In the year 1797, when the restrictions as to payments in cash were imposed upon 
 the Bank of England, the provisions of the Act of 1777, with regard to the issue of 
 notes between 20s. and £ 5 were suspended. By an Act passed in the third year of 
 his present Majesty, the suspension was continued until the 5th of January, 1833 ; but 
 now stands limited by an Act of the present session to April 5, 1829." 
 
 " The general result of the laws regulating the paper currency in the two countries 
 in this : — 
 
 " That in Scotland, the issue of promissory notes payable to bearer on demand for a 
 sum of not less than 20s. has been at all times permitted by law, nor has any Act been 
 passed limiting the period for which such issue shall continue legal in that country. 
 In England, the issue of promissory notes for a less sum than £5 was prohibited 
 by law from the year 1772 to the period of the bank restriction in 1797. It has been 
 permitted since 1797; and the permission will cease, as the law at present stands, in 
 April, 1829." 
 
 The Act which now regulates the issue of bank-notes in Scotland is 8 
 and 9 Vict. c. 38, passed in the year 1845. 
 
 By this Act, the power of issuing notes is confined to those banks that 
 issued notes in the year preceding the 1st day of May, 1845. And the 
 amount to which each bank may issue is not to exceed the average 
 amount of notes it had in circulation during the year ending the 1st of 
 May, 1845, and the amount of gold or silver coin it may at the time have 
 in possession at the head office or principal place of issue, in the propor- 
 tion that the silver shall not be more than one fourth the amount of the 
 gold. 
 
 This Act was to come into operation on the 6th day of December, 
 1845. After which day each banker is to make weekly returns to the 
 Stamp-office of his notes in circulation, and of the gold and silver coin on 
 hand ; and the averages of four weeks are to be published in the London 
 Gazette, with a certificate from the commissioner as to whether the bank 
 has held the amount of coin required by this Act. 
 
 All banks, except the Bank of Scotland, the Royal Bank of Scotland, 
 and the British Linen Company, are required to send to the Stamp-office, 
 between the 1st and 15th days of January inclusive, the names of all 
 their partners, which shall be published by the 1st day of March follow- 
 ing in some newspaper circulating within each town or county respec- 
 tively in which the head office or principal place of issue of such bank is 
 situated. * 
 
 Bank of England notes are not to be a legal tender in Scotland. 
 
 In the Acts of Parliament passed in 1844 and 1845 for Regulating 
 
 313
 
 A Treatise on Banking. 
 
 Banks of Issue in England and in Scotland, we may observe the follow- 
 ing differences : — 
 
 1. The maximum of the circulation in England is the average of the 
 twelve weeks ending the 27th of April, 1844, The maximum in Scot- 
 land is the average of the year ending the 1st day of May,* 1845. 
 
 2. The English banks are not, under any circumstances, allowed to ex- 
 ceed the fixed limit. The Scotch banks are allowed to exceed their limit, 
 provided they hold in their coffers at the head office an amount of gold 
 and silver equal to such excess. 
 
 3. In England, should two joint-stock banks of issue effect a junction, 
 the circulation of one of them would be forfeited, and the united bank 
 could issue only to the amount which the other bank had previously is- 
 sued. In Scotland, the united bank is allowed to issue to the amount of 
 the two circulations added together. There is no express provision in the 
 English Act with reference to the junction of two joint-stock banks. We 
 consider that only one of the banks would lose its issue, provided the 
 continuing bank retained its original title, so as not to create a new bank. 
 But if by the union a new bank should be formed, then both the banks 
 would lose their issues. In the same way, we think that the union of an 
 issuing and a non-issuing bank would cause no change in the issue. But 
 then the new bank must retain the title of the old issuing bank. Its right 
 of issue would not be affected by taking new directors or new share- 
 holders. 
 
 4. In Scotland, notes under ^5 are still permitted. In England, notes 
 under £ 5 are still prohibited. 
 
 II. — The Existing Banks of Scotland. 
 
 The following Table, which I constructed from the parliamentary evi- 
 dence of 1826, contains an account of the number of the banks in Scot- 
 land, the name of the firm or bank, date of its establishment, place of the 
 head office, number of branches, number of partners, and the name of 
 the London agents : — 
 
 Date. Head Office. 
 
 1695 
 1727 
 1746 
 1767 
 
 Names of Firms or Banks. 
 
 1. Bank of Scotland, . 
 
 2. Royal Bank of Scotland, 
 
 3. Briliah Linen Company, .• 
 
 4. Aberdeen Banking Company, 
 
 5. Aberdeen Town and County 
 
 Bank 1825 
 
 6 Arbroath Banking Company, 1825 
 
 7. Carrick & Co., or Ship Bank, . 1749 
 
 8. Commercial Banking Company 
 
 of Scotland, .... 1810 Edinburgh, 
 
 9. Commercial Banking Company, 1778 Aberdeen, 
 
 10. Dundee Banking Company, . 1777 Dundee, 
 
 11. Dundee New Bank, . . . 1802 Ditto, 
 
 12. Dundee Commercial Bank, . 1825 Ditto, 
 
 13. Dundee Union Bank, . . 1809 Ditto, 
 
 14. Exchange and Deposit Bank, — Edinburgh, 
 
 15. Falkirk Banking C mpany, . 1787 Falkirk, 
 
 16. Fife Banking Company, . 1802 Cupar, Fife, 
 
 314 
 
 No. of No. of 
 
 Branches. Partu. 
 
 Edinburgh, 16 chart. 
 
 Ditto, 1 ditto. 
 
 Ditto, 27 ditto, 
 
 Aberdeen, 6 80 
 
 Ditto, 4 416 
 
 Arbroath, 2 112 
 
 Glasgow, none, 3 
 
 31 
 
 none, 
 none, 
 
 1 
 none, 
 
 4 
 
 521 
 15 
 61 
 6 
 
 202 
 
 85 
 
 1 
 
 — 39 
 
 London Agents. 
 
 Coulis & Co. 
 Bank England & ditto. 
 Smith, Payne, & Co. 
 Glyn & Co. 
 
 Jones, Loyd, & Co. 
 
 Glyn & Co. 
 
 Smith, Payne, & Co. 
 
 Jones, Loyd, & Co. 
 Kinloch & Sons. 
 Kiidoch & Sons. 
 Ransom & Co. 
 Glyn & Co. 
 Glyn & Co 
 
 Remington & Co. 
 (Discontinued 1825.)
 
 The Banks of Scotland. 
 
 
 Names of Firms or Banks. 
 
 Date. 
 
 Head Office. 
 
 IV 0. 01 
 
 Branches 
 
 I\0. 01 
 
 Partn. 
 
 London Agents. 
 
 17. 
 
 Greenock Banking Company, 
 
 17S5 
 
 Greenock, 
 
 3 
 
 14 
 
 Kay & Co. 
 
 18. 
 
 Glasgow Banking Company, . 
 
 1809 
 
 Glasgow, 
 
 1 
 
 19 
 
 5 Ransom & Co., and 
 ^ Glyn & Co. 
 
 19. 
 
 Hunters & Co 
 
 1773 
 
 Ayr, 
 
 3 
 
 8 
 
 Herries & Co. 
 
 20. 
 
 Leith Banking Company, . 
 
 1792 
 
 Leith, 
 
 4 
 
 15 
 
 Barnelt & Co. 
 
 21. 
 
 National Bank of Scotland, . 
 
 1&25 
 
 Edinburgh, 
 
 8 
 
 1,238 
 
 Glyn & Co. 
 
 22. 
 
 Montrose Bank, 
 
 1814 
 
 Montrose, 
 
 2 
 
 97 
 
 Barclay & Co. 
 
 23. 
 
 Paisley Rankin? Company, . 
 
 17S3 
 
 Paisley, 
 
 4 
 
 6 
 
 Smith, Payne, & Co. 
 
 24. 
 
 Paisley Union Bank, 
 
 17g8 
 
 Ditto, 
 
 3 
 
 4 
 
 Glyn & Co. 
 
 25. 
 
 Perth Banking Company, 
 
 17GG 
 
 Perth, 
 
 5 
 
 147 
 
 Barclay & Co. 
 
 26. 
 
 Pertii Union Bank, . 
 
 ISIO 
 
 Ditto, 
 
 — 
 
 69 
 
 Remington & Co. 
 
 27. 
 
 Ramsay '.s, Bonar's, & Co., . 
 
 1733 
 
 Edinburgh, 
 
 none. 
 
 8 
 
 Coutts & Co. 
 
 23. 
 
 Renfrewshire Banking Company 
 
 1802 
 
 Greenock, 
 
 5 
 
 6 
 
 Kay & Co. 
 
 29. 
 
 Shetland Bank, 
 
 — 
 
 Lerwick, 
 
 — 
 
 4 
 
 Barclay & Co. 
 
 30. 
 
 Sir William Forbes & Co., . 
 
 — 
 
 Edinburgh, 
 
 — 
 
 7 
 
 (Barclay) (Coutts). 
 
 31. 
 
 Stirling Banking Company, 
 
 1777 
 
 Stirling, 
 
 2 
 
 7 
 
 Kinloch & Sons. 
 
 32. 
 
 Thistle Bank, 
 
 1761 
 
 Glasgow, 
 
 none. 
 
 6 
 
 Smith, Payne, & Co 
 
 Private Banking Companies, who do not Issue Notes. 
 
 Thomas Kinnear & Sons, . 1748 Edinburgh, none, — Smith, Payne, & Co. 
 
 Donald Smith & Co., . . 1773 Ditto, none, — Glyn & Co. 
 
 Robert Allen <k Son, , . — Ditto, none, — Barclay & Co. 
 
 Alexander Allan & Co., . 1776 Ditto, none, — Barclay & Co. 
 
 Since the year 1826 the following banks have been formed in Scot- 
 land : — 
 
 The Glasgow Union Bank, 
 
 The Ayrshire Baniiing Company, at Ayr, 
 
 The Western Bank of Scotland, at Gla.sgow, 
 
 The Central Bank of Scotland, at Perth, 
 
 The North of Scotland Bank, at Aberdeen, 
 
 The Clydesdale Bank, at Glasgow, 
 
 The Southern Bank of Scotland, at Dumfries, 
 
 The Eastern Bank of Scotland, at Dundee, . 
 
 The Edinburgh and Leith Bank, 
 
 The Caledonian Bank, at Inverness, 
 
 The City of Glasgow Bank, 
 
 Glasgow Joint-Stock Bank, .... 
 
 The North British Bank, at Glasgow, (not a bank of issue,) 
 
 The Exchange Bank of Scotland, at Edinburgh, (not a bank 
 
 of 
 
 issue), 
 
 Formed. 
 April, 1830. 
 Nov., 1831. 
 Oct., 1832. 
 April, 1834. 
 Oct., 1836. 
 May, 1838. 
 June, 1838. 
 Dec, 1838. 
 Dec., 1838. 
 Feb, 1839. 
 Mav, 1839. 
 Oct, 1840. 
 1844. 
 
 . 1845. 
 
 At present, the following are the only banks of issue in Scotland : — 
 
 A Table exhibiting the Capital and other particulars of the Banks of Issue in 
 Scotland, ttvVA the Price of their Shares, as publicly quoted in December, 1848. 
 {From the '■'Edinburgh Abnanac") 
 
 Insti- 
 tuted. 
 
 XT Part- o ,.„ Paid-up Dividend. 
 
 N**'^- ners. ^^^"•=^«^- Capital. Rate. Payable. 
 
 £ 
 
 31 1.000,000 7 April and Oct. 
 
 6 2,aJ0,000 5 Jan. and July. 
 
 43 500,000 8 June and Dec. 
 
 47 600,000 7 Jan. and July. 
 
 33 1,000,000 6J Jan. and July. 
 
 1695. Bank of Scotland, . 645 
 1727. Royal Bank, . , 917 
 1746. British Linen Company, 233 
 1810. Commercial Bank, . 565 
 1825. National Bank, . 1,456 
 1829. Union Bank of Scot- 
 
 land, 
 
 592 31 1,000,000 8 June and Dec. 
 
 315 
 
 STiare 
 Paid. 
 
 £ 
 100 
 100 
 100 
 100 
 10 
 
 50 
 
 Price 
 
 £ s. d. 
 
 162 
 
 lis 
 
 196 
 
 151 
 
 13 5 C 
 
 77 0-
 
 A Treatise on Banking. 
 
 tuted. ^^^- ners. branches. Capital. 
 
 Di 
 
 Rate. 
 
 vidend. 
 
 Payable. 
 
 Share 
 Paid. 
 
 Price. 
 
 1833. Edinburgh and Glasgow 
 
 
 £ 
 
 
 
 £ 
 
 £ 8.d. 
 
 Bank, . .1,500 
 
 20 
 
 1,000,000 
 
 6 
 
 Feb. and Aug. 
 
 5 
 
 5 11 
 
 1767 Aberdeen Banking 
 
 
 
 
 
 
 
 Company, . . 477 
 
 16 
 
 200,000 
 
 6 
 
 1 May and 1 Nor. 
 
 5 
 
 3 12 6 
 
 1825. Aberdeen Town and 
 
 
 
 
 
 
 
 County Bank, . 509 
 
 12 
 
 250,000 
 
 n 
 
 March and Sept. 
 
 5 
 
 6 4 
 
 1836. North of Scolland 
 
 
 
 
 
 
 
 Banking Company, 1,650 
 
 33 
 
 380,955 
 
 4 
 
 May and Nov. 
 
 5 
 
 3 5 
 
 1763. Dundee Banking Com- 
 
 
 
 
 
 
 
 pany, ... 61 
 
 1 
 
 60,000 
 
 6i 
 
 March, 
 
 60 
 
 80 
 
 1838. Eastern Bank of Scot- 
 
 
 
 
 
 
 
 land, ... 460 
 
 3 
 
 121,020 
 
 6 
 
 May and Nov. 
 
 10 
 
 9 10 
 
 1832. Western Bank of Scot- 
 
 
 
 
 
 
 
 land, . . . 1,167 
 
 60 
 
 1,7(B,450 
 
 8 
 
 July and Dec. 
 
 50 
 
 70 
 
 833. Clydesdale Banking 
 
 
 
 
 
 
 
 Company, . . 1,355 
 
 12 
 
 807,330 
 
 6i 
 
 Feb. and Aug. 
 
 10 
 
 12 4 6 
 
 1839. City of Glasgow Bank, 1,068 
 
 13 
 
 1,000,000 
 
 6 
 
 Feb. and Aug. 
 
 10 
 
 10 17 6 
 
 1838. Caledonian Banking 
 
 
 
 
 
 
 
 Company, . . 903 
 
 8 
 
 125,000 
 
 8 
 
 August, 
 
 2i 
 
 4 
 
 1766. Penh Banking Company, 182 
 
 3 
 
 100,050 
 
 8 
 
 July, 
 
 100 
 
 150 
 
 1834. Central Bank of Scot- 
 
 
 
 
 
 
 
 land, ... 405 
 
 5 
 
 56,275 
 
 8 
 
 September, 
 
 25 
 
 37 
 
 14,235 
 
 : 11,912,130 
 
 
 Thus we find that, although there were thirty-two banks of issue exist- 
 ing in Scotland in the year 1826, and twelve more banks of issue have 
 since been formed, yet the present number of issuing banks is only eigh- 
 teen. It may also be observed, that out of the four non-issuing private 
 banks in Edinburgh, only one remains. It will be interesting to trace the 
 changes that have taken place in the Scottish banks since the year 1826. 
 In the following Table the figures refer to the numbers in the Table at 
 pp. 314, 315. 
 
 Changes in Scottish Banks sirice 1826. 
 
 No. 
 
 6. Arbroath Banking Company . 
 
 9. Commercial Bank of Aberdeen . 
 
 10. Dundee Banking Company ) • • .^ 
 
 11. Dundee New Bank . . po'°^" ' 
 
 12. Dundee Commercial Bank . 
 
 13. Dundee Union Bank 
 
 14. Exchange and Deposit Bank 
 
 15. Falkirk Banking Company 
 
 16. rife Banking Company 
 
 17. Greenock Banking Company 
 
 18. Glasgow ).^.^^^ _ ^ _ 
 
 7. Ship S 
 
 19. Hunters & Co., Ajt . 
 
 20. Leith Bank .... 
 
 22. Montrose Bank 
 
 23. Paisley Bank 
 
 24. Paisley Union Bank 
 
 26. Perth Union Bank 
 
 27. Ramsay's, Bonar's, & Company 
 
 Merged in Commercial Bank of 
 Scotland. 
 
 Merged in National Bank of Scot- 
 land. 
 
 Are now Dundee Bank. 
 
 Merged in Eastern Bank of Scot- 
 land. 
 
 Merged in Western Bank of Scot- 
 land. 
 
 Failed. 
 
 Wound up. 
 
 Failed ; ])aid in full. 
 
 Merged in Western Bank. 
 
 Afterwards joined Union Bank of 
 Scotland. 
 
 Ditto. 
 
 Failed. 
 
 Wound up. 
 
 Merged in British Linen Company 
 
 Merged in Union Bank of Scotland 
 
 Wound up. 
 
 Ditto. 
 
 316
 
 Failures of Scotch Banks. 
 
 28 Renfrewshire Banking Company . . . Failed. 
 
 29. Shetland Bank Ditto. 
 
 30. Sir W. Forbes, J. Hunter, & Co. . . Joined with Union Bank. 
 
 31. Stirling Bank Suspended; paid in full. 
 
 32. Thistle Bank Merged in Union Bank. 
 
 Non-Issuing Private Banks. 
 
 Thomas Kinnear & Sons ) ( United under the firm of Kinnears, 
 
 Donald Smith & Co. )' ' * i Smiths, & Co., and afterwards failed. 
 
 R. Allan & Son Failed. 
 
 Alexander Allan & Co Continue in business as formerly. 
 
 Of the Banks formed since 1826 : — 
 
 The Glasgow Union Bank joined, in 1 844, the private bank, at Edinburgh, of Sir 
 William Forbes & Co. ; and afterwards took the title of the Union Bank of Scot- 
 land. 
 
 The Edinburgh and Leith Bank, and 
 
 The Glasgow Joint-stock Bank, united in 1844, and formed a new bank, called the 
 Edinburgh and Glasgow Bank. 
 
 The Ayrshire Banking Company merged in the Western Bank of Scotland. 
 
 The Southern Bank of Scotland became, in 1842, the Dumfries Branch of the Edin- 
 burgh and Leith Bank. 
 
 From this statement it will appear that the Union Bank of Scotland em- 
 braces the following banks : — 
 
 1. The Glasgow Union Bank. Formed since 1826. 
 
 2. The Paisley Union Bank. No. 23 in the first table. 
 
 3. Glasgow Banking Company. No. 18. 
 
 4. Carrick & Company, or Ship Bank, Glasgow. No. 7. 
 
 5. Sir William Forbes & Co. No. 30. 
 
 6. Thistle Bank, Glasgow. No. 32. 
 
 7. Hunters & Co., Ayr. No. 19. 
 
 The Western Bank of Scotland also embraces several original 
 banks : — 
 
 1. The Western Bank of Scotland. Formed since 1826. 
 
 2. The Dundee Union Bank. No. 13. 
 
 3. Greenock Banking Company. No. 17. 
 
 4. The Ayrshire Banking Company. Formed since 1826. 
 
 The Edinburgh and Glasgow Bank is formed of three banks : — 
 
 The Edinburgh and Leith Bank. 
 
 The Southern Bank of Scotland, at Dumfries. 
 
 The Glasgow Joint-Stock Bank. 
 
 The banks that have failed or wound up since 1826 are the follow- 
 ing : — 
 
 1. Exchange and Deposit Bank, Edinburgh. No. 14. 
 
 2. Fife Banking Company. In 1825, No. 16. 
 
 3. Leith Banking Company. No. 20. 
 
 4. Renfrewshire Banking Company, Greenock. No. 28. 
 .5. Montrose Bank. No. 22. 
 
 6 Perth Union Bank. No 26 
 
 7 Ramsay's, Bonar's, & Co., Edinburgh. No. 27. 
 
 8. Shetland Bank. No. 29. 
 
 9. Stirling Bank. No. 31. 
 
 317
 
 A Treatise on Banking. 
 
 From this account it will appear that out of the thirty-two banks con- 
 tained in my Hst of 1826 only nine remain. These are the following : — 
 
 1 . The Bank of Scotland. No. 1 . 
 
 2. The Royal Bank of Scotland. No. 2. 
 
 3. The British Linen Company. No. 3. 
 
 4. The Aberdeen Banking Company. No. 4. 
 
 5. Aberdeen Town & County Bank. No. 5. 
 
 6. Commercial Bank of Scotland. No. 8. 
 
 7. Dundee Banking Company. No. 10 and No. 11. 
 
 8. National Bank of Scotland. No. 21. 
 
 9. Perth Banking Company. No. 25. 
 
 Most of the banks that have ceased to exist were banks having only a 
 few partners, and their capital was unknown. The banks that have since 
 been formed have many partners, and generally a large amount of capi- 
 tal. It was probably in consequence of the greater strength of the new 
 banks that the old ones found it expedient to discontinue business. The 
 change has doubtless been for the advantage of the public, and it has 
 taken place without being attended with any inconvenience or excitement. 
 Indeed, we think that in all cases where the law leaves banking free, the 
 effect is to reduce the number of banks. We are aware that the general 
 impression is the reverse. 
 
 " The argument presumes, that incase of free banking the number of 
 banks would be very great. Are we justified in supposing that this would 
 be the case .'' Theory exclaims, ' Yes ' ; experience whispers, ' No.' The 
 numerous banks in America are not the result of free trade, but are the re- 
 sult of the Acts of the Legislature. The State Legislatures have thought 
 proper to give a large number of charters, and of course there is a large 
 number of banks. Had the charters been fewer, and required higher paid- 
 up capitals, the banks would have been larger and more respectable. The 
 number of banks in England, too, have been the result of the interference 
 of the Legislature. In the renewal of the charter of the Bank of England 
 in 1708 it was enacted, that no other bank having more than six partners 
 should have the privilege of issuing notes. As the growing trade and 
 wealth of the country required banks of some sort, and as banks having 
 more than six partners could not be formed, a great number of banks, 
 each not having more than six partners, rose into existence as they were 
 required by the increasing trade and wealth of the country. Hence, in- 
 stead of having a small number of large banks, wc have had a large num. 
 her of small banks. 
 
 " If we look to Scotland, where banking has been free, we find that the 
 total number of private and joint-stock banks is only twenty-eight.* Bank- 
 ing has been free beyond fifty miles from Dublin for the last fifteen years, 
 yet throughout that district there are only five banks of issue, with the ex- 
 ception of the Bank of Ireland. In England, where there has been, as 
 we are told, a frenzy in their favor, the joint-stock banks of issue are 
 only ninety-one,t and probably they would have been less numerous had 
 
 * This was written in the year 1840. The present reduced number of banks strength- 
 ens our argument, 
 t At present, sixty-six. 
 
 318
 
 Failures of Scotch Banks. 
 
 not the law excluded them from London. The capital which has been 
 embarked in a number of small local banks would have been invested in 
 large London establislimcnts, and the place of the local banks would have 
 been occupied by branches of the London banks. From these facts, it 
 seems fair to infer that some of the small joint-stock banks, and many of 
 the private banks, will in the course of the next twenty years be merged 
 in larger establishments. Tiie supposition that unlimited freedom of bank- 
 ing would lead to the establishment of an inconvenient multitude of banks 
 is wholly unsupported by the testimony of experience." {Currency and 
 Banking, by J. W. Gilbart.) 
 
 The existing banks in Scotland are thus distributed : — 
 
 Edinburgh is the head-quarters of the following banking institutions : — 
 
 1. The Bank of Scotland. 4. The Commercial Bank of Scotland. 
 
 2. The Royal Bank of Scotland. 5. The National Bank of Scotland. 
 
 3. The British Linen Company. 6. The Edinburgh and Glasgow Bank. 
 
 All these banks issue notes, and have branches. The first five have 
 charters. The charters of No. 4 and No. 5 are comparatively of recent 
 date, and do not limit the liability of the shareholders. 
 
 The Exchange Bank of Scotland : — This bank has a charter under 
 the Act of 1844 (7 & 8 Vict. c. 32). It does not issue notes, and has no 
 branches. 
 
 Glasgow is the head-quarters of the following banks : — 
 
 1. The Union Bank of Scotland. 3, The Clydesdale Bank. 
 
 2. The Western Bank of Scotland. 4. The City of Glasgow Bank. 
 
 The North British Bank, at Glasgow, does not issue notes, and has no 
 branches. Its capital has been reduced from .£233,270 to £ 156,520 by 
 the purchase of its own shares. These purchases have been carried to the 
 " Reserved Fund Account." 
 
 Dundee is the head-quarters of three banks, Aberdeen of three, Perth 
 of two, and Inverness of one. All the other places in Scotland have only 
 branches. Branches of other banks are also established in Edinburgh, 
 Glasgow, Dundee, Aberdeen, Perth, and Inverness, besides the banks 
 whose head ofiices are in those places. 
 
 III. — A Comparison between the Banks of Scotland and those of Eng- 
 land. 
 
 The differences between the English and the Scotch banks are the fol- 
 lowing : — 
 
 1. The Scotch banks are all joint-stock banks. In England there is a 
 mixture of joint-stock and private banks. 
 
 2. The Scotch banks are nearly all banks of issue. In England there 
 are many, both private and joint-stock banks, that are not banks of issue. 
 
 3. The Scotch banks generally have branches. In England most of 
 the private banks, and some of the joint-stock banks, have no branches. 
 
 4. The Scotch banks universally grant interest on the balance of cur- 
 rent accounts, — a practice not universally adopted in England, especially 
 in London. 
 
 319
 
 A Treatise on Banking. 
 
 5. Tho mode of making advances by way of" cash credit " is general 
 in Scotland, but very rare in England. 
 
 We may also observe some other differences, chiefly of a business 
 character, which have an important bearing on the interest of the commu- 
 nity. 
 
 1. The banks of Scotland have generally a large paid-up capital. 
 
 " Two prcat errors appear to have been committed in the formation of joint-stock 
 banks in Enghmd, and. until these are remedied, such cstaldishments can hardly ex- 
 pect to reach a higiier deforce of importance or credit than is attainable by a wealthy 
 private bank. These evils are, in the first jilace, too small a capital relatively to the 
 extent of business undertaken; and, in the next place, the circumstance of the is- 
 sues of the joint-stock banks being left uncontrolled by any effective system of ex- 
 chancre." 
 
 " The advantage of a small capital in banking is, that it enables the establishment, if 
 at all successful in business, to pay a large dividend. The profits of banking depend, 
 in a great measure, on the amount of dejiosits and circulation, and according as 
 these are great or small compared with the extent of the capital, will the company be 
 enabled to divide a larger or smaller dividend. It therefore becomes the obvious pol 
 icy of those establishments, the managers of which conceive that the success of a bank 
 is proved by the early payment of a high dividend, to keep the capital of the company 
 within the narrowest possible limits. This system has been carried to the utmost ex- 
 treme in England ; and hence, although large dividends have been paid to the share- 
 holders, there has been no corresponding increase of confidence on the part of the 
 public. 
 
 " The Scotch banks, on the other hand, have pursued a directly opposite course. 
 Their object has been to secure public confidence by the extent of their capital, and 
 they have continued to ])ay moderate dividends to their shareholders, until justified in 
 augmenting them by years of success, and a large accumulated sinking-fund. So well, 
 indeed, is this system understood, and so completely has it attained its purposes, that 
 the slighest appearance of improvidence displayed by a Scotch joint-stock bank, in fix- 
 ing the amount of its dividend, has been invariably attended with a decrease of the pub- 
 lie confidence in the stock of the establishment. In this manner public confidence has 
 been secured, the value of Scotch bank stock has risen in the market, and the share- 
 holders have received their extra profits as a bonus, or in the increa.sed value of their 
 own shares. Thus, instead of being looked u))on as establishments aiming at the 
 ephemeral advantage of making a large dividend, for stock-jobbing or temporary pur- 
 poses, our banks have almost invariably assumed the character of permanent national 
 establishments, identified with the prosperity of the country, and, by means of their 
 small-note circulation, conferring benefit on, as well as obtaining the confidence of, ev- 
 ery class in the community." (Letter to James William Gilbart, Esq., on the Relative 
 Merits of the English and Scotch Banking Systems ; with Practical Suggestions for 
 the Consolidation of the English Joint-stock Banking Interest. By llobert Bell. — Mr. 
 Bell is now manager of the City of Glasgow Bank, at Edinburgh ; and was examined 
 in 1848, as a witness before the Committee of the House of Commons on Commercial 
 Distress.) 
 
 The eighteen banks in Scotland have a paid-up capital of £ 11,912,130, 
 making an average to each bank of £ 661,785. The number of places of 
 issue (banks and branches) is 403, making an average of capital to each 
 place of £ 29,558. The authorized circulation for Scotland is £ 3,087,209, 
 making an average to each place of issue of £ 7,660. 
 
 The ninety-nine joint-stock banks of England have a paid-up capital of 
 about £ 14,000,000, making an average to each bank of about £ 140,000. 
 The joint-stock banks and branches in England are 513, making an 
 average of capital to each place of about .£27,290. 
 
 The sixty-si.x joint-stock banks of issue in England have a paid-up cap. 
 
 320
 
 Comparative View. 
 
 Ital of about £ 6,000,000, making an average capital of about .£91,000. 
 The number of places of issue, banks and branches, is 407, making an 
 average of capital to each place of about £ 15,000. The authorized is- 
 sue is £ 3,409,987, making an average of about £ 8,378 to each place :)f 
 issue. 
 
 There are 184 private country banks in England, issuing notes at 375 
 places. Their authorized issue is .£4,822,488, making an average to 
 each bank of £ 26,200, and of £ 12,860 to each place of issue. The 
 capital of these banks is unknown. 
 
 2. In operating on his current account, it is not the general practice in 
 Scotland for a customer to draw cheques on the bank for his individual 
 payments, nor to accept bills payable at the bank. If he has to make 
 twenty payments in the course of the day, he will go to the bank in the 
 morning, and draw out in one sum a sufficient amount of notes to make 
 all these payments. On the other hand, if a customer should receive 
 money from twenty different people in the course of the day, he will 
 not receive cheques, as there are none in circulation, but bank notes, 
 which at the close of the day he will pay in one sum into the bank. In 
 England, all these receipts and payments would be made in cheques, each 
 having probably odd shillings and pence. From this cause, the trouble 
 and expense to a bank of conducting a current account is much greater in 
 England than in Scotland. 
 
 A few years ago an attempt was made to form a bank, to be called the 
 Dunedin Bank of Scotland. One of the advantages it held out to the 
 public was the adoption of the English system of drawing cheques for 
 individual payments. The advantages of this system are pointed out in 
 the following terms : — 
 
 " Another prominent feature of the proposed institution is the proposal to take in 
 and pay out for customers 'any sum, however small.' Though troublesome to the 
 bank, such a measure must be of incalculable convenience to parties dealing with it. 
 Here, again, there is nothing absolutely new, as such a practice must, more or less, ex- 
 ist wherever there are cash accounts, forming, as it does, the essential element of 
 these transactions. In the Dunedin B.ank it is intended to extend the principle to its 
 widest limit ; in which case only its fullest benefits can be felt. Most banks are un- 
 willing to arrange transactions of trifling amount, and, in consequence, their customers 
 cannot follow up any determinate method of settling their accounts in that way. 
 Without a universal and indiscriminate system of payment, however inconsiderable 
 they may be, it is obvious that the practice of honoring larger drafts, — and those only 
 for sums of so many pounds in exact number, — the operation of settling accounts in 
 this manner is at best of a mixed description, and does not afford the whole advantages 
 to be derived from it. Were the principle adopted in its full extent, the bank would, 
 in reality, become general cashier for their customers ; and the necessity of having 
 money in hand for the purpose of meeting every-day expenses would be in a great 
 measure superseded. A larger portion of funds would be, consequently, in deposit, 
 bearing interest, and, at the same time, as ready for use as if in the coffer or pocket- 
 book of its oAvner. By this means, likewise, a regular journal of receipt and expendi- 
 ture would be carried on without the slightest trouble on the part of the individual 
 concerned, who, at the end of the year, or of the periodical balancing of accounts, 
 would find an authentic record of his ordinary tr.ansactions. Here, too, he would find 
 the vouchers for the payments he had made ; and would be under no apprehension of 
 being called upon in repetition of payment through any loss of his receipts. To in- 
 sure accuracy, both in regard to small cash payments and calculations of interest, it is 
 contemplated to institute a farthing column in the books of the Dunedin Bank, in or- 
 der that sums may be computed with greater minuteness and precision. As much 
 
 321
 
 A Treatise on Banking. 
 
 inconvenience and trouble will be necessarily incun-ed by the adoption of this plan, it 
 is proposed to meet the additional expense by a small tax upon tiic transactions them- 
 selves ; and it is calculated that the trifling commission of a half-penny upon each sin- 
 gle payment and entry, or 4s. 2d. upon the hundred, will aftbrd sulhcient remuneration 
 for the" increase of labor. Should this fee be found too small to remunerate, or to 
 guard sufficiently against the abuse of the privilege, it will, of course, be easy for the 
 bank to increase" the charge, — say to one penny, or more, on each transaction." 
 
 3. The system of numerous branches leads to uniformity all over Scot- 
 land in the terms on which business is transacted in the banks. 
 
 From the small number of banks that existed for many years in Scot- 
 land, and from the circumstance that the head offices of most of these 
 banks were fixed at Edinburgh, it was easy for them to form arrange- 
 ments among themselves for the regulation of theii' business. Hence 
 arose a uniformity of practice among all the banks, and throughout 
 the whole of Scotland. 
 
 This uniformity of practice does not exist in England. The system 
 of London banking is dillerent from that in the country. And the bank- 
 ing of one district differs from that of another district. It would be diffi- 
 cult to produce any general union in England, even among the joint-stock 
 banks. There is a difference in the character of their localities. Their 
 head offices are too wide apart to admit of frequent personal communica- 
 tion. And it may be feared that among the joint-stock banks of England 
 there is not enough of that esprit du corps which is essential to the exist- 
 ence of a general confederation. 
 
 There is, however, considerable competition among the banks of Scot- 
 land. This rivalry, however, does not lead to transacting business on 
 lower terms. Indeed these terms are always very moderate. The dif- 
 ference between the rate of interest allowed and charged is rarely more 
 than one per cent. No commission is charged on current accounts ; and 
 it is only recently, we believe, that commission has been charged on the 
 amount (not the operations) of cash credits. Sometimes the banks at 
 Glasgow, when there is a great demand for capital, have been disposed 
 to grant a higher rate of interest than the banks of Edinburgh. But this 
 difference has soon been arranged. The provincial banks, too, have car- 
 ried on a strong opposition against the branches of the Edinburgh banks. 
 The late Thomas Kinnear, Esq., when asked what had led to the discon- 
 tinuing of some branches of the Bank of Scotland, replied : — 
 
 " With respect to those that are beyond my memory, I cannot say M'hat was the 
 cause ; but those that have been given up within my recollection, in point of fact, 
 were given up in consequence of the town in which that branch had originally been 
 established having accumulated wealth to such a degree, that it could afford a bank- 
 ing capital of its own, and that it had in point of fact est:al)lished a local bank, then 
 the connection of that loc;d bank went so strongly against us by fair competition, that 
 we found we could employ our capital to better purpose elsewhere, and gave up the 
 branch." {Commons, 132, Kinnear.) 
 
 4. The system of numerous branches enables the banks of Scotland to 
 transfer the surplus capital of the agricultural districts to the manufactur- 
 ing and commercial districts, without going through the process of re- 
 discounting their bills. 
 
 Some Scotch writers have considered it a reproach to the English 
 
 322
 
 Comparative Vieio. 
 
 banks that they re-discount their bills, and have boasted that, with rare 
 exceptions, the practice of re-discount is unknown in Scotland. The ac- 
 cusation is made without due consideration. The system of branches 
 makes a difTcrcnce in all banking arangemcnts. A bank in an agricul- 
 tural district, say at Norwich, has a superabundance of money. A man- 
 ufacturing town, say Manchester, has a demand for money. The bank 
 at Norwich will send its money to a bill-broker in London. The bank at 
 Manchester will send its bills to the same broker. A re-discount takes 
 place. But let us suppose that the bill-brokering establishment should be- 
 come the head office of a large bank, having one branch at Norwich, and 
 another at Manchester. Then no re-discount will occur. The bills dis- 
 counted at Manchester will never pass out of the possession of the bank. 
 Nevertheless, the surplus funds at Norwich will be transferred to meet 
 the wants of Manchester as effectually as before. This is an illustration 
 of the branch system in Scotland. A bank at Edinburgh will have 
 branches in both the agricultural and the manufacturing districts. Or a 
 bank whose head office is in a manufacturing town, will have branches in 
 the agricultural districts. Thus the surplus funds of Perth, Ayr, and 
 Dumfries, are speedily transferred to be employed at Glasgow, Paisley, 
 and Dundee. Were a bank to be established at Glasgow, without branch- 
 es, it would probably have occasion for discount at certain times, as well 
 as the banks at Manchester or Leeds. 
 
 At the same time, we think this transfer of capital by means of 
 branches is better than by means of re-discount. There is no occasion 
 for the intermediate party, the bill-broker. The bills do not go out of the 
 bank, so that men's transactions do not become known. The abuses 
 connected with re-discount by fictitious bills are effectually prevented ; 
 and the bank can more readily regulate its advances in accordance with its 
 means. To recur to our illustration : — The bank at Norwich may lose a 
 large amount of its deposits ; the bank of Manchester, knowing nothing 
 of this, may continue its advances in dependence upon receiving its usual 
 re-discount. The check may at length come so suddenly that the Man- 
 chester bank may be placed in difficulty. Under the branch system, 
 should any large amount of deposits be withdrawn from one branch, the 
 bank would immediately limit its advances at the others. The advantage 
 of this system on the approach of a pressure is obvious. 
 
 5. The system of numerous branches leads to more regularity and 
 uniformity in the mode of making their exchanges : — 
 
 '■ The system of exchanges centres in Edinburgh. In that city a general exchange 
 of the bank notes of all the banks of issue in Scotland takes place twice a week. This 
 exchange is made alternately within the office, and under the superintendence of the 
 Bank of Scotland and of the Royal Bank. On these exchange days, clerks from all 
 the banks having establishments in Edinburgh assemble, bringing with them the notes 
 which each bank has collected, not only in Edinburgh, but, by means of their branch- 
 es, all over the country ; and as the Edinburgh banks act as agents for the several 
 provincial banks, and, as such, exchange or give value for their notes, the whole bank- 
 ing interest of Scotland, so far as concerns the exchange of notes, is represented in 
 the ' Clearing-room.' 
 
 " On these occasions a mutual exchange is made by the several clerks assembled, 
 giving the notes of other banks which they hold, and taking their own in exchange. 
 After this exchange of notes, a balance is struck, and each clerk hands over to the offi- 
 
 323
 
 A Treatise on Banking. 
 
 cer of the presiding bank a statement, showing tlie amount of the balances as between 
 his own bank and each of the other establishments. The aggregate balance on this 
 statement shows the result of the day's exchange as it atiects each bank ; and that bal- 
 ance will be for or against any given bank in the precise proportion in which its recent 
 transactions have exceeded or fallen short of its emerging and available resources. 
 
 " Tlie ultimate balance against every bank was formerly paid by a draft on London 
 at ten days' date. Bu,t this mode of settlement having been found inconvenient, and 
 having on one occasion led to considerable loss, in consequence of the failure of a pri- 
 vate bank in Edinburgh, a ditferent arrangement was then made, and is now acted 
 upon. According to that arrangement, every Scotch bank of issue having an estab- 
 lishment in Edinburgh is bound to hold a certain quota of £1,000 exchequer bills. 
 This quota is proportioned to the average circulation of the particular bank ; and with 
 these exchequer bills the balances of exchange arc paid, the fractional parts of £ 1,000 
 being settled by £ 100 Hank of England notes or gold. 
 
 " As the object of this system is to oblige each bank to hold a certain amount of 
 tangible Govenimcnt paper to meet any fluctuation and excess in its issues, the several 
 banks are further bound, under the general exchange arrangement, to sell or to buy 
 exchequer bills to or from each other whenever the number of bills which any one bank 
 holds exceeds one third, or falls short in the same proportion, of the conventional quota. 
 These purchases and sales of exchequer bills made from and to the banks reciprocally 
 are settled for by the bank making the purchase, by a draft on London at five days' 
 date, with a commission equivalent to the eight days which the draft has to run at the 
 exchequer bill rate of interest. In order to prevent the risk of these mutual sales and 
 purchases of exchequer bills being converted into stock-jobbing transactions, the pur- 
 chases are made at par, and each bank holds its quota., in its own name, direct from 
 Government, while the general supply of exchcciuer bills is kept in the circle by being 
 specially marked as ' Edinburgh Exchange Exchequer Bills.' 
 
 " Still further to complete the control of the banking interests over these exchange 
 arrangements, a statement is produced by each bank on every exchange day, showing 
 the amount of exchequer bills which it holds. And it is only necessary to add, that 
 these exchange regulations, which have been found so salutary in practice, are the re- 
 sult of mutual and voluntary concert among all the banks; and although it maybe 
 said that they are not compulsory, yet in cfl'ect they are so, since any bank of issue re- 
 fusing to accede to them would incur the risk of having its notes refused bv the com- 
 bined banks, which in Scotland would be tantamount to a suppression of the non-ac- 
 ceding bank as a bank of issue. 
 
 " In addition to these exchanges in Edinburgh, there are also exchanges made on 
 the same days in Gla.sgow ; and the balances being advised by post to Edinburgh, are 
 settled for next morning in the same manner by exchequer bills and Bank of England 
 notes. So also, in order to save the trouble and risk of transmitting to Edinbui'gh or 
 to Glasgow, notes collected by the ditl'crent agents in the country, wherever there are 
 two or more branch banks in the same town, their managers or agents exchange notes, 
 and advise the state of balances to Edinburgh, when they are included in the next en- 
 suing general exchange. 
 
 " what I have now said may be sufficient, without going into further detail, to give 
 a general idea of our system of exchanges. The Scotch banking interests have been 
 mainly indebted, it is believed, for the complete organization of this system, to Mr. 
 Blair, the Treasurer of the Bank of Scotland, one of the most talented of our Scotch 
 bankers ; and although in description it may appear complicated, nothing can be sim- 
 pler or more satisfactory than its operation in practice ; nor can any check be more 
 efficacious."* 
 
 The Scotch bankers are loud in their praises of the system of ex- 
 changes. And justly so. But they arc in error when they suppose that 
 nothing like it exists in England. We have shown that the country banks 
 make their exchanges with each other, and pay the dilfercnce by a draft 
 on London. These operations have the same eficct as the exchanges in 
 Scotland of withdrawing from circulation all the superfluous notes ; that is 
 
 * The Letter, already quoted, addressed to me by Mr. Btdl. 
 324
 
 Comparative View. 
 
 tc say, all the notes that come into the hands of the bankers. If it be 
 true that notes remain out longer in circulation in England than in Scot- 
 land, it arises not from any ditFerence in the system of exchanges, but 
 from a difference in the habits of the people with regard to " keeping a 
 banker." If a Scotch banker issue £ 1,000 of notes in the morning, he 
 feels assured that these notes will be paid into some other bank in the 
 course of the day. An English banker is not so sure. The party may 
 not " keep a banker," and he may then lock up the notes in a strong box 
 for a week or ten days, until he have occasion to make a payment. We 
 think it desirable that every man who has money should lodge it in a 
 bank, not merely for interest, but for security ; and therefore we approve 
 of the Scotch practice. But it is this universal practice of having a banker, 
 and not merely the system of exchanges, that withdraws notes so rapidly 
 from circulation. 
 
 At the same time, it should be stated that the Scotch bankers are of 
 opinion that our system of banking in England is chargeable with some 
 portion of the blame. They say that as the English banks do not univer- 
 sally allow interest on deposits and current accounts, the people have not 
 the same inducement as in Scotland for placing their money in a bank. 
 And as many banks charge commission on the operations of a current ac- 
 count, it is the interest even of those who keep bankers to pay away the 
 notes they receive to other parties, rather than to lodge them to their credit 
 with their banker. On this subject I may quote the following extract 
 from the second letter addressed to me by Mr. Bell. (A Letter to J. 
 W. Gilbart, Esq., on the Regulation of the Currency by the Foreign Ex- 
 changes, and on the Appointment of the Bank of England to be the sole 
 Bank of Issue throughout Great Britain. By Robert Bell.) 
 
 " In Scotland we have adopted every means to concentrate the resources of the coun- 
 try in the hi-iAj of the banker. We allow a liberal rate of interest on deposits, while 
 we not only CL^jourage small capitalists and traders to open accounts with us, but we 
 induce our customers to make frequent operations on their accounts, and the result is 
 that every superCuous bank note is rapidly returned upon the issuer. The very oppo- 
 site course is pursued in England ; you allow no interest on deposits, you give no en- 
 couragement to small depositors, while you put a barrier in the way of your customers 
 making frequent operations, by the charging a commission on the debit side of their 
 accounts ; the consequence of which is. that not only your paper but your gold curren- 
 cy stagnates in the hands of the public during times of prospei-ity, leaving the paper 
 issues to be poured "back upon the issuers in seasons of adversity, thus aggravating in 
 no slight degree the severity of monetary pressures." 
 
 Even were the keeping of a banker as general in England as in Scot- 
 land, the same system of exchanges could not be adopted. The Scotch 
 system requires an equality, or an approach to it, among the several 
 banks ; that the head offices of these banks, generally, should be in the 
 capital ; and that the banks should have numerous branches throughout 
 the country. These circumstances do not exist in England. And, more- 
 over, we have the Bank of England, whose notes are a legal tender. It 
 is obvious there can be no exchange of notes in places where, as in Lon- 
 don, there is only one bank of issue. But the exchanges between English 
 country banks are precisely upon the same principle as those in Scotland, 
 and have similar effects. The differences are paid by drafts on London, 
 payable on demand ; and these drafts again pass through the clearing. 
 
 325
 
 A Treatise on Banking. 
 
 Another advantage ascribed to the Scotch system of exchanges is, the 
 surveillance wliich, by this means, the large banks at Edinburgh are able 
 to exercise over the smaller banks in the provinces. That this surveil- 
 lance exists in Scotland, and that it has been exercised beneficially, we 
 entertain no doubt. It is equally true that such a surveillance does not 
 exist in England. But the system of exchanges is not the cause of this 
 surveillance, it is merely the instrument. In Scotland, the banks being 
 few, and all their head offices being at Edinburgh, they are able to confer 
 together, and to fix on rules for their general government. With any in- 
 ferior bank that refuses to comply with these rules they can refuse to ex- 
 change notes, and thus force it to compliance. In England, where the 
 banks are numerous, and where their head offices are distant from each 
 other, such a system cannot well be formed ; and hence each bank is free 
 from the control of other banks, and may pursue any course it pleases, 
 however injurious to itself or to others, so long as it is able to make good 
 its payments to the public. The banks at Edinburgh, too, by means of 
 their numerous branches, have the earliest information of any irregular 
 practice that may have been adopted by a local bank in the provinces ; 
 but the large banks in London have comparatively but a veiy imperfect 
 knowledge of the operations of either the private or the joint-stock banks 
 that are scattered over the country. 
 
 From a want of this surveillance, banks in England have carried on 
 business for years after they have been supposed to be insolvent. Hence 
 they have gone on until their losses have not only absorbed the whole of 
 their capital, but have required, to replace them, further demands to a large 
 amount from their shareholders. In Scotland, these banks, if they could 
 not be kept in the right path, would probably Imve been compelled to stop 
 before they had wandered so widely. Banks, as we have seen, do some- 
 times fail in Scotland, but never under circumstances that shake the pub- 
 lic confidence in the general banking institutions of the country. 
 
 6. The confidence placed in the banks of Scotland by the public ren- 
 ders them less exposed to inconvenience during a season of pressure. 
 
 When a pressure takes place in England, the first objects of suspicion 
 are the banks. People that have money in their banker's liands draw it 
 out and hoard it. The bankers, knowing that they arc liable to these de- 
 mands, draw in their funds, and make provision accordingly. Hence the 
 capital of the country is rendered dormant at the time when it is most re- 
 quired to be in a state of activity. Banks that issue notes are more liable 
 than others to these sudden demands. But no such feeling exists at pres- 
 ent in Scotland. And should the Act of 1845 have the efiect of inoculat- 
 ing the people with the love of gold, and by this means place the banks 
 in the same position during a pressure as the banks of England, it must 
 be regarded as a national calamity. 
 
 On this subject, we again quote from the letter of Mr. Bell : — 
 
 "Nor are these benefits, great as they arc, the only advantages wliich we have de- 
 rived from our system of banking. Our one-pound notes connect and familiarize every 
 artisan and laborer in the country with our banking cstal)lisliments ; and the implicit 
 confidence in our paper currency, thus created and per]K'tui\tcd by the general expe- 
 rience of the sufficiency of our banks, has on many occasions been remarkably illus- 
 trated. It is no exaggeration to say, that at this moment nine tenths of the laboring 
 
 326
 
 Currency in Scotland. 
 
 classes of Scotland, if they had their choice, would prefer a one-pound note to a sov- 
 ereign ; and, as a consequence of this feeling of security, combined with a sense of the 
 other advantages of the system, no one in Scotland can have forgotten the truly na- 
 tional stand on behalf of our currency, which was made by ricli and poor in tlie year 
 1825, when your English economists proposed to visit us with an injury similar to tha* 
 which was in that year inflicted on England. 
 
 " With banlving esUiblishments thus preeminently possessed of national confidence, 
 no mercantile convulsion has hitherto created any general run on our great joiut-stoek 
 banks. It has been otherwise in England, where, in consequence of legislative enact- 
 ments, the public have been taught to regard gold and silver as the only representatives 
 of value. The bond of union between the banks and the mass of the people has thus 
 been severed ; and when a monetary crisis occurs, its consequences arc incalculably 
 more injurious. With us (though very rarely), runs have been occasionally made on 
 particular banks ; but it has been merely to withdraw a deposit from one bank to place 
 it in another ; or to exchange the notes of a suspected bank for the notes of one of our 
 national joint-stock banks, the prevailing confidence in our paper currency remaining 
 unshaken. In this way the disposable banking capital or resources remain in the ag- 
 gregate unchanged ; whereas with you the run is for gold ; and the coin thus with- 
 dra\vn from one bank is not re-deposited in another, but hoarded till the panic is over, 
 by which means the entire banking resources of the country are involved in the conse- 
 quences of the temporary disaster ; and this, too, at the very time when these resources 
 are most needed." 
 
 IV. — Laws of the Currency in Scotland. 
 
 In Scotland the lowest point of the circulation is in March, and the 
 highest in November. The advance, however, between these two points 
 is not uniform, for the highest of the intervening months is May, after 
 which there is a sHght reaction ; but it increases again until November, 
 and falls off in December. The reason of the great increase in May and 
 November is, that these are the seasons for making payments. The in- 
 terest due on mortgages is then settled, annuities are then paid, the coun- 
 try people usually take the interest on their deposit receipts, and the ser- 
 vants receive their wages. There are frequently large sums transferred 
 by way of mortgage. It is the custom of Scotland to settle all transac- 
 tions, large as well as small, by bank notes, not by cheques on bankers, 
 as in London. It is remarkable that these monthly variations occur uni- 
 formly everv year, while the amount of the circulation in the correspond- 
 ing months of different years undergoes comparatively very little change. 
 
 A Table, showing the Circulation of all the Banks in Scotland on the last 
 Saturday in March, July, and November, in the years 1834, 1835, 1836, 1837, 1838, and 
 
 1839. 
 
 March. 
 £ 
 2.8.34,627 
 2.822.417 
 2,9.'U.292 
 2,875,404 
 2,811,377 
 3,041,545 
 
 This table shows us, first, that the circulation of Scotland is at its lowest 
 point in the month of March, is higher in July, and reaches its highest 
 point in November. Secondly, in the corresponding months of different 
 years there is but little difference in the amount of the circulation. We 
 find that during a course of six years, the difference between the lowest 
 W 327 
 
 
 Number o/Bariks. 
 
 1834 
 
 21 
 
 1835 
 
 21 
 
 1836 
 
 21 
 
 1837 
 
 22 
 
 1838 
 
 23-24 
 
 1839 
 
 24-28 
 
 July. 
 
 November. 
 
 £ 
 
 £ 
 
 3,094,468 
 
 3,497,795 
 
 3,097,947 
 
 3,457,899 
 
 3,222,142 
 
 3,657,431 
 
 2,962,673 
 
 3.560.242 
 
 3,060,199 
 
 3,688,410 
 
 3,120,183 
 
 3,559,599
 
 A Treatise on Banking. 
 
 and the highest circulation in the corresponding months is very trifling. 
 Thirdly, the increase in the number of banks does not produce a corre- 
 sponding increase in the amount of notes in circulation. In November, 
 1834, the number of banks of issue was twenty-one; by November, 1839, 
 they had increased to twentv-eight ; yet the circulation at the former pe- 
 riod was £ 3,497,795, and \n the latter, £ 3,559,599. Fourthly, these 
 Aicts prove that the circulation of Scotland docs not produce any ctTect upon 
 prices, nor, consequently, upon the foreign exchanges. It is hardly ne- 
 cessary to adduce evidence in proof of the fact, that the prices of commod- 
 ities do not go on increasing from March to November in every year ; 
 and if tliey do not, they cannot be regulated by the currency. Fifthly, 
 this regularity in the circulation shows that it must be governed by some 
 uniform laws, arising from the local circumstances or habits of the coun- 
 try ; and this we think will always be the case where the banks are pas- 
 sive, and permit themselves to be operated upon by the wants of the trade 
 and commerce carried on in their respective districts. {Currency and 
 Banking, by J. W. Gilbart.) 
 
 That the laws of the currency in Scotland are the same since the pass- 
 ing of the Act of 1845 as before, is evident from the following Table : — 
 
 An Account of the Circulation op the Banks of Scotland during the four 
 
 weeks ending at the under-mentioned dates, in the years 1846, 1847, and 1848, distinguish- 
 ing the notes of £ib and upwards from those below that amount. 
 
 Date. SZ. Fixedlssue. 
 
 1846. March 28 18 £3,087,209 
 Aug. 1.5 " " 
 Dec. 5 " 
 
 1847. March 27 " " 
 July 17 " " 
 Dec. 4 " " 
 
 1848. March 25 " 
 July 15 " " 
 Dec. 2 " " 
 
 The Act of 1845 does not appear to have much ellect on the amount 
 of notes in circulation. But it lias had an etfect in other ways. It has 
 required the Scotch banks to keep a larger amount of gold in their vaults. 
 This is evident from the following Table : — 
 
 A Return of the Aggregate Amount of Notes in Circulation in Scotland, and 
 of the Aggregate Amount of Got.T> Coin and Bullion held by Banks in Scot- 
 land, on the hist day of the second week of Februaiy and November, in the years 1842, 
 1843, 1844, 1845, 1846, atid 1847. 
 
 £5 and 
 upwards. 
 
 Under £5. 
 
 Total. 
 
 £ 828,778 
 
 £2,189,993 
 
 £3.018,771 
 
 1,013,.539 
 
 2,358,365 
 
 3,371,904 
 
 1,235,072 
 
 2,761,786 
 
 3,996,858 
 
 1,063,384 
 
 2,296,959 
 
 3,360.343 
 
 1.121,236 
 
 2,374,682 
 
 3,495,918 
 
 1,143.241 
 
 2.589.241 
 
 3,732,482 
 
 932,496 
 
 2,019,439 
 
 2,951,935 
 
 982.963 
 
 2,123,680 
 
 3,106,643 
 
 1,158,981 
 
 2,411,141 
 
 3,570,122 
 
 Years. 
 
 Fedi 
 
 RUARY. 
 
 November 
 
 
 Notes. 
 
 Coin. 
 
 Notes. 
 
 Coin. 
 
 
 £ 
 
 £ 
 
 .£ 
 
 £ 
 
 1842 
 
 2,710,515 
 
 408,220 
 
 3,078.289 
 
 411.070 
 
 1843 
 
 2,552,267 
 
 481,102 
 
 3,149,554 
 
 381,907 
 
 1844 
 
 2,690,969 
 
 422,968 
 
 3.555,789 
 
 324,982 
 
 1845 
 
 2,982,867 
 
 403,083 
 
 3.784,118 
 
 676.674 
 
 1846 
 
 3,097,930 
 
 1.116,088 
 
 4.046.526 1 
 
 ,284.261 
 
 1847 
 
 3,533,346 
 
 1,280,597 
 
 3,783,904 ] 
 
 ,100,258 
 
 It has also had the effect of inducing the banks to increase their charges, 
 and to decline granting cash credits. The banks are required to keep in 
 
 328
 
 Currency in Scotland. 
 
 their coffers a large amount of gold. This increased annount yields no 
 interest ; and hence to that extent tlie Act diminishes their profits. To 
 make up the same amount of profit as heretofore, the charges for dis- 
 counts and advances are increased. This illustrates a principle that we 
 think will always he found correct, that restrictions upo7i banks are taxes 
 upon the public. This principle is not sufficiently obvious to statesmen, 
 nor even to the public, in England ; the mercantile classes have been 
 pleased, rather than otherwise, when laws have been passed injurious to 
 bankers. In Scotland such matters are better understood. The commer- 
 cial classes have always rallied round the banks; they have had the saga- 
 city to perceive the truth of the principle we have advanced ; they know 
 that capital employed in banking must be made to produce an average 
 profit : and if the Legislature causes one branch of business to be less 
 productive, the bankers must make other branches more productive, in 
 order to render capital employed in banking as profitable as it would be 
 if employed in other occupations. But the Act of 1845 not only in- 
 creased the charge, it led to a limitation of accommodation. There is no 
 one point on which Scotchmen, of all classes, are more unanimous in 
 opinion, than on the advantages that have arisen to their country from the 
 system of cash credits. This system can exist only with a note circula- 
 tion. One of its objects on the part of the banker is to increase his circu- 
 lation. But he has no profit by increasing his circulation of notes, if he 
 must keep in his coffers an additional amount of gold equal to that in- 
 crease. But gold is the idol of our currency theory. The cash credit 
 system, therefore, with all the virtues it produced, has been offered up in 
 sacrifice to this " golden calf." 
 
 The following Table shows the Circulation of all the banks in Scotland 
 during the year 1848 : — 
 
 Amount of Bank Notes authorized by law to be issued by the several Banks of Issue 
 
 IN Scotland and the Average Amount of Bank Notes in Circulation and 
 
 q/'CoiN held during thirteen periods of four weeks, from December 4th, 1847, to November 
 
 ith, 1848, as published in the Gazette. 
 
 Names of Banks. 
 
 Bank of Scotland 
 
 Royal Bank 
 
 British Linen Company 
 Commercial Bank of Scotland 
 National Bank of Scotland . 
 Union Bank of Scotland . 
 Edinhur<;h & Glasgow Bank 
 Aberdeen Banking Company . 
 Aberdeen Town & County Bank 
 North of Scotland Banking Company 
 Dundee Banking Company . 
 Eastern Bank of Scotland 
 Western Bank of Scotland . 
 Clydesdale Banking Company . 
 City of Glasgow Bank 
 Caledonian Banking Company 
 Perth Banking Company . 
 Central Bank of Scotland 
 
 Totals 
 
 Authorized 
 
 Average 
 
 Coin 
 
 Circulaiioii. 
 
 CirculaUon. 
 
 
 £ 300.485 
 
 £ 326,276 
 
 £ 160,042 
 
 183,000 
 
 182,293 
 
 80,866 
 
 438,024 
 
 408,300 
 
 142,052 
 
 374,880 
 
 430,415 
 
 146,449 
 
 . 297.024 
 
 292,681 
 
 70,415 
 
 327,223 
 
 304,923 
 
 91,163 
 
 . 136.657 
 
 124,048 
 
 36.716 
 
 88,467 
 
 103,776 
 
 33,652 
 
 . 70,133 
 
 83,767 
 
 18,950 
 
 154,319 
 
 141,919 
 
 18,772 
 
 . 33,451 
 
 27,821 
 
 5,281 
 
 33.636 
 
 31,806 
 
 6,518 
 
 . 337,938 
 
 374,959 
 
 111,694 
 
 104,028 
 
 100,621 
 
 28,001 
 
 . 72,921 
 
 104,366 
 
 52,657 
 
 53,434 
 
 55,296 
 
 15,762 
 
 . 38,656 
 
 43,738 
 
 13.738 
 
 42,933 
 
 43,743 
 
 10,880 
 
 329 
 
 3,087,209 3,180,748 1,043,608
 
 A Treatise on Bankin". 
 
 The following is the latest return, taken from tlie Bankers' Magazine 
 for May, 1849, and shows the proportion between the notes of =£ 5 and 
 above, and those below £ 5. One advantage arising from this publication 
 is, that we can so readily refer to the records of the circulation. Those 
 who have never waded through Parliamentary Returns in order to prepare 
 tables for the public little know the time and labor thus consumed. We 
 now find this done to our hand, and laid before us in a most lucid manner, 
 eveiy month. The future history of banking and of currency will be 
 compiled from the facts recorded in the pages of the Bankers' Magazine. 
 
 Average Circulation and Coin held by the Scotch Banks during the four iveeks 
 
 ending Saturday, the 2Ath day of March, 1849. 
 
 Average 
 Averase Circulation during Four Amount of 
 
 
 
 Weeks 
 
 ending as 
 
 above. 
 
 Gold & Silver 
 Coin held 
 
 Names of Banks. 
 
 Authorized 
 Circulation. 
 
 £ 5 and 
 upwards. 
 
 Under 
 £5 
 
 Total. 
 
 during Four 
 
 Weeks ending 
 
 as above. 
 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 Bank of Scotland .... 
 
 300,435 
 
 95,125 
 
 194,649 
 
 239,774 
 
 160,304 
 
 Royal Bank of Scotland 
 
 183.000 
 
 58.759 
 
 115,037 
 
 173,796 
 
 79,001 
 
 British Linen Company . 
 
 433,024 
 
 125,255 
 
 255,999 
 
 381,254 
 
 135,387 
 
 Commercial Bank of Scotland 
 
 374,880 
 
 124,923 
 
 257,145 
 
 382,073 
 
 107,951 
 
 National Bank of Scotland 
 
 297,024 
 
 85,453 
 
 132,351 
 
 267,804 
 
 52,977 
 
 Union Bank of Scotland 
 
 327,223 
 
 107,477 
 
 190,477 
 
 297,954 
 
 105,525 
 
 Edinburgh & Glasgow Bank . 
 
 136,657 
 
 45,206 
 
 73,924 
 
 119,1-30 
 
 34,426 
 
 Banking Company in Aberdeen , 
 
 86,467 
 
 31,213 
 
 63,856 
 
 100,070 
 
 40,207 
 
 Aberdeen Town & County Bank 
 
 70,133 
 
 21,334 
 
 52,869 
 
 74,703 
 
 16,925 
 
 North of Scotland Banking Company . 
 
 154,319 
 
 46,853 
 
 80,512 
 
 127,366 
 
 19,844 
 
 Dundee Banking Company 
 
 33,451 
 
 8,2(B 
 
 18,996 
 
 27,205 
 
 4.698 
 
 Eastern Bank of Scotland 
 
 33.636 
 
 11,876 
 
 18,226 
 
 30,102 
 
 8,170 
 
 Western Bank of Scotland 
 
 . 337,933 
 
 99,864 
 
 255,937 
 
 355,801 
 
 116,909 
 
 Clydesdale Banking Company 
 
 1O4.02S 
 
 20,233 
 
 70,632 
 
 90,865 
 
 31,193 
 
 City of Glasgow Bank 
 
 . 72,921 
 
 39,572 
 
 58,657 
 
 93.229 
 
 56,670 
 
 Caledonian Banking Company . 
 
 53.434 
 
 13,626 
 
 33,163 
 
 46,739 
 
 16,642 
 
 Perth Banking Company . 
 
 . 33,656 
 
 10,187 
 
 34,554 
 
 31.741 
 
 11,102 
 
 Central Bank of Scotland 
 
 42,933 
 3,087,209 
 
 10,603 
 956,272 
 
 26,861 
 1,978,845 
 
 37,464 
 
 11,212 
 
 Totals 
 
 2,935,120 
 
 1,009,173 
 
 Among the theories on the currency was a notion of establishing one 
 bank of issue for the United Kingdom. The following evidence on this 
 subject was given by Mr. Kennedy, the manager of the Ayi-shire Bank, 
 before the Committee on Banks of Issue in 1841 : — 
 
 " Do you think the establishment of a single bank of issue for the United Kingdom 
 would be advantageous or otherwise to Scotland 1" . ..." I conceive that it must bo 
 very destructive to Scotland." 
 
 "In what way ?"...." It is perfectly clear that it would overturn the present sys- 
 tem of banking in Scotland. Our system of lianking is based upon the power that our 
 currency gives us to allow a high rate of deposit interest ; if yon take from us the profit 
 that our currency yields, we must make our profit from some otlter source ; we must 
 increase the charges to the community, and allow less interest, or probably no interest 
 at all. and our system will be totally changed." 
 
 Another favorite notion has been the abolition of all notes under £ 5. 
 A Committee of the House of Lords and a Committee of the House of 
 Commons made reports on this subject in the year 1826. The evidence 
 
 330
 
 Currency in Scotland. 
 
 produced by the Scotch banker was so overwhelming, that both the 
 connmittees recommended the postponement of the measure. Kobert 
 Paul, Esq., secretary of the Commercial Bank of Scotland, stated to the 
 Committee of the House of Lords that the following would be the effects 
 of the abolition of the small notes. {Lords' Report, p. 204.) : — 
 
 " "We should diminish the number of our branches, because we should be involved 
 in an expense in the transmission of gold, which the profits arising out of our branches 
 could never compensate ; they are not the most profitable part of our business ; they 
 are attended with a great many hazards and disadvantages. 
 
 '' We should withdraw our cash accounts, because they could no longer accomplish 
 the end for which they were granted ; which was the maintaining our circulation, espe- 
 cially of our small notes. 
 
 " We should diminish the interest of our deposit accounts, because we should then be 
 required to keep a verj- large amount of dead stock of gold in our coffers, to meet the 
 constant variations that would arise, and to keep it wholly unproductive. I imagine 
 that if a gold currency were substituted for a small-note currency, there would be a 
 much greater amount of gold required than there is at present of notes. We have at 
 present, in order to meet the constant variations, a large amount of notes constantly on 
 hand, and in the same way we should require a stock of gold, and that would be pro- 
 portionably larger as the general circulatiou would be greater." {Lords' Report, 
 p. 132.) 
 
 The following letter, written by an agent at Inverary, to Roger Aytoun, 
 Esq., manager of the Renfrewshire Bank at Greenock, states the incon- 
 veniences which the writer apprehends would result from the introduction 
 of a metallic currency into that part of Scotland : — 
 
 " With regard to the proposed measure of suppressing bank notes in Scotland for 
 less than £5,1 think it would be ruinous to this country ; for I cannot see how, if it 
 takes place, the business of the country can be carried on. Confining myself to some 
 of the most prominent instances in which the Highlands will be affected, I shall state 
 the difiiculties that occur to me. Our produce chiefly consists of cattle and sheep, 
 grain, wood, kelp, and the production of the fisheries. Cattle are brought to the coun- 
 try markets by the breeders, chiefly small farmers, every man attending his own, and 
 having generally from one to three young animals for sale. There they are met by 
 tl^p dealers and graziers, who purchase such of the beasts as suit them; and it is seldom 
 that a single animal, at the age of one or two years, being the ages at which they sell 
 them to the dealers and graziers, comes to the price of £ 5 ; the price is more frequently 
 from £2 to £4. Of these a dealer often purchases two or three hundreds in single 
 beasts, so that he has more than £ 1 and less than £ 5 to pay to each of as many sellers ; 
 but he has no notes under £ 5, and the sellers are not able to return balance in any 
 coin. This will occur to many dealers at every market ; and how is the diSiculty to 
 be removed 1 The dealers must all come loaded with gold and silver, and this they 
 cannot carry to the necessary amount ; and besides, they will not be supplied by banks 
 with gold and silver for their bills by which there would be no profit. The means of 
 paying being wanting, the seller will not deliver, and the object of the parties is frus- 
 trated ; and thus a difficulty is cast in the way of disposing of this material article of 
 Highland produce, which must discourage the sales, and occasion a reduction of price, 
 and consequently of the rent and value of land. 
 
 "It is the same in the case of grain, of which bear or barley is what is chiefly sold 
 by small farmers to the distilleries. In settling for some bolls, bought in small quan- 
 tities of two or three bolls, £5 notes will be found most inconvenient; and the pur- 
 chasers and manufacturers of wood and bark, and of seaweed for kelp, who require 
 many hands, and pay off tlieir workers generally once in a month, none ot whom will 
 draw so small a sum as £ I , nor so large a sum as £ 5, wiU experience the same 
 difliculty. 
 
 " The herring fishery on our coasts employs several thousand men, and is of very 
 great importance. Instances have occurred of herrings being taken in Lochfine alone 
 to the value of £ 40,000 in one season ; and a thousand boats are generally employed 
 
 331
 
 A Treatise on Banking. 
 
 there in the fishing. The fishermen every morning sell their fish to the curers on 
 shore, receive their money, and set out in quest of more. The value of each boat's 
 fishing for a night sometimes exceed £ 5, but generally is under it ; and there are, in 
 this fishing station alone, a tliousand boats to be paid ofi" every morning, of whom most 
 ])robabIy two thirds have to receive less than £5 each. It will l)e im])ossiblc to provide 
 gold and silver sufficient for such a purpose ; and in the remote parts of the North 
 Highlands, where the fishery is much more extensive, and banks at a greater distance, 
 the difficulty is insuperable. 
 
 " At present the business of the Highlands is transacted by means of bank notes of 
 £ 1 and JE 1 Is. with some larger notes on occasions, and that with the greatest focility. 
 Cattle dealers, and all others, having to pay away money to any amount in small sums 
 to a number of people, as in the instances mentioned, prepare thcmsehos liy a mix- 
 ture of notes, some large and some small, accompanied by a few pounds of silver, and 
 every thing goes on well. Tliosc notes are prcfciTcd by the country jicople before 
 gold, both because tliey are unable to distinguish between the genuine and base metal, 
 and because these coins are more liable to be lost from their pockets than notes ; and 
 they have no reason to repent their confidence in the stability of these banks, whose 
 notes they liave been accustomed to receive for so many years in tlieir transactions. 
 But if small notes arc superseded, and gold substituted, it is not easy to see how the 
 supply of gold is to be kept up to carry on the business and transactions of this coun- 
 try. Should a quantity of it be received into tlie circulation, it would not remain long, 
 but find its way into the banks, who will not again give it out in bills as they do tlieir 
 notes, and it will immediatel}' become a scarPe article in the country. A jicrson, then, 
 having to pay in small sums, will on every such occasion be obliged to send his large 
 notes to the bank that issued them, perhaps a hundred miles off, to receive gold and 
 silver in their place, to answer his jiurijose. The conveyance of it to him is next to 
 be provided for. The weight may be too much for the post. There are no mail 
 coaches; and he must either employ a can-ier, moving too slowly for his occasions, or 
 be at the expense of sending a trusty person for the treasure. 
 
 "In transmitting money from one part of the country to another, the same difficulty 
 ■will often present itself Suppose a person in the Western Isles has to jiay £ 19 to 
 one on the Continent. At present this may lie conveniently done by three notes of 
 £ 5 and four of £ 1 inclosed by post ; but when there shall be no £ 1 notes, tiie odd 
 £ 4 must be sent in gold or silver, not conveniently carried in a post letter, and re- 
 quiring that a person be employed for the jiurpose, and at some expense. 
 
 " Many other such difficulties and inconveniences will occur. These ]iresented 
 themselves to me, and I stated them hastily. Mithout regard to order. If you find 
 any thing in them useful for the purpose I shall be pleased. But it ap])ears extremely 
 hard thYit the Scotch system should be disturbed, and that we should be obliged to 
 adopt one, not only unsuitable to our purposes, but ruinous to the business of our 
 countiT-" 
 
 V. — Those Operations of the Scotch Banks that refer to Cash Credits, 
 Deposits, Remittances to India, and the Settlement of the Exchanges. 
 
 I. Cash Credits. — A cash credit is an undertaking on the part of the 
 bank to advance to an individual such sums of money as he may from 
 time to time require, not exceeding in the whole a certain definite amount, 
 the individual to whom the credit is given entering into a bond with secu- 
 rities, generally two in number, for the repayment on demand of the 
 sums actually advanced, with interest upon eacli issue from the day upoM 
 which it is made. 
 
 Cash credits are rarely given for sums below £ 100 ; they generally 
 range from ^200 to cCSOO, sometimes reaching £ 1,000, and occasional- 
 ly a larger sum. 
 
 A cash credit is, in fact, the same thing as an overdrawn current ac- 
 count, except that in a current account the party overdraws on his own
 
 Cash Credit System. 
 
 individual security, and in the casli credit he finds two sureties who are 
 responsible for him. Another difference is, that a person cannot over- 
 draw his current account, without requesting permission each time from 
 the bank ; whereas the overdrawing of a cash credit is a regular matter 
 of business, — it is in fact the very thing for which the cash credit has 
 been granted. The following advantages have been ascribed to the cash 
 credit system. 
 
 1. Cash credits enable young men of good character to acquire weahh 
 and respectability. (Tliis, and the following quotations, are taken from 
 the evidence given by the witnesses from Scotland, before the Committees 
 of Lords and Commons, appointed to consider the expediency of abolish- 
 ing the notes under .£5). 
 
 " I have known many instances of young men who were starting in the world from 
 low situations of servants, who have conducted themselves well during the time they 
 were ajiprentices, or farm servants even, who were able to procure an account from a 
 bank by means of some friends or acquaintances becoming their securities, that in the 
 course of tlieir business have raised themselves to situations by becoming farmers of 
 considerable extent, or manufacturers in a way highly creditable to themselves and 
 beneficial to the countiy. 
 
 " Without cash credits, sober, attentive, and industrious people, would not have the 
 means at all of following up what they very deservedly might be encouraged to follow 
 up ; they begin the world, in all probability, with a mere trifle, which trifle they have 
 been known to make by their o^vn industry. Having made that, it recommends their 
 character to persons of perhaps a little more fortune, who, to encourage them, become 
 sureties for their cash accounts. 
 
 " The classes of persons who have cash credits are very various ; but they are gen- 
 erally the industrious classes of persons, merchants, and traders, and farmers. 
 
 " The accommodation is more readily given to a small than to a large amount, — 
 the bank preferring to grant ten credits for £ 100 than one for £ 1,000, thereby demon- 
 strating that their accounts are quite as much for the asistance of the poor as for the 
 accommodation of the rich." 
 
 2. Cash credits furnish great facility to tradesmen and others in carry- 
 ing on their business, either in the way of raising money, in making pur- 
 chases, or in employing at particular seasons their surplus capital. ' 
 
 " Is the advantage to the party borrowing greater under the system of cash credit 
 than under the system of lending in the ordinary mode ? — Infinitely. 
 
 " Why ? — As to the question of actual j)ounds, shillings, or pence, paid in the shape 
 of interest, there is, in the first place, this difference, that when he discounts a bill he 
 pays the interest on the sum for three months, if that be the currency of it ; should 
 any accidental mercantile transactions throw into this individual's hands, on the next 
 day, the same amount which he had thus received from the banker, lie has lost the 
 benefit of the transaction, because he must kec]) tliis ; if he has a deposit account with 
 the banker he must keep it at banker's interest, while he is anticipated by having paid 
 to the banker three months' discount interest on his bill ; if a trader were to take his 
 money systematically by discounts instead of by cash accounts, a disadvantage to him 
 would arise. The same principle applied to small sums ; if half or a quarter, or any 
 part of the advance which he may have received upon the cash account comes in to him, 
 he immediately lessens the advance by paying it into the bank, and the interest being 
 calculated at the close of the account, there is a progressive account of interest dimin- 
 ishing with the principal sum till it is extinguished. So far as to actual benefit of 
 interest; but the convenience of getting money when wanted, affords a very material 
 advantage, independent of the actual benefit. 
 
 " What are the facilities that exist in obtaining this sort of advantage, compared 
 with those of obtaining an ordinary loan ? — When a person ajjplies for a cash ar- 
 count, which is not an immediate advance of monev on the part of the bank, but a 
 
 333
 
 A Treatise on Banking. 
 
 conferring of the power or privilege of drawing upon the bank to the extent specified, 
 the person proposes two or more personal sureties : a bond is made out, and he draws 
 as occasion requires. In this way he has never more from the bank than is absolutely 
 necessary for the purposes of his business. The account is never recalled, unless it 
 has ceased to be beneficial to the bank, by having been but little operated upon, and 
 thus not having promoted the circulationof the bank's notes. "Whenever it becomes 
 a dead advance, tlie bank calls it up. In the case of a person obtaining a loan, he 
 would probably in the first place, have to pay the interest down at once ; he would 
 have to pay it upon the whole sum, whether he should require it ultimately or not, 
 and it would be liable to be recalled by the lender at his pleasure." 
 
 " The person who procures a cash credit, does so upon the security of two or three 
 substantial individuals. He may be a man of little property, but upon that security 
 he gets a credit, perhaps of £ .500 ; his bill to any tiling like that amount, without 
 those securities, would not be discounted. 
 
 '•After the permanent credit is given, the option of using it lies solely with the bor- 
 rower, not with the bank, as does also tiie option of the period of re])ayment. 
 
 '■If a small trader borrow of an individual (not a banker) £100, that individual 
 would not be disposed to receive back his money in £ 5, or £ 10, or .£ 1 5, — he would 
 wait till the term expired, when he would receive the whole. When a credit is granted, 
 the individual, perhaps, draws out .£50 to-day, and pays in £40 to-morrow, and goes 
 on in that way, always having credit with the" bank to the extent originally stipulated. 
 
 " The repayment as well as the overdraught is permitted by the bank to be made 
 in small sums piecemeal : so that by attention in his repayment, the borrower saves 
 himself from paying interest on more than the precise advance for which he has occa- 
 sion at the moment, and can constantly convert to a safe and profitable purpose the 
 money which he may receive in the course of his trade, however small the amount. 
 
 " These advantages are steadily and uniformly aflbrded at all times to the industri- 
 ous tradesman, or farmer, the merchant, the professional man, and the landlord." 
 
 3. Cash credits supply capital for carrying on extensive branches of 
 trade, employing the population, and constructing public works. 
 
 " Cash credits for small sums enable the poor to be as instrumental, as far as their 
 means go, in increasing the capital of the country as the rich are. For the produce 
 of that industry which cash account credits enable to operate, and of that capital 
 which they leave at liberty to be employed in trade, goes to increase the real wealth 
 and capital of the country ; and a great proportion of the transactions, carried on 
 tlirough the instrumentality of cash accounts, consists of those of the poorer classes. 
 
 "I apprehend that those cash credits have enabled a large nuinl)cr of manufocturcrs 
 to carry on business, and to employ the population of the country, who, if they had 
 not such credits, could not have carried on such business, nor employed such popu- 
 lation. 
 
 " Cash credits are granted to almost all descriptions of persons throughout the 
 country. Every young man who has a prospect of success on entering life, applies 
 for a cash credit. A great many gentlemen have cash credits, and a great many farm- 
 ers. There is hardly any public work undertaken in Scotland that the first object is 
 not to apply for a cash credit, to carry it on to advantage. All the roads in Scotland 
 are managed by Parliamentary trustees ; and I believe there is hardly any one of 
 those sets of trustees which have not cash accounts for the purpose of carrying on 
 their operations. I am sure many of the most important public works in Scotland 
 would not have been carried on, or certainly not with the same advantage, but for the 
 credits they obtain from the banks." 
 
 4. Cash credits prevent large manufacturers setting up as bankers, and 
 thus they exclude those evils which in other countries have resulted from 
 the failure of private banks. 
 
 ""When the system is applied to the case of large manufacturers, employing hun- 
 dreds or thousands of workmen, and possessing a cash credit to a proportionate 
 amount, upon sufficient security, one obvious effect is, that the tcm]itation is removed 
 from the manufacturer, of attempting to issue notes, and becoming himself a banker, 
 
 334
 
 Cash Credit System. 
 
 an error or temptation which, if what is said is true, has been the main cause of the 
 institution of many insufhcient English bankers, whose partners, from being good 
 traders, became bad bankers, and brought upon their own distinct the distress which 
 bad banking sooner or later always produces." 
 
 5. Cash credits have a considerable moral influence upon the habits 
 and character of the people. 
 
 "The security aflbrded to a bank by its debtor, or rather its customer, on a cash cred- 
 it, is by bond, with two sureties at the least, — occasionally there are not two sureties, 
 but frequently many more ; the practical effect of which is, tliat the sureties do, in a 
 greater or less degree, keep an attentive eye upon tlic future transactions and cliarac 
 ter of the person for whom they have thus pledged themselves. And it is, pcrliaps, 
 difficult for those who are not intimately acquainted with it to conceive the moral 
 check which is afforded upon the conduct of the members of a great trading com- 
 munity, who are thus directly interested in the integrity, prudence, and success of 
 each other. It rarely, indeed, if ever, happens that banks suffer loss by small cash 
 credits. 
 
 " This system has a great effect upon the moral habits of the people, because those 
 who are securities feel an interest in watching over their conduct, and if they find 
 they are misconducting themselves, they become apprehensive of being brought into 
 risk and loss from having become their securities, and if they find they are so miscon- 
 ducting themselves, they withdraw the security. 
 
 " Sometimes cash credits are recalled from the interference of the securities. They 
 have the power of knowing from the bank at any time the state of the account, and 
 the operations upon it ; and if, from that, or from other circumstances, they have been 
 led to think less favorably of the person for whom they gave the security, they can 
 immediately cease to allow that account to be further operated upon." 
 
 The Report of the Committee of the House of Lords contains the fol- 
 lowing observations upon the effects of cash credits : — 
 
 " There is also one part of their system which is stated by all the witnesses, (and in 
 the opinion of the committee very justly stated,) to have had the best effects upon the 
 people of Scotland, and particularly upon the middling and poorer classes of society, 
 in producing and encouraging habits of frugality and industry. The practice referred 
 to is that of cash credits. Any persop who applies to a bank for a cash credit, is 
 called upon to produce two or more competent securities, who are jointly bound ; and 
 after a full inquiry into the character of the applicant, the nature of his business, and 
 the sufficiency of his securities, he is allowed to open a credit, and to draw upon the 
 bank for the whole of its amonnt, or for such part as his daily transactions may re- 
 quire. To the credit of this account he pays in such sums as he may not have occa- 
 sion to use, and interest is charged or credited upon the daily balance, as the case may 
 be. From the facility which these cash credits give to all the small transactions of the 
 country, and from the opportunities Avhich they afford to persons who begin business 
 with little or no capital but their character, to employ profitably the minuted products 
 of their industry, it cannot be doubted that the most important advantages are derived 
 from the whole community." 
 
 As by cash credits the banks render themselves liable to be called upon 
 at a moment's notice for the amount of the credit granted, it is natural 
 to suppose that they contemplate some advantage in return. The ad- 
 vantage contemplated is the circulation of their notes. It is not intended 
 that the cash credit shall be a dead loan of capital. It is expected that 
 there shall be a perpetual paying in and drawing out of money, and the 
 smaller the denomination of the notes drawn out, the more advantageous 
 is the account to the bank. Manufacturers, who pay away large sums 
 every week in wages, linen buyers and cattle dealers, millers and pro- 
 vision merchants, who make their purchases in small sums, and generally 
 
 335
 
 A Treatise on Banking. 
 
 all those who have quick returns of money passing through thoir hands 
 have the means of making a cash credit profitable to tlie bank. On this 
 subject, I again quote the evidence : — 
 
 " To secure to the bank the advantages of circulation, wliich is to make it worth 
 while to atlbrd these facilities at so little expense to their customers, he, on his part, 
 is to lose no opportunity of bringing to the bank, and thus withdrawing from circula- 
 tion, the notes of every rival bank which comes into his hands in the course of his 
 transactions; or of paying away, and thus introducing into circulation, as many of the 
 notes of the bank as his transactions admit of, always £ 1 notes if possible. The pay- 
 ments and receipts must be frequent, for in this consists the banker's profit, inas- 
 much as the paj-mcnts are uniformly made by him in his own notes, and the receipts 
 are generally, in a very great degree, in the notes of other banks. Thus, supposing a 
 shopkeeper "to have a credit for £50 or £ 100, if his receipts and ]iayments average 
 X.5 per day, he may in six months, or 150 days, have placed 750 of his banker's £1 
 notes in circulation. 
 
 '• It is quite necessary, in order to render a cash account beneficial, that there 
 should be repeated and continued operations upon it ; that the transactions should be 
 numerous; that there should be a continual drawing out and paying in of money; 
 and that, by these means, a circulation of the bank-notes may be promoted ; otherwise 
 the account is withdrawn, and the great reason of this is, that these accounts are not 
 intended to form dead loans, but to be productive of circulation to the bank. 
 
 " The explanation of the cash credit system is this: — The bank who first opened a 
 cash credit, opened it with an individual shopkeeper. He received payment of his 
 goods in the currency of the country. Previous to that system, he used to put his cur- 
 rency into his drawer, £8 or £ 10, or whatever it was. If people brought him larger 
 money to pay for his goods, he returned those people change ; or if he did not, he kept 
 it until he wanted to purchase for himself. But, after the banker had explained to 
 him what he wished him to do, when the shopkeeper received the currency of the 
 country, instead of putting it into his till, he looked to the banker's shop as his till, 
 and handed it over to the banker, and left his own till with only the change which he 
 could not do without. Then, when he required sums to pay away, instead of taking 
 them from his till, he sent to the bank, and took from it what he required, the banker 
 giving him his own notes. So much of the previous currency was thus removed, and 
 the banker's notes taken in its place. That was the effect of the first operation, when 
 the thing was only in so simple a state that there was only the notes of one bank and 
 a metallic circulation. If you apply the sam^ principle where there are thirty banks, 
 the result would be the same. The amount of the circulation of the country continues 
 the same, but the proportion between its parts vary." 
 
 II. Deposits. 
 
 A sum of money deposited or placed in a bank is called a deposit. 
 Some banks grant interest on these deposits ; others do not. The Lon- 
 don bankers allow no interest on deposits, but the English country bank- 
 ers usually do. The Scotch banks have carried tliis i)ractice to the great- 
 est extent ; and the deposit system forms a very important branch of the 
 banking system in Scotland. 
 
 Those regulations which the banks have established as the rule of their 
 transactions between themselves and the depositors are the following : — 
 
 The depositor may place in the bank any amount of money he pleases 
 above £ \0. 
 
 The whole or any part of the deposit may be withdrawn at the plea- 
 sure of trie aepositor without previous notice. 
 
 Interest is allowed on the deposit from the day it is lodged in the bank 
 until the day it is drawn out. 
 
 336
 
 Scotch Deposit System. 
 
 The balance of a current account is allowed interest at the same rate 
 as thouorh it were a permanent deposit. 
 
 The following are tiie advantages ascribed to the deposit system : — 
 1. The system of deposits is advantageous to the lower classes, in pro- 
 viding a place of safety for their deposits, in granting them interest on 
 their savings, in encouraging habits of frugality, and thus often enabling 
 them to advance in society. 
 
 " The deposit branch divides itself into two parts : — Tliere is, first, what is called a 
 runnin<j account, where the party pays in from day to day the whole surplus funds in 
 his hands, and on which he receives interest. These depositors are, in general, shop- 
 keepers, and merchants, and traders, more particuhirly in large towns ; and in these 
 deposit accounts there is found at tlieir credit at the close of every day, the whole 
 amount of the money for which they have not immediate employment in their trade. 
 The second branch of deposits consists of small sums placed in the hands of the bank 
 at interest, which have been in general the savings of their industry, and which are put 
 into the hands of the bank to accumulate, and on which they may operate not in the 
 way of a running account. They may receive a partial payment whenever they 
 please ; and in general these deposits are very seldom removed, excei)ting when an in- 
 dividual has occasion to build a house or begin business. This class of deposits is dis- 
 tinguished from I'unning accounts by the name of deposit receipts." {Lords' Report, 
 p. 80.) 
 
 " ^V^lat class of the community is it that makes the smaller deposits ? — They are 
 generally the laboring classes in towns like Glasgow. In country places, like Perth 
 and Aberdeen, it is from servants and fishermen, and just that class of the community 
 who save from their earnings in mere trifles and small sums till they come to be a bank 
 deposit. There is now a facility for tlieir placing money in the provident banks, who re- 
 ceive money till the deposit amounts to £ 10. When it amounts to £\0, it is equal to 
 the minimum of a bank deposit. The system of banking in Scotland is just an ex- 
 tension of the provident bank system. Half-yearly or yearly these depositors come to 
 the bank, and add the savings of their labor, with the interest that has accrued from 
 ths previous half-year or year, to the principal. And in this way it goes on, without 
 being at all reduced, accumulating, till the depositor is able either to buy or build a 
 house, when it comes to be one, two, or three hundred pounds, or till he is able to com- 
 mence business as a master in the line in which he has hitherto been a servant. A 
 great part of the depositors of the bank are of that description ; and a great part of 
 the most thriving of our farmers and manufacturers have risen from such beginnings. 
 And in regard to the deposit receipts, I may just mention what is generally the way in 
 which they are granted. To-day a person from the country appears at the bank, it 
 may be with £20 or £.30 or £50. We probably never see him again till that day 
 twelvemonths, but we are sure of seeing him about that very day. If he has £ 20 in 
 the bank, he may come and say, ' There are four guineas ; you will give a receipt for 
 £25.' He knows well that the £20 has earned 16s. interest; and I do consider that 
 the four guineas are just the savings of the year. He goes away with his new receipt, 
 and returns on that day twelvemonths ; then again it is added to, and thus accumulated, 
 
 — and so on in many instances throughout the country." {Commons' lieport, p. 159.) 
 
 2. The system of deposits is advantageous to capitalists in furnishing 
 them with a secure mode of employment of capital, either for a longer or 
 a shorter period, at their pleasure. 
 
 " What class of persons form the large and steady depositors in the Scotch banks ? 
 
 — The middling and the lower order of society, industrious poor people, who are sav- 
 ing their money, and small capitalists who have raised a moderate sum of money, 
 upon the interest of which they live. 
 
 "Do many persons live upon the interest of their deposits, as far as you know? — 
 Yes, a great many. {Lords' Report, p. 165.) 
 
 " Do you know whether it is the practice of persons who have small capitals in 
 Scotland, to invest them in the public securities in London, or to deposit them with the 
 
 337
 
 A Treatise on Banking. 
 
 banks in Edinburgh ? — I believe, almost universally, to deposit them with a Scotch 
 bank. 
 
 " And they live upon the interest of what they so deposit, in the manner as persons 
 here live upon their interest on stock ? — Yes ; they often look to the permament capi- 
 tal with a view of leaving it at their death, taking the interest during tlieir lives." 
 (Comvions' Report, p. 124.) 
 
 " The depo.<it accounts are of two kinds, — one kind from the commercial people 
 who have larixc sums that they wish to keep in a disposable form, waiting an opportu- 
 nity of any investment wiiich may occur. Of tlie operating deposits, there are others 
 who keep tlie money until a favorable turn in the Stock Exchani^e enables them to in- 
 vest it there. And there are others, res]iectable householders, who keep it for the pur- 
 poses of their family expenditure. I reckon that these and the sums due upon them 
 average one lialf of the aggregate amount of a bank's deposits." {Lords' Report, 
 p. 183.) 
 
 " Have you formed any estimate of the amount of deposits in all the banks in Scot- 
 land '. — I certainly have been at very great pains to get information upon tlie subject ; 
 and I am satisfied that the amount is considerably above twenty millions, — I should 
 say, twenty-five millions. 
 
 "From what class of persons are those deposits chiefly? — Generally from indus- 
 trious tradesmen, small shopkeepers, varying from £10 to £ 500. The greatest num- 
 ber of deposits, and the greatest in their aggregate amount, are in small sums. 
 
 " Are there not, however, deposits from richer classes, and each of them to a much 
 larger amount? — Certainly, there are deposits from £1,000 to £20,000 and 
 £30,000. (7i/(/. p. 231.) 
 
 " In the spring of 1824, the banks in Scotland began, in some instances, to decline ac- 
 cepting deposits at all. — In the autumn of 1824, the great banks made an express rule 
 that they would not accept more than £ 5,000 from any one depositor. They allowed 
 2-1 per cent, on the first £ 3,000, and 2 per cent, upon the remainder of the £ 5,000, 
 and above that they would not allow any interest. That was the general rule with the 
 great banks at that period.. There were many people who preferred leaving their 
 monev, though they received Uttle or no interest, to taking it away. That commenced 
 in 1825." (/W(i. p. 158.) 
 
 3. The system of deposits is advantageous to the countiy, by augment- 
 ing the amount of national capital, by increasing the demand for labor, by 
 granting facilities to trade and commerce, and by removing the tempta- 
 tions to engage in hazardous speculations and foreign investments. 
 
 " This system was adopted before the middle of the last century. Tlie rate of inter- 
 est allowed since then has been regulated by the value of money, and has, of course 
 fluctuated considerably; but it has ever been such as to afford as high a return to the 
 depositor as has been consistent with the reasonable profit, and of course the security 
 of the bank. The effect of this system has been to encourage and to atl'ord the 
 means of the accumulation of capital among the lower, as well as the hi<,dier, orders, 
 by placing within tlie reach of all, a convenient, safe, and moderately profitable invest- 
 ment of money, and to offer an inducement to capitalists to retain their accumulations 
 in Scotland, notwithstanding the opportunities or temptations which foreign invest- 
 ment.s might hold out." {Lords' Report, p. 175.) 
 
 " The system of deposit accounts, I think, is a very great stimulus to the habits ol 
 industry, and economy, and frugality, in Scotland. The whole surplus cajiital of the 
 individual is thus rendered productive. 
 
 " Under the system on which you conduct your business, is not the money arising 
 from those deposits issued out, to encourage the further consumption of labor in the 
 country ? — Yes. 
 
 " It "would be a loss, then, to the country, if it was to be removed from the channel 
 in which it is now placed, into this country, on government debentures ? — It certainly 
 would. 
 
 " Unrler this svstem, does not the poor workman gain immediate interest for his sav- 
 imr. whilst the s.'ivini: is immediately emjiloyed, through the bank, in juitting a further 
 portior of labor into motion ? — Precisely so. It is in this way tiiat the wealth of 
 
 338
 
 Scotch Deposit System. 
 
 those individuals is concentrated, and, through the afrcncy of tlie bank, is brought to 
 bear in carrying on the business of the country." (Ibid. p. 28.3.) 
 
 " Is there not an advantage to tlie public from the gathering of those small capitals 
 together, forming part of the deposits of the bank, and so being sent out again in large 
 sums, like other capitals, for the purpose of being applied to increase the powers of 
 productive industry? — The Scotch banks form a sort of reservoir for receiving the 
 small sums of capital scattered throughout the community, and then sending them forth 
 into channels of trade, so as to promote the commerce, manufactures, and agriculture 
 of the country. (Commons^ Report, p. 20-3.) 
 
 '• Are you of opinion that if the deposits with the banks of Scotland w-ere considcral)]y 
 lessened, the banks could afford the same accommodation by discounts which tliey do 
 at present? — I should think that is impossible, because it forms part of their cajntal. 
 It would diminish the capital which is at present employed in that business, of which 
 discounting forms a great part. 
 
 " Would not any such diminution of discount operate injuriously to the general 
 trade of the country ? — The want of those discounts must diminish the trade of the 
 country, inasmuch as the manufacturer and merchant receives his money at least three 
 months sooner by discounting their bills, than he could possibly get payment of his 
 account." {Lords' Report, p. 2G6.) 
 
 " The system of deposits forms a great part of the funds arising from our banking 
 system. It is a great deposit of money, which is given out to the trade of the coun- 
 try, for the profit of one per cent., for which the bank rans the risk of its business. If 
 that great deposit were withdrawn, and could not be issued with the same degree of 
 safety, I conceive the consequences would be a total derangement of the whole system; 
 and ruin of our country." {Lords' Report, p. 235) 
 
 '■ If the banks are under the necessity of reducing the interest on deposit accounts, 
 the depositors must look about them and find out on what security they can lend their 
 money so as to obtain a higher rate of interest. It would certainly diminish the capi- 
 tal of the trading part of Scotland, inasmuch as the banks would not have it in their 
 power to assist them in tr.ading by discounting, but it might be lent on Government 
 securities or landed property, and the temptation of a higher interest from individuals 
 would, undoubtedly, be a temptation to many, and a temptation that could scarcely be 
 resisted by those whose income depends entirely upon the interest of that lent money, 
 to lend it on personal and doubtftil security. 
 
 '■ ^V^len the banks reduced their interest some time ago, a great part of the deposits 
 was drawn out, to be invested in various different ways. And, as the depositors did 
 not get from the banks the interest on which they were depending, and did not choose 
 to make a less interest, many of them went into schemes, which have turned out very 
 ruinous to them. It has been one great cause of over-speculation, that the people did 
 not get the interest they had been accustomed to from the banks. They, therefore, 
 drew it out to invest it in joint-stock companies, lent it to builders, or other inferior se- 
 curities, or became builders themselves." {Ibid. p. 250.) 
 
 4. The system of deposits is advantageous to the banks, by inducing 
 every person to deposit his money in a bank, by furnishing the banks 
 with capital to carry on their business, and by putting in circulation a 
 large amount of their notes. 
 
 " The universal practice at Glasgow is to pay into the bank with which the individ- 
 ual transacts his business, the whole of the notes he has in his possession, or nearly the 
 whole, every day." {Commons' Report, p. 50.) 
 
 " Unquestionably, the giving of i^iterest upon deposits is an inducement to every 
 person that has any surplus money in his hands, to place it in the hands of his banker. 
 And in the s.ame way in the case of cash accounts, every payment by the holder of a 
 cash account into the bank, either diminishes the interest he has to pay to the bank, or 
 if the account should turn in his favor, enables him to get interest from the bank, and 
 that is a great inducement for everj' person to pay in daily into his banker's hands all 
 the monev which he does not require for the purposes of his business." ( Commons' 
 Report, p.' 201.) 
 
 " The means of a bank I conceive to consist of three things : first, capital paid in 
 
 339
 
 A Treatise on Banking. 
 
 its own stock ; secoiidl)', the notes which the bank is able to keep afloat in the circle ; 
 thirdly, the amount of the deposits." (Lords' Report, p. 195.) 
 
 " And if the amount of depo.<its were lessened, in that case their means of issuing 
 money upon discount would be proportionately lessened 1 — Yes. {Commons^ Report, 
 p. 150.) 
 
 " Every bank constituted as the banks of Scotland arc, make advances in two ways, 
 — they make them upon cash credits, and they make them upon the discount of bills. 
 They also borrow in two ways, — they borrow upon deposit receipts, and they bon-ow 
 also upon accounts current. That is, if a gentleman opens an account, and puts 
 £> 100 to his ci-edit, and operates upon it, drawing out a part of it, leaving a balance 
 in the hands of the bank, then is there a borrowing to the extent of the balance that 
 is so left. Those accounts we do not allow to be overdrawn, so that the advance is in 
 two ways, and the borrowing in two ways, that is, in two different forms." (Ibid 
 p. 180.) 
 
 " In the case of small depositors, a considerable part of the profit arising from tho 
 deposit of that money is the circulation of tlie notes. ^\nien a depositor withdraws 
 his money from the bank, he receives it in the notes of the bank, and, of course, they 
 go into circulation. As long as they remain out they are a source of profit." {Com 
 nions' Report, p. 45.) 
 
 " The bank issue their notes two ways, — they make advances upon cash accounts, 
 and they make advances upon discounts. They also issue their notes in payments 
 upon accounts current, and also in the re-paymcnt of deposit receipts." {Lords^ Re- 
 port, p. 236.) 
 
 " The deposit and cash accounts are the instruments for supporting our circulation, 
 and without the continued operations upon the deposits and cash accounts our circu- 
 lation cannot be maintained." (Ibid. p. 135 ) 
 
 III. Remittances to India. 
 
 Although this branch of banking business is not peculiar to Scotland 
 yet I believe the banks of Glasgow have carried it on to a greater extent 
 than any other banks. This has arisen partly from the more intimate 
 connection that exists between Glasgow and India, and partly from the 
 character of Scotch banking. We refer to the practice of granting bills 
 of exchange to be sent out to India, accompanied by an undertaking to 
 accept them when presented. 
 
 To enable our readers to understand distinctly this branch of business, 
 we must give a short description of the banking and commercial opera- 
 tions of India. The business transacted at each of the Presidencies con 
 sists of importing British manufactured goods, and exporting the produce 
 of the country, such as cotton, indigo, &c. Sonne of the merchants who 
 are engaged in these operations act also as bankers. They receive de- 
 posits, and allow interest on them, receive dividends on India stock, and 
 make remittances to England. Their business in this way was formerljf 
 very extensive, but has recently been much reduced by the establishmenl 
 of banks all over the country. One part of the business of these mercan 
 tile bankers is to advance money on shipments of goods either to England 
 or to China, taking as security tho bill of lading and the policy of insur- 
 ance. Here they often fmd a powerful competitor in the East India 
 Company; and die mercantile interests, in both India and Glasgow, arc 
 desirous of excluding the Company from this kind of business. (See the 
 Evidence taken before the Committee of tho House of Commons on 
 Commercial Distress, 1848.) 
 
 I cannot better describe the kind of business carried on in India, than 
 
 340
 
 Remittances to India. 
 
 by the following extract of a letter I received about two years ago, in re- 
 ply to some inquiries I made on the subject : — 
 
 " One part of business whicli the houses used to do largely was advancing on ship- 
 ment of goods to England and China, and it is still done by Messrs. 
 
 and . The system is : — A. ships Jt 10,000 worth of goods for Eng- 
 land, and takes the bills of lading and policies of insurance to B., who agrees to ad- 
 vance three fourths of the value ; the shipping documents are indorsed by ^1. to B., 
 and A. draws bills on the consignee of the goods in London for the value, in favor of 
 B., payable at six months' sight, and directs bun to accept the bills when presented by 
 /J.'s London correspondent. As the goods will most probably arrive in London lic- 
 fore the bills fall due, the consignee will take tiiem up before the due date, and witli 
 the bills receive the shipping documents from B.'s correspondent. Sometimes, how- 
 ever, it may be that A. has no agent in London, and the goods are therefore consigned 
 to B.'s correspondent, wlio is instructed to sell and remit the proceeds by bills, or witli 
 the purchase money of tlie Indian goods to buy British manufactured goods, and shi]) 
 them consigned to B. You will easily perceive what large profits could be realized in 
 this way, as commission is charged on the sale of tlie Indian goods, and purchase of 
 British, and a high rate of interest on the advance until it is paid otF. 
 
 '• The East India Company usually get a portion of the money required for the 
 home expenditure, from India, in this manner. Last month, the government here 
 gave notice, that, in pursuance of instructions from the Court of Directors, it was pro- 
 posed to provide a sum of £ 800,000 in India during the remainder of the official 
 year 1846-47, for the service of the East India Company in London, by the purchase 
 of bills of exchange to be secured by the hypothecation of goods. Advances in cash 
 are accordingly made for the purpose by the governments of Bengal, Madras, and Bom- 
 bay, at the rate of exchange of 2s. per company's rupee ; the operation is exactly the 
 same as I have stated in the former case. A. ships goods, and, on the security of the 
 bills of lading, policies of insurance, and his bills on consignees in London, at six 
 months' sight, receives from the government an advance equal to three fourths of the 
 value of the goods ; the bills, with the shipping documents attached, are sent to the 
 India House ; and in due course accepted by the drawee ; on the arrival of the goods 
 the bills are paid, and the goods given up. In the event of the ship arriving, and the 
 bills not being taken up, the goods are then lodged in one of the Dock Company's 
 bonded warehouses. If the bills are dishonored at the due date, the goods are sold 
 to reimburse the East India Company for the advance ; this, however, is an extreme 
 case, and could only occur in the event of the bankruptcy of the acceptor. 
 
 " With reference to the bills drawn from India, with an engagement on the part of 
 the drawee to accept, in the margin, tliese bills are obtained from a respectable Lon- 
 don house, and sent out to this country for negotiation ; but I must have recourse 
 again to my favorite plan of illustrating by an example. A. having credit with a 
 London house, or, if not, lodges security, and obtains bills, with an engagement in the 
 margin to accept, and remits them to B., his correspondent, in India, for the purchase 
 of produce; the drawee being well known, the bills obtain a favorable rate in the mar- 
 ket, and B. is enabled to purchase produce, which he ships, consigned to .li. in London, 
 who, before the bills fall due, pays them ; on paying the London house commission on 
 the amount, the transaction is concluded. 
 
 '• There is another system, and you very prohably may have seen some of the bills in 
 the London market. A , a merchant in New York, proposes to send a ship to China for 
 goods, but unwilling to have his money locked up on board ship for so many months, 
 with the additional risk of loss, he obtains, either on personal or other security, from 
 
 say Messrs. 's agent in New York, a letter of credit on the house in 
 
 London, to honor the bills of the captain or supercargo of the ship. On the arrival 
 of the ship in China, the cargo is purchased and paid for by the bills on Messrs. 
 
 , London: the bills are negotiated in China, with the indorsement 
 
 of 's agent there, and as soon as A., in New York, receives advice of 
 
 the same, he remits the amount to London, to meet the bills when they fall due. I 
 inclose you a form of one of these American bills. Sometimes money is sent to India 
 
 by means of London bankers' bills, and I have seen Messrs. 's bills 
 
 offered for sale, but being drawn at short dates, do not obtain such good rates of ex- 
 change as might be expected ; they are seldom used for commercial purposes, but are 
 
 341
 
 A Treatise on Banking. 
 
 taken by officers of the civil and itiiiitan- sen-ices, nisliins to make remittances to 
 their families at home. I understand tliat the Western Bank of Scotland issues bills 
 with an engagement to accept. 
 
 " This operation, as far as an exchange operation, of the banks issuing the bills, 
 would not realize a profit sufficient to cover the risk. Su]i]iose the London and West- 
 minster Bank sent out to au agent lierc its bills at six months' sight, for £20,000 and 
 that the bills arc sold at 2s. per ru])ce ; the agent must then remit the rupees (200,000), 
 which he has received, and even admitting that he could obtain good commercial bills 
 at 2 per cent, under that rate, it would scarcely pay his commission on the transac- 
 tion. 
 
 " The usual way in which merchants settle their exchange operations in Bombay, 
 and I believe it is the same all over the East, is by sending a notice to each house, in- 
 timating that A. ^' Co. have JG 10,000 to draw for on England ; A. Sj- Co. are called 
 sellers. B <5- Co. want to remit £5,000 to England, are called buyers, and ofter for that 
 amount of .4. ^' Co. bills ; C. ^- Co. are also buyers, and offer for £5,000 more, so that 
 the whole transaction is completed ; and unless a bank is prepared to buy up all the 
 bills offered for sale, at the same, or a more favorable rate than a mercb.ant can offer, 
 it cannot carry on its exchange operations profitably, the merchants buying and selling 
 among themselves, save all the bankers' charges. This, I imagine, has been the case 
 in all countries before the system of banking operations was clearly understood ; and I 
 have no doubt, but that in a short time wo shall see all exchange business done by the 
 banks." 
 
 FORMS OP LETTERS OF CREDIT. 
 
 To explain further this system, we shall transcribe the form of the bill 
 referred to in the above letter, and also the forms of the bills issued bv 
 two banks at Glasgow. 
 
 J^ -.«-5.S<^ "^ •^6«' YorA, 7th June, 1S42. 
 
 S K S~ r'^ '« i; ^•- « 
 
 R t= t~Si«ri:c1'^ Exchange for £SUr.m 
 
 ^rq 
 
 "^•S^g'^ 23S5 
 
 ■S -e «; l5 
 
 .2 » 
 
 ti; s 
 
 '='■«'' "^ a •§ Six Montlia after sight of this First of 
 
 ^ si; ?2 -C" "s ^3 
 
 (3 >§ S !§) ?j "^t Exchange {SecoTid and TTiird unpaid) pay to the order of Davis, 
 
 <u (2 ^''^ s if 
 
 *: -g - ^ w (i Brooks, A- Co. Three Hundred Pounds Sterling, value received, 
 
 oE?.c!8g(? [Tos advised by 
 
 a "S' "S S ii» Your obedient servant, 
 
 8 -e •« ^ -S .o GEO. D. CARTER.* 
 
 « 2 .^. ■« g 
 
 t- <: j; R a i; 
 . (3 a o ,| .<s 5 To 
 
 •^ 2 "o 2 "S*.^ " Messrs. Palmers, Mackillop, Dent, ^ Co., 
 
 — 8t?°-°'-S'S London. 
 
 •^ H^ P- 13 S » o 
 
 * This bill is endorsed, " Pay George D. Carter, or order. — Davis, Brooks, ^ Co." 
 
 342
 
 Remittances to India. 
 
 No. 
 
 To 
 
 for first of exchange. 
 Western Bank of Scotland. 
 18 
 
 / hereby engage to accept and to pay at Ma- 
 
 'unty, the first presented Bill of the set of 
 
 Exchange, of which the annexed is the 
 
 First, to be drawn by 
 
 on the Western Bank of Scotland, on or 
 
 before 
 
 at Sixty days' sight, 
 provided this Letter of Credit, as annexed 
 to such Bill, be presented therewith and de- 
 livered to me on acceptance thereof. 
 For the Western Bank of Scotland, Glas- 
 gow, Manager. 
 
 TmRD op exchange. 
 
 Clydesdale Bank, Glasgow. 
 To 
 
 We hereby engage to accept and to pay 
 at maturity the first presented Bill of the 
 set of Exchange of which the annexed is 
 the Third, to be drawn by you on us, on or 
 before the for £, 
 
 say Sterling, 
 
 payable in London at a date not less than 
 
 and not exceeding 
 days' sight, provided this Letter of Credit 
 be delivered to tcs on acceptance of the an- 
 nexed Bill. 
 
 For the Clydesdale Banking Company. 
 
 No. 
 
 18 
 
 Sixty Days after Sight, pay 
 this First of Exchange (Second and Third 
 of same tenor and date unpaid), to the or- 
 der of 
 
 at Messrs. Jones, Lloyd, jc Co.'s, London, 
 value received as advised. 
 
 To the 
 Western Bank of Scotland, 
 
 Glasgow. 
 No. 
 
 £ 18 
 
 after sight pay this Third of 
 Exchange {First and Second of the same 
 tenor and date unpaid), to the Order of 
 
 in London 
 
 Value received as advised. 
 To 
 
 SterltTig, 
 
 The Bank of England had their attention called to this subject, and 
 consequently issued expressly for remittance to India bank post bills drawn 
 at sixty days' sight. The following account of this arrangement is taken 
 from a city article of the Times : — 
 
 " Some inquiries having been made as to the origin of the bills at 60 days' sight- 
 drawn by the Bank of England, alluded to the other day, and the mode in which the 
 operation is conducted, the following information may be found acceptable: — 
 
 " About the year 1836, the bills of the East India firms had been brought into tem- 
 porary discredit by some failures which happened at the time, so that these bills did 
 not find ready purchasers in the Bombay market. It was conceived, therefore, that a 
 new sort of paper of unquestionable credit might be introduced into India Mith advan- 
 tage, and nothing seemed more fitted for this purpose than bills made by the Bank of 
 England, and payable by themselves. A resolution, passed in April, 1836, authorized 
 the issue of the required paper, and since that time it has been in use. 
 
 " And now, with respect to the mode of operation. A party who wishes to remit 
 money to India applies to the bank by filling up the following form, to which a list is 
 attached, and pays (of course at par) for the bills which he takes : — 
 
 " ' To the Chshiers of the Bank of England. 
 
 '''London, ,18 . 
 
 " ' request to be furnished with the undermentioned bills, at 60 days 
 
 sight, in triplicate, amounting to £ , the firsts to be accepted and held by the 
 
 X 343
 
 A Treatise on Banking. 
 
 Bank of England, for the purpose of being delivered to the holders of the seconds or 
 thirds, whichever may be first presented.' 
 
 " The bills so obtained are remitted to India, and have a peculiar advantage, which 
 is expressed by the condition in the form that the ' firsts ' are to be accepted and held 
 by the Bank of England. The paper which is drawn l>y a firm in India on London, is 
 generally made payable at 60 days after sight, but the 60 days do not begin to run till 
 after their acceptance in London. The bank paper, on the contrary, being accepted at 
 once, and held for the purpose of being delivered to the holders of the ' seconds ' and 
 • thirds,' the 60 days begin to run from the date, and the bills are payable immediately 
 on their return to London from India. This advantage and the unquestionable credit 
 of the paper, often enable the holder to dispose of them at a good premium in the In- 
 dia market in certain states of the exchanges, and thus they become, as it were, an ar- 
 ticle of commerce. 
 
 " Notwithstanding the advantages of this paper, it is not so commonly used as it 
 might be imagined. This is attributed to the competition of some of the Scotch hanks, 
 who offer an inducement for the circulation of their own paper. The Bank of England 
 pay no interest, treating the 60 days' bill just as they would treat an ordinary note, 
 and have the use of the money paid during all the time that the bill is performing its 
 voyage to India, is finding a customer in the Indian market, — a slow process in some 
 states of the exchanges, — and is returning home. The Scotch firms, on the contrary, 
 allow interest during this time, or a portion of it, and thus the capital of the holder 
 does not lie completely idle. Hence a preference is, in many instances, given to the 
 Scotch firms." 
 
 IV. Regulations for Settling the Bank Exchanges at Edin- 
 burgh. 
 
 1. There shall be every Thursday morning an exchange of the notes collected on 
 Monday, Tuesday, and Wednesday ; and every Saturday an exchange of the notes 
 collected on Thursday, Friday, and Saturday. The balances struck on Saturday shall, 
 ■with the Glasgow and country exchange receipts, be settled on Monday. The balances 
 struck on Thursday shall be settled on the same day ; and this settlement shall include 
 the country exchange receipts of Wednesday, and the Glasgow exchange receipts of 
 Thursday. The exchange on Saturday shall not be interrupted by holidays ; but on 
 these occasions it shall commence at half past nine o'clock A. m. When Monday is a 
 holiday, the settlement shall be made on Tuesday. 
 
 2. When exchanges are established in provincial towns, the notes received at the 
 exchanging agencies there must wait for the return of the next local exchange day ; 
 and must, under no pretext, be forwarded to meet the exchanges in Edinburgh, or at 
 the other agencies. 
 
 3. All payments of balances shall he made in exchequer bills of £ 1,000 each, the 
 thousands of the balance to indicate the number of cxchequor bills ; it being under- 
 stood, that Bank of Scotland, Royal Bank, or British Linen Company notes of £ 100 
 each, or Bank of England notes of £ 100 and upwards, or gold, shall be employed to 
 pay fractional parts of £ 1,000 only. 
 
 4. The amount of exchequer bills to be kept in the exchange circle is apportioned as 
 follows : — 
 
 Bank of Scotland . . . £ 24,000 Western Bank . . £ 24,000 
 
 Royal Bank .... 24,000 Clydesdale Bank . . . 12,000 
 
 Bridsh Linen Company . 24,000 Edinburgh & Glasgow Bank 12.000 
 
 Commercial Bank . . . 24,000 City of Glasgow Bank . . 12,000 
 
 National Bank . . . 24,000 
 
 Union Bank .... 24,000 £ 204,000 
 
 5. Exchequer bills put into the circle, to be filled up, payable to the banks which 
 have originally contributed them, and to be blank indorsed wlien first paid away. 
 They shall be registered before they are put into the circle, in a book kept in the Bank 
 of Scotland for the purpose, and shall bear the distinpuishing mark of " Edinburgh 
 Exchange Bill," affixed by the Bank of Scotland, showing that they belong to the Ed- 
 inburgh exchanges, and are not to be used for any other purpose whatever. 
 
 344
 
 Scotch Exchange System. 
 
 6. All the exchequer bills placed and retained in the exchange circle to bear a uni- 
 form rate of interest, and shall be paid and received in the exchanges at their nominal 
 par value, with the interest accrued ; and when they are withdrawn, in consequence of 
 being called in, or from an alteration in the rate of interest, a voucher in the form an- 
 nexed (Schedule A) shall be issued for each exchequer bill by the banks by whom 
 they were provided to pass as such, till replaced by the new bills in course of post af- 
 ter they are issued from the exchequer. 
 
 7. As exchequer bills may be expected to accumulate occasionally with some of the 
 banks, while the stock of others is exhausted or becomes low, the parties holding the 
 greatest amount of bills shall be bound to sell to the parties in want of them, who 
 shall, on the other hand, be obliged to buy ; but the holders shall not be required to 
 reduce their stock of exchequer bills, by selling below an excess of two thirds over 
 their original quota, unless necessary for the settlements ; and parties whose stock of 
 bills is short shall not be required to purchase more than will make up their stock to 
 one third of their original quota. 
 
 8. Purchasers of exchequer bills shall buy from parties holding the largest propor- 
 tional amount, with reference to their original quota, and two thirds more ; and the 
 party holding the largest proportion shall have a continued preference in selling to one 
 or more purchasers, until the stock of the selling bank is reduced to two thirds above 
 their original quota, when the next largest proportional holder at the time shall have 
 the preference, and so on. 
 
 9. Exchequer bills bought shall be paid for by drafts on London bankers at five 
 days' date ; and the purchasers of exchequer bills shall pay, in addition to the princi- 
 pal sums in the bills, the growing interest, at the rate allowed by the exchequer, up to 
 the date of the drafts falling due in London, and shall furnish stamps for the drafts. 
 
 10. Transactions in the purchase and sale of exchange bills maj' be made on either 
 of the settling days in the week , but they shall be made only in the exchange-room, 
 and solely for the settlement of the exchange ; and no private transactions of this kind 
 between bank and bank shall be permitted, so that the number of exchequer bills in 
 the hands of any one party after the exchanges are so settled shall be the number re- 
 turned on the next exchange day. 
 
 11. In the event of any exchange draft being dishonored, without prompt and most 
 satisfactory explanation of the cause, the bank issuing such draft shall be immediately 
 excluded from the clearing-room, and their notes shall be refused in all future transac- 
 tions with the public. 
 
 12. The exchanges shall be made alternately ; on Thursdays in the Bank of Scot- 
 land, and on Saturdays (with the relative settlement on Mondays) in the Royal Bank ; 
 and these banks will undertake to receive from the banks which are debtors, and to 
 pay to the banks which are creditors in the exchanges, the exchequer bills. Bank of 
 England and other notes, and gold, which are passed in payment of the balances : but 
 the Bank of Scotland and the Royal Bank shall not, nor shall either of them, be in 
 any way responsible for the exchange transactions, nor otherwise soever. 
 
 1.3. The clerks of the different banks shall appear in the clearing-room at ten o'clock 
 A. M. on Thursdays and Saturdays, and, before the exchange operations commence, 
 they shall write down, on the board allotted for the purpose, the amount of exchequer 
 bills held by the banks they represent ; and after the balances are struck and ascer- 
 tained on the settling days, they shall mark on the same board the exchequer bills 
 which will be in their hands after the balances are settled by the Bank of Scotland and 
 Royal Bank ; and this is to be considered the number on which all transactions in the 
 purchase and sale of exchequer bills for that day shall be founded. 
 
 14. After the balances are struck on Thursdays and Mondays, statements of the 
 same shall be conveyed to the respective banks by their own clerks, who shall afterwards 
 attend in the clearing-room, to pay and receive the balances due, at half-past eleven 
 o'clock on Mondays, and at half-past three o'clock on Thursdays, after the vouchers of 
 the balances of the Glasgow exchange of that day are received. These are to be con- 
 veyed, by a special messenger, from the Glasgow banks of issue alternately, and to be 
 delivered by him personally at the banks to whom they are addressed in Edinburgh. 
 
 15. The British Linen Company having, from a desire to promote the general con- 
 venience, consented to forego the advantage they have hitherto enjoyed of making 
 their whole exchanges with banks junior to themselves within their own office, no cer- 
 tified statements of their separate exchanges will henceforth be necessary. 
 
 16. The seventh and eighth regulations will tend, in a great degree, to equalize thft 
 
 345
 
 A Treatise on Banking. 
 
 amount of exchequer bills among the diftercnt hanks ; hut as it may possibly hap- 
 pen, notwithstanding, from some peculiar state of the exchanges, that exchequer bills 
 may accumulate in the hands of one bank to a considerable amount beyond its quota 
 and two thirds more, without the power of sale to any other bank, according to the 
 above regulations, then that bank, when the amount on hand exceeds fifty-seven, may 
 require the bank holding the fewest number, although not under one third of their quo- 
 ta, to purcliase up to their quota, and so on to the next lowest, until the stock of the 
 selling bank shall be reduced to the original quota and two thirds more. 
 
 17. The annexed Schedule will be the guide to distinguish the extreme points, in 
 terms of the seventh and eighth regulations, at which sales and purchases of exchequer 
 bills are to proceed. 
 
 18. All the exchanging banks shall have free access, at such times as may be con- 
 venient, to the record of the exchange transactions. 
 
 19. The subscribers, having framed these regulations with the view to keep the 
 circulation of Scotland in a sound state, as well as to give facilitj' in the settlement of 
 their balance of notes issued in the fair way of business, and being of opinion that it is 
 discreditable in a bank of issue to force its notes into circulation, by exchanging them 
 for other notes in the circle, they resolve to check and discourage any such irregular 
 issues by every means in their power. 
 
 20. It is further understood and agreed, in consideration of the circulation of each 
 bank (other than what may be issued against gold and silver coin) being fixed and lim- 
 ited, by the Act 8 & 9 Vict. c. 38, that the banks shall bring to the exchange-room 
 regularly, at their head office and agencies, all the exchangeable notes which they re- 
 ceive, and that under no circumstances shall any bank issue the notes of another bank 
 of issue in Scotland without pennission first asked and obtained. 
 
 21. The parties to this agreement shall be entitled to withdraw from it, and to re- 
 ceive back their exchequer bills at their par value, with accruing interest, on giving 
 three months' notice. 
 
 Edinburgh, Feb. 16, 1846. 
 
 Alex. Blair, for the Bank of Scotland. 
 
 Robert Stm Wilson, for the Koyal Bank of Scotland. 
 
 Tho. Corrie, for the British Linen Company. 
 
 Robert Paul, for the Commercial Bank of Scotland. 
 
 George Crosbie, for the Nation.al Bank of Scotland. 
 
 Saml Hat, Cashier, for the Union Bank of Scotland. 
 
 Peter Ramsat, for the Western Bank of Scotland. 
 
 William Flemming, Manager, Edinburgh, for the Clydesdale Bank. 
 
 Arch. Bonar, for the Edinburgh & Glasgow Bank. 
 
 Robert Bell, for the City of Glasgow Bank. 
 
 VI. — Exchange Banks, and Exchange Conipanies.* 
 
 As these institutions exist only in Scotland, they may fairly be classed 
 among the banks of Scotland. At the period they originated I wrote the 
 following letter to the late Patrick Maxwell Stewart, Esq., M. P. for Ren- 
 frewshire, who had asked my opinion on the subject. This letter was af- 
 terwards published in the Railway Herald. 
 
 " In compliance with your request, I will now give you my notions re- 
 snecting the new Exchange Banks recently formed in Scotland. 
 
 1. A division of labor among banking institutions is by no means a new 
 idea. There, is scarcely any beink that carries on every branch of the bu- 
 
 * Note hy American Ptihlisher. — Those who are curious as to the system of the Ex- 
 change Bank System of Scotland, and the recent failure of these banks, are refeiTed to 
 the Bankers' Magazine, pubh.shcd at Boston, pp. 249-251, and 298-301, in which the 
 able views of the London Atlas and the London Bankers' Magazine are fully given 
 upon this subject. 
 
 346
 
 Scotch Exchange Banks. 
 
 slness of banking. The dealing in foreign exchanges, which forms so 
 large a portion of the business of Continental bankers, is quite unknown 
 to English bankers ; it is confined to merchants, or to large moneyed 
 houses, like the Messrs. Rothschild. In London, the West-end bankers, 
 as Messrs. Coutts and Messrs. Drummond, do not discount commercial 
 bills, but confine their advances to mortgages, as their connections lie 
 chiefly among the aristocracy ; while the city bankers look on mortgages 
 with horror, and make their advances by the discount of bills and short 
 loans on personal security. Loan Banks, or Monts de Piete, have been 
 in existence for several centuries as a distinct branch of business, 
 and loan societies are now sanctioned with us by Act of Parliament. 
 Some London bankers do not take the agency of country banks, while 
 the agency of colonial and foreign banks is often taken by mercantile 
 houses, who carry on no other part of the business of bankers. I might 
 add to these illustrations, but these are enough to show that division of la- 
 bor among banking institutions is accordant with every-day practice, and 
 therefore the new exchange banks, in marking out for themselves a par- 
 ticular line of conduct, cannot be charged with any deviation from ac- 
 knowledged principles. 
 
 2. But then comes the question, Is the particular department of bank- 
 ing marked out for themselves by the new exchange banks sufficiently ex- 
 tensive to justify the formation of banks for that particular department, and 
 also sufficiently lucrative to justify the anticipation of profit to the share- 
 holders ? With regard to the extent, there can be no doubt that, from the 
 formation of railways, and the multiplication of companies of all sorts, 
 those kinds of securities on which commercial banks do not like to make 
 advances are largely on the increase. It is likely, too, that these ex- 
 change banks would attract much business in the way of advances on 
 goods, &c., which is now done by brokers or individual capitalists. With 
 regard to profit, it is well known that loans on the kind of security taken 
 by the exchange banks are always charged a higher rate of interest than 
 commercial bills. 
 
 3. One reason for the formation of banks to take up this particular line 
 of business is, that it requires a peculiar kind of knowledge in the mana- 
 ger. He must make himself acquainted with certain points of law con- 
 nected with shares, with the value of all shares in the market, the history 
 and prospects of each company, the law and practice with regard to bond- 
 ed goods, and other matters that do not usually come under the notice of 
 the manager of a commercial bank, and the knowledge of which he 
 could not readily acquire and maintain without neglecting other matters 
 of, to him, greater importance. 
 
 4. Although the rate of interest obtained by the exchange banks will 
 be higher than what is termed the market rate, yet it will be affected by 
 the market rate, and hence I think an exchange bank cannot yield a 
 high dividend to its shareholders, unless it transacts a large amount of busi- 
 ness. The only deductions from the interest received must be the ex- 
 pense of the establishment. Every commercial man knows that a large 
 establishment can be conducted with a less proportional expense than a 
 small one. To conduct even a small business with safety, an exchange 
 
 347
 
 A Treatise on Banking. 
 
 bank must have a first rate manager ; but as the business increases, the 
 same manager transacts the increased business, and the chief increased 
 expense is in the number of clerks. In a large bank the expense may 
 form a small proportion to the profits ; in a small bank the expense may 
 equal the profits, or even exceed them. To do a large business, of coui-se 
 an exchange bank must have a large capital. 
 
 5. After a while, these exchange banks may obtain funds beyond their 
 own capital. The commercial banks obtain such funds by the issue of 
 notes, the balance of drawing accounts, lodgments on deposits, and the 
 issue of drafts on London and elsewhere. None of these means are 
 adapted for exchange banks, except the lodgments on deposits. After 
 they are better known to the public, perhaps they may be able to receive 
 deposits for three, sLx, or twelve months certain, on which tliey may afford 
 to allow higher interest than is allowed by the commercial banks. Possi- 
 bly some persons may prefer lending to these banks on liberal interest 
 rather than lending on mortgage. Any large extent of this business 
 would, of course, add proportiunubly to the profits of the bank. 
 
 6. I know of no better form of government for an exchange bank than 
 a board of directors and a manager. Conmiercial banks find a large 
 board useful, as the number of directors exalt the bank in public estima- 
 tion, and extend its influence, but with an exchange bank a small number 
 of efficient directors would be preferable. But all banks should avoid 
 what are called " managing directors." A manager is selected because 
 he has had a banking education, and has obtained banking experience. 
 Over him are placed two directors, who have had no banking exi)erience. 
 The manager is thus reduced to a clerk, and having neither power nor 
 responsibility, he has no stimulus to exertion. The managing directors 
 being members of the board, their brother directors do not scrutinize their 
 acts so closely as they would the acts of the manager. These other di- 
 rectors thus become ciphers. A bank thus governed resembles a private 
 bank with two partners, with this diiTerence, that the private bankers un- 
 derstand their business, and deal with their own money. The main ob- 
 jects of managing directors are to direct the manager, and to manage the 
 directors. Most of the English joint-stock banks that have gone astray 
 have been either constitutionally or practically governed by managing di- 
 rectors. The great object of the exchange banks shovdd be to manage 
 their affairs prudently ; though a large business is essential to good profit, 
 yet they should not attempt a large business with a small capital. Let 
 them get a large paid-up capital first, and the large business will come of 
 course. The main danger to which they are exposed is, that they may 
 attem])t to get on too fast. 
 
 7. An obstacle to the progress of these banks is the stamp duties on 
 the transfers of shares. I trust these and all other banks and companies 
 will use their influence to get these duties abolished. In political economy, 
 there is no proposition capable of clearer demonstration than that domestic 
 taxes on the transfer of property arc pernicious. Our (government seem 
 to have recognized this jirinciple last session in their spontaneous surren- 
 Qer of the auction duties. Tiiere is no more reason in laying a tax upon 
 the sale of railway shares than there would be in laying a tax upon the 
 
 348
 
 Scotch Exchange Banks. 
 
 sale of iron and timber. It will be a happy thing if the formation of ex- 
 change banks should have the effect of causing these taxes to be repealed. 
 You will perceive from what I have written that my opinions are in 
 favor of these exchange banks. Presuming they will be well managed 
 (for without good management no bank can succeed), I think they will be 
 found profitable channels for the employment of capital, and after a while 
 may worthily take their plate side by side with the other banking estab- 
 lishments of Scotland." 
 
 The following extracts, from a letter addressed in March, 1847, by 
 George Kinnear, Esq., the manager of the Glasgow Commercial Ex- 
 change Company, to Alexander Blair, Esq., the treasurer of the Bank of 
 Scotland, point out the difference between the business of those compa- 
 nies and that of the Commercial Banks : — 
 
 " The advances of exchange companies are all made, irrespective of commercial 
 credit, on the security of shares in joint-stock companies. Although these shares pre- 
 sent the most undeniable and complete security, they do not present what all prudent 
 bankers understand by a legitimate hanking security. Every banker knows that he might 
 as well devote his funds to lending over land as over shares ; that when he does so, he 
 in reaXitj abstracts his funds from banking, and to that extent loses his banking power ; 
 and that, just in proportion as he does so, he must be prepared to give up his commer- 
 cial business. 
 
 " It is this which has induced prudent bankers, not only in Scotland, but everjrwhere 
 else, to repudiate such transactions as inconsistent with the prosperity of their commer- 
 cial business. They do occasionally lend a customer over his shares, as they also oc- 
 casionally lend a customer over the security of his title deeds, but they regard both as 
 equally foreign to their legitimate business, and are well aware that if they practised 
 either for any length of time they would ruin their legitimate commercial trade." 
 
 '■ The Commercial Exchange Company allows interest at 5 per cent, on deposits for 
 six months certain, and repayable at three months' notice. The Bank of Scotland 
 allows interest at 4 per cent, on deposits repayable at call. I may appeal to any re- 
 spectable banker, bill broker, or money dealer of any kind, if a difterence of one per 
 cent, per annum is too much between money for nine months certain, and money at a 
 moment's notice ■? I maintain that it is not ; and that the extra one per cent, which 
 we pay is justly due on account of the superior character of the article which we re- 
 ceive." 
 
 " The whole of the money lent by the Commercial Exchange Company is at the 
 rate of 6i per cent, per annum, and is lent for six months at a time. On all six 
 months' paper the Bank of Scotland charge 6 per cent., so that the Commercial Ex- 
 change charge only one half per cent, more than the Bank of Scotland. IS'or is this 
 half per cent, charged for nothing ; as the bank has no trouble in taking bills at six 
 months, while the Exchange Company has the trouble and risk of taking over securi- 
 ties, and of renewing and changing them for the parties as they may desire." 
 
 " The Exchange Company allows 5 per cent, for money, and charge 6.^ per cent., 
 making a fixed difference in favor of the company of 1 4 per cent. The Bank of Scot- 
 land allows on current accounts 3^ per cent., on deposit receipts 4 per cent, and 
 charges on bills under four months 5 per cent., and above four months 6 per cent. ; 
 making a difference in favor of the bank varying from one per cent, up to 2^ per 
 cent." 
 
 " The directors of the Commercial Exchange Company have allowed to the public 
 5 per cent, on money deposited with them ; and they have done so, although the Bank 
 of Scotland and the Royal Bank only allow 4 per cent." 
 
 '• If money, repayable on demand, be worth to these banks 4 per cent., it follows as 
 a matter of "course, that money for six months certain, and repayable at three months' 
 notice, ought to be worth 5 per cent." 
 
 " I beg of you to recollect what class of people it is who are the great majority of 
 depositors. Mostly persons incapable of working, — maiden ladies, widows, and or- 
 phans, — people incapable of making the most of their money for themselves, — nay, 
 
 349
 
 A Treatise on Banking. 
 
 most of them, either from their sex or their ignorance of business, hardly capable of 
 judging where their money is safe. 
 
 " It is a very great pleasure to rac to know that the establishment of the exchange 
 companies has been of great service to tliis class of persons. Hundreds of persons of 
 moderate means have had tlieir comforts increased, by the increased interest they thus 
 derive from the money, on the produce of which they are obliged to live ; and I rejoice 
 to believe, that thousands will yet enjoy similar benefits." 
 
 " The exchange companies no more compete with banks than do the river trusts, 
 harbour trusts, railway companies, road trusts, and other public undertakings, who bor- 
 row money for lengthened periods. There is, in fact, no possible room for jealousy or 
 competition betv.'cen banks and exchange companies, for there is no business under- 
 taken by the one which could be accepted of by the other with any safety or propriety. 
 You will yourself acknowledge that the Bank of Scotland could not afford to receive 
 money on deposit for nine months certain at 5 per cent. ; and I assure you the Com- 
 mercial Exchange Company could not afford to give 4 per cent, for money at call." 
 
 " AVc do not, in the smallest degree, injure or interfere with the prosperity of com- 
 mercial banking; on the contrary, the estahlishmcnt of exchange companies must have 
 given a very acceptable apology to prudent bankers for declining to make advances to 
 their customers on securities, Mhich (although quite good in themselves) are as foreign 
 to prudent banking as advancing money on mortgage over land." 
 
 " What you call evils are in fact great public benefits. First, by conferring substan- 
 tial advantages on a certain class of depositors ; and secondly, by enabling the internal 
 improvements of the country to be carried out with an ease and rapidity which could 
 not otherwise be attained." 
 
 The Exchange Banks and Companies that have been formed in Scot- 
 land are the following : — 
 
 1. The Exchange Bank of Scotland, at Edinburgh. 
 
 2. The Commercial Exchange Company, at Glasgow. 
 
 3. The Union Exchange Company, at Glasgow. 
 
 4. The National Exchange Company, at Glasgow. 
 
 5. The Glasgow E.xchange Company, at Glasgow. 
 
 6. The West of Glasgow Exchange Company, at Glasgow. 
 
 1. The Exchange Bank of Scotland. — This bank has a charter under 
 Sir Robert Peel's Act of 1845. Its paid up capital is £ 350,000, and it 
 has about ^400,000 deposits. It cannot issue notes. In making pay- 
 ments it issues the notes of the City of Glasgow Bank. It has paid a 
 dividend of 6 per cent. 
 
 2. The Commercial Exchange Company. — This bank has no charter. 
 It was established before the passing of the Act of 1845, but not regis- 
 tered until after the passing of the Act. It has since registered, and 
 hence the directors consider that they are entitled to carry on business as 
 a bank without a charter. The extracts we have made from the pam- 
 phlet of Mr. Kinncar, the manager of this bank, will show the principles 
 on which it is conducted. 
 
 3. The Union Exchange Company of Glasgow, does not profess to be 
 a bank at all, and hence avoids the question of a charter. At a special 
 general meeting of shareholders, held in November, 1846, it was resolved 
 " that the word ' banking ' be omitted from the name or firm of the Com- 
 pany, as prescribed by the first article of the contract of copartnery, and 
 from the description of companies referred to in the third article of said 
 contract ; and that a special declaration be added to the said third clause 
 of the said contract, that it has not been, and does not form any part of 
 
 350
 
 Scotch Exchange Banks. 
 
 the business of the company to make advances simply on personal secu- 
 rity, unaccompanied by the collateral security of real or personal proper- 
 ty." Its paid-up capital is about £ 250,000, on which it has paid a divi- 
 dend of 7^ per cent. 
 
 4. The National E.xchange Company. — This company has been very 
 unsuccessful. It commenced in the year 1845, and got into difficulties at 
 the end of 1847. Their first paid up capital was .£210,790. They have 
 since made a call of £■ 2 a share more, on 57,000 shares, to enable them 
 to meet their liabilities. 
 
 5. The Glasgow Exchange Company began business in 1847, and 
 wound up creditably in 1848, returning to their shareholders 4s. per share 
 more than they had paid up. 
 
 6. The West of Scotland Exchange Investment Company is winding 
 up its affairs, and is expected to return to its shareholders nearly the 
 whole of its paid-up capital, — about £ 120,000. 
 
 The losses that have fallen upon exchange companies seem to have 
 arisen mainly from the great reduction that has taken place in the price 
 of railway shares. The following observations of the directors of the 
 Glasgow Exchange Company, with reference to the prosecution of their 
 business, appear very just and impartial : — 
 
 " The directors will first state the negative view of the question. From the nature 
 of the transactions which form the general business of exchange companies, their suc- 
 cess depends chiefly upon a high state of the prosperity of the country, and particularly 
 of railway enterprise. The main object of nearly all who enter into such transactions 
 is to realize the benefits of an expected augmentation of the value of the stock ; the 
 business, therefore, is necessarily attended with risk, and though that risk may be 
 guarded by what appears an ample margin, recent experience has shown that this has 
 not been a sufficient precaution. 
 
 " The directors' short experience may not give much weight to their opinion ; but it 
 appears to them to be essential to the profitable management of the company's business, 
 that it should possess, in addition to its own capital, a considerable amount of money 
 in loans from the public. The employment of such money is the chief source of the 
 profit of banking companies, and this advantage is still more required by exchange 
 companies. To command a share of such loans, this company must possess the confi- 
 dence of the public : what might tend to infuse this confidence would be a large paid- 
 up capital ; but although this would be quite requisite, if. the business is to be earned 
 on, yet it is doubtful how far it would remove the strong prejudice which has taken 
 possession of the public mind against exchange companies, — a prejudice which is a 
 good deal mixed up with the injurious cfi'ects to individual fortunes which recent bank- 
 ruptcies have disclosed, as arriving out of transactions with exchange companies. 
 
 " The directors will now state what has occurred to them in favor of prosecuting the 
 business. 
 
 " The magnitude of railway stock in this country is so great, that it may be fairly 
 concluded it will always form a subject of extensive dealings, and that, therefore, there 
 will always be a large field on which business may be cultivated. In ordinary times, 
 tlie risks attending the business of the company would not be much ; and it is not to 
 be expected that a period such as has just been passed, distinguished by extraordinary 
 vicissitudes in the value of public securities, will often occur. 
 
 " The prejudice which exists against such companies at present, time may remove, 
 for it does not appear to the directors that the grounds of that prejudice rest on any 
 principle that would not apply to any other joint-stock company ; but it is not to be 
 concealed that the existence of this prejudice will be an obstacle, for a time, to the fa- 
 cility of increasing the paid-up capital, and the increase of loans from the public, 
 both essential to the profitable results of the business." 
 
 351
 
 A Treatise on Banking. 
 
 Section MI. — THE BANKS OF IRELAND. 
 
 The last Act of Parliament for rcpulating banks in Ireland is the 8 & 9 
 Vict. cap. 37, passed in the year 1845. 
 
 This Act recites that by the Act 21 & 22 Geo. III. an act was passed 
 for establishing a bank by the name of the Governor and Company of the 
 Bank of Ireland ; and which prohibited any other company consisting of 
 more than six persons to issue notes payable on demand or within any 
 time less than six months. That by the Act 1 & 2 Geo. IV, cap. 72, 
 other companies consisting of more than six partners might issGe notes 
 payable on demand, at a greater distance than fifty miles (Irish) from Lon- 
 don. And that by 6 Geo. IV. cap. 42, and 1 AVm. IV. cap. 32, such 
 co-partnerships of bankers might transact certain matters of business by 
 agents in Dublin, including the payment though not the issue of notes. 
 
 The Act further recites that the Bank of Ireland had at various times 
 advanced for the public service, the several sums of £ 600,000, £ 500,- 
 000 and £ 1,250,000 late Irish currency ; and that by the 48 Geo. III. 
 cap. 103, the charter of the Bank of Ireland was extended to the first day 
 of January, 1837, — upon twelve months' notice to be published in the 
 Diihlin Gazette, and after the repayment of the above-mentioned sums. 
 And that by the Act 1 & 2 Geo. IV. cap. 72, the Bank of Ireland had 
 agreed to advance a further sum of £ 500,000, and the bank was em- 
 powered to enlarge their capital to £ 3,000,000 ; making the total ad- 
 vances i: 2,850,000 late Irish currency, equal to ^2,630,769 4s. 8d. 
 sterling money of the United Kingdom of Great Britain and Ireland ; on 
 which, by the Act 3 & 4 Vict. c. 75, the bank received an annuity from 
 the Government of £ 115,384 12^. 4d. sterling, payable on the 5th of 
 January and 5th of July in each year, redeemable upon six months' no- 
 tice, to be given after January 1st, 1841, and after payment of the above- 
 mentioned sums. 
 
 The Act further recites, that the above annuity of £ 115,384 12s. 4rf. 
 has, with the consent of the said governor and company, been reduced 
 to .£92,076 18.S. 5rZ., being at the rate of 3 J per cent, per annum on the 
 capital sum of ,£2,630,769 4s. 8f/., which capital sum shall not be re- 
 paid until the expiration of six months' notice, to be given after January 
 1st, 1855 ; and that, during such term, the said governor and company 
 shall manage the public debt free of all charge. The company is to con- 
 tinue a corporation, for the purpose of carrying on the business of bank- 
 ing, but not to have any exclusive privileges. The charter to continue 
 until the expiration of twelve months' notice to be given, and published 
 in the Duhlin Gazette, after January 1st, 1855, and upon repayment of 
 the sums due from the Government to the bank. 
 
 The Act removes, from the 6th day of December, 1845, all restric- 
 tions upon banks having more than six partners issuing notes and carry- 
 ing on business in Dublin, and within fifty miles thereof. But no banker 
 shall issue any larger amount of notes than the average amount he had 
 m circulation during the year ending the first day of May, 1845, (which 
 amount shall be certified by the Commissioners of Stamps,) and the 
 
 352
 
 The Banks of Ireland. 
 
 amount of gold and silver coin he may have in his hands, in the propor- 
 tion of not more than one fourth of silver to that of gold. 
 
 In case two banks should unite, the new bank to have the power of is- 
 sue to the amount of both the united banks. Any bank may arrange 
 with the Bank of Ireland to give up its issue ; and in that case the Bank 
 of Ireland may increase its issue to that amount. But the bank that thus 
 contracts shall not afterwards resume its issue. All notes for a fractional 
 part of a pound are prohibited. Each bank issuing notes is required to 
 send to the Stamp-office weekly returns, stating the amount of notes in 
 circulation on each Saturday, distinguishing those below £ 5 ; and also 
 the amount of gold and silver coin held at each of the head offices or prin- 
 cipal places of issue in Ireland. And from these returns the Commis- 
 sioners of Stamps and Taxes shall make a monthly return, which shall 
 be published in the Dublin Gazette. This monthly average must not 
 exceed the amount certified by the commissioners and the amount of gold 
 and silver on hand. 
 
 All banks are required to send a list of their shareholders to the 
 Stamp-office, eveiy year, between the 1st and the 15th of January, to be 
 published in the Dublin Gazette before the first day of the succeeding 
 March. All banks, whether they issue notes or not, are entitled to sue 
 and be sued in the name of their public registered officer. 
 
 Upon the Act of 1845, for the Regulation of Banks in Ireland, we may 
 observe : — 
 
 1. The authorized issue is like that of the banks of Scotland, the aver- 
 age amount of the year ending on the 1st day of May, 1845. 
 
 2. If any two banks unite, the new bank may issue to the amount of the 
 circulation of both the united banks. Here the law is the same as that of 
 Scotland, but different from that of England. 
 
 3. If any bank gives up its issue, and agrees to issue Bank of Ireland 
 notes, the Bank of Ireland may increase her authorized issue to the full 
 amount of the issue of the bank whose notes are withdrawn. In Eng- 
 land, the Bank of England can, in a similar case, issue only to the extent 
 of two thirds of the issue of the bank whose notes are withdrawn. There 
 is no similar provision in the Act referring to Scotland. 
 
 4. Another difference may be noticed between Ireland and Scotland. 
 All the notes issued at the branch banks in Scotland are payable only at 
 the head office of the bank that issued them. In Ireland all the notes are 
 legally demandable in gold at the branches where they have been issued. 
 Hence the banks in Ireland must keep some gold at every branch, while 
 the banks in Scotland need not have any gold except at the head office. 
 In both countries, the banks must hold a stock of gold equal to the amount 
 of notes in circulation beyond the authorized issue : and, according to 
 the Act, this gold must be at the head office, or chief place of issue. The 
 gold held at the branches, however necessary for business purposes, is 
 not taken into account in the returns to the Stamp-office. The banks, 
 indeed, return the whole amount of the gold in their possession ; and it is 
 this which is published in the newspapers. But the amount held against 
 the excess of authorized issue must be held at the chief office, or other 
 chief places of issue. In the Provincial Bank of Ireland these places are 
 
 353
 
 A Treatise on Banking. 
 
 Cork, Limerick, Dublin, and Belfast. They are desirous of having in ad- 
 dition, Watcrford and Sligo. (Mr. Murray'' s Evidence, Lords, 4279.) 
 
 The banking institutions of Dublin arc the Bank of Ireland, which is a 
 chartered bank, like the Bank of England. It is the Government bank. 
 It issues notes, and has branches in the principal towns throughout Ire- 
 land. It has now no exclusive privileges. 
 
 The Provincial Bank of Ireland, and the National Bank of Ireland 
 These are joint-stock banks that issue notes, and have numerous branches. 
 These two banks are governed by boards of directors, who meet in Lon- 
 don. 
 
 The Hibernian Bank, and the Royal Bank of Ireland. These are 
 joint-stock banks, that do not issue notes, and have no branches, except 
 that the Hibernian Bank has a branch at Drogheda. 
 
 The private banks of Messrs. La Touche & Co., Messrs. Ball & Co., 
 and Messrs. Boyle, Low, Pirn, & Co. 
 
 There are three joint-stock banks at Belfast, all of which issue notes 
 and have branches. They are the Northern Bank, the Belfast Bank, 
 and the Ulster Bank. 
 
 There is also a joint-stock bank at Tipperary, which does not issue 
 notes, but has several branches. 
 
 The Bank of Ireland. 
 
 In tracing the history of banking we may observe that most public 
 banks have been formed, in the first instance, under the protection of the 
 Government of the state in which they were established. Such was the 
 case with the banks of Venice, Genoa, and Amsterdam ; and such, too, 
 was the case with the banks of England, of Scotland, and of Ireland. 
 The former were closely connected with the state, and may properly be 
 called " State Banks " ; the latter had peculiar privileges bestowed by 
 charter, and are usually called " Chartered Banks." These privileges 
 may be divided into two classes, those which refer to the proprietors them- 
 selves, and those which refer to other parties. The privileges of the 
 first class relate to the amount of capital, the form of government, the 
 number of the directors, and the mode of their nomination, the meeting 
 of the proprietors, and the specification of the branches of business the 
 bank are allowed to carry on. The privileges of the second class refer 
 to the restricted liability of the shareholders, and the prohibition of other 
 parties carrying on the same business. 
 
 If the charters granted to banking companies referred only to the first 
 class of privileges, they would be liable to but little objection. In the 
 infancy of commerce and of banking, the assistance of the government 
 may with propriety be granted to encourage the formation of institutions, 
 fio eminently calculated to promote the public advantage. But of what 
 avail are prohibitory clauses .-' If no other persons are disposed to form 
 similar institutions, then those prohibitions are a nullity. But if other 
 parties are disposed to form similar companies, without the assistance of 
 the Government, then why should the Government interfere at all .'' Why 
 should tney grant a charter to efiect an object which can be effected with- 
 out their assistance .'' 
 
 354
 
 The Bank of Ireland. 
 
 In the charter first granted to the Bank of England in 1694, there 
 was no proliibitory clause. But when the charter was renewed in 1708, 
 it was enacted that no other company formed of more than six persons 
 should carry on the business of banking in England. The charter grant- 
 ed to the Bank of Scotland, in 1695, contained the following prohibition, 
 — "That for the period of twenty-one years from the 17th of July 1695, 
 it should not be lawful for any other persons to set up a distinct company 
 or bank within the kingdom of Scotland." This privilege was not re- 
 newed after the expiration of the twenty-one years ; and in the year 
 1727, a charter, without any prohibitions, was also granted to the Royal 
 Bank of Scotland. In the year 1746, the British Linen Company was 
 formed, and carried on the business of banking as a joint-stock company. 
 Subsequently this bank also obtained a charter, but without any exclusive 
 privilege. Hence Scotland has had the advantage of chartered banks, 
 and joint-stock banks, and private banks, all working well together with- 
 out producing those effects which in this country have followed the prohib- 
 itory clauses of the charter of the Bank of England. 
 
 Both in its constitution and government the Bank of Ireland closely im- 
 itated the Bank of England ; and it has produced in Ireland most of the 
 advantages and evils which that establishment has produced in this coun- 
 try. It has supplied the country with a currency of undoubted solidity ; 
 it has supported public credit, it has granted facilities to trade, and it has 
 assisted the financial operations of the Government. On the other hand, 
 its prohibitory clause necessarily led to the formation of many private 
 banks, whose failure was the cause of immense wretchedness to all classes 
 of the population. 
 
 The charter of the Bank of Ireland contained a clause, which prevented 
 more than six persons forming themselves into a company to carry on 
 the business of banking in Ireland. In the year 1824, they surrendered 
 this exclusive privilege, as far as regard those places which are situated 
 at a greater distance than fifty Irish miles from Dublin ; and in 1826, the 
 Bank of England made a similar surrender, with regard to places at a 
 greater distance than sixty-five miles from London. As eleven Irish miles 
 are equal to fourteen English miles, fifty Irish miles are equal to about 
 sixty-five English miles. But it must be observed, that Dublin is situated 
 on the sea-coast, therefore, the Bank of Ireland had only the monopoly 
 of a semicircle, whose radius is fifty Irish miles. But London, being 
 situated inland, the Bank of England had the monopoly of a whole cir- 
 cle of 130 English miles in diameter. 
 
 The Bank of Ireland was established by an Act of Parliament passed 
 in 1782, 21 & 22 Geo. III. cap. 16. The following are the provisions 
 of this Act : — 
 
 The capital was £ 600,000, which was lent to Government at 4 per 
 cent. No one pei'son was permitted to subscribe more than £ 10,000. 
 If the bank incurred debts to a greater amount than their capital, the sub- 
 scribers were answerable in their private capacity to the creditors in pro- 
 portion to their subscriptions. The bank were not either to borrow or 
 lo lend money at a higher interest than 5 per cent., nor to engage in 
 any business but banking. The stock to be transferable, and deemed 
 
 355
 
 A Treatise on Bankiiig. 
 
 personal estate, and as such to go to the executors of the holders, and 
 not to their heirs. No transfer of bank stock to be valid, unless regis- 
 tered in the bank books, in seven days from the contract, and actually- 
 transferred in fourteen days ; the charter to expire at twelve months' no- 
 tice after the 1st day of January, 1794, and repayment of all sums due 
 by the Government to the bank. 
 
 The charter is dated May 15, 1783, and contains as follows : — Such 
 persons as should subscribe before January 1, 1784, the sum of <£ 600,000 
 were to be formed into a corporation, to be styled the Governor and 
 Company of the Bank of Ireland ; the corporation were to have a gov- 
 ernor, deputy-governor, and fifteen directors ; which governor, deputy- 
 governor, and directors, or any eight or more of them, shall be called a 
 Court of Directors, for the management of the affairs of the corporation. 
 
 Fifteen directors shall be chosen annually, between March 25 and 
 April 25 in each year, and not above two thirds of the directors of the 
 preceding year to be reelected. 
 
 The notice for the meeting of general courts of proprietors to be affixed 
 upon the Royal Exchange in Dublin at least two days before the time of 
 meeting. The qualification for a voter at a general court shall be £ 500 
 stock, to be held for six months preceding, unless it came by will, mar- 
 riage, &c. The qualification for Governor shall be £ 4,000 stock, and for 
 deputy-governor £ 3,000, and for director £ 2,000. 
 
 No dividend shall at any time be made by the said governor and com- 
 pany, save only out of the interest, profit, or produce, arising by or out 
 of the said capital, stock or fund, or by such dealing, buying, or selling, 
 as is allowed by the said Act of Parliament ; nor without the consent of 
 the members of the said corporation, in a general court qualified to vote 
 as aforesaid. 
 
 The governor or deputy-governor shall summon four general courts 
 at least in every year. One in the month of September, one in Decem- 
 ber, one in April, and another in July. 
 
 The governor or deputy-governor shall also summon a general court, 
 whenever requested to do so by nine members, each holding £ 500 stock. 
 
 If governor and deputy-governor be absent one hour after the usual 
 time of proceeding, at any general court or court of directors, a chairman 
 shall be chosen for that time only, who shall have like privileges as the 
 governor or deputy-governor. 
 
 Governor, deputy-governor, or chairman, not to vote in general courts, 
 or court of directors, save when there shall happen to be an equal number 
 of votes on each side. 
 
 The Bank of Ireland commenced business at St. Mary's Abbey, June 
 25, 1783. After the Union, its office was removed to the Parliament 
 House. 
 
 In the year 1821, the capital of the Bank of Ireland was increased from 
 .£2,500,000 to i: 3,000,000 Irish currency. The additional iT 500,000 
 was taken from the bank's surplus fund, and lent to the Government at 4 
 per cent., to be repaid by the 1st of January, 1838. The increased capital 
 was divided among the proprietors, at the rate of ^20 for every £ 100 
 tiiev possessed. In consideration of this increase of capital, the bank 
 
 356
 
 The Bank of Ireland. 
 
 jonsented to a clause in this Act, whereby persons in partnership, resid- 
 ing fifty miles from Dublin, might carry on the business of banking, al- 
 though such partnership might consist of more than six partners ; but that 
 iuch partnership should possess no other privilege than being allowed to 
 sue and be sued in the name of a public officer, should Parliament here- 
 after think fit to grant such a power. This privilege was of little prac- 
 tical use, for, according to the construction put upon the Act, it required 
 that all the partners in these banks should reside in Ireland. 
 
 In this year an Act was passed (5 Geo. IV. cap. 73) " to relieve bank- 
 ers in Ireland from certain restraints imposed by the provisions of the 
 29 Geo. II., and to render all and each of the members of certain co- 
 partnerships of bankers, which may be established, liable to the engage- 
 ments of such copartnerships, and to enable such copartnerships to sue 
 and be sued in the name of their, public officer," 
 
 Those clauses in the former Act that required the names of all the 
 partners to be subscribed to the notes, and which prohibited bankers being 
 traders, are by this Act repealed. Banking partnerships exceeding six 
 persons, and carrying on business at any place beyond fifty miles from 
 Dublin, shall be registered at the Stamp-office, Dublin ; and also the 
 names of the public officers, in whose name such partnerships sue and are 
 sued. The names of those public officers were also required to be sub- 
 scribed to all notes and receipts issued by the company. Judgments 
 against the public officers to operate as judgment against the partnership, 
 and execution upon judgment may be issued against any member of the 
 society, and the public officer to be saved harmless. 
 
 In the year 1825 was passed the " Act for the better regulation of co- 
 partnerships of certain bankers in Ireland." It was obtained by the di- 
 rectors of the Provincial Bank of Ireland, as the Acts previously granted 
 did not furnish the facilities which the Provincial Bank required for the 
 beneficial exercise of its operations. It confirmed the permission granted 
 by former Acts to establish joint-stock banks at a greater distance than 
 fifty miles from Dublin, and permitted persons resident in Great Britain 
 to become shareholders in such banks. The banks were required to re- 
 gister at the Stamp-office in Dublin an account of the names of the firms, 
 the several partners therein, and the public officers thereof. The partner- 
 ships shall sue and be sued in the name of their public officers. Parties 
 obtaining judgments in Ireland may authorize the acknowledgment of like 
 judgment in Great Britain ; and, in like manner, parties obtaining judg- 
 ment in Great Britain may proceed thereon in Ireland. Judgments 
 against public officers shall operate against the society, and execution upon 
 judgment may be issued against any member of the co-partnership. All 
 transfer of shares must be registered at the Stamp-office, 
 
 In this year, too, an Act of Parliament was passed to assimilate the 
 currency of Ireland to that of England, It is entitled, " An Act to pro- 
 vide for the assimilation of the currency and moneys of account through- 
 out the United Kingdom of Great Britain and Ireland," (6 Geo. IV. 
 cap. 79.) The Act recites, that the pound sterling in Great Britain and 
 Ireland respectively is divided into twenty shillings, and the shilling into 
 twelve pence ; but the silver coin which represents a shilling in Great 
 
 357
 
 A Treatise on Banking. 
 
 Britain is paid and accepted in Ireland for thirteen pence, and the pound 
 sterling of Great Britain is, at the par of exchange, paid and accepted 
 for one pound one shilling and eight pence of the currency of Ireland ; 
 and that great complexity of accounts, and other inconveniences, arise 
 from the said difference of currencies. It then enacts, that the currency 
 of Great Britain shall be the currency of the United Kingdom, and all re- 
 ceipts, payments, contracts, and dealings, shall be made in such currency. 
 And all contracts, debts, &c., made or contracted previous to the com- 
 mencement of this Act shall be carried into effect, and satisfied by pay- 
 ment in British currency of r2-13ths of the amount according to Irish 
 currency. All duties and public revenues, and all funds and public debts, 
 shall be estimated in British currency, and the accounts thereof kept ac- 
 cordingly. After a day to be named by proclamation, British silver and 
 gold coins shall be current in Ireland at the same rate of pence as in Great 
 Britain. On the like proclamation, Irish copper coin shall be brought 
 into the Bank of Ireland, and exchanged there for British copper coin, at 
 the rate of twelve pence British for thirteen pence Irish, and the Irish 
 copper coin shall cease to circulate. Bankers' notes shall be made pay- 
 able in British currency. No notes payable in Irish currency shall be re- 
 issued after the commencement of this Act, under a penalty of £ 50 for 
 each ofTence, Bankers may deliver into the Stamp-office re-issuable 
 notes, payable in Irish currency, and receive in lieu thereof new stamps 
 to the whole amount of the stamps delivered up, if dated within one year 
 previous, or three fourths if within two years, and one half if within three 
 years. This Act came into operation on the 5th day of January, 1826. 
 
 Very ample returns of the state of the Bank of Ireland are published 
 in the Appendix attached to the Reports of the Parliamentary Commit- 
 tees. The following is that of the latest date : — 
 
 12th FEBRtrART, 1848. 
 
 Circulation : — £ £ Securities : — £ £ 
 
 £5 and above, .1,867,300 Public, . . . .3,735,800 
 
 Under, . . 1,232.900 Private, \\z. 
 
 '■ 3,100,200 Notes and Bills 
 
 Deposits:— discounted, . 2,605,400 
 
 Public, . . 1,336,600 All other Private 
 
 Private and Sun- Securities, . 536,900 
 
 dry Balances, . 2,160,500 3,142,300 
 
 3,497,100 Specie, .... 808,500 
 
 6,597.300 7,686,600 
 
 This account includes the bank and the branches. The circulation of 
 the branches was : — £5 and above, £ 769,800 ; under £ 5, £ 855,500 ; 
 making a total of ^ 1 ,625,300. The deposits at the branches amounted 
 to £ 564,800, and the bills under discount to £ 1,852,000. 
 
 The Bank of Ireland has branches at the following places : — 
 
 Anmaf^h, 
 
 Dropheda, 
 
 Lonpford, 
 
 TuUamore, 
 
 Ballinasloe, 
 
 Dundalk, 
 
 Maryborough, 
 
 Waterford, 
 
 Belfast, 
 
 Gahvay, 
 
 New Ross, 
 
 Westport, 
 
 Carlow, 
 
 Kilkenny, 
 
 Newry, 
 
 Wexford, 
 
 Clonmel, 
 
 Limerick, 
 
 Sliffo, 
 
 Yo'ighal. 
 
 Cork, 
 
 Londonderry, 
 
 Tralec, 
 
 
 358
 
 The Provincial Bank. 
 
 The Provincial Bank of Ireland. 
 
 Public banks may be divided into three, classes : first, Chartered Banks, 
 those which have received a charter from the crown ; secondly. Joint- 
 stock Banks, formed under the common law ; and, thirdly, Joint-stock 
 Banks, formed under the statute law. 
 
 The common law of England allowed any number of persons to form 
 themselves into a partnership to carry on banking. At the same time, it 
 presented this inconvenience in the formation of such partnerships, — in 
 all actions at law, it was necessary to state the names of all the individ- 
 uals who composed the company. Another inconvenience of partnerships 
 focmed under the common law was, that all the partners were answerable 
 fox the debts of the company, to the full extent of their property, not only 
 while they were partners, but after they had ceased to be partners, as far 
 as regards any transactions that took place during the continuance of their 
 partnership. The banks avoided these inconveniences, in the first place, 
 by conducting their business in the names of trustees, in the same way as 
 some of the insurance companies ; and in the second place, by inserting 
 a clause in the deed of settlement, that in case the bank should lose one 
 third or one fourth the amount of its paid-up capital, it should immediate- 
 ly be dissolved. 
 
 The statutes 6 Geo. IV. c. 42, with reference to Ireland, and 7 Geo. 
 IV. c. 46, with reference to England, not only repealed those Acts of 
 Parliament which prohibited the formation of banking companies having 
 more than six partners, but they also removed the inconveniences of the 
 common law. It was enacted, that it should no longer be necessary, in 
 legal actions, that the names of all the partners should be placed upon 
 the record ; but that the company should register at the Stamp-office 
 the name of some one person in whose name they wished to sue and be 
 sued. Any party who had a disputed claim upon the company must sue 
 this public officer, and when he had obtained a verdict in his favor, he 
 might issue judgment against all the partners, in the same way as though 
 he had obtained a verdict against them all. And, that he might have no 
 difficulty in ascertaining who were or were not partners, it was required 
 that the names of all the partners should be annually registered at the 
 Stamp-office. The statute law also obviated the second inconvenience of 
 the common law, by enacting that every partner, as soon as he had trans- 
 ferred his share, should be released from all liability as to the subsequent 
 act of the company, and at the end of three years he was no longer liable 
 for any acts that took place even at the time he was a partner. 
 
 The Provincial Bank of Ireland was formed under the statute of 6 Geo. 
 IV. c. 42. Few banks have in so short a time advanced to so high a de- 
 gree of prosperity. The circumstances of Ireland at that period were 
 friendly to the growth of such an establishment. The recent abolition 
 of the union duties, and the introduction of steamboats, had given a stim- 
 ulus to the trade between the two countries, while nearly all the banks in 
 the south of Ireland had been swept as by a whirlwind from the face of 
 the land. The operations of the bank were also facilitated by the assimi- 
 lation of the currency, and the measures taken by the Government and 
 y 359
 
 A Treatise on Banking. 
 
 the Bank of Ireland to prevent these fluctuations in the exchanges which 
 had previously existed. But the prosperity of this bank must be attribut- 
 ed chiefly to the wisdom and prudence manifested in its constitution and 
 in its subsequent government. The capital was raised chiefly in England, 
 and London was, consequently, made the seat of government. The 
 board of directors was composed of merchants and statesmen, and the 
 latter were taken from the leading men of the two parties into which Ire- 
 land was then divided. The local government of the respective branches 
 in Ireland was composed of directors possessing local knowledge and in- 
 fluence, and of managers selected for their experience in banking, and 
 the manager had a veto upon the decision of the board. An inspector 
 was appointed to visit the branches, and to report to the London office. 
 
 At the same time, the bank had considerable difficulties to contend 
 against. Property in Ireland was considered insecure ; political and re- 
 ligious feelings often interfered with matters of business ; the habits of 
 the people were not commercial ; and the countiy had suffered so severe- 
 ly from private banking, that confidence was not easily acquired for a 
 new company, the members and constitution of which were but imper- 
 fectly known. Before these diflliculties had been completely overcome, 
 the bank became involved in a competition with branches of the Bank of 
 Ireland, and exposed to sudden demands for gold arising out of political 
 events. 
 
 The object of the bank is thus stated in the original prospectus : — 
 
 " The bank to have a capital of £ 2,000,000, if necessarj-, subscribed in shares of 
 .£ 100 each. To have a board of directors in London, and establishments for business 
 in the principal towns of Ireland which arc distant above fifty miles from Dublin. 
 At each of these places, a part of its stock to be subscribed, and from the stockholders 
 a local board of (firectors to be chosen. The establishments to be managed by steady, 
 experienced persons sent from England, with the advice and under the inspection 
 of the local directors, but subject to the entire control of the London board, to whom 
 accounts shall be regularly transmitted." 
 
 The first report, delivered by the directors to the shareholders in May, 
 1826, stated that the bank had the following nine branches : — 
 
 Opened. 
 Wexford,. . . . Feb. 27, 1826 
 Belfast, . . . Mar. 1, 1826 
 Waterford, . . . May 1, 1826 
 Galway, . . . May 1, 1826 
 
 The state of banking in Ireland at the time the Provincial Bank was 
 formed is thus described in their Eleventh Annual Report, delivered in 
 May, 1836 : — 
 
 " To show the progress of that competition, it may be sufficient to state, that prior 
 to 182.'), when the Act 6 Geo. IV. c. 42 was passed, under which the Provincial Bank 
 was established, the Bank of Ireland had no establishment out of Dublin. 
 
 "That in Dublin itself there were only four more, and these private banks; and 
 that in all Ireland besides there were no other than private banks, and these only in 
 Belfast, Cork, Wexford, and Mallow. 
 
 "From 1825 to 1834, banking oQices in the chief cities and towns of Ireland had 
 
 360 
 
 
 Opened. 
 
 Cork, 
 
 . Sept. 1, 1825 
 
 Limerick, . 
 
 Nov. 1, 1825 
 
 Clonmel, . 
 
 . Nov. 15, 1825 
 
 Londonderry, 
 
 Dec. 12, 1825 
 
 Sligo, 
 
 . Feb. 20, 1826
 
 The Provincial Bank. 
 
 been gradually established by the Provincial Bank, the Bank of Ireland, the Northern 
 and the Belfast Banks, to the number of about fifty ; while, within the short space of 
 the last two years, the offices of joint-stock banks having resident managers or agents 
 beyond fifty miles from Dublin, added to the branches of the Bank of Ireland, liave 
 increased to upwards of 120, and appear to be daily augmenting in number; besides 
 which, there are a great variety of stations attended on market-days by non-resident 
 agents, on behalf of one or other of such banks ; and, in addition to all these, several 
 establishments, on a large scale, have been lately announced in Dublin as in con- 
 nection with some of the joint-stock banks most recently formed in the provinces. 
 
 '• The directors cannot, however, regard this unexampled rapidity of increase in the 
 number of banks as a certain indication of prosperity. Amidst the excitement arising 
 out of this state of things, they have considered it to be their duty to impress upon all 
 their local directors and managers the necessity of increased caution and vigilance, and 
 to warn them of the extreme danger of entering upon a race of competition, in which 
 those who engage in it are too apt to overlook what is essential to their own safety." 
 
 There is no joint-stock bank of whose rise and progress we have a 
 more detailed account than the Provincial Bank of Ireland. This account 
 is furnished to us in the evidence given to a Committee of .the House of 
 Commons, by the late secretary, Mr. James Marshall. We recommend 
 the following quotations to the especial consideration of students in prac- 
 tical banking, as showing most minutely the various steps by which pros- 
 perity is obtained by banking institutions : — 
 
 1. — TTie Constitution of the Provincial Bank of Ireland. 
 
 " Can you explain to the committee the constitution of the Provincial Bank ? — I 
 can. I may make reference to the annual reports of the institution, of which, I un- 
 derstand, copies were furnished to this committee ; a report is made to the proprie- 
 tors on the third Thursday of May in each year. 
 
 " By whom is that report prepared ? — By a special committee. 
 
 " A committee of the board of directors ? — A committee of the board of directors, 
 whom it is my duty to attend ou such occasions, and to be their organ in acting as the 
 clerk of that committee. 
 
 " When that sub-committee has prepared the report, what further step is then taken ? 
 It is submitted then to the general court of directors. 
 
 " Is it examined by them 1 — By the general court ; it is laid before them, and every 
 part of it is explained to tliem ; and they have it in their power to examine any part, 
 to refer instantly to the books, or the source from which it is drawn. The committee 
 in making it up go very minutely to work, and examine very particularly. 
 
 " Then are the committee to understand, that before the report is laid before the 
 proprietors, that report is first submitted to a select committee, reported by them to 
 the general court, and approved of by the general court ? — It is ; it is, in the first 
 instance, signed by the chairman of the committee, when presented to the general 
 court. 
 
 " When laid before the proprietors, is it laid before the proprietors on the responsi- 
 bility of the court of directors ? — Completely so." 
 
 " just confine yourself at present to the constitution of the bank. ' It may be here 
 proper to state, for the information of the proprietors, the regulations which have been 
 adopted, in the first place, for conducting business in a proper manner at the branches : 
 and, secondly, for the control and superintendence which are exercised over them by 
 the directors in London. First, as to the branches ; for the due management of the 
 business at each a suitable house has been obtained, and the following officers have 
 been provided ; viz. manager, accountant, teller, clerk, porter ; all of whom find secu- 
 rity for their fidelity. Where the scale of business requires it, the number of the in- 
 ferior officers is increased, but there are only two principal officers at any branch, 
 viz. manager and accounuint ; and for securing more effectually the proper discharge 
 of the duties of all, and assisting the manager with advice and information, there has 
 been appointed at each station a board of local directors, consisting, according to cir- 
 cumstances, of three, four, or five gentlemen of the first respectability in the place, 
 
 361
 
 A Treatise on Banking. 
 
 who, in order to be eligible, must themselves have an interest in the establishment, by 
 holding ten shares each of its stock. The duty of these gentlemen is to meet daily at 
 a given hour at the bank's office, and, along with tlie manager, to judge of bills pre 
 sented for discount, and of all applications for credits. For every act of business of 
 this nature it is necessary that two local directors and the manager be present ; and it 
 is provided, that where applications for discounts or credits exceed, in individual cases, 
 a certain tixed amount, or when the manager differs in opinion from the majority of 
 the local board, the matter must be submitted to the decision of the court of directors 
 in London. It is further the duty of the local directors to compare daily the vouchers 
 with the entries in the cash-book, to count, at stated intervals, the cash in charge of 
 the manager, and to certify the returns made periodically from the branch to London. 
 
 " Are the committee then to understand distinctly that the local directors, in the 
 case in which the manager, who is the head officer of the society, differs with them, 
 although he may diff'er singly, are bound to refer those cases to the London board be- 
 fore any decision is come to ■? — In everj' case. 
 
 " In another contingency it would appear, that where the pecuniary transactions in 
 question exceeded a given amount, that too, although the board might be unanimous, 
 is brouglit under the consideration of the London board of directors 1 — It is. 
 
 '' What does that sum generally amount to ? Is it a fixed sum, or does it vary ac- 
 cording to the circumstances of the ditferent branches ? — It has varied according to 
 circumstances ; but, generally speaking, from £ 300 to £ .500 is considered the extent 
 to which any thing in the shape of a credit, other than the discount of a mercantile 
 bill, would go." 
 
 2. — The Selection of Officers. 
 
 " Be so good as to explain to the committee what steps were taken by the Provincial 
 Bank of Ireland in the selection of their various paid officers at the branches ? — I be- 
 lieve that is detailed in this said report. ' The selection of officers in particular was 
 a matter of paramount importance, both on account of the great number required to 
 fill the intended situations in Ireland, and the necessity there w^as to scrutinize their 
 qualifications as to character and ability. Communications were made on this subject 
 with various gentlemen in different parts of the country, from whom it was expected 
 the best information could be obtained. The prospectus of the society having set out 
 with the resolution that the business should be conducted on the principles which had 
 been so long and so successfully acted ujjon in Scotland, it seemed desirable to obtain 
 from that country persons trained up in banks there, provided their qualifications in 
 other respects were such as to recommend them. With this view, the secretary' (that 
 was not myself at that time) ' was sent down to Edinburgh in February for the purpose 
 of making inquiries ; and notice having been given in the public papers that persons 
 were wanted to fill situations in the projected establishnient.s in Ireland, a gentleman 
 in the above city was employed to receive applications and to institute the most minute 
 and scrupulous inquiries regarding the cliaracter and qualification of those who should 
 apply. Another gentlemen from the same city was also engaged to proceed to Lon- 
 don, to assist the directors in the formation and prosecution of a plan for condufting 
 the business, when they should be ready to commence it in Ireland ' (that alludes to 
 myself ). ' The extensive correspondence which the applications and inquiries, pro- 
 duced by the measures above mentioned, necessarily occasioned, occupied the atten- 
 tion of the directors very closely, and for a considerable length of time, and the result 
 has been that the services of a number of most valuable officers have been secured to 
 the society.' 
 
 " But at that period was there a greater facility in procuring the services of gentle- 
 men more particularly who had experience in the Scotch banking than there would 
 be subsequently, when there was a more active competition in the establishment of 
 banks ? — No doubt of it. 
 
 " What description of security were these officers required to give ? — Unexception- 
 able personal security ; two persons, at least, generally were joined in a bond for the 
 fidelity of the officer. 
 
 " Was there any fixed proportion between the amount of the security required and 
 of the salary paid, or the duties to be performed ? — The amount had respect to the 
 duties to be performed rather than to the salary. 
 
 362
 
 The Provincial Bank. 
 
 " What was the general security that was taken by bond for the fidelity of these 
 officers ? — The lowest clerk was £ 1,000 ; the highest £ 10,000 for a manager at the 
 largest branch. 
 
 " And that has been enforced by the Provincial Bank with respect to its officers ? 
 The amount of .£ 10,000 has not been required, as we have practically found £ 5,000 
 to be a more commandahle sum ; I would say, within the reach of the description of 
 parties who are aspirants to these offices. 
 
 " Now with respect to the local directors, how were they selected ? — It is mentioned 
 here, that there should be selected three, four, or five gentleman of the first respecta- 
 bility in the place, of commercial knowledge, whenever those could be obtained ; if 
 having had that commercial knowledge, and being disengaged from business, they 
 were considered as so much the more eligible. 
 
 " But in the selection of local directors, so far from excluding persons by reason of 
 their having commercial or banking knowledge, are the committee to understand that 
 such parties were preferred f — Where they had it, and were not understood to be in 
 a situation to require banking accommodation for themselves. 
 
 " You have stated that the local directors were required to take ten shares each, at 
 the least ? — Yes. 
 
 " Will you have the goodness to state what the reason was that they were required 
 to take those shares ? — In order that they might have a greater interest in the estab- 
 lishment ; feel a personal interest. I must say we have not, in every instance, been 
 able to get gentlemen of that description. We have, in some instances, appointed 
 gentlemen who, from various causes, declined to become shareholders ; at least, we 
 have elected gentlemen to be local directors without requiring the fulfilment of that 
 condition : there are some instances at present of gentlemen who are so ; but no doubts 
 regarding the solvency of the bank ever deterred any of them." 
 
 3. — The Choice of Directors. 
 
 " Now tell us how they are appointed ? — The directors in London were, of course> 
 originally appointed by the gentlemen who associated together for the purpose of 
 fonning this establishment ; and they continued, with the approbation of the meeting, 
 ■until a certain time, when by the deed of settlement, which was afterwards prepared, 
 four were to go out every year. 
 
 '■ In the vacancy of the four, who appoints their successors ? — The proprietors gen- 
 erally ; the general meeting of proprietors. 
 
 '• Are they refiligible ? — They are declared by the deed of settlement to be re- 
 eligible. 
 
 " Are they recommended to the court of proprietors by the court of directors ? 
 They are ; they have been virtually so : and I beg to refer to one of the annual re- 
 ports, which gives an explanation upon that point. It is in the report made the 17th 
 of May, 1827, in which it is stated : — The directors have now to advert to a cir- 
 cumstunce of some importance as connected with the constitution of the society. 
 By the deed of settlement, the number of directors was limited to twenty. Since 
 the completion of the deed, that number has been reduced by death or resignations 
 to sixteen ; and the directors having found by experience that the latter number is 
 quite sufficient to insure a due attendance for the efficient management of the busi- 
 ness of the establishment, have not thought it necessary to enforce the terms of the 
 deed by proposing the election of new members ; and they think themselves now justi- 
 fied, by past experience, in unanimously recommending to the court of proprietors to 
 limit the number of directors for the ensuing year to sixteen. The directors may add, 
 that this arrangement will be attended with a considerable saving of expense ; and in 
 conclusion, they beg to state to the proprietors an opinion in which they also unani- 
 mously concur; viz. that in future elections, it will greatly conduce to the harmony 
 and cordiality which it is so desirable should prevail amongst the directors themselves, 
 as well as to the good management of the bank's afliiirs, if a recommendation shall be 
 made by them to the proprietors in favor of those candidates whom, after due inquiry, 
 they shall find to be the best qualified to fill the situation.' 
 
 " Have those recommendations been genesally complied with by the proprietors ? 
 — Always. 
 
 " Uniformly, without exception 1 — Uniformly ; it has uniformly been acquiesced in. 
 Two or three candidates had upon more than one occasion started, but when the mat- 
 
 363
 
 A Treatise on Banking. 
 
 ter was explained to them, they have nniformly acquiesced in it. It is necessary tc 
 state, to complete this, that the recommendation to limit the numher of directors tc 
 sixteen was aftenvards the sulyect of a special provision by an additional deed of the 
 proprietors, therefore the number cannot be extended beyond sixteen without altering 
 the deed. 
 
 " Are the directors paid for their attendance ? — They are. 
 
 • What is the amount of payment which they receive ? — It is so reflated that no 
 director can receive above JC 250 a year, the director in London I mean, were he at- 
 tending at every possible meeting that he could. 
 
 " Is the payment an annual payment, or proportionate to the attendances ? — Pro- 
 portionate to'the attendances, ascertained every quarter. 
 
 " According to the number of attendances so the parties are paid ? — Yes, accord- 
 ing to the attendances. 
 
 " Was that sanctioned by the proprietors and by the society ? — The deed of settle- 
 ment contains a provision allowing the directors to take the sum of £5,000 as re- 
 muneration ; they have never taken more than £ 3,000 ; the proportion is reduced ; 
 that was when the number of directors was twenty. 
 
 " Sir T/iomas Fremantk. — What do they take now, the sixteen ? — They cannot 
 exceed £3,000." (At a recent meeting of the shareholders of the bank, the chairman 
 stated the amount to be £4,000.) 
 
 4. — The Daily Committee. 
 
 " Will you state how they transact their business ? — By meeting daily in committee, 
 (a general committee,) which is open to all to attend ; but in order to be a quonim, 
 there must be three present ; and by a weekly court, held each Friday, at which all 
 ought to be present. 
 
 '■ Is there a record in writing of all the directions and the acts of that special com- 
 mittee ? — There is. 
 
 " Are each of those acts brought under the examination and review of the general 
 court on Friday? — At the weekly court they are, the minutes are read over. 
 
 '■ Is the question put upon the confirmation of those minutes, or is it open to the 
 general court to vary or alter them ? — The question is specially put by the chairman 
 of the weekly court, whether it is the pleasure of that court to confirm the minutes of 
 the past Aveeic which have been read. 
 
 " Have you known instances in the management of the bank in which there have 
 been any variations upon the proceedings of the committee proposed by the general 
 court, so as to show that it is an active as well as a theoretical superintendence ? — I 
 have seen instances where the subject has been brought under revision, and which has 
 produced an alteration of the resolution of the committee. 
 
 " Having now explained to the committee the formation of your local administra- 
 tion at the branches, and your general administration in London, will you state what 
 the course of proceeding is, to insure to the court in London a knowledge of that 
 which takes place at the different branches ? — I read from the report already referred 
 to: 'Regular advices of the proceedings at the branches are transmitted by the mana- 
 gers to London by post every second or third day, according to circumstances ; and at 
 the end of each week a complete statement of the whole transactions is made up, and 
 forwarded by the mail-coach. These returns are first examined by the officers of the 
 London establishment, and then submitted to the directors. For giving the necessary 
 orders arising out of these communications, for judging of all matters refeiTcd to 
 them from the branches, for disppsing of the bank's funds in London and Dublin, and 
 for the discharge of all other duties implied in the exercise of a superintendence over 
 the whole establishment, whether in Ireland or in London, the directors hold regular 
 and daily meetings. 
 
 " Are the accounts which are sent from the branches accounts in detail of the whole 
 of the operations of the bank ? — They arc. 
 
 " Are they, in fact, transcripts of the accounts of the bank from period to period ? — 
 Thev are so ; with this explanation regarding the current accounts of parties holding 
 accounts with the bank, every particular draft or receipt is not sent to London, or 
 rather the entries of these, I mean, are not copied or sent to London ; but there is this 
 check on the ojjcrations at the branches, the exact balance of every man's a-count at 
 the end of each week is given, and forms part of an abstract of the balance-sheet 
 
 364
 
 The Provincial Bank. 
 
 which is set forward, and which must agree ; therefore if it were wrong it would at 
 once detect itself 
 
 '• Then no variation can take place in the actual balance without the attention of the 
 court being at once called to it ? — None can. 
 
 " And is the name of each individual to whom these advances are made from time 
 to time brou<;ht under the special notice of the court of directors in London ? — Yes ; 
 by the following process. The branches are divided amongst the directors, so many 
 allotted to such a sub-committee, who take up the affairs of these branches each week 
 in succession, and examine all the bills that have been discounted, the advances that 
 have been made of any description, and the balance of each man's account, whether in 
 his favor or against him." 
 
 5. — The Inspection of Branches. 
 
 " Have you any system of inspection by which you are enabled from time to time to 
 verify the correctness of the proceedings of the branches 1 — We have ; besides having 
 a half-yearly balance-sheet made out with all the details of the affairs of each branch 
 at the time, and which is scrupulously examined at London, there is an inspector (two 
 at present) whose duty it is to go through the branches and to examine personally and 
 verify every voucher and every particular, and to remain at the branch until they are 
 fully satisfied that all is right. 
 
 '' Who are these officers ? — Mr. Murray, the first manager employed at Cork, was, 
 from a conviction of his very eminent qualifications for that office, elected inspector ; 
 he is now our agent in Dublin, and chief inspector of the branches. There has been 
 united with him in duty, first, Mr. Paton, who was manager at Armagh, and then 
 manager at Cork, but who has now left our service, except that he has been elected a 
 local director of the Armagh branch, where he now resides. Mr. Paton has been suc- 
 ceeded in the inspectorship by Mr. Hewat, who is at present acting as interim manager 
 at Cork branch. 
 
 " Are the visits of your inspectors at stated and known intervals, or is any branch at 
 any one moment liable to the visit of an inspector, and to an immediate examination 
 and verification of their accounts and bills and balances ? — Every branch is so liable 
 to be visited ; there is no previous intimation given, except the visit be for some par- 
 ticular purpose which, by a representation from the branch, calls on the inspector 
 to go. 
 
 " As an additional security, have you yourself, or any of the directors, been accus- 
 tomed to visit the branches, and to report thereon 1 — I have myself every year, and 
 sometimes oftener than once a year, even twice or three times in a year, gone to Ire- 
 land, and have gone through the whole branches, in fact, more than once, at diff'erent 
 times ; and on all occasions have made examinations which appeared to me to be 
 necessary ; and besides that, the directors have in person repeatedly visited the 
 branches ; deputations of the London directors, I mean, have so done." 
 
 6. — The Declaration of a Dividend. 
 
 " Will you explain to the committee what steps you take before you declare a divi- 
 dend ■? — We have regularly a balance every half year ; the dividend has only been 
 declared once a year, at the termination of the year, which is in March ; our year end< 
 in March. Prior to that period, each manager is directed to send up a special report 
 of every obligation which is outstanding, or of any which is doubtful, describing par- 
 ticularly in the report eveiy party to such obligation ; that is preparatory to going fur- 
 ther into the matter ; then when the balance at the end of March is completed, a com- 
 plete balance sheet of every branch is made up and sent to the bank, with a more de- 
 tailed report. A special committee of the directors is appointed to examine those, and 
 they go minutely through them, and weigh every outstanding debt, and strike oft' 
 every thing that is considered to be irrecoverable ; they then consider in what degree 
 the reports of the managers represent every other outstanding debt to be recoverable, 
 either in full or in part ; and when all that has been done, they add generally a sum 
 to cover still any possible omission, and it is only then that the fair profits of the year 
 are considered to be ascertained. 
 
 " Can you inform the committee how far your calculations, your annual calculations 
 of bad and doubtful debts, have or have not been below or above the mark ? — In 
 many instances, our allowances have exceeded what has turned out to be the real loss ; 
 
 365
 
 A Treatise on Banking. 
 
 for, as I mentioned before, the directprs, in order to be more secure, have been in the 
 practice of making an additional deduction over all the deductions made by the oflBcers 
 at the branches. 
 
 '' Have the proprietors any power under your deed of settlement of naming any au- 
 ditors, or liaving any examination of those accounts, so as to verify their lidelity 1 — 
 We have no auditors, but there is a provision in the deed of settlement by which a 
 certain number of proprietors may call for a further investigation of the accounts, if 
 they arc dissatisfied." 
 
 7. — The Causes of its Prosperity. 
 •' Do you think there is any thing peculiar in the construction of tliis bank which has 
 insured its being correctly and well managed up to the present time, or that it has 
 rather arisen from the 'happy accident' of the directors who were selected having been 
 honorable and correct men of business 1 — I conceive the very first and indispensable 
 thing was an exceedingly respectable board of directors formed in the first instance, 
 and which has alwa3-s been maintained. In the next place, that the system of account- 
 ing that was adopted, and the check on the operations of the different branches, which 
 has not been departed from, has most materially contributed to that good result. In 
 the next place, there was an exceedingly good field for banking when we commenced, 
 for Ireland was very destitute of good banks at the time, the Bank of Ireland opera- 
 tions having been confined only to Dublin. Therefore, from all those concurring cir- 
 cumstances, I conceive the prosperity of the bank has resulted." 
 
 To these causes we may add one more, stated in the Report delivered 
 by the Directors to the Proprietors in the year 1836, — the non-interfer- 
 ence of the shareholders in the distribution of the profits : — 
 
 " To this desirable position the alTiiirs of the bank have been conducted, as the di- 
 rectors have great pleasure in acknowledging, by the uniform support and continued 
 approbation of the proprietors, who, far fi-om manifesting any impatient desire to par- 
 ticipate in the reserved profits, have always relied with confidence on the opinion of 
 those by whom the working of the establishment was superintended, feeling assured 
 that whenever such participation was clearly expedient, it would not be withheld." 
 
 The following is a copy of the Balance-sheet attached to the last Re- 
 port, delivered May 17th, 1849 : — 
 
 Provincial Bank of Ireland. 
 
 The amount of rest or undivided profits at 25th March, 1848, was . 
 
 Out of which there have been paid two half-yearly dividends, at the 
 
 rate of 8 per cent, per annum, amounting to ... . 
 
 Leaving a balance, or rest, of ... . 
 
 To which there has since been added the amount of net profits for 
 
 the year ending the 31st March last, after deducting the Property 
 
 Tax and all expenses, and providing for all bad and doubtful 
 
 debts, 
 
 Making the amount of rest at 31st March, 1849, 
 
 £ s. d: 
 
 107,505 10 11 
 
 43,200 
 
 64,305 10 11 
 
 45,733 5 6 
 £110,038 16 5 
 
 The Provincial Bank of Ireland has branches at the following places 
 
 Armagh. 
 
 Athlone. 
 
 Ballina. 
 
 Ballymcna. 
 
 Ballyshannon. 
 
 Banbridge. 
 
 Bandon. 
 
 Belfast. 
 
 Cavan. 
 
 Clonmel. 
 
 Coleraine. 
 
 Cootehill. 
 
 Cork. 
 
 Droglieda. 
 
 Dundalk. 
 
 Dungannon. 
 
 Dungarvon. 
 
 Ennis. 
 
 Enniscortliy. 
 
 Enniskillcn. 
 
 Fermoy. 
 
 Galway. 
 
 Kilkenny. 
 
 Kilrush. 
 
 Limerick. 
 
 Londonderry. 
 
 Mallow. 
 
 Monaghan. 
 
 Newry. 
 
 Omagh. 
 
 Parsonstown. 
 
 Skibbereen. 
 
 Sligo. 
 
 Strabane. 
 
 Tralee. 
 
 Watcrford. 
 
 Wexford. 
 
 Youghal. 
 
 3G6
 
 The National Bank. 
 
 The National Bank of Ireland. 
 
 The Prospectus of this bank, issued in 1834, announced that it would 
 be conducted on the " local shareholder principle." 
 
 " It is proposed that each branch shall have a separate capital proportioned to the 
 extent of its business, one half to be subscribed by resident shareholders, so as to iden- 
 tify their interest with their own establishment, and the other half to be subscribed by 
 the National Bank of Ireland, whose connection with each branch, whether its separate 
 capital consists of £5,000 or £50,000, will afford it the credit of whatever capital 
 (however large) the National Bank of Ireland may have actually paid up at the 
 time." 
 
 " The following are the terms and conditions of subscribing : — 
 
 " 1 . That a company shall be formed in London, to extend to L-eland the benefit of 
 a sound banking system. 
 
 "2. That a bank be formed in each town in Ireland, where practicable by law, and 
 which offers a prospect of success to the operations of the company. 
 
 •' 3. That the object of the London company shall be to connect itself with share- 
 holders exclusively interested in the success of each local establishment. 
 
 "4. That the principle of the bank shall be the division of profits of each bank with 
 such local shareholders in Ireland. The capital of each branch to be subscribed 
 equally by shareholders on the spot and the company in London. 
 
 " 5. That the capital of the London company shall be £ 1,000,000, in shares of £ 50 
 each, to be called the original capital, which may be increased as the business of the 
 company extends ; but the premium, on any addition, to go to tlie first subscribers. 
 
 " 6. That the bank shall be formed as soon as half the capital is subscribed. 
 
 " 7. That the bank shall be managed by a board in London, consisting of twenty- 
 four directors, in whom will be vested the supreme control. 
 
 " 8. That each local bank shall be managed by a board of local directors, elected by 
 the shareholders, subject to the approbation of the directors in London." 
 
 This principle was first announced to the public by the late Mr. 
 Thomas Joplin. He attempted to introduce it into the National Provin- 
 cial Bank of England, of which he was the managing director, and to the 
 formation of which he had materially contributed. But the practical dif- 
 ficulties were found to be great. It was almost impossible to arrange the 
 preliminaries to the satisfaction of all parties, and the principle was never 
 brought into operation. Mr. Lamie Murray, who projected the National 
 Bank of Ireland, was the secretary of the National Provincial Bank of 
 England, and had adopted Mr. Joplin's views on the subject. When first 
 established, therefore, the National Bank of Ireland acted on this princi- 
 ple ; but after a few years the independent banks in Ireland consented to 
 become branches of the head establishment. Those at Clonmel and 
 Carrick-on-Suir, however, declined this arrangement, and they still regis- 
 ter as independent banks, though they are regarded by the public as 
 branches of the National Bank of Ireland. 
 
 Another peculiarity attended the formation of this bank. Its chief con- 
 nections lay among that political party in Ireland who advocated a Repeal 
 of the Union, and who had been accused of causing all the runs for gold 
 that had taken place on the existing banks. In the provisional committee 
 we find the names of the late Daniel O'Connell, Esq., M. P., Maurice 
 O'Connell, Esq., M. P., Fitz-Stephen French, Esq., M. P., James Grattan, 
 Esq., M. P., and others of the same political views. The seat of govern- 
 ment, however, like that of the Provincial Bank of Ireland, was fixed in 
 London One advantage resulted from connecting the heads of this parly 
 
 367
 
 A Treatise on Banking. 
 
 with an Irish joint-stock bank. There was an end to all political runs for 
 gold. When a run afterwards took place, in consequence of the failure 
 of the Agricultural Bank, Mr. O'Connell used all his influence to allay the 
 excitement then occasioned. The branches of the National Bank are 
 opened ahnost entirely in the south and west of Ireland. The bank has 
 also an office in Dublin, where, since the Act of 1845, it has issued its 
 own notes. 
 
 The report of 1848 states that the National Bank of Ireland had taken 
 the business of the London and Dublin Bank : — 
 
 " During the latter part of the year, it having been intimated to the directors that 
 the London and Dublin Bank were desirous of dissolving that (■oni])any, negotiations 
 were entered into with the directors, which terminated in this estalilishnicnt succeeding 
 to its connections in the towns of Dundallc, Carrickmacross, Wicklow, Kells, Athy, 
 Mullingar, and Parsonstown, with every prospect of advantage to the bank. The 
 whole of these localities are, with the exception of Parsonstown, within the circle from 
 which all banks of issue, except the Bank of Ireland, had been excluded, until the ex- 
 tinction of the monopoly by the Banking Act of 1845." 
 
 Several of the savings' banks in Ireland having failed, and occasioned 
 losses to the depositors, through the dishonesty of the officers, and the in- 
 ability of the trustees to make good the losses, the National Bank of Ire- 
 land have recently determined to discharge some of the functions of a 
 savings' bank. They receive deposits for 10s., ^ 1, ^1 10s., ^'2, £2 
 10s., or for any multiple of 10s., but not for any fractional part of 10s. 
 When the sums thus received amount to £ 5, the party gets a regular de- 
 posit receipt for the amount. In the mean time he receives interest at the 
 same rate which is allowed on other deposit receipts (at present 2 per 
 cent.) and can withdraw it at a short notice. The following is the form 
 of receipt given to the savings' bank depositor : — 
 
 National Bank of Ireland. 
 
 No. 
 of 
 
 Received from 
 
 Ten Shillings. 
 
 day of 18 
 
 Manager. 
 
 The following is a copy of the Balance-sheet attached to the last An- 
 nual Report, delivered May 23d, 1849 : — 
 
 £ s. d. 
 The undivided profits at December, 1847, were . . . 61,105 4 4 
 
 Net profits for the year ending December, 1848 . . . 26,490 12 10 
 
 Deduct half year's dividend to Midsummer, 1848, 
 
 at 5 per cent £11,250 
 
 Ditto, to Christmas, 1848 
 
 Bonus of 10s. per share on 20,000 shares 
 
 Amount paid T. Lamie Murray, Esq., according 
 
 to the provisions of the Deed of Settlement 
 Balance of profit and loss carried to that account 
 
 for 1849, 
 
 Leaving amount of undivided profits to the credit of reserve fund, 
 
 at December, 1848 £50,105 4 4 
 
 368 
 
 
 £87,595 17 2 
 
 11,250 
 11,250 
 10.000 
 
 
 
 
 
 1,000 
 
 
 
 3,990 12 
 
 10 
 
 _ . ^7 /ion 1 *» in 
 

 
 The Hibernian Bank. 
 
 [Tie National Bank of Ireland 
 
 has branches at the 
 
 following places 
 
 Athlone 
 
 Cork. 
 
 Limerick. 
 
 Roscommon. 
 
 Athy. 
 
 Dundalk. 
 
 Longford. 
 
 Roscrea. 
 
 Ballina. 
 
 Dungarvan. 
 
 Loughrea. 
 
 Skibbereen. 
 
 Ballinasloe. 
 
 Ennis. 
 
 Mallow. 
 
 Tallow. 
 
 Boyle. 
 
 Enniscorthy. 
 
 Midleton. 
 
 Thurles. 
 
 Carrickmacross. 
 
 Fcrmoy. 
 
 Mitchelstown. 
 
 Tipperary. 
 
 Carrick-on-Suir. 
 
 Gahvay. 
 
 Moate. 
 
 Tralee. 
 
 Cashel. 
 
 Kanturk. 
 
 Mullingar. 
 
 Tuara. 
 
 Castlerea. 
 
 Kells. 
 
 Nenagh. 
 
 Waterford. 
 
 Charleville. 
 
 Kilkenny. 
 
 New Ross. 
 
 Westport. 
 
 Clonakilty. 
 
 Killarney. 
 
 Parsonstown. 
 
 Wexford. 
 
 Clonmel- 
 
 Kilrush. 
 
 Rathkeale. 
 
 Wicklow. 
 
 The Hibernian Bank. 
 
 The Hibernian Joint-stock Bank was formed in the year 1824. The 
 following account of the origin of this bank is given by John Robinson 
 Pirn, Esq., of Dublin : — 
 
 " A number of Roman Catholic gentlemen, finding they were continued to be ex- 
 cluded from the direction of the Bank of Ireland, met together, and obtained the sig- 
 natures, not only of Roman Catholics, but of a number of others, amongst the rest 
 myself, to the establishment of this bank ; many merchants signed it, as considering 
 that by having an opposition bank in such a city as Dublin, advantages would fre- 
 quently be derived from it, and not altogether looking to the emolument which they 
 should receive as subscribers to the bank, but looking at it as citizens generally ; I 
 myself never calculated on a very great deal of profit from it, except at a very remote 
 period. Some of the individuals who undertook it came over to London, and they 
 had expected to obtain the power of issuing notes, but they met with so much opposi- 
 tion from the Bank of Ireland, — there were some of the directors of the Bank of Ire- 
 land came over here in order to oppose it, — and the clauses which they intended to 
 enable them to issue notes were expunged in the committee ; but I state this only from 
 hearsay." 
 
 Its nominal capital is £ 1,000,000, divided into 10,000 shares of =£100 
 each. £ 25 per cent, has been paid upon each share, so that the money 
 actually advanced amounts to £ 250,000. 
 
 In the same year this company obtained an Act, entitled " An Act to 
 enable the Hibernian Joint-stock Company, for the purpose of purchas- 
 ing and selling annuities, and all public and other securities, real and per- 
 sonal, in Ireland, and to advance money and make loans thereof, on the 
 security of such real and personal security, at legal interest, and on the 
 security of merchandise and manufactured goods, to sue and be sued iu 
 the name of the governor or secretary for the time being." * 
 
 The preamble slates, that, — 
 
 " Whereas the commerce, and manufactures, and agriculture of Ireland has long la- 
 bored under great disadvantage, arising from the want of due command of capital ; 
 and that merchants and manufacturers have no means of procuring temporary advan- 
 ces of money on a deposit of their goods, when a slackness of demand arises ; and 
 whereas several persons have agreed to form themselves into a company, or partner- 
 ship, under the name of the 'Hibernian Joint-Stock Company,' and have subscribed 
 or raised considerable sums of money in order to purchase and sell annuities and all 
 public and other securities, real and personal, in Ireland ; or to make loans and ad- 
 vances of money on the security thereof, and on the security of merchandise and 
 
 * Anno quinto Gcorgii IV. Regis, cap. 159 
 369
 
 A Treatise on Banking. 
 
 manufactured goods, at legal interest, and to receive lodgments of money or deposit 
 thereof; and great public benefit is expected to be derived to the trade, manufactures, 
 and agriculture of Ireland from the formation of such a company or partnership ; and 
 whereas difficulties may arise from time to time," &<;. 
 
 It is enacted, that this company may sue and be sued in the name of their 
 governor or secretary. A memorial of the names of the governor, secretary, 
 and members, and of the transfer of shares, to be enrolled in Chancery ; 
 and no actions to be brought by the company, under the authority of this 
 Act, until such memorial shall have been enrolled. Execution upon any 
 judgment against the governor or secretary may be issued against any of 
 the members, who are to be reimbursed their expenses by the company. 
 
 At the last half-yearly meeting of the shareholders, held on the 4th 
 of December, 1848, the following statement was exhibited, and a dividend 
 declared at the rate of 5 per cent. : — 
 
 Abstract of the Affairs of the Company to \st of November ^ 1848, pursuant to the Deed of 
 
 Settlement, 
 
 £ s. d. 
 
 Assets of the company 550,575 1 6 
 
 Due to the public 218,623 7 8 
 
 331,951 13 10 
 Capital of the company, £1,000,000, 25 percent, paid . . . 250,000 
 
 Balance to credit of profit and loss in favor of the company . . 81,951 13 10 
 
 Net profits of the company for the year ending the 1st of November 
 last, after deducting all charges for management • . . . £16,055 15 7 
 
 The Royal Bank of Ireland. 
 
 The Royal Bank of Ireland was formed in the year 1836, and before 
 opening made arrangements for taking the business of the private bank of 
 Sir James Shaw & Co. At that time the law did not permit joint-stock 
 banks, in Dublin, to accept bills drawn at less than six months after 
 date, or to sue and be sued in the name of their public officers. These 
 restrictions were removed by the Act of 1845. The Royal Bank attempt- 
 ed also at that time to obtain the power of issuing notes, but were not 
 successful. The manager of the bank from its commencement has been 
 Mr. Charles Copland, who had previously been a manager in the Provin- 
 cial Bank of Ireland. 
 
 At the last annual meeting, held on the 7th November, 1848, the 
 following statement was laid before the shareholders : — 
 
 £. 8. d. 
 
 The paid-up capital of the bank is 209,175 
 
 The amount of reserve fund 45,475 8 
 
 The net profits of the year, which terminated on the 31st of August last, 
 
 after deducting all expenses of management, amount to . . 19,877 16 4 
 
 Out of which have been paid to the proprietors two half-yearly divi- 
 dends, at the rate of 5 per cent, per annum, amounting to . 10,458 15 
 
 Leaving a surplus on the year of £9,419 1 4 
 
 Which has been added to the bad and doubtful debt fund. 
 
 370
 
 The Banks of Belfast. 
 
 The Banks of Belfast. 
 
 There are three joint-stock banks at Belfast. The Northern Banking 
 Company was formed in 1825, on a private bank which was called the 
 Northern Bank. This was the first joint-stock bank in actual operation in 
 Ireland. The Belfast Banking Company was formed on a private bank, 
 which was called the Belfast Bank. The senior partner in this bank, 
 John Holmes Houston, Esq., was examined as a witness before the Par- 
 liamentary Committee of 1826, on the abolition of small notes in Ireland. 
 His evidence contains some interesting particulars respecting the state of 
 banking in Belfast during the time he had been a partner in that bank.* 
 The Ulster Banking Company is a new bank, formed in 1837. All these 
 banks have branches extending throughout the north of Ireland. The 
 prudence with which banking institutions have at all times been managed 
 at Belfast, has no doubt greatly contributed, with other causes, to the 
 prosperity of the north of Ireland. The following is the condition of the 
 three banks at Belfast : — 
 
 Belfaat 
 Baaka. 
 
 Date of 
 Bank. 
 
 Number 
 of Sliares. 
 
 o 
 
 II 
 
 si 
 
 3 a 
 ox: 
 
 < 
 
 £ 
 
 Paid up on 
 Sliare. 
 
 £ s. 
 
 ' First 25 ' 
 
 Paid-up 
 
 Capital. 
 
 a 
 
 II 
 = 2 
 
 Fixed Circu- 
 lation. 
 
 £ 
 
 Northern 
 
 1825 
 
 5,000 
 
 193 
 
 100 
 
 Bonus 5 
 30 0. 
 
 • 150,000 
 
 10 
 
 11 
 
 243,440 
 
 Belfast 
 
 1827 
 
 5,000 
 
 656 
 
 100 
 
 25 
 
 125,000 
 
 8 
 
 18 
 
 281,611 
 
 Ulster 
 
 1837 
 
 75,000 
 
 440 
 
 10 
 
 2 10 
 
 187,500 
 
 5 
 
 15 
 
 311,079 
 
 The Northern Banking Company has branches in the following 
 places : — 
 
 Armagh. 
 Ballymena. 
 Carrickfergus. 
 Clones. 
 
 Coleraine. 
 Downpatrick. 
 Lisburn. 
 Londonderry. 
 
 Lnrgan. 
 
 Magherafelt. 
 
 Newtownlimavady. 
 
 The Belfast Banking Company has branches at the following plu 
 ces : — 
 
 Armagh. 
 
 Ballymena. 
 
 Ballymoney. 
 
 Castleblayney 
 
 Coleraine. 
 
 Cookstown. 
 
 Dungannon. 
 Larne. 
 
 Letterkenny. 
 Londonderry. 
 Magherafelt. 
 Monaghan. 
 
 Newry. 
 
 Newtownards. 
 
 Newtownlimavady. 
 
 Portadown. 
 
 Strabane. 
 
 Tenderagee. 
 
 See the History of Banking in Ireland, by J. W. Gilbart 
 371
 
 A Treatise on Banking. 
 
 The Ulster Banking Company has branches at the following places : - 
 
 Antrim. Cookstown. Lurgan. 
 
 Armagh. Cootehill. Monaghan. 
 
 Ballymena. Downpatrick. Oniagh. 
 
 Ballymoney. Enniskillcn. Portadown. 
 
 Banbridge. Londonderry. 
 
 Tlie Tipperary Joint-stock Bank. 
 In the Act of 1845 there is an e.xpress provision with reference .• ttio 
 Tipperary Bank. 
 
 Provision in case of Determination of existing Agreement between the Bank of JrJctmt and 
 Tipperary Joint-stock Bank. 
 " XXXI. And whereas a certain joint-stock banking Company, called ani known as 
 ' The Tipperary .Joint-stock Bank,' refrained from issuing its own bank i-otes, under 
 a certain agreement with the Governor and Company of the Bank of Ireland for the 
 issue of the bank notes of the said governor and company, which agreement is deter- 
 minable by either party upon certain notice to the other party, and it ia just that incase 
 such agreement should at any time hereafter during the continuance of this Act be 
 determined and put an end to by the Governor and Company of the Bank of Ireland, 
 that the said Tipperary Joint-stock Bank should receive by way of compensation 
 such composition as hereafter mentioned ; be it therefore enacted, That if the said 
 agreement shall be at any time hereafter during the continuance of this Act determined 
 or put an end to by the Governor and Company of the Bank of Irelaiid, then and in 
 such case the said governor and company shall, from the termination of the said 
 agreement, pay and allow to the said Tipperary Joint-stock Bank, so long as the lat- 
 ter shall continue to carry on the business of a bank and to issue exclusively the 
 notes of the Governor and Company of the Bank of Ireland, a composition at and 
 after the rate of one per centum per annum on the average annual amount of the Bank 
 of Ireland notes issued by the said Tipperary Joint-stock Bank, and kept in circula- 
 tion, such average annual amount to be ascertained by tlie Bank of Ireland in the 
 manner provided for regulating the compensation to be made to certain bankers by 
 the Bank of England in and by the Act passed in the seventh and eighth years of 
 the reign of her present Majesty, entitled ' An Act to regulate the Issue of Bank 
 Notes, and for giving to the Governor and Company of the Bank of England certain 
 Privileges for a limited Period : ' Provided always, that the total sura payable to the 
 Tipperary Joint-stock Bank by way of composition as aforesaid in any one year shall 
 not exceed 1 per cent, on an amount that hath been agreed on by and between the 
 Bank of Ireland and the Tipperary Joint-stock Bank, and certified by both banks to 
 the Commissioners of Stamps and Taxes ; and such composition shall cease to be 
 payable from and after the 1st day of January, one thousand eight hundred and fifty- 
 six." 
 
 The Tipperary Bank has branches at the following places : — 
 
 Athy. Nenagh. Thurles. 
 
 Carlow. Roscrea. Tipperary. 
 
 Carrick-on-Suir. Thomastown. 
 
 At the last general meeting the directors declared a dividend at the rate 
 of 6 per cent., and added .£2,513 8s. 5rf. to the " doubtful debt fund," 
 which then amounted to .£5,013 8s. hd. The amount of the capital was 
 not stated. 
 
 The following joint-stock banks have ceased to exist in Ireland : — 
 
 1. The Agricultural and Commercial Bank of Ireland, formed in the 
 year 1831, stopped payment in the latter end of tlic year 1836. It was 
 afterwards resumed for a short time, and then finally clcsed. A full ac- 
 count of the reckless proceedings of this bank is given in the third volume 
 of the Bankers'' Magazine. 
 
 372
 
 Currency in Ireland. 
 
 2. The London and Dublin Bank was formed in 1844, and merged in 
 the National Bank of Ireland in the year 1848, This was not a bank 
 of issue. 
 
 3. The Southern Bank of Ireland was formed at Cork after the failure 
 of the Agricultural Bank of Ireland. It was registered the 25th of 
 March, 1837, opened in Cork in the month of July, and stopped payment 
 in the following September. 
 
 The Laws of the Currency in Ireland, 
 
 From what we have already said of the laws of the currency,* those of 
 our readers who are acquainted with Ireland will be able to judge before- 
 hand of the revolutions of her circulation. Being purely an agricultural 
 country, the lowest points will of course be in August or September, 
 immediately before the harvest, and the commencement of the cattle and 
 bacon trade. Then it rises rapidly, till it reaches its highest point in Jan- 
 uary, and then gradually declines. As an agricultural country, we 
 should naturally expect that during the season of increase the circulation 
 would expand most in the rural districts ; and so we find that the circu- 
 lation of the Bank of Ireland, in Dublin, expands very moderately, — that 
 of her branches, which are located chiefly in large towns, expands more, 
 — while the circulation of the joint-stock banks, which are located in 
 the agricultural districts, receives the largest increase. Again, the pur- 
 chases and sales of agricultural produce are known to be in small 
 amounts ; and hence the notes of the smallest denomination receive the 
 largest relative increase. The annual changes of the Irish circulation are 
 governed chiefly by the produce of the harvest and the prices of agricul- 
 tural products. These are the laws of the circulation of Ireland. 
 
 On this subject I may quote my own evidence before the Committee on 
 Banks of Issue : — 
 
 " I have told the committee that I was formerly manager of a joint- 
 stock bank of issue in Ireland, and I have attempted to discover the laws 
 which regulate the circulation of that country, by ascertaining the high- 
 est and lowest amount of the circulation in each year. This which I 
 have in my hand is a table showing the circulation of the Bank of Ire- 
 land (including branches), the separate circulation of the branches alone, 
 and the circulation of the Irish joint-stock and private banks, on the last 
 Saturday of April, August, and December of the years 1834 to 1839. 
 It will be observed that those periods are the same as those which I have 
 referred to in the circulation of the English country banks. The law of 
 circulation appears to be different, but they agree pretty nearly in this, 
 that the lowest point is the latter end of August ; but the highest point in 
 Ireland is generally the end of December or the beginning of January, 
 and from December, or the beginning of January, it declines ; so that the 
 country circulation of England is advancing eight months and declining 
 four ; bat the circulation of Ireland is advancing four months and declining 
 eight, 
 
 " V^Tience is this table compiled } — From Appendix Nos, 32 and 33, 
 * See pages 240, 292, 327. 
 373
 
 A Treatise on Banking. 
 
 This table shows that the circulation of Dublin docs not vary much 
 it shows that the circulation of the branches of the Bank of Ireland varies 
 more ; and that the circulation of the joint-stock and private banks in Ire- 
 land varies considerably more. 
 
 A Table shoiving the Circulation of the Bank of Ireland (including Branches) : 
 the Circulation of the Branches alone; and the Circulation of the Irish Joint-Stock and 
 Private Banks; on the last Saturday of April, August, and December, of the years 1834 
 to 1839. 
 
 /. — Ba7ik of Ireland and Branches. 
 
 
 1834. 
 
 1835. 
 
 1836. 
 
 1837. 
 
 1838. 
 
 1839. 
 
 April, . . 
 
 August, 
 
 December, 
 
 .£ 
 
 . 3.922,.300 
 
 3.452.800 
 
 . 3,926,800 
 
 .£ 
 3,798,500 
 3,198,700 
 3,574,200 
 
 £ 
 3,614,100 
 3,133,500 
 3,481,100 
 
 £ 
 3.332.300 
 2,921.600 
 3,265,700 
 
 £ 
 3,398,400 
 3.055.800 
 3,474,500 
 
 ,£ 
 3.536.400 
 2,981.800 
 3,192,200 
 
 
 
 //. — Branches of the Bank of Ireland. 
 
 
 
 April,. . ■ 
 
 August, 
 
 December, 
 
 > No separate account kept 
 
 at this time. < 
 ( 
 
 \ 1,056,200 
 ' 1,342,300 
 
 1,357,600 
 1,257.600 
 1,695,600 
 
 1.572,000 
 1,211,900 
 1,464,000 
 
 
 
 in. — Joint-Stock and Private Banks. 
 
 
 
 April, . . 
 
 August, 
 
 December, 
 
 . 1,386,165 
 
 1,140,654 
 
 . 1,666,269 
 
 1,517,648 
 1,264,572 
 1,959,542 
 
 2,083,431 
 1,928,900 
 1,787,586 
 
 1,798,724 
 1,480,240 
 2,204,286 
 
 2,366.774 
 1.881,906 
 2,972,034 
 
 2,588,377 
 1,982,122 
 2,629,205 
 
 " It will be observed, that in the year 1836, with regard to the joint- 
 stock banks, there was a departure from the law, which usually increases 
 the Irish circulation very rapidly between the months of August and De- 
 cember ; for in 1836 the Agricultural and Commercial Bank of Ireland 
 stopped payment ; that brought on a run for gold upon the other banks, 
 and thus the circulation of those banks became reduced. This is the 
 only year in which there is not a very considerable increase in the circu- 
 lation of the joint-stock banks of Ireland between August and December. 
 
 " To what do you attribute this uniform increase of the Irish circula- 
 tion towards December.^ — I attribute it to the trade in corn, and bacon, 
 and cattle, which commences in the months of September and October in 
 every year ; the produce of the harvest commences to be brought to 
 market in September ; but the bacon is made in the beginning of Octo- 
 ber. The bacon must be made in cold weather, and therefore pigs are 
 reared so as to be fit for killing by the 1st of October ; and in the begin- 
 ning of October the provision merchants send out their men to purchase 
 pigs at the different markets, and they get notes from the bank. The 
 cattle trade is conducted in the same way ; men go to the market to buy 
 pigs and cattle, and take them over to Bristol and Liverpool, but chiefly to 
 Bristol, from the part where I was. Those notes are chiefly issued in 
 three ways. During the summer, the merchants, having their capital un- 
 employed, lodged it as deposits in the bank ; then, when the season for 
 trade commenced, they drew out their deposits, in the form of notes. 
 Afterwards, they brought us bills upon their factors in London, and our 
 notes were issued in discounting those bills which they had drawn against 
 
 374
 
 Currency in Ireland. • 
 
 the exportations of bacon and cattle. The dealers took their pigs and 
 cattle over to Bristol, and sold them in the various markets and fairs in 
 the west of England, and received the notes which were circulating in 
 that district, and took them to Mr. Stuckey, and got a letter of credit upon 
 me, payable on demand, for the amount. So that our notes were issued, 
 in the first place, by the withdrawal of deposits ; secondly, for the dis- 
 counting of bills on London, drawn against the exports which were made ; 
 and thirdly, for the payment of letters of credit which had been obtained 
 by the parties who had sold Irish cattle in the English markets. The 
 notes were, therefore, drawn out by the trade of the country, and of 
 course it was not in our power to withhold issuing those notes, unless we 
 wished to cramp the trade of the country." 
 
 Robert Murray, Esq., the chief officer of the Provincial Bank of Ire- 
 land, was examined as to the establishment of one Bank of Issue through- 
 out Ireland. The following is his reply: — 
 
 " It would produce an entire revolution in the monetary affairs of Ireland. The 
 committee will already have gathered from the questions I have previously answered, 
 tliat the produce is brought to market in very small quantities, and by a very large num- 
 ber, I had almost said an innumerable class, of farmers ; each man brings his sack of 
 oats and two or three pigs to market. It would be almost impossible, in such a state 
 of things, to regulate by one bank of issue the monetary atfairs of Ireland, or to adapt 
 it to its purposes as it is now situated." 
 
 The following is the report of the Select Committee of the House of 
 Commons, made in 1826, respecting the abolition in Ireland of notea 
 under <£ 5 : — 
 
 " With respect to the circulation of Ireland, the inquiries of your committee have 
 been less extensive than those which they have instituted with respect to Scotland. 
 
 '■ The first law in Ireland which restrained the negotiation of promissory notes, was 
 an Act passed in the Irish Parliament in the year 1799. 
 
 '■ The preamble recites, that various notes, bills of exchange, and drafts for money, 
 have been for some time past circul.ated in lieu of cash, to the great prejudice of trade 
 and public credit ; and that many of such notes are made payable under certain terms, 
 with which the poorer classes of manufacturers and others cannot comply, unless by 
 submitting to great extortion and abuse. It adds, that the issue of such notes has 
 very much tended to increase the pernicious crime of forgery ; and the Act proceeds 
 to apply to notes between the value of £ 5 and 20s. similar restrictions to those which 
 had been applied to such notes issued in England by the Act which passed in the year 
 1777. It permits, however, during the suspension of cash payments by the Bank of 
 Ireland, the issue of bank-post bills, bills of exchange, and drafts under certain regu- 
 lations, for any sums not less than three guineas. This Act did not extend to the 
 Bank of Ireland. 
 
 '' In 1803, this and some other Acts which had passed in the interim, relating to the 
 issue of small notes, were repealed ; and notes under 20s., which had been previously 
 admitted under certain regulations by the Act of 1799, were declared void. 
 
 '■ There is at present no law in force imposing any limitation to the period for 
 which notes for a sum not less than 20s. may be issued in Ireland. 
 
 " A tolerably correct estimate of the amount of promissory notes, above and below 
 £ ,'). circulating in Ireland, may be formed from the subjoined returns made by the 
 Bank of Ireland, and by other banks at present established in that country. 
 
 " Bank of Ireland notes. — An account of the average amount of the Bank ot Ire- 
 land notes of £.5 and upwards (including bank-post bills) for the years 1820, 1821. 
 1822, 1823, 1824, and 1825 : — 
 
 Z 375
 
 A Treatise on Banking. 
 
 Irish Currency. 
 £ s. d. 
 
 " Notes and post bills of £ 5 and upwards, . • . 3,646,660 19 6 
 
 " An account of the average amount of the Bank of Ireland notes under the value 
 of £5 (including bank-post bills) for the vears 1820, 1821, 1822, 1823, 1824, and 
 1825: — 
 
 Irish Currency. 
 £ s. d. 
 
 " Notes and post bills under the value of £ 5, . . . 1,643,828 5 
 
 " It appears from the evidence that a practice prevails in Ireland of issuing notes for 
 tlie payment of sums between one and two pounds, for three guineas, and other frac- 
 tional sums. 
 
 '• Your committee see no public advantage arising out of this practice; and they are 
 of opinion that it ought to be discontinued, as it tends to dispense with the silver coin, 
 and practically to exclude it from circulation. ? 
 
 " Your committee hesitate, in the present imperfect state of their information, to 
 pronounce a decisive 'opinion upon the general measures which it may be fitting to 
 adopt with respect to the paper currency of Ireland. 
 
 " Although they are inclined to think that it would not be advisable to take any im- 
 mediate step for the purpose of preventing the issue of small notes in Ireland, their* 
 impression undoubtedly is, that a metallic currency ought ultimately to be the basis of 
 the circuhition in that country. 
 
 " It will probably be deemed advisable to fix a definite, though not an early petiod, 
 at which the circulation in Ireland of all notes below £ 5 shall cease ; and it is deserv- 
 ing of consideration, whether measures might not be adopted in the interim, for the 
 purpose of insuring such a final result by gradual though cautious advances to- 
 wards it." 
 
 The following is a summary of the evidence given before the Commit- 
 tees of the two Houses of Parliament as to the effect of abolishing the 
 small note circulation in Ireland : — 
 
 1. Small currency is necessary to carry on the commercial transac- 
 tions of the country.. 
 
 John Acheson Smyth, Esq., Agent for the Belfast Bank at Londonderry. 
 
 " In Lancashire, I believe all the raw materials are bought in large parcels, and by 
 bills. In Ireland, the raw material is all bought in small parcels, and all in small 
 notes. In Lancashire, there is only cash wanted to pay the workmen ; but we want it 
 both to pay the workmen and to buy the raw material. The provision and grain that 
 we send to England are also bought in small notes, and we are reimbursed by drawing 
 bills for our shipments." {Commons' Rejmrt, p. 77.) 
 
 Pierce Mahont, Esq., Solicitor to the Provincial Batik of Ireland. 
 
 " If the banks were prevented issuing notes under the amount of £ 5, would any in- 
 conveniences arise in conducting the trade of the South of Ireland ? — The trade of 
 Ireland generally, and especially in the South of Ireland, would be greatly inconve- 
 nienced, and the growth of manufactures would be decidedly checked, if not destroyed, 
 by such a measure. From the gi-eat subdivision of land in Ireland, and particularly 
 in the South and West (where the population is almost exclusively agricultural), the 
 produce is disposed of in small portions, scarcely ever representing £ .5, and almost 
 universally under that amount. I am of o])inion, that the withdrawal of all notes under 
 that amount would have the eflfect of curtailing the accommodation the banks now af- 
 ford to the public, to a ruinous extent ; and that the trade of the country under such cir- 
 cumstances would not afford profitable employment for banking capital to any extent ; 
 and, therefore, I should anticipate tlie withdrawal of such establishments, except per- 
 haps at Cork and Belfast. In the South and West of Ireland, from the nature of the 
 
 376
 
 Currency in Ireland. 
 
 provision and com trade, the chief demand for notes or for gold commences in Octo- 
 ber, and continues until March, when that trade is nearly over for the season. From 
 March until Octohcr the butter trade is almost the only one in the South and West of 
 Ireland ; and as that trade would not employ all the capital that is re(iuired in the win- 
 ter season, the effect would be, if sovereigns were substituted for small notes, that the 
 extra supply required for the corn, beef, and pork trade, must remain idle in the bank- 
 er's chest, or be remitted at great risk and expense for employment elsewhere during 
 tlie summer and autumn. 
 
 " Do you think if a metallic circulation were adopted that there would be a difficulty 
 in maintaining that metallic circulation? — I do; because the trade in the South and 
 West of Ireland is periodical ; the remittances from those districts of Ireland would 
 force the gold away at certain periods, and it must be returned at others with consider- 
 able expense to meet the trade of the country." {Commons^ Report, pp. 250, 251.) 
 
 2. A gold currency would be more inconvenient than notes, and would 
 not be so well liked by the people. 
 
 Leonard Dobbin, Esq.,* Agent for the Northern Banking Company of Belfast, at Ar- 
 magh. 
 
 " Do the people of the North of Ireland manifest any wish for gold in preference to 
 notes, or for notes in preference to gold ? — They decidedly prefer notes, and the 
 weavers have refused to carry gold out of the market lately. 
 
 " Can you assign any reason for this preference ? — There are many reasons that I 
 could assign. The bank notes are now the established currency ; the people are per- 
 fectly acquainted with them. If a man should lose notes, or a house be robbed, or if 
 there is a forger}', it would be much better for them to trace notes than it would gold 
 I have often assisted poor people in tracing notes that were robbed, and forged notes, 
 whereas the gold could not be traced so readily. Another reason I would give is this; 
 guineas became light, and were troublesome to the people. When standing beam 
 there was Is. charged, and when lighter than standing beam, 2s. 6c?. ; and when gold 
 was scarce, and bank notes not a legal tender, the land agents refusing to take any 
 thing but gold, the tenants were obliged to pay from Is. to 4s. on a guinea discount 
 Some agents would only take gold." {Commons' Report, p. 243.) 
 
 J. A. Smyth, Esq., Linen Merchant, and Agent for the Belfast Bank at Londonderry. 
 
 " I am in the habit of employing my linen buyers to go to the country markets, and 
 I must supply them with the week's money before they start, perhaps five hundred or 
 a thousand pounds ; they have to go through the interior of the country, and do not 
 return for a week. They make their purchases all in small quantities, and it is more 
 convenient for them to carry notes than gold." {Lords' Repwt, p. 7.) 
 
 Arthur Guiness, Esq., Director of the Bank of Ireland. 
 
 " I conceive that with the persons who handle the circulation of the country, there is 
 a decided preference in favor of small notes over cash in every respect. I speak from 
 mine own experience ; for I remember perfectly well, before the restrictions upon cash 
 payments, when gold was a great inconvenience in trade. I speak of those who handle 
 the currency of the country, among whom I think the preference is in favor of the 
 sm.all notes, as more convenient, more portable, and less liable to counterfeit. I con- 
 ceive these to form the general ground of preference." (Commons^ Report, p. 237.) 
 
 3. The profits of the banking establishments would be so much dimin- 
 ished, that they could not extend the same accommodation to the agricul- 
 tural and commercial classes. 
 
 W. P. LuNNEL, Esq., Director of the Bank of Ireland. 
 " If the notes under £ 5 were prohibited, would the profits of the Bank of Ireland 
 
 * This gentleman was afterwards agent for the Bank of Ireland at Armagh, and 
 M. P. for that place. 
 
 377
 
 A Treatise on Banking. 
 
 be materially affected by such prohibition ? — I should expect that they would suffer 
 they must sacrifice a certain profit. 
 
 " Have you considered to what extent the profits of other bankers would be affected T 
 — I should expect that the principal circulation of the country ])ankers is in small 
 notes, and therefore in that proportion they would suffer." (Lords' Report, p. 108.) 
 
 John Holmes IIoustox, Esq., BanJcer at Belfast. 
 
 " If all the notes under £5 were prohibited to be issued, would it be worth while, in 
 your opinion, to keep the establishment of a bank at Belfast? — I do not think it 
 would, except by carrying it on in the same manner as it formerly was, — to keep a 
 discount office, charging a commission on discounting bills, because £5 notes would 
 not circulate ; then our circulation would be so trifling it would not answer." (Ibid, 
 p. 35. 
 
 H. A. Douglas, Esq., Director of the Provincial Bank of Ireland. 
 
 "I consider the cash account system, and the one pound circulation so connected, 
 that if the notes arc ■withdrawn, it is understood that our establishment will not grant 
 any further cash credits. The business which we canw on, even if we charged a higher 
 rate of interest, or a commission, would not be of suflScient magnitude to repay us for 
 the expense of our establishment, independent of our notes. If the issue of small notes 
 be withdrawn, then we cannot afford to allow interest on deposits." {Lords' Report, 
 pp. 24, 26, 27.) 
 
 4. The abolition of small notes would prevent the investment of British 
 Capital in the present banking establishments. 
 
 T. S. EiCE, Esq., M. P., and Director of the Provincial Bank of Ireland* 
 
 " Is it your opinion, that if all notes under £ 5 were abolished, a considerable incon 
 venience would arise in the ordinary traffic in Ireland? — I conceive that it would. I 
 conceive that the first effect of the extinction of all notes below £ 5 would be a much 
 more considerable diminution of the general mass of the circulating medium in Ireland 
 than in England. 
 
 "I fear extremely that if any thing were to occur which materially diminished the 
 profits of our establishment, it would have the effect of depriving us of" one of the chief 
 benefits of the establishment, namely, the support and control of British capitalists, 
 and conducting the bank by British merchants, and upon British commercial princi- 
 ples. I conceive a rate of profit, rather higher than the average rate of profits, is es- 
 sential to induce persons so circumstanced to engage in such a business, more particu- 
 larly when it is considered that there is no limitation of responsibility by the grant of 
 charters." (Lords' Report, pp. 47, 51.) 
 
 5. The gold currency would be sent out of the country, whenever it 
 bore a premium in England. 
 
 Henry H. Hunt, Esq., Local Director of the Provincial Bank of Ireland, at Waterford. 
 
 " What do you think would be the consequence of a law which prohibited the issue 
 of notes below £ 5, both by the Bank of Ireland and by any other banking establish- 
 ment in Ireland ? — I should think it would be very hazardous indeed : I should very 
 much apprehend that the gold circulation would at times be withdranm in a very great 
 degree from the country, whenever gold was wanted in London ; for instance, a small 
 
 PREMIUM UPON a SOVEREIGN WOULD INDUCE A VAST QUANTITY OF THEM TO BE 
 BROUGHT OUT OF IRELAND. 
 
 " Have you ever known instances of quantities of gold being brought over from Ire- 
 land to this country, and persons making a regular traffic of it? — I have." (Com- 
 mons' Repoi-t, pp. 73, 74.) 
 
 6. The proposed measure would cause general distress, and prevent 
 the progress of enterprise. 
 
 * Now Lord Monteagle. 
 378
 
 Currency in Ireland. 
 
 John Robinson Pim, Esq., General Merchant in Dublin. 
 
 " The very idea of curtailing the currency under £ 5 would have a tendency to dis- 
 courage all adventure in Ireland at present. I should not, for one, be careful of plac- 
 ing money in any kind of machinery till the effect was tried. I fancy it would reduce 
 property very much in that country, — and sometimes fancies arc almost as bad as 
 reality." {Lords' Report, p. 19.) 
 
 The following table was given Irt by Mr. Murray to the Committee of 
 the House of Lords, showing the circulation of Ireland since the passing 
 of the Act of 1845 : — 
 
 Abstract of the Returns bu the several Banks of Issue in Ireland under the Pro- 
 visions of the Act 8th 4r ^th Victoria, cap. 37. From 3d January, 184G, to 20th May, 
 1848. 
 
 For the 
 Four Weeks 
 ended 
 1S46. 
 3d Jan. , . 
 31 3t Jan. . 
 28ih Feb. . 
 aSlh March, 
 25th April, . 
 23d May, . 
 20th June, . 
 ISlh July, . 
 1.5th Aug. . 
 12th Sept. . 
 10th Oct. . 
 7th No7. . 
 5lh Dec. 
 
 1847. 
 2J Jan. 
 30th Jan. . 
 27ih Feb. . 
 27th March, 
 24th April, . 
 •Hi x^Iay, . 
 19th June, . 
 17ih July, 
 14th Aug. . 
 11th Sept. 
 9th Oct. 
 6th Nov. . 
 4lh Dec. 
 
 1848. 
 1st Jan. . 
 29th Jan. . 
 26th Feb. . 
 25lh March, 
 22d April, . 
 20th May, 
 
 Certified 
 Issue of all 
 the Banks. 
 
 £ 
 6,354,494 
 6,354,494 
 6,354,494 
 6,354,494 
 6,3.54,494 
 6,354,494 
 6,354,494 
 6,354,494 
 6,354.494 
 6.354,494 
 6,3.54,494 
 6,354,494 
 6,354,494 
 
 6.354,494 
 6;354,494 
 6,-3.54,494 
 6,354,494 
 6,354,494 
 6,354,494 
 6,354,494 
 6,354,494 
 6,354,494 
 6,354,494 
 6,354,494 
 6,354,494 
 6,354,494 
 
 6,354,494 
 6,354,494 
 6,3.54,494 
 6,a54,494 
 6,354,494 
 6,354,494 
 
 Notes of £ 
 
 ^ Notes 
 under £5. 
 
 Total Issue 
 
 
 
 Total Specie 
 
 and 
 upwards. 
 
 of all the 
 Banks. 
 
 Gold held. 
 
 Silver held. 
 
 held by all 
 the Banks. 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 £ 
 
 3,039,855 
 
 4,.3&4,509 
 
 7,404,366 
 
 2,221,944 
 
 267,308 
 
 2,489,254 
 
 3,052,168 
 
 4,358,583 
 
 7,410,751 
 
 2,232,887 
 
 298,145 
 
 2,.531,032 
 
 3,066,5-29 
 
 4,403,198 
 
 7,469,729 
 
 2,262,714 
 
 304,582 
 
 2,567,300 
 
 3,071,589 
 
 4,373,371 
 
 7,444,960 
 
 2,246,022 
 
 322,131 
 
 2,568,158 
 
 3,170,291 
 
 4,366,031 
 
 7,536,323 
 
 2,204,748 
 
 321,861 
 
 2,526,613 
 
 3;223,469 
 
 4,198,610 
 
 7,422,080 
 
 2,177,633 
 
 321,310 
 
 2,498,945 
 
 3,072,053 
 
 3,899,973 
 
 6,972,026 
 
 2,032,018 
 
 a32,981 
 
 2,415,002 
 
 3,003,914 
 
 3.682,577 
 
 6,686,491 
 
 1,908,216 
 
 3-58,567 
 
 2.266,786 
 
 2,959,671 
 
 3,520,.844 
 
 6,480,517 
 
 1,887,457 
 
 376,335 
 
 2,263,795 
 
 3,013,054 
 
 3,575,113 
 
 6,588,175 
 
 1,832,938 
 
 349,980 
 
 2,182,922 
 
 3,183,979 
 
 4,067,575 
 
 7,251,555 
 
 1,894,453 
 
 345,812 
 
 2,240,267 
 
 3,3.35,209 
 
 4,-501,616 
 
 7,836,825 
 
 2,131,587 
 
 353,447 
 
 2,485,034 
 
 3,273,326 
 
 4,566,204 
 
 7,839,530 
 
 2,253,124 
 
 316,467 
 
 2,569,595 
 
 3,151,117 
 
 4,364,295 
 
 7,51.5,414 
 
 2,264,266 
 
 343,740 
 
 2,608,013 
 
 3,161,701 
 
 4,097,724 
 
 7,259,426 
 
 1,999,140 
 
 384,091 
 
 2,383,236 
 
 3,158,358 
 
 3,871,694 
 
 7,030,053 
 
 1,795,792 
 
 383,389 
 
 2,179,184 
 
 3,123,516 
 
 3,581,218 
 
 6,704,736 
 
 1,710,405 
 
 403,693 
 
 2,114,100 
 
 3,16.3,465 
 
 3,-357,768 
 
 6,521,234 
 
 1,547,530 
 
 445,010 
 
 1,992,545 
 
 3,086,115 
 
 2,932,305 
 
 6,018,420 
 
 1,162,163 
 
 520,506 
 
 1,682,682 
 
 2.835,513 
 
 2,629,436 
 
 5,464,951 
 
 1,028,579 
 
 520,299 
 
 1,518,882 
 
 2,740,914 
 
 2,516,464 
 
 5,257,378 
 
 993,810 
 
 563,524 
 
 1,557,337 
 
 2,670,376 
 
 2,426,869 
 
 5,097,245 
 
 969,590 
 
 597,627 
 
 1,567,221 
 
 2,581,063 
 
 2;467,246 
 
 5,048,310 
 
 966,818 
 
 565,399 
 
 1,532,222 
 
 2,636,692 
 
 2,718,920 
 
 5,355,613 
 
 1,006,066 
 
 511,643 
 
 1,517,712 
 
 2,714,939 
 
 2,804,374 
 
 5,519,314 
 
 1,045,805 
 
 490,718 
 
 1,536.526 
 
 2,597,237 
 
 2,725,502 
 
 5,322,741 
 
 1,087,074 
 
 503,692 
 
 1,590,770 
 
 2,502,756 
 
 2,693,357 
 
 5,196,116 
 
 1,112,9.55 
 
 605,800 
 
 1,618,760 
 
 2,528,633 
 
 2,705,281 
 
 5,233,916 
 
 1,132,937 
 
 531,806 
 
 1,664,746 
 
 2,510,595 
 
 2.709,483 
 
 5,220,080 
 
 1,144,0-32 
 
 562,846 
 
 1,706,862 
 
 2,505,565 
 
 2,601,829 
 
 5,107.395 
 
 1,095,722 
 
 584,711 
 
 1,680,437 
 
 2,540,489 
 
 2,468,542 
 
 5,009;033 
 
 1,071,297 
 
 551,568 
 
 1,622,868 
 
 2,561,459 
 
 2,279,211 
 
 4,840,672 
 
 1,087,162 
 
 501,318 
 
 1,588,485 
 
 93,235,610 109,829,727 203,065,375 51,556,884 13,740,306 65,297,310 
 
 Averages of the preceding Returns. 
 
 Notes of £ 5 Notes un- .p . i f^^A 
 
 and upwards, der £ 5. ^otal. Gold. 
 
 £ £ £ £ 
 
 Average for whole Period . . 2,913,612 3,432,178 6,345,791 1,611,152 
 
 Average for the year 1846 . . 3,121,2.59 4,144,461 7,265,721 2,106,004 
 
 Average for the year 1847 . . 2,844,049 2,956,375 5,830,425 1,263,517 
 
 Average for the first Five Months; 3, jggQ9 4339953 7,456,768 2,224,800 
 
 of 1Mb S 
 
 Average for the first Five Months 3,33 ggj 3563141 6,706,773 1,643,006 
 
 of 1847 2 
 
 ^''^/?ll/°'' ^^"^ *^"^ ^'"^ "^""^'^ J 2,529,348 2,552.969 5,082,219 1,106,230 
 
 379 
 
 Silver. 
 
 £ 
 429,384 
 
 334,258 
 
 491,953 
 
 313,605 
 427,337 
 546,449 
 
 Total 
 Specie. 
 
 £ 
 2,040,540 
 2,440,266 
 1,755,475 
 
 2,538,409 
 2,070,3ia 
 1,652,683
 
 A Treatise on Banking. 
 
 The last Return of the Circulation of Ireland is as follows : — 
 
 AvEBAGE Circulation and Coin Iicld by the Irish Banks during the four weeks 
 ending Saturday, the 24th day of March, 1849. 
 
 Average 
 Average Circulation duringFour Amount of 
 Weeks ending as above. Gold & Silver 
 Coin held 
 ., <• T> 1 Auliiorized £5 and Under -r^.oi duringFour 
 
 Names of Banks. Circulation, upwards. £5. ^°^^- Weeks ending 
 
 as above. 
 £ £ £ £ £ 
 
 Bank of Ireland 3,738,428 1,671,200 927,4.50 2,598,6.'>0 809,690 
 
 Provincial Rank 927,667 282,439 384,053 666,492 357,864 
 
 Belfast Bank 281,611 29,997 186,426 216,423 110,829 
 
 Northern Bank 243,440 23,287 148,251 Rl-OSS 94,086 
 
 Ulster Bank 311,079 19,025 181,371 200,396 57,847 
 
 National Bank 761,757 197,173 303,340 500,514 257,072 
 
 Carrick-on-Suir National Bank . . 24,084 3,838 6,073 9.962 3,738 
 
 Clonmel National Bank . . . 66,423 17,501 20,274 37,775 17,731 
 
 Totals . . . 6.354,494 2,244,510 2,157,238 4,401,750 1,708,857 
 
 We have noticed the different meanings given to the word " circula- 
 tion " in England, since the passing of the Act of 1844. By the Act 
 of 1845, it is enacted that this word shall have the following meaning in 
 Scotland and Ireland : — 
 
 " Section 17. — And be it enacted, That all bank notes shall be deemed to be in cir- 
 culation from the time the same shall have been issued from any banker, or any ser- 
 vant or agent of such banker, until the same shall have been actually returned to such 
 banker, or some servant or agent of such banker." 
 
 It may he useful to trace the effects of this Act (the Act of 1845, 8 
 & 9 Vict. c. 37) upon the state of banking in Ireland, as compared with 
 the effects of similar enactments in Scotland and England. 
 
 1. The limitation of issue in Ireland, as in Scotland, is not absolute. 
 The banks may issue beyond this limit, if they retain an amount of gold 
 and silver equal to this excess. In England the prohibition is absolute. 
 The probable effect will be, that these enactments will not lead to any 
 permanent decrease of the circulation in Ireland or Scotland. The banks 
 will merely import more gold when the circulation increases. In Eng- 
 land it seems probable that the circulation will permanently decrease. 
 Means will be employed to conduct banking operations with fewer notes, 
 and these means will operate at all times, when the circulation is low, 
 as well as when it is high. 
 
 The provision of the Act of 1845, which requires the banks of Scot- 
 land and of Ireland to keep an amount of gold equal to the notes in circu- 
 lation beyond the fi.xed limits, tonds, as we have observed, to restrict the 
 granting of cash credits in Scotland. We doubt if it will have an equal 
 effect in Ireland, simply because the cash-credits exist only to a limited 
 extent. The Provincial Bank introduced the system in 1825 ; and no 
 system could be better adapted to the state of the country. It would 
 doubtless have greatly improved the condition and the habits of the peo- 
 j)le ; but the iniquitous runs for gold which, at the suggestion of reckless 
 
 380
 
 Bank Circulation. 
 
 politicians, took place in 1828, 1830, 1831, and 1833, compelled the 
 banks to restrict their operations. Had the banks remained witliout mo- 
 lestation, the whole of the agricultural districts of Ireland would probably 
 by this time have had the benefits of this system, with the same benefi- 
 cial results which have been realized in Scotland. 
 
 2. In Ireland these measures will not tend to produce so great an in- 
 crease of gold as in Scotland. In Scotland the banks, previous to the 
 passing of the Act, kept but a small amount of gold. But in Ireland the 
 banks, from their liabilities to runs, have always kept large deposits of 
 gold. The amounts required by the Act are not larger than those for- 
 merly kept in their vaults. It appears from the returns, that the Bank of 
 Ireland has recently kept a smaller amount than before the passing of the 
 Act. Hence their means of affording accommodation are not dimin- 
 ished ; and as they sustain no loss, they have no reason for increasing 
 their charges. It may, however, confirm the Irish banks in their regula- 
 tion not to give interest on current accounts. Nowhere throughout Ire- 
 land is this system now followed. The Bank of Ireland gives no interest 
 on any class of lodgments. The joint-stock banks allow it only on depos- 
 it receipts. The reason assigned by the Scotch banks was that the oper- 
 ations on these accounts maintained in circulation a large amount of their 
 notes. This will be no advantage if the bank must retain an amount of 
 gold equal to this increase of notes in circulation. 
 
 3. The prohibition of new banks of issue has operated variously in the 
 three countries. In Ireland it was beneficial ; in Scodand it has been 
 harmless ; and in England it is injurious. The Agricultural Bank of Ire- 
 land caused considerable mischief. To prevent the recurrence of such 
 evils, the most effectual way was to prohibit the formation of new banks 
 of issue. Hereafter this restriction may become oppressive. Cork, and 
 Limerick, and Waterford may become sufficiently wealthy to supply a 
 banking capital, and may wish to form local banks. The local banks at 
 Belfast have conferred great benefits on the north of Ireland. In Scot- 
 land the banks are sufficiently numerous ; and, as they are allowed to ~ 
 unite, the authorized issue of notes is never likely to be less than it is. 
 And although restrictions on banks are unsound in principle, they may 
 not at present do any harm in Scotland. In England the restriction is in- 
 jurious. Had we an unlimited power of forming new banks, many of 
 those firms that now consist of not more than six partners would be 
 merged in larger establishments. The number of banks would be less, — 
 the amount of their issues would probably be less, — but they would attract 
 a higher degree of public confidence, and their character and continuance 
 would not be dependent upon the lives of individual partners. 
 
 4. Unions of Banks in either Ireland or Scotland are not very likely, 
 nor perhaps desirable. The banks are large, have a respectable capital, 
 and enjoy the public confidence. In England, many banks are small, and 
 have small capitals. Union among them would be highly beneficial. 
 Yet such is the waywardness of legislation, that the Acts of 1844 and 
 1845 give facilities to unions in Ireland and Scotland, and restrict them 
 in England. In Ireland and Scotland two banks of issue may unite, and 
 the united bank have the united circulation. In England, if two banks of 
 
 381
 
 A Treatise on Banking. 
 
 issue, either of which has more than six partners, should unite, the circu- 
 lation of one or both of these banks would be lost. 
 
 5. The Act passed in 1844, for the regulation of joint-stock banks in 
 England, was extended in 1846 to Scotland and Ireland, with the omission 
 of the clause that rendered the banks subject to the laws of bankruptcy. 
 By a clause in these Acts, any bank for the formation of which proceed- 
 ings had been taken before the 6th May, and which was actually in busi- 
 ness on the 4th of July, must at the end of a year after the passing of the 
 Act either retire from business or take a charter. The Preston Banking 
 Company was in this case, and accordingly became a chartered bank. 
 This is the only bank that has a charter under the Act in England. The 
 Exchange Bank of Scotland was in a similar case, and on the 31st of De- 
 cember, 1846, became a chartered bank. There is no bank of this kind 
 in Ireland. 
 
 From the extracts we have made from the Act at p. 308, it will be 
 seen that no new joint-stock bank can be formed of a less nominal cap- 
 ital than £ 100,000, and half the capital must be paid up before the com- 
 mencement of business ; that the assets and liabilities of the company 
 must be published once at least in every month ; and that at least one 
 fourth of the directors shall retire yearly, and shall not be eligible for 
 reelection for at least twelve calendar months. As a specimen of the 
 monthly returns required, we copy from the London Gazette the last re- 
 turn of the Preston Banking Company : — 
 
 Account of the Assets and Liabilities of the Preston Banking Company, at 
 ■ Preston, on Saturday the 7th day of April, 1849. 
 
 Assets. Liabilities. 
 
 Bills of Exchange, Bank Premises, Prelim- Capital stock . . £100,000 
 
 inary Expenses, Loans, &c., Cash in Deposits, and other Lia- 
 
 Bank, and Deposits in other Banking bilities . . . 206,899 4 3 
 
 Establishments . . £309,658 2 1 Undivided Profits . . 2,758 17 10 
 
 £309,658 2 1 £309,658 2 1 
 
 That provision of the act which requires one fourth of the directors to 
 retire annually, and which declares them ineligible for election for one 
 year, has been the subject of much discussion. The object of the Legisla- 
 ture appears to have been to prevent those evils which, in public compa- 
 nies of every kind, occasionally arise from the undue ascendency of indi- 
 vidual directors. Practically, it may be injurious or advantageous to a bank, 
 according to circumstances. On the one hand, it may deprive a bank of 
 the services of its most useful directors for one year. And on their return, 
 they may be less useful than heretofore, from being less acquainted with 
 the tran-sactions that have taken place during their absence. In small 
 country banks it might not be easy to find other parties to take the places 
 of the directors who had thus retired. On the other hand, it has been con- 
 tended that the number of the directors, and consequently their influence, 
 would thus be virtually increased, — that, while on some occasions the 
 most clever directors would be compelled to retire, at other times the 
 least clever would retire, and their places might be better supplied, — that 
 the retirement of even the most clever might call forth the energies of the 
 
 382
 
 Ireland Bank Circulation. 
 
 others, and thus the talents of the whole might be improved, — that the 
 plan tends to prevent the undue ascendency of any individual director, or 
 of any knots or parties of directors, for any length of time, — and that it is 
 a convenient means of getting rid of an inefficient, injurious, or disagree- 
 able director : for, as when he is once out, it would be easy for the board, 
 if so disposed, to prevent his reelection. By the charter of the Bank of 
 Ireland, fifteen directors are chosen annually, and not above two thirds of 
 the directors of the preceding year can be reelected. 
 
 6. There is another difference between Scotland and Ireland with ref- 
 erence to banking operations, though it does not arise from the above- 
 mentioned Act. At the time of the union between England and Ireland, 
 Ireland had her debts as well as England. And although England be- 
 came liable for these debts, the dividends continued to be paid, and the 
 transfers made in Dublin. Hence Government stock is bought and sold 
 there in the same way as in London. Besides this, any party may pur- 
 chase stock in Ireland, and have it transferred to England, or the reverse. 
 The plan is this : — Any person holding stock may go to the Bank 
 of England, either personally or by power of attorney, and get a ticket 
 that will authorize him to have the same amount of stock put in to his 
 name in Ireland. The stock in England is then transferred to the com- 
 missioners for the reduction of the National Debt. He may go to the 
 Bank of Ireland in Dublin and reverse the operation. Several Acts of 
 Parliament have been passed with reference to this subject. The last is 
 the 5th Geo. IV. c. 53, passed in the year 1824. When there is a great 
 difference in the price of stocks in the two countries, operations of this 
 kind may be very profitable. 
 
 This power of transferring government stock from one country to the 
 other has a tendency to equalize the price in both countries. It also 
 serves the purpose of a medium of exchange. A transmission of stock 
 has the same effect in rectifying the exchanges as a transmission of gold. 
 And, doubtless, the exchanges between England and foreign countries 
 might, to a great degree, be adjusted in the same manner. 
 
 There is a Stock Exchange in Dublin similar to that of London, estab- 
 lished for the purchase and sale of Government stock, bank stock, railway 
 shares, &c. No person can transact business there unless he has ob- 
 tained a license from the' Lord Lieutenant. The number of these persons 
 is at present about twenty-five. There are no time-bargains as in London. 
 The borrowing and lending of money on stock are matters of daily occur- 
 rence. This is not always done through brokers. Individuals often effect 
 these transactions directly with the banks. The general rule is, that the 
 lender shall have a margin of 5 per cent, on the value of the stock, and 
 shall be entided to call for additional security whenever the market price 
 falls below that difference. 
 
 The Exchanges hetioeen the Banks 
 
 Since the Act of 1845 — when other banks besides the Bank of Ireland 
 acquired the power of issuing notes in Dublin — a system of cleanng, or, 
 as it is called, of exchanges, has been established, similar to that estab- 
 lished in Edinburgh. 
 
 383
 
 A Treatise on Banking. 
 
 The following is a copy of a clearing balance-sheet : — 
 Balances of Exchanges with otheh Banks, on . , 
 
 _, 1849. 
 
 DUE TO IT. 
 
 WITH 
 
 DUE BY IT. 
 
 
 
 
 Bank of Ireland. 
 Provincial Bank. 
 National Bank. 
 Northern Bank. 
 Belfast Bank. 
 Ulster Bank. 
 
 
 
 
 
 
 
 
 
 
 Here we may observe that all the banks that clear are banks of issue ; 
 and the clearing in Dublin includes all the banks of issue in Ireland, al- 
 though three of these banks have their head quarters in Belfast. The» 
 J^elfast banks clear by their agents. The Bank of Ireland is the agent 
 for the Northern Bank and the Belfast Bank, and the Royal Bank of Ire- 
 land is the Dublin agent for the Bank of Ulster. It will also be observed 
 that the Bank of Ireland — the chartered bank — is a member of the 
 clearing ; and, in fact, the clearing is held daily, at two o'clock in one of 
 the rooms of that establishment. The differences are paid daily, like 
 those at Edinburgh, in exchequer bills. The following are the amounts 
 required to be held by each bank : — 
 
 The Bank of Ireland, ...... £134,000 
 
 The Provincial Bank, 58,000 
 
 The National Bank, 48,000 
 
 The Northern Bank, 30,000 
 
 The Belfast Bank, 30,000 
 
 The Ulster Bank, • . . 30,000 
 
 £ 330,000 
 
 Those banks in Dublin that are not banks of issue are not members of 
 the clearing. Although the Royal Bank of Ireland attends the clearing 
 as the agent of the Ulster Bank, it does not clear on its own account. All 
 the non-issuing banks, however, have accounts with the Bank of Ireland, 
 and pay into that establishment the cheques they may have on the other 
 banks. The National Bank, though an issuing bank, and a member of 
 the clearing, has no account with the Bank of Ireland. 
 
 This system of clearing appears to work very satisfactorily. The fol- 
 lowing is an extract from a letter I received a few days ago from an Irish 
 banker, on the subject : — 
 
 " The settlement of our ' exchange balances ' in Dublin, through the use of excheq- 
 
 384
 
 Irish Bank Exchanges. 
 
 er bills, works very well. The great evil, previously, was, that when these balances 
 ■ere of magnitude, Dublin was such a limited money market there was difficulty and 
 xpense in raising the needful quantity of Irish money for the purpose. If you antici- 
 ated the balance to be heavy against you, it was requisite to prepare some time before, 
 nd to have your funds lying idle and unproductive until the crisis arose. Now, we 
 ave exchequer bill interest for our surplus, and the power of replenishing our stock ac- 
 ount wlienever required by drawing on London, thus possessing the unbounded advan- 
 .iges of the greatest money market in the world. In point of fact, the arrangement has 
 irtually changed the venue, and made London the actual and final place of settlement, 
 lirough machinery worked in Dublin." 
 
 The following are the " Regulations for making exchanges between 
 he several banks in Ireland, at Dublin, and for settling the balances of 
 uch exchanges, at Dublin ; to take effect from and after the 8th day of 
 December, 1845." 
 
 " 1. The exchange shall be made daily at two o'clock, p.m. 
 
 " 2. The payments of the balances shall be made in exchequer bills, except for the 
 fractional parts of £ 500 which may be paid in the notes of the particular bank debtor. 
 
 "3. The exchequer bills shall be filled up in favor of the bank who may be the orig- 
 inal holders, and shall bear the distinguisliing mark of 'Dublin Exchange Bills,' show- 
 ing that they belong to the Dublin exchanges, and are not intended to be used for any 
 other purpose, and shall be received at par, with the interest that may be due when the 
 transfer takes place. 
 
 " 4. The amount of exchequer bills to be kept in the circle is fixed at £ 330,000, to 
 be apportioned amongst the following banks in fixed sums, calculated in their respec- 
 tive amounts of circulation : — 
 
 KAMES OF BANKS. 
 
 Bank of Ireland. Northern Bank. Ulster Bank. 
 
 Provincial Bank. Belfast Bank. National Bank. 
 
 The sums being once fixed, each bank is to maintain its quota at all times, as herein- 
 after provided. 
 
 " 5. Nine tenths of the exchequer bills to be of £ 1,000, and one tenth of £ 500. 
 
 " 6. The amount of exchequer bills held by each bank shall be stated every day in 
 the Clearing- room. 
 
 '•7. It is expedient that no bank shall be obliged permanently to hold more exche- 
 quer bills than a surplus of one third above the fixed amount, nor shall be allowed to 
 reduce the amount held more than one third below the fixed amount ; but as the ex- 
 chequer bills will accumulate with some of the banks, and be required by others, it 
 shall be imperative on the parties so situated to sell or buy exchequer bills ; that is to 
 say, the bank holding the greatest amount of exchequer bills shall be bound to sell to 
 the bank in want of them, what may be required for the legitimate purposes of the ex- 
 changes ; but it shall not be imperative on that party to sell a greater amount than 
 what will reduce their stock to the original quota, and the purchaser shall be bound to 
 take bills from those parties having the greatest proportionate amount of them beyond 
 their respective original quota. 
 
 " 8. The preceding regulations will tend in a great degree to equalize the amount of 
 exchequer bills ; but if exchequer bills shall nevertheless accumulate in the hands of a 
 bank, so as to exceed their original quota by more than one third, that party shall have 
 the power to call upon the party or parties holding the smallest amount in proportion 
 to their quota to purchase the excess — th.it is to say, the excess above their quota — 
 plus one third ; but it shall not be imperative on any party to take more than is re- 
 quired to bring up their stock to two thirds of the original amount. 
 
 " In this way the fluctuation in the amount of exchequer bills amongst the different 
 banks, which is an essential part of this arrangement, need never permanently exceed 
 one third more or one third less than the original quota of each bank. 
 
 " The terms of purchase to be governed by the next regulation. 
 
 " 9. The bank seeking to bu}', or being called upon to buy, exchequer bills, from the 
 bank or banks holding in excess of their quota, shall pay for the purchase by a Letter 
 of Credit on their London correspondent, demandable on the fifth day after the date 
 
 385
 
 A Treatise on Banking. 
 
 thereof, the purchaser paj'ing Is. 3(7. per cent, on the amount of tlie Letter of Credit; 
 or to pay the amount in fjold in Dublin, at the option of the holders of the bills. 
 
 " 10. The exchequer bills to be used for the Dublin exchanges are to be as nearly as 
 Dossible divided into the two dates of IMarch bills and June bills, which are to be ex- 
 changed at the raymastcr-General's Office here before due, and new ones to be pro- 
 vided, so as to keep up the stock in the circle ; and no exchequer bills advertised to be 
 paid are to be used in the exchanges. 
 
 "11. Each hank is to be always liable to the income-tax on the interest of its origi- 
 nal quota of exchequer bills, and no more ; and the exchequer bills advertised to be 
 renewed are, within a week after the Government notice appears in the Gazette, to be 
 given up to the original holders, upon receiving other bills not advertised, failing which, 
 a Letter of Credit on London, dcmandable on the fifth day from its date, subject to the 
 charge as stated in No. 9, is to be given, or the amount to be paid in gold, at the op- 
 tion of the holders of advertised bills. 
 
 " 12. The exchanges are to be made at the Bank of Ireland, who undertake to pay 
 those banks who are creditors in the exchange the exchequer bills or bills of exchange 
 received from those banks who are debtors in the exchange ; but the Bank of Ireland 
 shall not be in any way responsible for the exchange transactions, or othenvise soever. 
 
 '• 13. The statement of the balances after they are struck to be sent to their respec- 
 tive banks from the Clearing-room, by their clerks ; and the clerks of banks creditors 
 to be in waiting to receive the amount due to them at two o'clock. 
 
 " 14. Any bank a party to this agreement to have the power of withdrawing from 
 it, and receiving back their exchequer bills at par, upon payment of tliem if needful, 
 upon giving three months' notice. 
 
 " 15. No bank a party to this arrangement shall, after the Sth of December, 1845, di- 
 rectly or through any agent, demand gold from or pay gold to any other bank or 
 banks parties to this arrangement, except as hereinbefore provided, unless under spe- 
 cial agreement between any two of the banks they mutually arrange to pay and re- 
 ceive a sum of gold. 
 
 " It is assumed that each bank always has its statutory amount of gold, and if any 
 bank he either in excess or deficiency in that amount, the export or import of gold 
 must be borne by the bank seeking to diminish or increase its stock. 
 
 " Any violation of this regulation after the Sth of December, 1845, to be considered a 
 virtual withdrawal of the bank who departs from this rule. 
 
 " N. B. The foregoing arrangements are to be subject to such alterations and amend- 
 ments as may be required and agreed on by the several banks parties thereto, after the 
 plan shall be* in operation, and its working eftect ascertained." 
 
 THE IRISH BANKS. — ADDENDUM 
 
 {From the London Bankers' Almanac, Diary, and Year Book, for 1851.) 
 
 Fixed Ao. of 
 Naine. Established. Capital. Fuiul. Issue. Branchts. 
 
 £ 
 
 1. Bankoflrelfind 1783 
 
 2. Belfast Banking Company, . . 1827 
 
 3. Hibernian H.ank, Dublin, . . 1S25 
 
 4. National Bank of Ireland, . . 18.W 
 
 5. Da do. Clonmel, . . 1836 
 
 6. Do. do. Carrick-on-Suir, '' 
 
 7. Northern Biinkin? Company, Belfast, 1825 
 
 8. Provincial Bank, .... 1825 
 
 9. Royal Bank of Ireland, . . . 1836 
 
 10. Tipperary Joint Stock Bank, . . 18,38 
 
 11. Ulater Banking Company, , . 1836 
 
 General Circulation. 
 
 1. Bank of En(?land, 
 
 2. Private Banks, 
 
 3 Joint-Stock Banks, 
 
 4 Irish Bank.s, . 
 
 6. Scotch Banks, . 
 
 Dec. 4, 1»17. 
 
 £ 
 ao.iBi.-iai 
 
 3.61)1, 000 
 2,576,f)()0 
 2,147,000 
 3,732,000 
 
 Paid-up 
 Capital. 
 
 £ 
 
 3,ato,ooo 
 
 12,''),(KX) 
 2.W,00(J 
 450,000 
 
 l.'iO.dOO 
 5411,000 
 209,175 
 
 206,'(X)b 
 
 Dec. 2, 1»18. 
 
 £ 
 18.702,000 
 3,7a3.00O 
 2,727,000 
 2,117,000 
 3,570,000 
 
 Reserved 
 Furul. 
 
 £ 
 
 1,093,300 
 
 68,000 
 50,105 
 
 49,479 
 110,182 
 45,745 
 
 3,738.428 
 
 281,611 
 
 No Issue 
 
 761,757 
 
 66,428 
 
 24,084 
 
 ai3,440 
 
 927,667 
 
 No issue 
 
 311,079 
 
 11 
 38 
 None 
 8 
 14 
 
 Dec. 1, 1349. Nov. 2, 1850. 
 
 £ 
 18,156,000 
 3,703,000 
 2,703,000 
 4,674,000" 
 3,500,000 
 
 £ 
 
 19,787,000 
 3,7S4,(K)0 
 2.894,0(X) 
 4,99'1,0()0 
 3,318,0(.X) 
 
 386
 
 Moral and Religious Duties 
 
 ?r.c:?!ON VUL — THE MORAL AND RELIGIOUS DUTIES 
 OF BANKING COMPANIES.* 
 
 •'i implore the blessing of Divine Providence on our united efforts to encourage the industry and in- 
 crease the comforts of my people, and to inculcate those Religious and Moral Principles which are the 
 surest foundation of our security and happiness." — Speech from the throne, Aug. 9, 1845. 
 
 " Properly has its Duties aa well as its Rights." — The late Mr. Drummond. 
 
 This is the age of public companies. The principle of association is 
 one of the most powerful agents of modern times. Whatever object we 
 wish to accomplish, whether political or commercial, literary or religious, 
 the first step is to form a society. Those joint-stock associations that 
 involve the outlay of capital with a view to profit, are called public com- 
 panies ; and these form the subject of our present inquiries. 
 
 Public companies now occupy a distinguished place in our social econo- 
 my. We receive our education in schools and colleges founded by public 
 companies. We commence active life by opening an account with a 
 banking company. We insure our lives and our property with an insur- 
 ance company. We avail ourselves of docks, and harbours, and bridges, 
 and canals, constructed by public companies. One company paves our 
 streets, another supplies us with water, and a third enlightens us with gas. 
 At home, numerous luxuries are brought within our reach by difierent 
 companies. And if we wish to travel, there are railway companies, 
 and steamboat companies, and navigation companies, ready to whirl us 
 to eveiy part of the earth. And when, after all this turmoil, we arrive 
 at our journey's end, cemeteiy companies wait to receive our remains, 
 and take charge of our bones. 
 
 The question that now claims our attention is, whether these powerful 
 companies ought to be regarded as moral agents ? that is, whether they 
 are capable of virtuous and vicious actions, and, like individuals, are re- 
 sponsible to a Superior Power, who will reward or punish them according 
 to their works. 
 
 In examining this question, we shall propose the following inquiries : — 
 
 First. Ought public companies, like individuals, to be regarded as 
 moral agents, and therefore bound to perform moral and religious duties ? 
 
 Seccnd. What are those moral and religious duties which, as moral 
 agents, public companies are bound to perform ? 
 
 * This section was printed separately in the beginning of the year 1 846, under the 
 title of " The Moral and Religious l5uties of Public Companies." It was designed 
 . only " for private distribution among such of the writer's friends as were in a position 
 to influence the conduct of public conipanie.s." The fiivorable opinion of it expressed 
 by some of those friends, has induced me to publish it as a portion of the present 
 work. 
 
 387
 
 A Treatise on Banking. 
 
 Third. What are those rewards or punishments which may be ex- 
 pected to follow the performance or non-performance of those duties ? 
 
 First. We inquire, ought public companies, like individuals, to be 
 regarded as moral agents, and therefore bound to perform moral and re- 
 ligious duties ? 
 
 We assume, at the commencement of our inquiries, that nmnkir.ii, as 
 individuals, are moral agents, having had laws laid down for their gov- 
 ernment by a Superior Being, to whom they are responsible for their ac- 
 tions. They who deny this proposition (if such there be) are not the 
 persons for whose perusal these pages are designed ; and therefore we 
 will not ask them to accompany us any farther in our inquiries. 
 
 Assuming that mankind are responsible, as individuals, we propose to 
 inquire whether public bodies, as such, are subject to the same responsi- 
 bility. And here we would suggest the following considerations : — 
 
 1. Public companies are recognized as moral agents by the laws of 
 the country in which they are established. 
 
 Public companies have, by law, the same rights as individuals ; their 
 property is protected by the same laws as that of individuals. Theft or 
 fraud towards them is attended with the same punishment. They can 
 sue and be sued in the same courts of justice. The military and naval 
 forces protect them from external violence. They have the same com- 
 mercial privileges, and can buy and sell and get gain. The improve- 
 ments in the arts and sciences benefit them as well as individuals ; and 
 whatever new laws are passed by the Legislature confer upon them the 
 same benefits as upon individual citizens. Having the same rights, they 
 have necessarily the same duties as individuals. Equality of privilege 
 implies equality of moral obligation. Property has its duties as well as 
 its rights ; and if the property which to-day is in the hands of an indi- 
 vidual is transferred to-morrow into the possession of a thousand indi- 
 viduals, would it not carry with it the same amount of moral obligation .'* 
 Would not the possession of the property demand from the company the 
 same duties towards their servants, their fellow-citizens, their country, 
 and their God, which it previously demanded from the individual ? and 
 would they not be equally bound to the exercise of justice, kindness, be- 
 nevolence, and patriotism .'' The success of public companies is often at 
 the expense of individuals. Ought they not, then, to be called upon to 
 perform the social duties of the classes they have annihilated ? On these 
 principles the legislatures of all countries have imposed on public com- 
 panies the same duties as on individuals ; and in case of violations of 
 its laws, have rendered them subject to the same penalties. They have 
 thus been recognized as moral agents. 
 
 2. Public companies arc capable of sustaining many social relations 
 which are the foundation of moral duties. 
 
 The social relations of public companies are various. They may be 
 buyers or sellers, debtors or creditors ; they may employ others, or be 
 employed themselves ; they may be receivers or bestowers of favor ; they 
 may be friends or enemies, neighbours or strangers ; they may be wealthy 
 or indigent, in prosperity or adversity ; they may be influential or other- 
 wise ; they may be plaintiffs or defendants in a court of law, or be the 
 
 3<8
 
 Moral and Religious Duties. 
 
 accusing or the accused party in a criminal court. Every relationship 
 implies a corresponding duty ; and we contend that public companies, in 
 any of these relative positions, are bound to perform the same duties 
 which the same relations would impose upon individuals. 
 
 If it were necessary to quote Scripture, to show that relation implies cor- 
 responding duties, we might multiply quotations, — a few will suffice : — 
 
 " Have we not all one fiithcr ? Ilath not one God created us ? Why do we deal 
 treacherously every man against his brother'? " Mai. ii. 10. 
 
 " A son honoreth his father, and a servant his master : if, then, I be a father, where 
 is mine honor ? And if I be a master, where is my fear 1 " Mai. i. 6. 
 
 " It is not for kings to drink wine, nor princes strong drink." Prov. xxxi. 4. 
 
 " It was not an enemy that reproached me ; then I could have borne it : but it was 
 thou, a man mine equal, my guide, and my acquaintance." Ps. iv. 12, 13. 
 
 " Thou shalt neither vex a stranger, nor oppress him : for ye were strangers in the 
 land of Egypt." Exod. xxii. 21. 
 
 " Am I a Jew ? Thine own nation have delivered thee unto me." John xviii. 35. 
 
 " Ye call me Master and Lord : and ye say well ; for so I am. If I, then, your Lord 
 and Master, have washed your feet ; ye also ought to wash one another's feet." John 
 xiii. 13, 14. 
 
 " There was a certain creditor which had two debtors : the one owed five hundred 
 pence, and the other fifty. And when they had nothing to pay, he frankly forgave 
 them both. Tell me, therefore, which of them will love him most." Luke vii. 41, 42 
 
 " Shouldst not thou also have had compassion on thy fellow-servant, even as I had 
 pity on thee 1 " Matt, xviii. 33. 
 
 " Which now of these three, thinkest thou, was neighbour to him that fell among 
 thieves ? And he said, He that showed mercy on him." Luke x. 36. 
 
 " Love as brethren." 1 Pet. iii. 8. 
 
 " Sittest thou to judge me after the law, and commandest me to be smitten contrary 
 to the law 1 " Acts xxiii. 3. 
 
 " What hast thou that thou didst not receive ? now if thou didst receive it, why dos 
 thou glory, as if thou hadst not received it ? " 1 Cor. iv. 7. 
 
 " If any man see thee which hast knowledge sit at meat in an idol's temple, shall not 
 the conscience of him which is weak be emboldened to eat those things which are 
 offered to idols ; and through thy knowledge shall the weak brother perish 1 " 1 Cor. 
 viii. 10, 11. 
 
 " Art thou a Master of Israel, and knowest not these things ? " John iii. 10. 
 
 " Thou that teachest another, teachest not thou thyself 1 " Rom. ii. 21. 
 
 " If thou, being a Jew, livest after the manner of the Gentiles, and not as do the 
 Jews, why compellest thou the Gentiles to live as do the Jews 1 " Gal. ii. 14. 
 
 All these quotations refer to certain relations, and intimate certain 
 duties. They serve to prove the general principle, that every relation 
 implies a corresponding duty ; and hence we infer, that so far as public 
 companies are capable of sustaining the same relations, they are bound 
 to the performance of the same duties. 
 
 3. Public companies sustain those relations to the Deity which imply 
 an obligation to the performance of moral and religious duties. 
 
 We have considered public companies in their relation to the com- 
 munity in which they are established ; in relations they may sustain to in- 
 dividual members of that or any other community ; we shall now consider 
 them in their relation to the Deity. This forms the chief ground of 
 moral and religious duty. Their relation to the Deity is a relation of 
 dependence. It will not be denied that for every talent necessary to 
 conduct their operations, and for all the success which may attend their 
 exertions, public bodies are as dependent as individuals upon the kindness 
 of Providence. Every good and every perfect gift cometh down from 
 
 389
 
 A Treatise on Banking. 
 
 tne Father of Lifjht. (James i. 17.) Their relation to the Deity is also 
 a relation of obligation. They have received favors; as recipients of 
 favors it is their duty to be grateful, and this duty is the more obligatory 
 in proportion to tlie greatness and condescension of their Benefactor. 
 Their relation to the Deity is also a relation of responsibility. They 
 possess ■wealth, influence, power. Providence never bestows these talents, 
 without holding the parties on whom they are bestowed responsible for 
 their proper use. Those who duly improve the talents with which Provi- 
 dence has intrusted them, will have those talents increased, and be re- 
 warded by the Divine approbation. Those who neglect to use these tal- 
 ents, are held responsible for their neglect, and will be punished for their 
 inactivity. (Luke xix. 13-26.) We ^ave no reason to suppose that 
 public companies are excluded from the general rules of the Divine ad- 
 ministration. As far, then, as they are endowed with the same talents 
 as individuals, so far must they be considered as subject to the same 
 responsibilities. From these considerations we infer, that public com- 
 panies, like individuals, are moral agents, 
 
 4. Public companies are analogous to other collective bodies who are 
 acknowledged to be moral agents. 
 
 It will not be denied that a nation may declare an unjust war, may 
 carry it on in a crnel manner, may treat a conquered nation with oppres- 
 sion, or may conduct a treaty of peace with duplicity and fraud. Nor 
 will it be denied, that a nation may become immoral by the extinction of 
 moral feeling in its rulers, and throughout the population. 
 
 If, then, nations are capable of performing virtuous or vicious actions, 
 then are they moral agents ; to be rewarded or punished according to 
 their actions. The doctrine of national responsibility is thus stated by 
 Moses : — 
 
 " If ye will walk in my statutes, and keep my commandments, and do them ; then I 
 will give you rain in due season, and the land shall yield her increase, and the trees of 
 the field shall yield their fruits, and your threshinj^ shall reach unto the vintage, and 
 the vintage shall reac'h unto the sowing time : and ye shall eat your bread to the full, 
 and dwell in your land safely. And I will give peace in the land, and ye shall lie 
 down, and none shall make you afraid; and I will rid evil beasts out of the land, 
 neither shall the sword go through your land. And ye shall chase your enemies, and 
 they shall fall before you by the sword. And I will set my tabernacle among you, and 
 will be your God, and ye shall be my people." Lev. xxvi. 3-12. 
 
 " But if ye will not hearken unto me, and will not do all these commandments, I 
 also will do this unto you ; I will aj)point over you terror, consumption, and the burn- 
 ing ague, that shall consume the eyes, and cause sorrow of heart : and ye shall sow 
 your seed in vain, for your enemies shall cat it ; and I will set my face against you, 
 and ye shall be slain before your enemies ; they that hate you shall reign over you ; 
 and ye shall flee when none pursueth you. And if ye will not yet for all this hearken 
 unto me, then I will punish you seven times more for your sins." Lev. xxvi. 14- 18 ; 
 Dent, xxviii. 1-15; Neh. ix.; Jer. v. 23-28: vii. 5-7; xviii. 7-10; xxii. 2-9; 
 Ezek. xxii.; Matt, xxiii. 34-38. 
 
 The Jewish history presents the most remarkable instance on record of 
 a nation being rewarded for their righteousness and punished for their dis- 
 obedience. The nations they conquered were subjected to the same dis- 
 cipline, and it is expressly stated that those nations were punished for 
 their sins. And those who have studied the philosophy of history will 
 
 390
 
 Moral and Religious Duties. 
 
 have observed, that nations have risen and fallen in political greatness as 
 they have risen and fallen in their observance of the principles of mo- 
 rality and religion. 
 
 On this subject we might quote the language of historians, of moralists, 
 of philosophers, and of theologians ; but we prefer citing the language of 
 a monarch, especially as that monarch is our own. Surrounded by her 
 nobles, her senators, her councillors, her judges, her generals, and her 
 adjnirals, — Queen Victoria has declared from the throne, " Religious 
 
 AND MORAL PRINCIPLES ARE THE SUREST FOUNDATION OF OUR SECURITY 
 AND HAPPINESS." 
 
 As, then, large bodies of men, like nations, are rewarded or punished 
 in their collective capacity, for their virtuous or vicious actions, it would 
 seem to follow, that smaller bodies of men, like public companies, may 
 be subjected to the same moral discipline. 
 
 A public company, like a nation, is composed of a number of individ- 
 uals who have a government for the regulation of their affairs, and whose 
 acts are considered as the acts of the whole body. It is true that a pub- 
 lic company is composed of a smaller number of persons than a nation, 
 but that cannot affect the moral character of its actions. It is also true, 
 that while a nation must always act through its government, a public 
 company may, and often does, at the general meeting of its shareholders, 
 act independently of its government ; but neither can this alter its moral 
 agency ; for whether the form of government be aristocratical or democrat- 
 ical, the duties of a nation, or of a public company, remain the same.* 
 
 In opposition to this doctrine, it may be contended that, to render public 
 bodies of men responsible in their collective capacity, would be destruc- 
 tive of personal or individual responsibility. But this is not the case. A 
 nation may be punished for its national crimes, and yet the individual 
 who may have caused these crimes may sustain an individual punishment. 
 Thus Jeroboam, Ahab, and other kings of Israel, were individually pun- 
 ished, while, at the same time, the nation was also punished in its collec- 
 tive capacity. So a public company may be punished or rewarded for its 
 actions, while, at the same time, any individual who caused these actions 
 may also be personally rewarded or punished. It may, too, be objected, 
 that if a public company is to be punished as such for its acts, then all the 
 partners would share in the punishment, though many of them may have 
 been quite innocent of the crime. To this we answer, that the same ob- 
 jection would apply to the doctrine of national responsibility.t It is not 
 
 * In this discussion we consider public companies as corporations, and inquire what 
 duties they, as corporations, owe to other parties. The several duties of directors, 
 officers, and shareliolders, do not He within the range of our inquiries. 
 
 t The logical reader need not be reminded, that in arguments from analogy it is a 
 sufficient answer to an objection to show that the objection appHes with equaf force to 
 the doctrine from which the analogy is drawn. Thus, in the text, the moral responsi- 
 bility of nations is assumed as admitted by all parties, and therefore requiring no fur- 
 ther proof From the resemblance or analogy between the two cases, we infer the 
 moral responsibility of public companies. It is therefore a sufficient answer to any 
 objection against the latter doctrine, to show that it will equally apply to the former. 
 Indeed, the more numerous the objections, if they will apply equally in both cases, the 
 more the argument is strengthened ; as they are confirmatory of the soundness of the 
 analogy. 
 
 2 A 391
 
 A Treatise on Banking. 
 
 possible in the case of a large body of men for every individual to take 
 part in its actions. The act of the authorized government, or of the 
 majority of the members, must be regarded as the act of the whole com- 
 munity, and every individual must share in the prosperity or adversity re- 
 sulting from such acts. 
 
 It may further be observed, that it is not inconsistent with the principles 
 of the Divine government for persons to suffer for the wickedness, or to 
 be rewarded for the righteousness, of those with whom they are sociall) 
 connected : — 
 
 " I the Lord thy God am a jealous God, visiting the iniquity of the fathers upon the 
 children unto the third and fourth generation of them that hate me ; and showing 
 mercy unto thousands of them that love me, and keep my commandments." Exod. 
 XX. 5, 6. 
 
 In our own day, we witness numerous instances of children possessing 
 wealth, mental cuUivation, and influence in society through the virtues of 
 their parents. And also, not a few cases of children being reduced to 
 poverty and degradation through the vices of their parents. Children 
 suffer through the conduct of their parents, and parents through the con- 
 duct of their children ; masters by their servants, and servants by their 
 masters. In fact, it is not possible for any individual, however obscure, to 
 be either virtuous or vicious without in some way promoting the happiness 
 or misery of some person besides himself It is, therefore, no valid ob- 
 jection to the doctrine of the moral responsibility of public companies 
 that it renders all the partners answerable for the conduct of the majority. 
 In fact, human governments act upon this principle. If any company 
 were to incur penalties to the state, those penalties would be enforced 
 against the whole property of the company, though many individual part- 
 ners might be quite unconscious of the offence by which those penalties 
 were incurred. 
 
 We might further confirm our doctrine by tracing the analogy between 
 public companies and families. 
 
 " Pour out Thy fury upon the /(nnilirs that call not on Thy name." Jcr. x. 2,5. 
 
 " In that day I will perform against Eli all things I have spoken concerning his 
 house; for I have told him that I will judge his house for ever, for the ini<iuity which 
 he knoweth ; because his sons made themselves vile and he restrained them not. And 
 therefore I have sworn unto the house of Eli. that the iniquity of Eli's house shall not 
 be purged with sacrifice nor ortering for ever."' 1 Sam. iii. 12- 14. 
 
 " And the ark of the Lord continued in the house of Obcd-edom the Gittite three 
 months : and the Lord blessed Obcd-edom, and all his household ; and it was told 
 King David, saying. The Lord hath blessed the house of Obcd-edom and all that pcr- 
 taineth unto him, because of the ark of God." 2 Sam. vi. 11, 12. 
 
 '■And Jeremiah said unto the house of the llccliabites, Thus saith tlie Lord of Hosts, 
 the God of Israel; liecausc ye have obeyed the commaiulmcnt of Jonadab your fa- 
 ttier, and kept all his prece])ts, and done according to all that he hath commanded 
 you: therefore thus saith the Lord of Hosts, the God of Israel; Jonadab, the son of 
 Rechab, shall not want a man to stand before me for ever." Jer. xxxv. 18, 19. 
 
 We might adduce other declarations respecting the families of David 
 .Teroboam, Ahab, and others. It may be objected, that in diese cases th( 
 families were rewarded or pimished for the acts of the head of the fami- 
 ly, and not for their own. It appears, however, that the families con- 
 curred in the actions of their head. VVhen this was not the case, the 
 
 392
 
 Moral and Religious Duties, 
 
 exception is mentioned (1 Kings xiv. 13), and in others it is expressly 
 stated tliat the reward or punishment of tlie family would in some degree 
 depend upon their own conduct (Ps. Ixxxix. 30-33). 
 
 The doctrine of collective responsibility in the present world might be 
 still further confirmed by references to the punishments inflicted on partic- 
 ular cities. We will refer only to Nineveh and Jerusalem. In the former 
 case an act of general humiliation obtained a remission, or at least a 
 postponement, of the punishment due to their wickedness ; and in the 
 latter, their sin in rejecting the Gospel was visited with a signal punish- 
 ment. 
 
 " The word of the Lord came unto Jonah, saying, Arise, go to Nineveh, that great 
 
 city, and cry against it ; for their wickedness is come up before me And he cried 
 
 and said. Yet forty days, and Nineveh shall be overthrown. So the people of Nine- 
 veh believed God, and proclaimed a fast, and put on sackcloth, from the greatest of 
 them even to the least of them. For word came unto the king of Nineveh, and he 
 arose from his throne, and he laid his robe from him, and covered him with sackcloth, 
 and sat in ashes. And he caused it to be proclaimed and published through Nineveh 
 by the decree of the king and his nobles, saying. Let neither man nor beast, herd nor 
 flock, taste any thing : let them not feed, nor drink water : but let man and beast be 
 covered with sackcloth, and cry mightly unto God : yea, let them turn every one from 
 his evil way, and from the violence that is in their hands. Who can tell if God will 
 turn and repent, and turn away from his fierce anger, that we perish not ? And God 
 saw their works, that they turned from their evil way ; and God repented of the evil 
 that he had said that he would do unto them ; and he did it not." Jonah i. 2 ; iii. 4-10. 
 
 " And when he was come near, he beheld the city, and wept over it, saying. If thou 
 hadst known, even thou, at least in this thy day, the things which belong unto thy 
 peace ! but now they are hid from thine eyes. For the days shall come upon thee 
 that thine enemies shall cut a trench about thee, and compass thee round, and keep 
 thee in on every side, and shall lay thee even with the ground, and thy children within 
 thee; and they shall not leave in thee one stone upon another; because thou knewest 
 not the time of thy visitation." Luke xix. 41 -44 ; Matt, xxiii. 37, 38. 
 
 Before quitting this branch of our inquiry, we may notice one practical 
 application of the doctrine of collective responsibility. It is, that every 
 individual member of a public body, whether a nation, a family, or a com- 
 pany, should induce that body to walk in the path of uprightness. For 
 should they not do so, he will have to bear a portion of the collective 
 punishment, though he may not personally have taken any active part in 
 the crime (Matt. xxiv. 19). 
 
 Secondly. — Having shown that public companies are moral agents, 
 and consequently bound to the performances of certain duties, we shall 
 now inquire what are those duties which, as moral agents, public compa- 
 nies are bound to perform. 
 
 We shall not attempt to enumerate all these duties, but merely make a 
 selection of the most important, and these we shall classify as, I. The 
 duties of patriotism ; II. The duties of social relationship ; III. The du- 
 ties of religion ; IV. The duties of benevolence. 
 
 I. The duties of patriotism. 
 
 By the duties of patriotism we mean those duties which a public com- 
 pany owes to the state. Patriotism is the love of one's country, or, more 
 properly, the love of one's nation. Public spirit is a willingness to sacri- 
 fice a portion of one's time, property, or comfort, to promote the happiness 
 
 393
 
 A Treatise on Banking. 
 
 of one's fellow-citizens. These are duties obligatory on every citizen 
 (Ps. cxxxvii. ; Neh. i. 4 ; ii. 3 ; Rom. ix. 3), and consequently binding on 
 every collective body of citizens. VVe repudiate the doctrine that a pub- 
 lic company has only to attend to the interest of its proprietors, regardless 
 of the effect its measures may have on the public weal. This would be 
 a violation of duty on tlie part of an individual, and still more so on the 
 part of a public company. For they have received from the Legislature 
 special privileges to enable them to carry on their operations. These 
 privileges have been granted with a view to the promotion of the public 
 interest. If, then, these privileges are employed to the injury of the 
 public, then is there "not merely a violation of the duty of citizenship, 
 but a further violation of duty by the misapplication of privileges con- 
 ferred by the Legislature. 
 
 " Unto whomsoever much is given, of him shall much he required ; and to -whom 
 men have committed much, of him they will ask the more." Luke xii. 48. 
 
 In proportion as the Legislature has conferred privileges, in such pro- 
 portion it may be expected that they who have received these privileges 
 will be active in promoting the public interest. The possession of privi- 
 leges implies an increased obligation to perform certain duties. 
 
 The first of these duties is to obey the laws, A public company should 
 abstain from smuggling and all other illicit proceedings, should make cor- 
 rect returns to government, and pay its fair proportion of the property- 
 tax and of all other duties. 
 
 " Render unto Caesar the things which are Cassar's. Render to all their dues ; 
 tribute, to whom tribute is due ; custom, to whom custom ; fear, to whom fear ; honor, 
 to whom honor." Rom. xiii. 7. 
 
 Another duty is to enforce the laws upon others. Individuals some- 
 times abstain from prosecuting frauds upon themselves, from a misap- 
 plied feeling of compassion, an unwillingness to incur odium, or the fear 
 of expense ; but none of these feelings are sufficient to justify a public 
 company in abstaining from this duty. Such a course is injurious to the 
 public, by holding out inducements to the commission of similar crimes. 
 
 " Because sentence against an evil work is not executed speedily, therefore the 
 heart of the sons of men is fully set in them to do evil." Eccles. viii. 11. 
 
 It is also the duty of public companies to support the cause of order 
 and of due submission to constituted authorities, the rights of property, 
 the supremacy of the law, the impartial administration of public justice, 
 and to honor the constitutional government of the country, by whatever 
 party it may be administered. 
 
 " Put them in mind to be subject to principalities and powers, to obey magistrates, 
 to be ready to every good work, to speak evil of no man, to be no brawlers, but gentle, 
 showing all meekness unto all men." Tit. iii. 1. 2. 
 
 Another duty is to conduct the affairs of the company on such a liberal, 
 yet prudent scale of expense, as shall afford encouragement to the indus- 
 try, trade, and fine arts of the country. Solomon says, — 
 
 " Prepare thy work without, and make it fit for thyself in the field, and afterwards 
 build tiiy house." Pro v. xxiv. 27. 
 
 394
 
 Moral and Religious Duties. 
 
 Which means, if we understand it rightly, " Get your money before you 
 spend it ; but having got it, live in a scale of expense corresponding to 
 your means ; afterwards build thy house," Individuals may be justified 
 in living much within their means, in order to provide for old age, or for 
 the proper settlement of their children ; but public companies cannot have 
 such motives for conducting their establishments with an unsuitable econ- 
 omy. But, above all, it is the duty of a public company to maintain, in 
 all its transactions, a high-toned morality. 
 
 '• Righteousness exalteth a nation." Prov. xiv. 34. 
 
 A departure from moral rectitude is altogether inexcusable in a public 
 company. As all their actions are presumed to be the result of previous 
 deliberations, they cannot plead in excuse, as individuals do, the power of 
 passion, the impulse of the moment, or the force of habit. In proportion 
 to the weakness or the absence of temptation, in such proportion would 
 their conduct be the more criminal (Prov. vi. 30) ; while their wealth and 
 influence would render their example more extensively injurious to the 
 public morality. If parties of high station in society depart from the 
 strict rule of duty, those of inferior station will deviate still more widely 
 
 " If a ruler hearken to lies, all his servants are wicked." Prov. xxix. 12. 
 
 II. The duties of social relationship. 
 
 The social duties of public companies are the same as those of individ- 
 uals who maintain the same relations. These duties are clearly stated in 
 the Holy Scriptures. The Bible is a code of laws, — not a book of ad- 
 judged cases. It lays down the principles of human actions, but leaves 
 the application of these principles to the dictates of reason and of con- 
 science. We might read through the Bible, and not find a chapter headed 
 " The Duties of Public Companies." In this case we endeavour to ascer- 
 tain, in the fiist place, what are the duties of individuals. Then we take 
 the principles of these duties and apply them to the acts of public com- 
 panies. The principles of moral duty undergo no change ; but the cir- 
 cumstances of human society are perpetually changing, and hence the 
 correct, application of these principles is sometimes a matter of difficulty. 
 We shall here, in the first place, state in the language of Scripture the 
 principles of some of our social relationships, and then make a practical 
 application of them. There are, doubtless, other principles y/.e have not 
 mentioned, and those we have mentioned may be applied, and are applied, 
 in practice, to many other cases besides those specified. 
 
 1. These are the things that ye shall do : " Speak ye every man the 
 TRUTH to his neighbour, execute the judgment of peace and truth in 
 your gates, and let none of you imagine evil in your hearts against his 
 neighbour, and love no false oath ; for all these are things that I hate, 
 saith the Lord." Zech. viii. 16, 17. 
 
 Insert no erroneous statements in your prospectus ; make no incorrect 
 calculations in order to deceive a parliamentary committee ; circulate no 
 unfounded rumors for the purpose of affecting the market value of your 
 shares ; and let your annual reports contam nothing but the truth 
 
 395
 
 A Treatise on Banking. 
 
 " Thon shalt not raise a false report; put not thy hand with the wicked, to be an 
 anrif^hteous witness." Exod. xxiii. 1. 
 
 " The getting of treasures by a lying tongue is a vanity tossed to and fro of them 
 that seek death." Prov. xxi. 6. 
 
 2. Ye shall not steal, neither deal falsely, neither He one to an- 
 other." Lev. xix. 11. 
 
 Be honest and upright in all your dealings, let your charges be fair and 
 just, and be sincere and straightforward in all your pecuniary' transac- 
 tions. 
 
 " Thou shalt not have in thy bag divers weights, a great and a small. Thou shalt 
 not have in thine liousc divers measures, a great and a small. But thou shalt have a 
 peifect and just weight, a perfect and just measure shalt thou have ; that thy days 
 may be lengthened in the land which the Lord thy God giveth thee." Deut. xxv. 
 13-15. 
 
 " What man is he that desircth life, and loveth many days, that he may see good ? 
 Keep thy tongue from evil, and thy lips from speaking guile. Depart from evil and 
 do good; seek peace, and pursue it." Ps. xxxiv. 12-14; 1 Pet. iii. 10, 11. 
 
 All promises or engagements must be faithfully kept, even when the 
 performance is injurious to tiie interests of the company. 
 
 " That which is gone out of thy lips, thou shalt keep and perform." Deut. xxiii. 23. 
 " He sweareth to his own hurt and changeth not." Ps. xv. 4. 
 
 The Israelites were punished with three years of famine, because one 
 of their kings attempted to violate a treaty into which they had been 
 drawn by false representations. Josh. iv. 25 ; 2 Sam. xxi. 1. 
 
 3. "If iniquity be in thy hand, put it far aiuaij, and let not wickedness dwell in thy tah- 
 efiacles." Job. xi. 14. 
 
 If any of the servants of a public company are found wanting in integ- 
 rity, they should immediately be dismissed, and on no account be rein- 
 stated. And if any of their professional agents act dishonestly, even to 
 benefit the company, they should not be employed again. 
 
 " He that walketh in a perfect way, he shall serve me. He that worketh deceit 
 shall not dwell within my house ; he that tcUcth lies shall not tarry in mv sight." 
 Ps. ci. 6, 7. 
 
 Banking companies should not take the accounts of disreputable par- 
 ties ; and a fraudulent bankrupt should not be allowed to re-open his ac- 
 count, even should he plead that, although he had cheated all his other 
 creditors, he had not cheated his banker. 
 
 " Shouldst thou help the ungodly, and love them that hate the Lord, therefore is 
 wrath upon thee from before the Lord." 2 Chron. xix. 2. 
 
 " Dcjiart from me, ye evil doers, for I will keep the commandments of my God " 
 Ps. cxix. 115. 
 
 In making advances, banking companies should consider the moral 
 cnaracter of the party with whom they deal, as an element of their secu- 
 rity ; and should more roadily airord accommodation to j)arties having 
 such a character than to those who are without it. " The wicked borrow- 
 eth and payeth not again." Ps. xxxvii. 21. 
 
 Public companies sliould do nothing that would be considered dishonor- 
 at.»lc and disreputable in an individual member of the company. The 
 
 3U6
 
 Moral and Religious Duties. 
 
 moral character of an action cannot be changed by the number of persons 
 who may commit it. 
 
 " Though hand join in hand, the wicked shall not go unpunished." Prov. xi. 21. 
 " Fire shall consume the tabernacles of bribery." Job xv. 34. 
 " Abstain from every appearance of evil." 1 Thess. v. 22. 
 
 Public companies should not listen to plans and schemes proposed for 
 their adoption by parties known to be deficient in moral principle ; nor 
 should they hire agents to do what they would not do themselves. 
 
 "Evil communications corrupt good manners. 1 Cor. xv. 33. — Lord, who shall 
 abide in thy tabernacle '? who shall dwell in thy holy hill ? He that walketh uprightly, 
 and worketh righteousness, and spcaketh the truth in his heart. He that backbiteth not 
 with his tongue, nor doeth evil to his neighbour, nor taketh up a reproach against his 
 neighbour. In whose eyes a vile person is contemned ; but who honoreth them that 
 fear the Lord." Ps. xv. 1 -4. 
 
 4. "Speak not evil one of another." James iv. 11. 
 
 Public companies should not speak unjustly or unkind of each othej. 
 " Love as brethren." 1 Pet. iii. 8. But this does not prohibit their speak- 
 ing the TRUTH of each other on proper occasions, even when the truth 
 may be unpleasant or injurious to the party about whom it is spoken. It 
 may sometimes become the duty of a respectable and honorable compa- 
 ny to expose the fraudulent and deceitful practices of other companies : 
 we are not forbidden to bear witness — but only false witness — against 
 our neighbour. " By mercy and truth iniquity is purged." Prov. xvi. 6. 
 
 5. " Fear thou the Lord and the King, and meddle not with them that 
 are given to change.'''' Prov. xxiv. 21. 
 
 A public company slwuld not meddle with politics : nor let the influ- 
 ence of the company be employed to produce any political change. It 
 should not too frequently change the principles and maxims of its own gov- 
 efrnment. Fixed rules and regulations are to a public company what 
 habits are to an individual : they insure a uniformity of conduct, and are 
 equally essential to success. A steady adherence to fixed principles is 
 the surest road to prosperity. A restless discontent with moderate profits, 
 and an attempt to get suddenly rich, by reckless speculation, has been the 
 ruin of many companies as well as individuals. Prov. xxviii. 20 -22. 
 Nor should they change too often the terms on which they transact busi- 
 ness with the public, as that occasions much inconvenience. Nor change 
 too frequently the rate of their dividend, as that may lead to gambling in 
 their shares. Better pay always the same rate of dividend, and let the 
 surplus profit of one year be placed to a reserved fund to supply the defi- 
 ciences of future years. 
 
 " A double-minded man is unstable in all his ways." James i. 8. 
 
 " Unstable as water, thou shalt not excel." Gen. xlix. 4. 
 
 " Trust in the Lord with all thine heart, and lean not unto thine own understand 
 ing. Be not wise in thine own eyes. Fear the Lord, and depart from evil." Prov 
 iii. 5-7. 
 
 6. " Thou shalt NOT avenge, nor bear any grudge against the children 
 of thy people, but thou shalt love thy neighbour as thyself.'''' Lev. xix. 18. 
 
 397
 
 A Treatise on Banking. 
 
 In cases of dispute or litigation, do not let your judgment be blinded by 
 solf-interest ; but judge impartially, and do unto others as, in a similar 
 case, you would wish to be done unto yourself. Use no means of hostil- 
 ity, or annoyance, or rivalry towards other companies which you would 
 condemn as unjust or unfair were they used against yourself. Recom- 
 mend to others no schemes, or speculations, or investments, in which you 
 would not be willing to take any share yourself. Give no false testimonials 
 of character, so as to induce others to employ parties whom you would 
 not employ yourself. If you have received favors from other companies, 
 or from individuals, do not let your thankfulness evaporate in mere votes 
 of thanks, or acclamations of applause, but render to others the same tok- 
 ens of gratitude which, under the same circumstances, you would expect 
 to receive yourself. " All things whatsoever ye would that men should 
 do unto you, do ye even so to them, for this is the law and the prophets." 
 Matt, vii!^ 12. 
 
 7. " If thine enemy he hungry, give him bread to eat ; and if he be 
 thirsty give him water to drink ; for thou shalt heap coals of fire upon his 
 head, and the Lord will reward thee." Prov. xxv. 21, 22. 
 
 If there be a run on a banking company, the rival banking companies 
 should render assistance, and not suffer a solvent bank to stop payment for 
 want of temporary support. All hostile companies should render assist- 
 ance to each other on the occurrence of calamities, to which all are liable. 
 
 " Eejoice not when thine enemy falleth, and let not thine heart be glad when he 
 stumbleth, lest the Lord see it, and it displease him, and he turn away his wrath from 
 him." Prov. xxiv. 17, 18- It is quite right to contend against our enemies, and to 
 rejoice when we are successful. "I will extol thee, Lord, for thou hast lifted me 
 up, and hast not made my foes to rejoice over me." Ps. xxx. 1. 
 
 But it is not right to rejoice when the wrath of Providence permits 
 them to fall into calamity, or to stumble into acts of vice or folly. A 
 railway company should not rejoice when accidents occur on a rival line ; 
 nor a banking company when a rival bank has made a large amount of 
 bad debts ; nor an insurance society when extensive fires or numerous 
 deaths have absorbed the funds of a rival society ; nor a mining associa- 
 tion when accidents have damaged the mines belonging to a rival asso- 
 ciation. 
 
 " He that is glad at calamities shall not be unpunished.'' Prov. xvii. 5. 
 
 If your enemies treat you in a different manner, you sliould not imitate their exam- 
 ple, but forgive them. " Recompense no man evil for evil.'' l\om. xii. 17. 
 
 '"Let all bitterness, and wrath, and anger, and clamor, and evil S])eaking, be put 
 away from you, with all malice ; and be ye kind one to another, tender-hearted, for- 
 giving one another, even as God for Christ's sake hath forgiven you." Eph. iv. 31, 32. 
 
 8. " If any man will stie thee at the law, and take away thy coat, let 
 him have thy cloak also.'''' Matt. v. 40. 
 
 (1.) If he have an equal claim to the coat and the cloak, and the law 
 decides that he is justly entitled to the coat, give him the cloak also, 
 though he do not claim it. Do what is just, though the law may not 
 require it, and never have recourse to a legal quibble in order to baffle a 
 just demand. 
 
 398
 
 Moral and Religious Duties. 
 
 " The thoughts of the righteous are right, but the counsels of the wicked are de- 
 ceit." Prov. xii. 5. 
 
 (2.) Do not go to law without mature deliberation, 
 
 " Go not forth hastily to strive, lest thou know not what to do in the end thereof, 
 when thy neighbour hath put thee to shame." Prov. xxv. 8. 
 
 (3.) Nor yet about matters of trifling importance which are no practi- 
 cal injury. 
 " Strive not with a man without cause, if he have done thee no harm." Prov. iii. 30. 
 
 (4.) Nor yet from vindictive motives. 
 
 " Say not thou, I will recompense evil, but wait on the Lord, and he shall save 
 thee." Prov. xx. 22. 
 
 (5.) Never go to law about matters in which you have no direct in- 
 terest. 
 
 " He that passeth by, and meddleth with strife belonging not to him, is like one that 
 taketh a dog by the ears." Prov. xxvi. 17. 
 
 (6.) Do not go to law with a man merely because he is poor, and 
 therefore unable to contend against your large capital ; nor trespass on 
 any man's rights because he cannot atTord the expense of obtaining legal 
 redress. 
 
 " Rob not the poor because he is poor, neither oppress the afflicted in the gate, for 
 the Lord will plead their cause, and spoil the soul of those that spoiled them." Prov. 
 xxii. 22, 23. 
 
 (7.) It will be wise and honorable to bring the suit to a close as soon 
 as you can. 
 
 " It is an honor for a man to cease from strife, but every fool will be meddling." 
 Prov. XX. 3. 
 
 (8.) If you reject a just and honorable compromise, you may lose the 
 action, and you will then not only have to pay the expense of the suit, 
 but you will have put yourself in a disreputable poaition. 
 
 "Agree with thine adversary quickly, while thou art in the way with him, lest at 
 any time the adversary deliver thee to the judge, and the judge deliver thee to the offi- 
 cer, and thou be cast into prison. Thou shalt by no means come out thence till thou 
 hast paid the uttermost farthing." Matt. vi. 25, 26. 
 
 (9.) Do not indulge a fondness for litigation. 
 
 " He loveth transgression that loveth strife, and he that exalteth his gate seeketh 
 destruction." Prov. xvii. 19. 
 
 (10.) If you have to sue any party criminally, enforce the law with 
 kindness and forbearance. 
 
 " Execute true judgment, and show mercy and compassion, every one to his broth- 
 er." Zech. vii. 9. 
 
 It is quite possible to execute judgment and show mercy at the same 
 time. 
 
 (11.) If called upon to arbitrate between contending parties, act justly 
 and impartially. 
 
 " Thou shalt not respect the person of the poor, nor honor the person of the mighty '? 
 but in righteousness shalt thou judge thy neighbour." Lev. xix. 15. " Thou shalt not 
 
 399
 
 A Treatise on Banking. 
 
 wrest judgment : thou shalt not respect persons : neither take a gift ; for a gift doth 
 blind the eyes of the wise, and per^•ert the words of the righteous.'' Ueut. xvi. 19. 
 
 (12.) Public companies should employ none but honorable men to 
 plead anv cause in which they may be engaged. Advocates who are 
 noted for legal quibbling, attacking private character, or browbeating wit- 
 nesses, should not be engaged ; and, more especially, the standing coun- 
 sel of a public company should be a man of high moral and religious 
 principle. 
 
 '• What hast thou to do to declare my statutes 1 Thou givest tliy mouth to evil, and 
 thy tongue frameth deceit. I's. 1. lC-19. — They speak vanity every one with his 
 neighbour : with tiattcring lips and with a double heart do they speak. The Lord shall 
 cut off all flattering lips, and the tongue that speaketh proud things: who have said, 
 With our tongue will we prevail : our lips are our own : who is Lord over us ? Ps. 
 xii. 2-4. — There is that speaketh like the piercings of a sword : but the tongue of 
 the wise is healtli. The lip of truth shall be established for ever : but a lying tongue 
 is but for a moment. Deceit is in the heart of them that imagine evil : but to the 
 counsellors of peace is joy." Prov. xii. 18-20. 
 
 9. " Be ye all of one mind, having compassion one of another ; love as 
 brethren ; he pitiful, be courteous.'''' 1 Pet. iii. 8. 
 
 Be of one mind. — Public companies should entertain a good feeling 
 towards each other, and endeavour to promote each other's interest. On 
 proper occasions, they ought to unite their influence for the protection of 
 their mutual rights. 
 
 Be courteous. — All the servants of the company who come into com- 
 munication with the public should be instructed to behave with the utmost 
 courtesy ; and if they do so, they are entitled to courtesy in return. No 
 shareholder should address a servant of the company as if he were his 
 own individual servant ; nor should he, in his transactions with the com- 
 pany, expect any undue attention or preference on account of his being a 
 shareholder. When a company lias occasion, in its annual report or pub- 
 lic documents, to refer to the proceedings of other companies, it should 
 always be done in the language of courtesy. 
 
 Be pitiful {full of pity). — In some cases, life policies become forfeit- 
 ed through the inability of the parties to pay the premiums, and sometimes 
 by the party meeting his death in a way that deprives his relations of all 
 claim on the company. In cases like these, insurance companies should 
 take all the circumstances into consideration, and he pitiful. When an 
 honest tradesman fails, and his creditors agree to take a composition, the 
 banking company should not refuse to accept the terms proposed, but 
 should be pitiful. When the servant of a company has inadvertently 
 committed an error, not involving any moral delinquency, let him not be 
 too hastily dismissed, and thus placed for life in a lower condition, but be 
 pitiful. When servants of the company, from sickness or old age, have 
 become less eflective than formerly, let arrangeinents be made for render- 
 ing their duties proportionate to their diminished strength. Recollect they 
 were once young and healthy, and you had then the benefit of their ser- 
 vices, — do not treat them harshly now. Be pitiful. 
 
 10. " Use hospitality one to another, without grudging." 1 Pet. iv. 9. 
 
 400
 
 Moral and Religious Duties. 
 
 It is proper that public companies, on particular occasions, such, for ex- 
 ample, as the opening of a new line by a railway company, should enter- 
 tain their friends and others connected with the company. Also, that the 
 companies should use hospitality " one towards another." Social inter- 
 course tends to promote friendly feelings ; and a friendly feeling between 
 the principal officers and members of different companies tends to pro- 
 mote a friendly feeling between the companies themselves. It is also a 
 good practice to give an annual dinner to all the servants of the company. 
 The words " without grudging " may suggest that when the company can 
 afford it, these entertainments should be given in a rather handsome style, 
 without a too strict regard to economy. On these festive occasions, the 
 humbler servants and others connected with the company should not be 
 forgotten. 
 
 " When thou makest a feast, call the poor, the maimed, the lame, the blind. And 
 thou shalt be blessed : for they cannot recompense thee ; for thou shall be recom- 
 pensed at the resurrection of the just." Luke xiv. 13, 14. 
 
 11. "Thou shalt not oppress a stranger, for ye know the heart of a 
 stranger, seeing ye were strangers in the land of Egypt." Exod. xxiii. 9. 
 
 The principle of this suggestion is, that we ought to have compassion 
 for all those who are in the same difficulties in which we formerly were 
 ourselves. Those whom Providence has raised to a higher station than 
 they or their fathers occupied, should entertain kindly feelings towards 
 those who belong to the class from whence they have sprung. The same 
 rule applies to public companies. Those which have overcome the diffi- 
 culties of their formation, and become prosperous, should not employ any 
 vexatious or oppressive means of preventing the growth of similar compa- 
 nies. Knowing the anxieties they experienced from the difficulties they 
 had to encounter, they should not inflict similar anxieties upon others. 
 Moses often enforces the duty of kindness towards servants and strangers, 
 by reminding the Israelites that they had been strangers and bondsmen in 
 the land of Egypt. In questions of morals, it is generally a safe guide 
 to a correct judgment, to put ourselves in the position of others, and to 
 inquire what then would be our own feelings, and what kind of conduct 
 we should wish, under such circumstances, to be adopted towards our- 
 selves. In the decision of such cases, it usually appears that the cultiva- 
 tion of the moral feelings has improved the intellectual faculties. A 
 sound heart is less likely to go astray than a clever head. 
 
 " The entrance of thy words giveth light : it giveth understanding unto the simple." 
 Ps cxix. 130. 
 
 12. " Masters, give unto your servants that which is just and equal, 
 knowing that ye also have a Master in heaven." Col. iv. 1. 
 
 Be just in your appointments, and select those who are the most wor- 
 thy and the best qualified for the duties they will have to discharge. Be 
 just in the amount of your rcmurieration ; recollect that many of the ser- 
 vants of public companies have greater trusts and heavier responsibilities 
 than the servants of individuals ; and in this case, it is just and equal 
 that they be rewarded accordingly. Be just in your promotions, and 
 let not merit be supplanted by patronage or favoritism. Be just in the 
 
 401
 
 A Treatise on Banking. 
 
 quantity of lahor you exact. Appoint a sufficient number of servants to 
 do the work easily. Do not compel them to keep late hours ; nor refuse 
 reasonable holidays, for the purposes of health and recreation. Be just 
 in your pensions, and let your aged and worn-out servants be treated 
 with respect and liberality. Be just in your reproofs. " Forbearing 
 threatening." Eph. vi. 9. Let not your censures nor your punishments 
 be more than proportionate to the oflence ; and be as ready at all times to 
 acknowledge the merits of your servants as to notice their defects. 
 
 All complaints, and all applications for increased remuneration or privi- 
 leges, from the servants of public companies, should receive mature con- 
 sideration ; and all refusals should be given with kindness and courtesy. 
 Job, when reduced to distress, consoled himself with the reflection, that 
 in his former prosperity, when he was the greatest of all the men of the 
 East, (Job xxxi. 13,) he had not despised the cause of his man-servant or 
 his maid-servant when they contended with him. Moses enacted, " Thou 
 shalt not muzzle the ox when he treadeth out the corn" (Deut. xxv. 4) ; 
 and St. Paul has twice quoted this enactment ( 1 Cor. ix. 9 ; 1 Tim. v. 18 ) ; 
 to inculcate the lesson that we ought not to stint the remuneration, nor 
 even the enjoyments, of those by whose labor we profit. There is some- 
 thing touching in the following text: — "A certain centurion's servant, 
 lolio was dear unto hint, was sick, and ready to die." Luke vii. 2. And 
 the Psalmist has given us a lovely exhibition of the Divine character in 
 the words, " He hath pleasure in the prosperity of his servants." Psalm 
 XXXV. 27. 
 
 13. " Exhort servants to he obedient unto tlieir oion masters., and to 
 please them well in all things, not answering again, not purloining, but 
 showing all good fidelity, that they may adorn the doctrine of God our 
 Saviour in all things." Titus ii. 9, 10. 
 
 Public companies have a right to expect that their servants should not 
 only be obedient during the official hours of business, but that at all times 
 their conduct should be such as will be reputable to the company, at- 
 tempting to " please them well in all things," " not answering again," 
 not objecting to obey any lawful commands, " not purloining, but show- 
 ing all good fidelity," not misapplying the property with which they are 
 intrusted, not suffi3ring the company to be defrauded or damaged by othei 
 parties. " That they may adorn the doctrine of God our Saviour in all 
 things," the servants of a public company are exposed to observation and 
 criticism, and its honorable reputation in the world will be aflbcted by the 
 estimate that may be formed of their moral and religious character. 
 
 Christian principle is of more importance than brilliant talents, and is 
 more highly respected, even by the ungodly. The personal character of 
 its servants is sometimes of greater value to a company than their per- 
 sonal services, and can less easily be replaced. They adorn the doctrine 
 of Christianity when, from Christian motives, they practise those virtues 
 which are suitable to their several stations. It gives us a pleasing idea of 
 social life among the Hebrews, when we find that not only did the chil- 
 dren address the Supreme Being as the God of their fathers, but the ser- 
 vants addressed Him as the God of their masters. " O Lord God of my 
 master Abraham," said Eliezcr of Damascus, " I pray Thee send me good 
 
 402
 
 Moral and Religious Duties. 
 
 speed this day, and show kindness unto my master Abraham." Gen. 
 xxiv. 12. It is one of the duties of the sei-vants of public companies to 
 pray for the prosperity of the company whom they serve. 
 
 14. " Pure religion, and undefiled before God and the Father, is this, 
 to visit the fatherless and widows in their affiiction, and to keep himself 
 unspotted from the world." James i. 27. 
 
 Establish a fund for the relief of the widows and children of the ser- 
 vants of the company. Such a fund is established by the East India 
 Company and by the Bank of England, and why not by all large compa- 
 nies .? Mining and railway companies should relieve the widows and chil- 
 dren of those who meet with accidents in their respective works. The 
 word VISIT implies that this relief should be generous and kind ; and the 
 words IN their affliction may suggest that it ought to be prompt and im- 
 mediate, not postponed till after their affliction. 
 
 15. " As we have opportunity, let us do good unto all men, especially 
 unto them who are of the household of faith," Gal. v. 10. 
 
 Let all your arrangements be adapted to promote the public good, and 
 more especially to benefit the moral and religious portion of the com- 
 munity. 
 
 '■ He that diligently seeketh good, procureth favor; but he that seeketh mischief, it 
 shall come unto him." Prov. xi. 27. 
 
 Among the minor immoralities of the present age we are disposed to 
 place the practice of smoking cigars, to the extent to which it is now car- 
 ried. We refer to smoking in the streets, on board of steamboats, and in 
 places of public resort, where the smoker can obtain his enjoyment only 
 by annoying others, and thus violating the injunction, " Thou shalt love 
 thy neighbour as thyself." The public are much indebted to the railway 
 companies for prohibiting this practice in their carriages and establish- 
 ments, and it is desirable that the steamboat companies should adopt simi- 
 lar regulations. 
 
 III. Having considered the duties of patriotism, and the duties of social 
 relationship, we now come to the duties of religion. 
 
 By the duties of religion we mean the duties we owe directly to God. 
 Those which are most applicable to public companies are, to acknowl- 
 edge the hand of God, to promote his worship, and to reverence his 
 Sabbaths. 
 
 To acknowledge the power and goodness of God, and our dependence 
 on Him for all the blessings we possess, is not less the duty of a public 
 company than it is of an individual. Moses cautions the Israelites against 
 forgetfulness of God in the time of their prosperity : — 
 
 " Beware that thou forget not the Lord thy God, in not keeping his commandments, 
 and his judgments, and his statutes, which I command thee this day : lest when thou 
 hast eaten and art full, and hast built goodly houses and dwelt therein ; and when thy 
 herds and thy flocks multiply, and thy silver and thy gold is multiplied, and all that 
 thou hast is multiplied ; then thine heart be lifted up, and thou sayest in thine heart. 
 My power and the might of mine hand hath gotten me this wealth. But thou shall 
 remember the Lord thy God : for it is he who gave thee power to get wealth." Deut. 
 viii. 11-18. 
 
 403
 
 A Treatise on Banking. 
 
 A neglect to acknowledge the hand of God is denounced as a heinous 
 offence. The chief national crime charged against ancient Tyre by the 
 prophet Ezekiel was, — 
 
 " By thy great wisdom and thy traffic thou hast increased thy riches, and thy heart 
 is lifted up hccause of thy riches." Ezck. xxviii. 5. 
 
 " If ye will not hear, and if ye will not lay it to heart, to give glory unto my namej 
 saith the Lord of Hosts, I will even send a curse upon you, and I will curse your bles- 
 eings." Mill. ii. 2. 
 
 They who honor inferior agents, but forget the Cause of all their pros- 
 perity, are compared to the heathen fishermen who " sacrifice unto their 
 net, and burn incense unto their drag, because by them their portion is 
 fat, and their meat plenteous." Hab. i. 16. 
 
 In ancient Rome the merchants and bankers had a public procession 
 every year to the temple of Mercury, — who, by a strange association, 
 was regarded as the god of merchants and of bankers, of thieves and 
 of eloquence, — to offer sacrifices for the blessings they had received ; 
 and, as the satirists said, to ask forgiveness for all the frauds and tricks 
 they had practised in their trade during the past year. 
 
 In the Middle Ages, the public companies then formed took mottoes, 
 many of which were expressive of religious feelings. Thus, if we cast 
 our eyes on our Royal Exchange, we shall see that the City motto is 
 " Domine dirige Nos " ; and that of the Mercers' Com.pany is " Honor 
 Deo." This would not be consistent with the manners of the present 
 age, though we believe our public companies are as much disposed to im- 
 plore Divine direction, and to render to God the honor of their success, as 
 were any of the associations of former days. The way to obtain this di- 
 rection, and to have occasion for rendering this honor, is to acknowledge 
 the superintendence and kindness of God. 
 
 " In all thy ways acknowledge him, and he shall direct thy paths." Prov. iii. 6. 
 " Call upon me in the day of trouble; I will deliver thee, and tliou sliult glorify me." 
 Ps. 1. 15. 
 
 We are not friendly to the introduction of religious matters, either by 
 individuals or public bodies, into secular intercour.se. We have no wish 
 that our business meetings should commence with prayer, and conclude 
 with the doxology. But surely there must be some way in which a public 
 company may, consistently with our national character and the manners 
 of the age, express its reliance on Divine Providence, and its gratitude 
 for the favors that Providence has conferred. Is there no way in which a 
 public company may virtually utter the sentiments so beautifully ex- 
 pressed by David : — 
 
 " David blessed the Lord before all the congregation : and said. Blessed be thon. 
 Lord God of Israel, our Father, for ever and ever. Thine, O Lord, is the greatness, 
 and the power, and the glory, and the victory, and the majesty ; for all that is in the 
 heaven and the earth is thine : thine is the kingdom, O Lord, and thou art exalted as 
 head above all. Both riche.'^ and honor come of thee, and thou reigncst over all; and 
 in thine hand is power and might ; and in thine hand it is to make great, and to give 
 strength unto all. Now, therefore, our God, we thank thee, and praise thy glorious 
 name. But who am I, and what is my people, that we should be al)le to otter so wil- 
 lingly after this sort; for all things come of thee, and of thine own have we given 
 tiiee " 1 Chron. xxix. 10- 14. 
 
 404
 
 Moral and Religious Duties. 
 
 Another religious duty is, to support the public worship of God. Hu- 
 man legislation can enforce a small portion only of the moral and relig- 
 ious duties of mankind, and can never interfere until vice has grown into 
 crime. Some writers on moral philosophy have divided the social rights 
 of man into perfect and imperfect. The perfect rights can be enforced 
 by human laws. The enactments referring to these rights are generally 
 expressed in a negative form : " Thou shalt not kill " ; " Thou shalt not. 
 steal." The imperfect rights cannot be enforced perfectly by human 
 laws. These enactments are generally positive : " Honor thy father and 
 thy mother" ; " Thou shalt love thy neighbour as thyself." The fourth 
 commandment has one of each kind : " Thou shalt do no manner of 
 work " ; " Remember the Sabbath day to keep it holy." Religion ex- 
 tends her sway, not only over all the actions of man, but over the mo- 
 tives and springs of action (Exod. xx. 17; Matt. xv. 19). Religious and 
 moral principles implanted in the mind of the community are the only se- 
 curity for the performance of religious and moral duties, and the only 
 means of acquiring the happiness which the performance of these duties 
 tends to produce. 
 
 While we maintain, in the words of our motto, that " property has its 
 duties as well as its rights," we maintain, with equal firmness, that prop- 
 erty has its rights as well as its duties ; and they who disregard its rights 
 have no claim on the performance of its duties. But though the rights 
 of property are as sacred as any other rights (Mark x. 19), yet they are 
 the first to be disregarded among an immoral or an irreligious population. 
 As a portion of the property class, therefore, public companies should 
 support the extension of moral and religious principles, as a means of se- 
 curing the safe and quiet enjoyment of their possessions. The mainte- 
 nance of the public worship of God is one means of extending the knowl- 
 edge and influence of these principles. 
 
 But apart from motives of interest, it is no less the duty of public com- 
 panies, than of individuals, to promote the honor of their Creator and 
 Benefactor ; and to difi'use among others those blessings that attend the 
 discharge of religious obligations. 
 
 Public companies should not only give to all their servants the means 
 of attending public worship, but they should also contribute towards its 
 support in the district in which their operations are carried on. The 
 houses and the lands they occupy, if not held by them, would probably 
 be occupied by others who would thus contribute. It is, therefore, as 
 much their duty as it is the duty of the other parishioners to provide the 
 means of religious instruction for their neighbours. Contributions tow- 
 ards this object, may not only be a suitable way of performing the duty 
 to which we have referred, that of acknowledging their obligations to the 
 Divine Being, and of extending those principles by which their own prop- 
 erty is rendered more secure, but also of promoting the piety, and, con- 
 sequently, the happiness of all the members of the community, and of 
 discharging a duty to which is distinctly attached the promise of temporal 
 prosperity. 
 
 " Brlnfj ye all the tithes into the storehouse, that there may be meat in mine house, 
 and prove me now herewith, said the Lord of Hosts, if I will not open you the win- 
 
 405
 
 A Treatise on Banking. 
 
 dows of Heaven, and pour you out a blessing, that there shall not be room enough to 
 receive it." Mai. iii. 10. 
 
 Another religious duty is to reverence the Sabbath-day. 
 
 Viewed only with reference to the present life, the institution of the 
 Sabbath-day is one of the greatest blessings that religion has conferred 
 upon man : — 
 
 " Remember the Sabbath-day to keep it holy : in it thou shalt not do any work."' 
 Exod. XX. 8-10. 
 
 It may be observed, that this is the only one of the ten commandments 
 that we are e.xprcssly enjoined to enforce upon our households, and some 
 of the most awful denunciations and threatenings in the Holy Scriptures 
 are directed against the violation of the Sabbath-day. After the return 
 from the Babylonish captivity, Nehemiah was the most an.\ious to enforce 
 the due observance of the Sabbath : — 
 
 "In those days saw I in Judah some treading wine-presses on the Sabbath, and 
 bringing in sheaves, and lading asses ; as also wine, grapes, and figs, and all man- 
 ner of burdens, which they brought into Jerusalem on the Sabbath-day : and I testi- 
 fied against them in the day wherein they sold victuals. Tlicre dwelt men of Tyre 
 also therein, wJiich brought fish, and all manner of ware, and sold on the Sabbath 
 unto the children of Judah, and in Jerusalem. Then I contended witli the nobles of 
 Judah, and said unto them, What evil thing is this that ye do, and profane the Sab- 
 bath-day ? Did not your fathers thus, and did not our God bring all this evil upon 
 us and upon this city 1 Yet ye bring more wrath upon Israel by profaning the Sab- 
 bath." Neh. xiii. 15-18. 
 
 The design of the Sabbath is to insure an interval of bodily repose, 
 more especially for the humbler classes of society (Deut. v. 14) ; to 
 change the current of thought, and thus to preserve the mental powers in 
 a state of vigor and freshness; to give leisure for reflection, and thus 
 enable man to look above him, and around him, and within him, and 
 consider his own character and destiny ; and to furnish opportunity 
 for the discharge of those duties of piety, of kindness, and of benevo- 
 lence, which devolve upon him as a moral and religious being. To ex- 
 press thankfulness for past mercies is specially named as one of the duties 
 to be performed (Deut. v. 15) ; and these feelings are beautifully ex- 
 pressed in the 100th Psalm : — 
 
 " O be joyful in the Lord, all yc lands. Serve the Lord with gladness: and come 
 before his presence with a song. Be ye sure that the Lord he is God : it is he that 
 hath made us, and not we ourselves ; we are his pco])le. and the shcc]) of his pasture. 
 O go your way into his gates with thanksgiving, and into his courts with praise: be 
 thankful unto 'him, and sj)eak good of his name. For tlie Lord he is gracious: his 
 mercy is everlasting ; and his tmth endureth from generation to generation." Prayer- 
 book translation. 
 
 The institution of the Sabbath-day must not be regarded as diminishing 
 the produce of annual labor. By improving the habits and invigorating 
 the mental powers, it increases the annual produce of labor, both in re- 
 gard to nations and individuals. 
 
 The labor of the Sunday tends not to wealth. It is not the man who 
 " adds Sunday to the week " of toil, who employs that holy day in at- 
 tending to his ordinary business or in making up his books, — no, it is not 
 he who is in the surest road to riches. It is the man who, when the Sun- 
 
 406
 
 Moral and Religious Duties. 
 
 day dawns, feels his mind expand with new and exhilarating and en- 
 nobling associations ; who, accompanied by his family, appropriately at- 
 tired, pays his morning homage in the temple of religion, and passes the 
 remainder of the day in works of charity or piety, or in innocent re- 
 laxations corresponding with the sanctity of the day; — that is the man 
 who, by improving the intellectual, the moral, and the social faculties of 
 his mind, is adopting the surest means of acquiring wealth and respecta- 
 bility in the world. 
 
 They greatly err who imagine they are pleading the cause of the poor 
 when they endeavour to remove the religious sanctions of the Sabbath- 
 day. Should the mass of the population once entertain the impression 
 that the observance of the Sunday is not required by religion, but is 
 merely a matter of convenience or expediency, the poor will then have 
 no security for cessation from toil. Reasons will soon be found, based 
 apparently upon a regard for the poor, for increasing their labor. Let 
 the Sunday be regarded no longer as a day of devotion, but merely as a 
 day of pleasure, and it will soon become a day of toil. 
 
 Were the Sunday abolished, the poor man would receive no more 
 wages for his seven days' labor than he now does for his six. His scale 
 of comforts would be reduced, as he would have no occasion for a Sun- 
 day's attire. His opportunities of social intercourse and of moral im- 
 provement would be abolished. In this and in other cases it is shown 
 that Religion, while she is the guide and solace of the wealthy, is pre- 
 eminently the friend and guardian of the poor. (See a work just pub- 
 lished, on The Temporal Benefits of Christianity, by Robert Blakey, 
 Longman.) 
 
 If it be the duty of nations and of individuals to observe the Sabbath- 
 day, it must equally be the duty of public companies. We read of no 
 dispensation in their favor. The prohibition of any manner of work 
 does not except the work of public companies. It is not said that all 
 men-servants and maid-servants shall have rest except the servants of 
 public companies. Nor are we taught that the violation of the Sabbath- 
 day will bring down judgments upon nations, but none upon public com- 
 panies. 
 
 But, as in domestic, so in social life, there are certain works of ne- 
 cessity, and many duties that must be performed, even on the Sabbath- 
 day. (Isa. xlix. 15; Luke xiii. 15; xiv. 5.) In these cases a public 
 company will act like the head of a reHgious family. All the secular 
 duties that can be postponed will be postponed to the following day. 
 Other duties will be performed in such portions of the day as will permit 
 as many servants as possible to attend Divine service ; and those servants 
 who cannot be thus favored will be allowed other seasons for the perform- 
 ance of this duty. (We omit here the discussion of the question respect- 
 ing Sunday travelling by railways, as inappropriate to the present work.) 
 
 We will not attempt to specify in detail all the works that may lawfully 
 be performed by public companies, or by individuals, on the Sabbath-day. 
 We will merely observe that, though " the Sabbath was made for man, 
 and not man for the Sabbath " (Mark ii. 27), yet, at the same time, they 
 who most religiously keep holy the Sabbath-day, may expect to share 
 2 B 407
 
 A Treatise on Banking. 
 
 most largely of those spiritual and temporal benefits its institution was 
 designed to bestow. 
 
 "If thou turn away thy foot from the Sabbath, from doinjj thy pleasure on my holy 
 day ; and call the Sabbath a dclit;ht, tlic holy of the Lord, honorable ; and shalt honor 
 him, not doing thine own ways, nor finding thine own pleasui-e, nor speaking thine 
 own words : then shalt thou delight thyself in the Lord ; and I will cause thee to 
 RIDE UPON THE HIGH PLACES OF THE EARTH, and feed thec with the heritage of 
 Jacob thy Father : for the mouth of the Lord hath spoken it." Isa. Iviii. 13, 14. 
 
 IV. The last class of duties are the duties of benevolence. 
 
 By the duties of benevolence, we mean the duties we owe to the poor. 
 
 Throughout both the Old and the New Testament there is no duty 
 more frequently enforced than this, — nor one, to the performance of 
 which there is attached so many promises of temporal prosperity. 
 
 Moses, besides enacting many laws that had an especial bearing upon 
 the welfare of the poor, enjoined, moreover, the duty of voluntary be- 
 nevolence. 
 
 " And if thy brother be waxen poor, and fallen in decay with thee ; then thou shalt 
 relieve him: though he be a stranger, and a sojourner." Lev. xxv. 35. 
 
 " For the poor shall never cease out of the land : therefore I command thee, saying. 
 Thou shalt open thy hand wide unto thy brother, to thy poor, and to thy needy, in thy 
 land." Deut. xv. 11. 
 
 The devotional exercises of the Israelites abound with benedictions on 
 those who pitied the poor. 
 
 " Blessed is he that considereth the poor : the Lord will deliver him in time of 
 trouble. The Lord will preserve him, and keep him alive ; and he shall be blessed 
 upon the earth : and thou wilt not deliver him unto the will of his enemies. The 
 Lord will strengthen him upon the bed of languishing : tliou wilt make all his bed in 
 his sickness." Ps. xli. 1, 2, 3. 
 
 Job said : — 
 
 " When the ear heard me, it blessed me ; and when the eye saw me, it gave witness 
 to me : because I relieved the poor that cried, and the fatherless, and him that had 
 none to help him. The blessing of him that was ready to perish came upon me; and 
 I caused the widow's heart to sing for joy." Job. xxix. 11-13. 
 
 In the Proverbs of Solomon, we read : — 
 
 " He that hath pity upon the poor lendcth unto the Lord ; and that wliich he hath 
 given will he pay him again." Prov. xix. 17. 
 
 " He that hath a bountiful eye shall be blessed ; for he givcth of his bread to the 
 poor." Prov. xxii. 9. 
 
 " He that hath mercy on the poor, happy is he." Prov. xiv. 21. 
 
 Seasons of festivity were celebrated by granting relief to the poor. 
 
 " The days wherein the Jews rested from their enemies, and the month which \vas 
 turned unto them from sorrow to joy, and from mourning into a good day : that they 
 should make them days of feasting and joy, and of sending portions one to another, 
 and gifts to the poor." Esther ix. 22. 
 
 " This day is holy unto the Lord your God ; mourn not, nor weep. Go your way, 
 eat the fat and drink the sweet, and send portions unto them for whom nothing is pre- 
 pared." Neh. viii. 9, 10. 
 
 In the New Testament, we read : — 
 
 " Give, and it shall be given unto you ; good measure, pressed down, and shaken to- 
 
 408
 
 Moral and Religious Duties. 
 
 gcther, and running over, shall men give into your bosom. For with the same meas- 
 are that ye mete withal, it shall be measured to you again." Luke vi. 38. 
 
 " Charge tliem that are rich in this world, that they be not high-minded, nor trust in 
 uncertain riches, but in the living God, who givcth us richly all things to enjoy ; that 
 they do good, that they be rich in good works, ready to distribute, willing to commu- 
 nicate ; laying up in store for themselves a good foundation against the time to come, 
 that they may lay hold on eternal life." 1 Tim. vi. 17 - 19. 
 
 " Whoso hath this world's goods, and secth his brother have need, and shutteth up 
 his bowels of compassion from him ; how dwellcth the love of God in him ? " 1 John 
 iii. 17. 
 
 On the other hand, the most awful denunciations are directed against 
 those who are unfeeling towards the poor : — 
 
 "He that oppresseth the poor reproacheth his Maker: but he that honoreth him 
 hath mercy on the poor." Prov. xiv. 31. 
 
 " Whoso stoppeth his ears at the cry of the poor, he also shall cry himself, but shall 
 not be heard." Prov. xxi. 13. 
 
 " He that oppresseth the poor, to increase his riches ; and he that giveth to the rich, 
 shall surely come to want." Prov. xxii. 16. 
 
 " He that giveth unto the poor shall not lack ; but he that hideth his eyes shall have 
 many a curse." Prov. xxviii. 27. 
 
 The rule by which public companies, as well as individuals, should 
 regulate the amount of their contributions to religious and charitable pur- 
 poses, is distinctly laid down in the Holy Scriptures, — it is their ability. 
 
 " Every man shall give as he is able, according to the blessing of the Lord thy God 
 which he hath given thee." Deut. xvi. 17. 
 
 " Thou shalt truly tithe all the increase of thy seed, that the field bringeth forth year 
 by year." Deut. xiv. 22. 
 
 " Upon the first day of the week let every one of you lay by him in store, as God 
 hath prospered him." 1 Cor. xvi. 2. 
 
 The spirit of these instructions appears to be, that public companies 
 should devote to religious and charitable purposes a certain proportion of 
 their annual profits. What that proportion should be, must be determined 
 by each individual company. All public companies have the advantage 
 of knowing the exact amount of their annual gains. 
 
 " Be thou diligent to know the state of thy flocks, and look well to thy herds." 
 
 The principle of this injunction is, balance your books every half-year, 
 in order to ascertain the state of your affairs, and the amount of your 
 profits. In all cases we think it better that a fixed sum should be set 
 apart at the commencement of the year, rather than the amount should 
 be regulated by the caprice of the moment. We think it a good practice, 
 even for individuals, and especially for young men commencing life, to 
 determine, like Jacob (Gen. xxviii. 22), that a certain part of their future 
 gains should be devoted to the cause of piety and benevolence. We 
 are not friendly to religious vows ; but we think every prudent man, 
 (and public companies are presumed to be assemblies of prudent men,) 
 should have fixed principles of action, and not let his discharge of pious 
 and charitable duties depend on the impulse of the moment. 
 
 " Every man according as he purposeth in his heart, so let him give, not grudgingly 
 or of necessity, for God loveth a cheerful giver." 2 Cor. ix. 7. 
 
 This language seems to imply, that the amount devoted to acts of 
 
 409
 
 A Treatise on Banking. 
 
 charity should be the result of previous deliberation, and that those who 
 have fixed the amount by a previous purpose, give with more cheerful- 
 ness than those whose minds present on every occasion a conflict between 
 the suggestions of liberality and those of selfishness, and who grudgingly 
 comply with the solicitations of others, or give as a necessity imposed on 
 them by their social position. 
 
 We are no advocates for indiscriminate charity. We think that men 
 of business (and of such our public companies are usually composed) 
 should show the same prudence in the exercise of their charity as they 
 would on other occasions ; they should endeavour to ascertain the way of 
 doing the most good with equal means, and should look to the remote as 
 well as to the immediate effects of their benevolence. 
 
 The first claim on their liberality, is that of the parish or district in 
 which the company conducts its operations. As the locality, if not occu- 
 pied by a company, would probably be occupied by individuals, the com- 
 pany is morally bound to subscribe to the local charities as liberally as 
 would be done by individuals of equal wealth. Another claim is, that of 
 charities whose object has some connection with the object of the com- 
 pany, or which would relieve the distress of parties employed by the 
 company. 
 
 There are also extraordinary cases, wherein, by a sudden visitation of 
 Providence, there is general distress ; such as when, by a revulsion of 
 trade, large masses of men are thrown out of employment ; or the occur- 
 rence of famine, pestilence, or fire. In these cases the appeal is not made 
 to us in our local or professional character, but to our national feeling, or 
 to our common humanity ; and then public companies have the same du- 
 ties to perform as would fall upon individuals of equal wealth. On the 
 other hand, there are occasions wherein private charity is more useful 
 than public charity ; and it may become the duty of public bodies, as well 
 as of individuals, to exercise their benevolence in secret.* 
 
 But it is not necessary that kindness to the poor should always take the 
 form of almsgiving. It is often better to prevent poverty than to relieve 
 it, — to give employment rather than money, — to grant a loan, than to 
 bestow alms. And sometimes public companies can so construct their 
 business arrangements, as, without any pecuniary sacrifice, greatly to 
 promote the interest and the comfort of the humbler classes of the com- 
 munity. Public companies should also cooperate in endeavouring to raise 
 the social condition of the poor, by diminishing the hours of labor, by re- 
 lieving women and children from unsuitable or oppressive toil, and by ex- 
 tending among the rising population the benefits of religious education. 
 
 * Matt. vi. 1-4. It appears to us, that one of the Icivst useful modes of henefiting 
 the poor is that of permanent endowments. It seems much better that .£ 1,000 were 
 distributed immediately to the poor, than that this sum were invested in the funds, 
 and the interest doled out to the poor of distant generations. Let the Ijcncvolcnce of 
 •he present age relieve the distress of the jjresent age ; and lot us hope that the benevo- 
 lence of future ages will be equal to our own, and equally commensurate with the dis- 
 tress which may then exist. This immediate and broadcast charity seems to answer 
 best to the scriptural description : " He hath dispersed abroad ; he hath given to the 
 poor; his righteousness — not his legacies — endurcth for ever." I's. cxii. 9 ; 2 Cor. 
 ix. 9 
 
 410
 
 Moral and Religious Duties. 
 
 To remove the ignorance of the poor is a duty not less important than 
 to relieve their distress. 
 
 The God of the Bible is described as " the God of knowledge " (1 Sam. 
 ii. 3) ; and he has implanted in the minds of his creatures a faculty for ac- 
 quiring and increasing knowledge. The exercise and improvement of this 
 faculty is as much a duty as the improvement of any other talent with which 
 we are intrusted. And from the claims of our common humanity, and from 
 the relation we all sustain to the same Creator (Mai. ii. 10 ; Acts xvii. 
 26), it becomes our duty also to aid others in their pursuit of knowledge. 
 The cultivation of our intellectual faculties does not diminish, but increases 
 and refines our physical comforts, augments our social pleasure by impart- 
 ing to each individual additional claims to regard, exalts our devotional 
 feelings by unlocking more of the wisdom and goodness manifested in the 
 works of God ; and while the amiable, though injurious, aberrations of the 
 moral and religious feelings are controlled by the judgment, the adjudica- 
 tions of reason on moral and religious questions are aided and guided by 
 an instructed and enlightened conscience. It is quite possible for all 
 these advantages to be extended to every individual in the community. 
 
 It is peculiarly the duty and the interest of the rich to educate the poor : 
 the morals of their children, and the comfort of their families, depend 
 much on the religious education of their servants. Among an educated 
 population, the rights of property, — the effects of capital on the demand 
 for labor, and the useful tendency of what are called luxuries, — and the 
 necessity for order and subordination in the state, will be better under- 
 stood. In proportion as the mass of the population are instructed will be 
 the amount of national happiness and prosperity. Mighty is the monarch, 
 great is the statesman, who can direct the united energies of a nation of 
 cultivated minds. The education of the poor is a duty even more incum- 
 bent upon public companies than upon individuals. For it is to the inven- 
 tions and improvements in science, often made by persons of the working 
 class, that many of them owe their existence. Improvements in the ap- 
 plication of steam have produced most of our present mining, and steam- 
 boat, and railway companies. Increased attention to statistics and the 
 laws of mortality has multiplied our insurance companies. The general 
 principle on which all our companies are founded, — the power of asso- 
 ciation, — is itself the offspring of modern science. Our public compa- 
 nies are triumphs of mind ; they denote a high degree of civilization, and 
 exhibit, most strikingly, the command of man over the elements of nature, 
 as well as over the beasts of the field, and his power in compelling the 
 inert properties of matter to become the active ministers of his will. 
 
 Great is the debt of gratitude due by all our public companies to the 
 cause of mental cultivation ; and when these companies are computing 
 the annual gains which from this source they have acquired, let them not 
 forget that the Genius of Mental Cultivation, supported by Benevolence, 
 Patriotism, and Religion, and attended by crowds of the uninstructed chil- 
 dren of the indigent, stands at their door, and humbly asks payment of a 
 portion of this debt. 
 
 Let them in part discharge this debt, by seeing that the children of 
 their laborers, and the people of the district, are all supplied with the 
 
 411
 
 A Treatise on Banking. 
 
 means of instruction. And afterwards, let them patronize those societies 
 which have for their object the education of the children of the poor in 
 other districts, and throughout the land. They should also, as far as it 
 can be done with justice to others, give promotion to such of their ser- 
 vants as devote their leisure to the cultivation of their minds. The time 
 has gone by when it was a reproach for a young man to be bookish, as 
 he was supposed to abstract so much more time and attention from his 
 official duties. It is now well known that the general cultivation of the 
 intellectual powers, renders them more effective in every operation in 
 which they may be exercised. It is a great advantage to a public com- 
 pany to have educated servants.* Their superior knowledge is always 
 useful, — the mental discipline they have acquired improves their business 
 habits, — and, possessing within themselves a constant source of enjoy- 
 ment, they are the less likely to indulge in those expensive pleasures 
 which are the usual temptation to neglect and dishonesty. Prov. iii. 13-15; 
 iv. 7-9. 
 
 Thirdly. — Having ascertained that public companies are moral agents, 
 and having described the duties which, as moral agents, they are bound 
 to perform, we shall now inquire what are the rewards or punishments 
 which may be expected to follow the performance or non-performance of 
 these duties. 
 
 A liability to rewards or punishments is essential to moral agency. To 
 say that public companies are moral agents, but that they will not be re- 
 warded or punished for any thing they may do, would be to assert a con- 
 tradiction. In pursuing our inquii-ies, therefore, on this subject, we shall 
 ask : — I. At what time will these rewards or punishments be received ? 
 II. What will be their nature ? Ill, In what manner will they be ap- 
 plied ? and IV, What are the effects these doctrines should produce on 
 the conduct of public companies ? 
 
 I, When will these rewards or punishments be bestowed ? 
 
 From the established order of Providence, which causes virtue to be 
 followed by happiness, and vice by misery (Prov. xi. 31), and from the 
 dispositions implanted in the mind of man,t it may fairly be inferred, 
 
 * " It seems likely that next year a movement will be made in favor of nnivcrsal 
 education. I think it desirable that bank managers, and branch managers, should aid 
 this movement in their resi)ective localities, and should support generally, by their as- 
 sistance and influence, the formation of literary and scientitic institutions. I'his would 
 atibrd an outlet for any surplus energy of character that might remain after the hours 
 of business, and enable them to promote the public good, without taking part in']ioliti- 
 cal or religious discussions. They would acquire for themselves much pleasurable 
 and profitable amusement, would add to the usefulness and respectability of their char- 
 acter in public estimation, and thus be enabled to increase the influence of their respec- 
 tive establishments." — A furtlier Extract from tlie Ldler quoted at jKuie 148. 
 
 t Rom. ii. 14, 15. Some writers on moral ])hilosophy have denied that man pos- 
 sesses those moral powers which are usually, but ])crliaps not very properly, called the 
 moral sense; and, to support their sentiments, they have adduced the immoral practices 
 of various nations in ancient and modern times ; such as infanticide, the burning of 
 willows, &c. They might as well iiave collected together all the erroneous opinions in 
 the arts and sciences that liave prevailed in dilVerent ages of the world, and then have 
 infe^'-ed, that man is not endowed with reason. 
 
 112
 
 Moral and Religious Duties. 
 
 that the Creator and Governor of the world is a God of truth, and without 
 iniquity, just and right is he (Deut. xxxii. 4). And as he also possesses 
 omnipotent power, he will assuredly carry his dispositions and purposes 
 into effect. But on comparing these attributes of the Supreme Governor 
 of the universe with the actual destiny of the righteous and the wicked in 
 the present world, we do not perceive that perfect union of virtue with 
 happiness, and of vice with misery, which our contemplation of the 
 Divine character would lead us to expect, and inquiring minds have often 
 been puzzled for a solution of this difficulty. 
 
 " Righteous art thou, Lord, when I plead with thee : yet let me talk with thee of 
 thy judgments : wherefore doth the way of the wicked prosper? wherefore are all they 
 happy that deal very treacherously ? " Jer. xii. ] . 
 
 " Thou art of purer eyes than to behold evil, and canst not look on iniquity : where- 
 fore (then) lookcst thou upon them that deal treacherously, and holdest thy tongue 
 when the wicked devoureth the man that is more righteous than he ? " Hab. i. 13. 
 
 " As for me, my feet were almost gone ; my steps had well nigh slipped. For I was 
 envious at the foolish, when I saw the prosperity of the wicked." Ps. Ixxiii. 2, 3. 
 
 The book of Job is a controversy upon this question. 
 The friends of Job maintained the proposition, that the destiny of men 
 in the present life corresponded with their moral character. 
 
 " Remember, I pray thee, who ever perished, being innocent ? or where were the 
 righteous cut off? Even as I have seen, they that plough iniquity, and sow wicked- 
 ness, reap the same." Job iv. 7, 8. 
 
 " Behold, God will not cast away a perfect man, neither will he help the evil doers." 
 Job viii. 20. 
 
 '• If thou wert pure and upright ; surely now he would awake for thee, and make the 
 habitation of thy righteousness prosperous." Job viii. 6. 
 
 Job does not admit this proposition, but declares that sometimes " the 
 tabernacles of robbers prosper, and they that provoke God are secure, 
 into whose hand God bringeth abundantly." Job xii. 6. 
 
 In attempting the solution of this difficulty, it may be observed that, 
 though not universally, yet generally, virtue and happiness, vice and mis- 
 ery, are associated in the dispensations of Providence in the present world. 
 And, indeed, in all the moral sciences, the general propositions are subject 
 to exceptions, — the moral sciences differing, in this respect, from the ab- 
 stract and the physical sciences ; or, to use the language of logicians, there 
 is a metaphysical, a physical, and a moral universality (VVatts's Logic). 
 Thus, though it be a general rule in political economy, that the diligent 
 hand maketh rich, yet there are some diligent hands that do not become 
 rich. And though it be a general rule in the science of education, that if 
 you train up a child in the way he should go, when he is old he will not 
 depart from it, yet there are some melancholy exceptions. And thus it 
 is a general rule, that the righteous are prosperous and the wicked miser- 
 able, in the present world, subject only to those exceptions to which all 
 general rules, in the science of morals, are liable. It may also be observed, 
 that, when those exceptions do occur, the prosperity of the wicked, and the 
 afflictions of the righteous, are only of a short duration (Ps. xxxiv. 19 ; Job 
 XX. 5), and often even rectify themselves ; the afflictions of the righteous 
 leading to prosperity, and the prosperity of the wicked leading to destruc- 
 tion. Gen. xlv. 7, 8 ; Prov. i. 32. 
 
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 A Treatise on Banking. 
 
 It may, moreover, be contended, that outward circumstances are no cer- 
 tain index of happiness ; tliat tlie wicked man, amid all his proKperity, 
 may have a conscience that shall bite as an adder (Prov, xxiii. 32) ; or 
 have some particular circumstance that shall give him so much an- 
 noyance as to nullify all the pleasures of his success. Esther v. 1 1 - 13. 
 While, on the other hand, the righteous man may possess such inward 
 sources of happiness, as shall enable him to rejoice even in tribulation. 
 Heb. X. 34 ; Hab. iii. 17, 18. 
 
 But though these considerations may hghten, they do not remove the 
 difhculty. It is not consistent with the teachings of our intellectual facul- 
 ties, nor with the impulses of our moral feelings, that a Being of immacu- 
 late holiness and inflexible justice, and possessed, moreover, of omniscience 
 and omnipotence, should permit, in even a single instance, that virtue 
 should go unrewarded, and vice should remain unpunished. If the Crea- 
 tor of the world were not a righteous Being, he would not have implanted 
 a love of righteousness in the minds of his creatures ; and if he be a 
 righteous Being, it is reasonable to expect that his righteousness should 
 appear in all the operations of his moral government. And as we find 
 this is not universally the case (Eccles. vii. 15; ix. 2), we are driven to 
 the conclusion, that the present state is not a state of final retribution ; that 
 the enjoyments and the afflictions of the present life are intended chiefly 
 as instruments of moral discipline ; and that there is a future state of ex- 
 istence, in which the final distribution of rewards and punishments will 
 take place. Thus reason concurs with revelation in teaching us that " it 
 is appointed unto men once to die, and after that the judgment." Heb. ix. 
 27. The inequalities of the present world will thus be rectified in the 
 next, and " every man will be rewarded according to his works." Prov. 
 xxiv. 12. 
 
 But, however satisfactory this solution of the difficulty may be with re- 
 gard to individuals, it does not apply to the case of public companies. 
 Their existence commences and terminates in the present world, and 
 they must be rewarded or punished in the present world, or they will 
 not be punished or rewarded at all. In the latter case they are ex- 
 empted from the moral government of God. With them virtue has no 
 reward and vice no punishment. In reply to any exhortations to perform 
 their moral and religious duties, they may exclaim, " What is the Al- 
 mighty, that we should serve him, and what profit should we have if we 
 pray unto him ?" Job xxi. 15. " We know not the Lord, neither will 
 we obey his voice." Exod. v. 2. As, however, we cannot suppose that 
 God has exempted public companies from his moral government, we must 
 infer that they are punished or rewarded in the present state. 
 
 This conclusion rests upon the same evidence as the argument we 
 have just stated. In the former case the argument stands thus : — 
 
 The Righteous Governor of the world must reward the good and punish the wicked 
 
 But this is not done in the present world. 
 
 Therefore there must he a future world, in which this retribution will take place. 
 
 Our present argument stands thus : — 
 
 The Righteous Governor of the world must reward the good and punish the wick 
 cd, whether those actions arc performed by public bodies, or private individuals. 
 
 414
 
 Moral and Religious Duties. 
 
 Bat the public companies who now perform good or evil actions will not exist in a 
 
 future world. 
 Therefore public companies must be rewarded or punished in the present world. 
 
 The only way of resisting this argument is either to maintain that pub- 
 lic companies are not moral agents, and therefore not responsible for their 
 good or evil actions, or that they will exist in a future world. The for- 
 mer part of the alternative we think we have sufficiently refuted, — the lat- 
 ter is too wild to need refutation. Luke xx. 34 - 36. If the marriage 
 contract shall then be dissolved, d fortiori, other contracts will also be 
 dissolved. 
 
 All the promises and threatenings of Scripture made to nations or 
 other bodies of men have a reference to the present world, as it is only in 
 the present world that such collective bodies can, in their corporate capa- 
 city, be either punished or rewarded, 
 
 II. What is the nature of these rewards or punishments ? 
 
 The object of a public company is to get wealth, — a few patriotic 
 shareholders may have taken shares to benefit the countiy or the district 
 that may be the field of its operations ; but by far the greater number 
 have no other object than to obtain a profitable employment for their 
 capital. A public company, therefore, cannot be considered as prosper- 
 ous, unless this object be obtained. If then a public company be reward- 
 ed, it must be by an increase of its wealth ; if it be punished, it must be 
 by a diminution of its wealth. It may be observed, that wealth, riches, 
 and similar terms, have usually a relative meaning. Generally they de- 
 note the amount of property possessed by each individual in the highest 
 classes of society. In this sense, wealthy people are comparatively few. 
 But when it is said that " the diligent hand maketh rich," it is not meant 
 that every diligent man is placed at the top of society, — that would be 
 impossible. It means only, that he possesses more property, and a larg- 
 er portion of the comforts of life, than he would possess were he not 
 diligent. He is rich, not, perchance, as compared with others, but as 
 compared with his former self. 
 
 That wealth is an evil, is not the doctrine of Scripture nor of common 
 sense. 
 
 In Scripture, wealth is distinctly called a blessing : — 
 
 " The Lord hath blessed my master greatly ; and he is become great : and he hath 
 given him flocks, and herds, and silver, and gold, and man-servants, and maid-servants, 
 and camels." Gen. xxiv. 35. 
 
 " Thou knowest how I. have served thee, and how thy cattle was with me. For it 
 was little which thou hadst before I came, and it is now increased unto a multitude, 
 and the Lord hath blessed thee since my coming." Gen. xxx. 29, 30 
 
 " The Lord blessed the latter end of Job more than his beginning : for he had four- 
 teen thousand sheep, and six thousand camels, and a thousand yoke of oxen, and a 
 thousand she-asses." Job. xlii. 12. 
 
 The exhortation given in Scripture to the rich, to relieve the distress 
 of the poor, must be founded on the principle that wealth is a blessing, 
 and that poverty is an evil ; for if the poor are more happy, more wise, 
 and more virtuous than the rich, upon what ground can the rich be ex- 
 horted to relieve the poor .'' 
 
 415
 
 A Treatise on Banking. 
 
 Even the cautions and admonitions given to the rich, assume the prin- 
 ciple that vcahh is a blessing, — " Belter is the poor that walkcth in his 
 uprightness, than he that is perverse in his ways, though he be rich." 
 Prov. xxviii. 6. This asserts that wcaUh is not so great a blessing as 
 moral rectitude ; but still it assumes that wealth is a blessing. This will 
 appear if we reverse the sentence ; for though it will then be equally 
 true, yet for want of this assumption it will appear ridiculous ; — better 
 is the rich that walketh in his uprightness, than he that is perverse in 
 his ways, though he be poor. 
 
 •' Let not the rich man glorj' in his riches." Jer. ix. 23. " Eiches make themselves 
 wiugs and fly away as an eagle towards heaven." Prov. xxiii. 5. " Charge them 
 that are rich in this world, that they ti-ust not in uncertain riches." 1 Tim. vi. 17. 
 
 All these expressions imply that riches are blessings, and though they 
 partake of the uncertainty of all earthly blessings, as health, friends, or 
 reputation, yet still they are blessings to be received with thanksgiving ; 
 1 Tim. iv. 3 ; and to be employed in promoting the honor of God ; 2 
 Cor. viii. 7 ; and the good of mankind. 
 
 The Scriptures do not intimate that the personal enjoyment of wealth 
 is necessarily sinful. 
 
 Wealth, like any other blessing, may be desired from improper motives, 
 James iv. 3 ; and sought by improper means, Prov. xxviii. 22 ; 1 Tim. 
 vi. 9 ; and such an ill regulated desire may become the root of all evil, 
 1 Tim. vi. 10. It is also true, that when wealth is obtained it has its 
 temptations, and so have intellectual superiority, literary excellence, and 
 even religious attainments. 2 Cor. xii. 7. But, it is not the honorable 
 pursuit of wealth, nor the innocent enjoyment of its advantages, that 
 constitutes a crime. " The ground of a certain rich man brought forth 
 plentifully, and he said, I will pull down my barns and build greater, and 
 there will I bestow my fruits, and will say to my soul, Take thine ease, 
 eat, drink, and be merry." Luke xii. 16-20, There was nothing 
 wrong in this. His folly consisted in forgetfulness of the approach of 
 death, and his neglect of preparation for a future state. And in regard 
 to the other rich man, Luke xvi. 19, it was not his clothing himself 
 in purple and fine linen, and faring sumptuously every day ; it was his 
 omitting to relieve the poor man who was laid at his gate, and his neg- 
 lecting to hear Moses and the prophets, that brought him to the place of 
 torment. 
 
 Not only is wealth represented in Scripture as a blessing, but it is a 
 blessing promised as a reward to the practice of virtue and piety. 
 
 " All these blessings shall come on thee, and overtake thee, if thou shalt hearken 
 unto the voice of the Lord thy God. — Blessed shalt thou be in the city, and blessed 
 .slialt thou be in tlie field. — Elessed shall be thy basket and thy store. The Lord 
 shall command the lilessing upon thee in thy storehouses, and in all tliat thou settest 
 thine hand unto. — And the Lord shall make thee plenteous in goods, in the fruit of 
 tliy cattle, and in the fruit of thy ground. — The Lord shall oj)en unto thee his good 
 treasures, the heaven to give the rain unto thy land in his season, and to bless all the 
 work of thine hand." Deut. xxviii. 
 
 " Godliness is profitable unto all things, having promise of the life that now is, and 
 of tiiat which is to come. 1 Tim. iv. 8. — By humility and the fear of the Lord, are 
 riches, honor, and life. Prov. xxii. 4. — The blessing"of the Lord it maketh rich, and 
 
 416
 
 Moral and Religious Duties. 
 
 he addeth no sorrow therewith. Prov. x. 22. — That I may caa.se them that love me 
 to inherit substance, and I will fill their treasures." Prov. viii. 21. 
 
 The virtues, upon the exercise of which wealth is most frequently 
 promised, are diligence, righteousness, prudence, liberality in the cause of 
 religion, and kindness to the poor. 
 
 1. Diligence in business: — 
 
 "Tlie hand of the diligent maketh rich. Prov. x. 4. — The hand of the diligent 
 shall bear rule, but the slothful shall be under tribute. Prov. xii. 24. — The soul of 
 the diligent shall be made fat. Prov. xiii. 4. — The thoughts of the diligent tend only 
 to plenteousness. Prov. xxi. 5. — Seest thou a man diligent in his business, he shall 
 stand before kings, he shall not stand before mean men." Prov. xxii. 29. 
 
 " Wealth gotten by vanity shall be diminished, but he that gathereth by labor shall 
 increase. Prov. xiii, 11. — Be thou diligent to know the state of thy flocks, and look 
 well to thy herds." Prov. xxvii. 23. 
 
 2. Righteousness in social transactions : — 
 
 " The curse of the Lord is in the house of the wicked, but he blesseth the habitation 
 of the just." Prov. iii. 33. 
 
 " He that walketh righteously, and speaketh uprightly ; he that despiseth the gain of 
 oppressions, that shaketh his hands from holding of bribes, that stoppeth his ears from 
 hearing of blood, and shutteth his eyes from seeing evil ; he shall dwell on high: his 
 place of defence shall be the munitions of rocks : bread shall be given him ; his water 
 shall be sure." Isa. xxxiii. 15, 16.* 
 
 " And if thy brother be sold unto thee, and serve thee six years ; then, in the seventh 
 year, thou shalt let him go free from thee. And when thou sendest him out free from 
 thee, thou shalt not let him go away empty : thou shalt furnish him liberally out ol 
 thy flock, and out of thy floor, and out of thy wine-press : of that wherewith the Lord 
 thy God hath blessed thee thou shall give unto him. It shall not seem hard unto thee 
 when thou sendest him away free from thee ; for he hath been worth a double hired ser- 
 vant unto thee, in serving thee six years : and the Lord thy God shall bless thee in all 
 that thou doest." Deut. xv. 12, 13, 14, 18. 
 
 3. Prudent habits : — 
 
 " He that loveth pleasure shall be a poor man ; he that loveth wine and oil shall nc 
 be rich. Prov. xxi. 17. — The drunkard and the glutton shall come to poverty, and 
 drowsiness shall clothe a man with rags. Prov. xxiii. 21. — He that tilleth his land 
 shall be satisfied with bread, but he that followeth after vain persons shall have poverty 
 enough." Prov. xxviii. 19. 
 
 " He that is slothful in his work is brother to him that is a great waster. Prov. xviii 
 9. — A prudent man foreseeth the evil, and hideth himself; but the simple pass on and 
 are punished. Prov. xxii. 3. — The sluggard will not plough by reason of the cold ; 
 therefore shall he beg in harvest, and have nothing. Prov. xx. 4. — Love not sleep, 
 lest thou come to poverty. Open thine eyes and thou shalt be satisfied with bread 
 Prov. XX. 13. — In all labor there is profit: but the talk of the lips tendeth only to 
 penury." Prov. xiv. 23. 
 
 4. Liberality in the cause of religion : — 
 
 " Honor the Lord with thy substance and with the first fruits of all thine increase 
 so shall thy bams be filled with plenty, and thy presses shall burst out with new wine. ' 
 Prov. iii. 9, 10. 
 
 " Thou shalt truly tithe all the increase of thy seed, that the field bringeth forth year 
 by year. And thou shalt eat before the Lord thy God, in the place in which he shall 
 choose to place his name there, the tithe of thy corn, of thy wine, and of thine oil, and 
 the firstlings of thy herds and of thy flocks ; that thou mayst learn to fear the Lord thy 
 God always. And the Levite, (because he hath nor part or inheritance with thee,) and 
 the stranger, and the fatherless, and the wiiAow, which were within thy gates, shall 
 
 '.17
 
 A Treatise on Banking. 
 
 nome, and shall eat and be satisfied ; that the Lord thy God may bless thee in all the 
 work of thy hand whicli thou doest.'' Dcut. xiv. 22, 23, 29. 
 
 4. Kindness to the poor : — 
 
 "If there he nmonjr you a poor man of one of thy brethren within any of thy »ates 
 in thy land whicli the Lord thy God jriveth thee, thou shalt not harden tliine heart, nor 
 shut thine hand from thy poor brother. Thou shalt surely give him, and thine heart 
 shall not be jrrieved when thou givest unto him : because that for this thin<r the Lord 
 thy God shall bless thee in all thy works and in all that thou puttest thine hand unto." 
 ])eut. XV. 7, 10. 
 
 These are the maxims that form the Scriptural art of getting rich. We 
 often hear of other maxims, — such as, " Mind number one " ; " A penny 
 saved is a penny got " ; " Take care of the pence, and the pounds will 
 take care of themselves " ; " Charity begins at home." , But these maxims 
 are not found among the proverbs of Solomon, nor does the Bible any- 
 where teach us that selfishness, niggardliness, and closefistedness, are the 
 road to wealth. The Scriptural doctrine is the reverse of this : — 
 
 " The liberal soul shall be made fat: and he that watereth shall be watered also him 
 self Prov. xi. 25. — The liberal deviseth liberal things ; and by liberal things shall he 
 stand." Isa. xxxii. 8. 
 
 " There is that scattereth, and yet inereaseth ; and there is that withholdeth more 
 than is meet, but it tendeth to poverty. Prov. xi. 24. — He which soweth sparingly, 
 shall also reap sparingly ; and he which soweth* bountifully shall reap also bounti- 
 fully." 2 Cor. ix. 6. 
 
 And even in those cases in which wealth is obtained by dishonorable 
 means, that wealth is represented as soon departing from the possession 
 of the individual, and passing into more worthy hands. 
 
 " He that oppresseth the poor to increase his riches, and he that triveth to the rich, 
 shall surely come to want. Prov. xxii. 10. — The Lord will not sutler the soul of the 
 righteous to famish : but he casteth away the substance of the wicked. Prov. x. 3. — 
 He that by usury and unjust gain inereaseth his substance, he shall gather if for him 
 that will pity the poor." Prov. xxviii. 8. 
 
 " The wealth of the sinner is laid up for the just. Prov. xiii. 22. — God giveth to a 
 man that is good in his sight wisdom, and knowledge, and joy : but to the sinner he 
 giveth travail, to gather and to heap up, that he may give to him that is good before 
 God." Eccles. ii. 26. 
 
 Thus we find, that, according to the political economy of the Bible 
 wealth is the gift of God, Eccles. v. 19 ; and it is bestowed by hiin upon 
 those that fear God, and keep his commandments. This blessing is not 
 always bestowed on righteous individuals, because with individuals this 
 is not a state of final retribution ; and they are promised in this world, 
 only such a portion of the sunshine of prosperity, as shall conduce to the 
 maturing of the excellencies of their character. Rom. viii. 28 ; 1 Cor. iii. 
 21. But with public companies this is a state of final retribution, and 
 hence, with them righteousness will bring wealth, and wickedness will 
 bring poverty. 
 
 III. In what manner are these rewards or punishments applied ? 
 
 Rewards or punishments in the present life reach us as the natural ef- 
 fects of the virtues or vices which we practise, or they fall upon us by the 
 special visitations of Divine Providence. There is a natural connection, 
 
 418
 
 Moral and Religions Duties. 
 
 for instants*;, between the virtue of temperance and the blessing of health, 
 — between industry and wealth, — between honesty and reputation ; and 
 when we read, " He that tilleth his land shall be satisfied with bread," 
 Prov. xii. 11 ; "The hand of the diligent maketh rich," Prov. x. 4, we 
 see at once the connection between the virtues practised and the blessings 
 that follow them. 
 
 But when we read, " Honor thy father and thy mother, that thy days may 
 be long," Exod. xx. 12 ; " Blessed is he that considereth the poor : the 
 Lord will deliver him in time of trouble," Ps. xli. 1 ; we do not so readily 
 see the connection between the duty and the blessing. We do not 
 see why filial piety should be connected with longevity, nor why consider- 
 ing the poor should produce deliverance from trouble. These, then, are to 
 be considered as 'commandments " with promise." Eph. vi. 2. The 
 connection between the duty and the blessing depends on the promises of 
 God. It may so be, that in the secret machinery of Providence the con- 
 nection between the virtues and the blessings may be as natural and as ne- 
 cessary in these latter cases as in the former, but the connection is not so 
 obvious to us, and therefore, when these blessings occur, we view them 
 as coming directly from the special visitations of the Most High. It may 
 also be observed that, even in the former cases, the connection is not so 
 necessary or so constant as to.supersede the necessity for the Divine bles- 
 sing. For though industry has a tendency to produce wealth, yet, in ma- 
 ny individual cases, it does not do so. In this, and in other moral laws, 
 the Supreme Being appears to have left them open to exceptions, in order 
 to keep up the sense of dependence and the feelings of devotion in the 
 minds of his creatures. 
 
 It may be observed, in general, that a principle of righteous retaliation 
 appears to be the prevailing principle of the Divine government. 
 
 The-Scriptures abound with declarations of this principle : — 
 
 "I the Lord search the heart, I try the reins, even to give every man according- to 
 his ways, and according to the fruit of his doings. Jer. xvii. lo'. — "Whatever good 
 thing any man doeth, the same shall he receive of the Lord." Eph. vi. 8. 
 
 " For if ye forgive men their trespasses, your heavenly Father will also forgive you : 
 but if ye forgive not men their trespasses, neither will your Father forgive your tres- 
 passes. Matt. vi. 14, 15. — He that doeth wrong shall receive for the wrong which he 
 hath done. Col. iii. 25. — It is a rigliteous thing with God to recompense tribulation 
 to them that trouble you." 2 Thess. i. 6. 
 
 "Judge not, that ye be not judged. For with what judgment ye judge, ye shall be 
 judged : and with what measure ye mete, it shall be measured to you again." Matt, 
 vii. 1,2. 
 
 '' Whoso rewardeth evil for good, evil shall not depart from his house. Prov. xvii. 
 13. — Whoso causeth the righteous to go astray in an evil way, lie shall fall himself 
 into his own pit. Prov. xxviii. 10. — They shall eat of the friiit of their own v/aj, and 
 be filled with their own devices." Prov. i. 31. 
 
 This principle prevails throughout all the enactments of the Mosaic law. 
 
 " If a man cause a blemish in his neighbour ; as he hath done, so shall it be done to 
 him. Lev.xxiv. 19. — Eye for eye, tooth for tooth, hand forliand, foot for foot. Exod. 
 xxi. 24. — If a false witness rise up against any man to testify against him that which 
 is wrong; then shall ve do unto him, as he had thought to have done unto his brother. 
 Deut. xix. 16, 19. — tVHioso sheddcth man's blood, by man shall his blood be shed." 
 Gen. ix. 6. 
 
 The denunciations of Scripture often refer to this principle. 
 
 419
 
 A Treatise on Banking. 
 
 " Te shall not afflict any widow, or fatherless ehild. If thou afflict t>em in anrwise, 
 and they cry at all unto me, I will surely hear their cry ; and your Tiives shall be 
 widows" and your children be fatherless. Exod. xxii. 22-24. — Because thou hast 
 spoiled many nations, all the remnant of the people shall spoil thee. Hab. ii. 8. — The 
 children also of Judah and the children of Jerusalem liavc ye sold unto the Grecians ; 
 and I will sell your sons and your daughters into the hand of the children of Judah, 
 and they shall sell them to the Sabeans." Joel iii. 6, 8. 
 
 Many of the facts recorded in Scripture illustrate the application of 
 this principle. 
 
 "But Adonibezek fled, and they pursued after him, and caught him. and cut off his 
 thumbs, and his great toes ; and Adonibezek said. Threescore and ten kings having 
 their thumbs and their great toes cut off, gathered their meat under my table: as I have 
 done, so God hath requited me." Judges i. 6, 7 
 
 " Samuel said unto Agag, As thy sword hath made women childless, so shall thy 
 mother be childless among women. 1 Sam. xv. 33. — Elijah said to Ahab, Thus saidii 
 the Lord, In the place where dogs licked the blood of Naboth, shall dogs lick thy 
 blood, even thine. 1 Kings xxi. 19. — They hanged Hamanon the gallows that he had 
 prepared for Mordecai." Esther vii. 10. 
 
 Providence seems to have implanted in the mind of man a desire of 
 witnessing the application of this principle. An honorable feeling of grat- 
 ification arises in virtuous minds, when the man of violence, of fraud, or 
 oppression, has been punished in a way corresponding to his crime, 
 and by means brought on by his own actions. Hence the Psalmist 
 prays, " Let the wicked fall into their own nets, whilst that I withal es- 
 cape." Ps. cxli. 10. " Let his net that he hath hid catch himself: into 
 that very destruction let him fall." Ps. xxxv. 8. And he rejoices in wit- 
 nessing the accomplishment of his desires. " The wicked is snared in 
 the work of his own hands. The heathen are sunk down in the pit that 
 they made : in the net which they hid is their own foot taken." Ps. ix. 
 15, 16. " They have digged a pit before me, into the midst whereof 
 they are fallen themselves." Ps. Ivii. 6. 
 
 We should infer from these principles, that, in the ordinary course of 
 Providence, it will be natural to expect that public companies will receive 
 their rewards or punislrments as the result of their own actions. And this 
 will more obviously be the case when prosperity is bestowed as the re- 
 ward of diligence, righteousness, or prudence. But when success is be- 
 stowed as the reward of the duties of religion or benevolence, it may arise 
 from sudden or unexpected causes. At the same time, we cannot lay 
 down any rules for the Divine procedure. " He giveth not account of 
 any of his matters." Job xxxiii. 13. " He will destroy the wisdom of 
 the wise, and will bring to nothing the understanding of the prudent." 
 1 Cor. i. 19. He can unlock fresh sources of prosperity, or open new 
 fountains of affliction whenever he thinks meet to do so for the moral 
 discipline of his intelligent creation. " The Lord maketh poor and mak- 
 eth rich : He bringeth low, and liftcth up." 1 Sam. ii. 7. " When he 
 giveth quietness, who then can make trouble .'' and when he hideth his 
 face, who then can behold him, whether it be done against a nation or 
 against a man only .'' " Job Ixxxiv. 29. With regard to public com- 
 nanies, as well as individuals, " He putteth down one, and setteth up 
 another, and none can stay his hand, or say unto him, What doest 
 
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 Moral and Religious Duties. ' 
 
 thou ? " Ps. Ixxv. 7 ; Dan. iv. 35. But though " clouds and darkness 
 are round about him, yet righteousness and judgment are the habitation 
 of his throne." Ps. xcvii. 2. And he will so arrange the dispensations 
 of his providence, " that men shall say. Verily, there is a reward for 
 the righteous ; verily, there is a God that judgeth in the earth." Ps. 
 Iviii. 11. 
 
 IV. The effects which a liability to these rewards and punishments 
 should produce on the conduct of public companies. 
 
 The doctrine we have endeavoured to establish is, that public compa- 
 nies are moral agents, capable of performing good and evil actions. That 
 those which perform good actions will be rewarded, and those which per- 
 form evil actions will be punished ; and that those rewards and punish- 
 ments will consist generally in an increase or diminution of their wealth. 
 We shall now notice the practical application which public companies 
 may make of this doctrine. 
 
 A liability to be rewarded or punished according to their works should 
 naturally induce public companies to act in such a way as to obtain the 
 reward and to avoid the punishment. This is to be done by performing 
 the duties we h&ve described. Let them perform the duties they owe to 
 their country, and to those with whom they are socially related ; their du- 
 ties to God and to the poor ; and they may hope with confidence for those 
 blessings which are promised to follow the performance of those duties. 
 
 1. Public companies should not use this doctrine uncharitably in the 
 opinion they form of other companies which are not so prosperous as 
 themselves. 
 
 Our doctrine does not teach us that success will immediately., in all 
 cases, follow the performance of the duties we have described : nor that 
 success \yill be unchecked or unalloyed. A few years is a short period 
 in the history of a public company, and we can form no judgment from 
 so short a period of its ultimate success. Nay, it may be that these few 
 years of struggle and difficulty may be the foundation of its future great- 
 ness. We should, therefore, judge illogically and uncharitably, were we, 
 from the temporary distress of a public company, to infer that it was de- 
 ficient in the performance of its moral and religious duties. We know 
 enough of the principles of the Divine government to be able to regulate 
 our own conduct, but not enough to enable us to pass sentence on the 
 conduct of others. Luke xiii. 1 - 5 ; Acts xxviii. 3-6. 
 
 2. Public companies should not envy other public companies, who may 
 have neglected their moral and religious duties, and yet, for a time, may 
 enjoy a high degree of apparent prosperity. 
 
 When large fortunes are suddenly acquired by comparatively slight 
 deviations from the path of rectitude, even virtuous minds are almost 
 tempted to regret their own purity, and to exclaim, " Verily, I have 
 cleansed my heart in vain, and washed my hands in innocency. Behold 
 the ungodly, who prosper in the world ; they increase in riches." Ps. 
 Ixxiii. 12, 13. But we are cautioned against the indulgence of this dis- 
 position. 
 
 " Fret not thyself because of evil doers, neither be thou envious against the workers 
 
 421
 
 A Treatise on Banking. 
 
 of iniquity. For they shall soon be cut down like the prass, and wither as the green 
 herb. Rest in the Lord, and wait patiently for liim : fret not thyself because of him 
 who prosperctii in his way, because of tlie man who bringeth wicked devices to pass. 
 Fret not thyself in any wise to do evil ; for evil doers shall be cut off: but those that 
 wait upon the Lord, they shall inherit the earth. For yet a little while, and the wicked 
 shall not be : yea, thou shalt diligently consider his place, and it shall not be." Ps. 
 xxxvii. 1 -10. 
 
 '• I have seen the wicked in great power, and spreading himself like a green bay- 
 tree. Yet he passed away, and, lo, he was not : yea, I sought him, but he could not 
 be found." Ps. xxxvii. 3b', 36. 
 
 3. Let those public companies which are not successful examine the 
 duties we have described, one by one, and ascertain if they have per- 
 formed them all. If they find they may justly be charged with omissions, 
 then " put away the evil of your doings ; cease to do evil ; learn to do 
 well ; seek judgment, relieve the oppressed, judge the fatherless, plead 
 for the poor. If ye be willing and obedient, ye shall eat of the fruit of 
 the land." Isaiah i. 16, 18, 19. If they find they have performed all 
 their duties, and yet arc not successful, let them not " be weary in well- 
 doing, for in due season they shall reap, if they faint not." Gal. vi. 9. 
 
 4. Let those public companies which are prosperous also examine how 
 far they are chargeable with a neglect of any of their moral or religious 
 duties. " If weighed in the balance, and found wanting" (Dan. v. 27), 
 let them reflect on the transient nature of unsanctified prosperity. 
 
 •' Behold, these are the ungodly, who prosper in the world ; they increase in riches. 
 Surely thou didst set them in slippery places : thou castcdst them down into destruc- 
 tion. How are they brought into desolation as in a moment!" Ps. Ixxiii. 12, 18, 19. 
 
 " Lo, this is the man that made not God his strength ; but trusted in the abundance 
 of his riches, and strengthened himself in his wickedness. God shall destroy thee for 
 ever, he shall take thee away, and root thee out of the land of the living." Ps. lii. 5, 7 . 
 
 If they find that they have strictly observed the duties of morality, but 
 neglected those of religion and benevolence, let them recollect that, al- 
 though it is said, " To do justice and judgment is more acceptable to the 
 Lord than sacrifice " (Prov. xxi. 3), thus intimating that morality without 
 religion is better than religion without morality, yet the union of both is 
 essential to perfection of character and to the attainment of the highest 
 degree of prosperity. If they have received those blessings which are 
 promised to the exercised of diligence, righteousness, and prudence, let 
 them endeavour to obtain those also which are promised to religion and 
 benevolence. Let them not allow it to be said, that though " diligent in 
 business " (Prov. xxii. 29), yet they have not " diligently followed every 
 good work" (1 Tim. v. 10), that their righteousness refers only to tem- 
 poral affairs, and though scrupulously observant of the rights of man, yet 
 they have been unmindful of the rights of God (Deut. xxxii. 18); that 
 their wisdom is only the wisdom of this world, and not the wisdom which 
 cometh from above, which is " first pure, then peaceable, gentle, and 
 easy to be entreated, full of mercy and good fruits" (James iii. 17) ; and 
 that their splendid buildings arc temples devoted to the service of Mam- 
 mon (Matt. vi. 24), from whose altars no sacrifices of thanksgiving (Ps. 
 cxvi. 17) ascend to the Most High, and at whose gates the poor and the 
 needy stand and plead in vain. (Deut. xv. 7 ; Luke xvi. 21.) 
 
 As for those public companies that have performed all their moral and 
 
 422
 
 Moral and Religious Duties. 
 
 religious duties, and have obtained all the promised prosperity, they have 
 only to indulge in the pleasing duties of gratitude and joy. 
 
 " Go thy way, eat thy bread with joy, and drink thy wine with a merry heart, for 
 God now accepteth thy works." Eccles. ix. 7. 
 
 " Because the Lord thy God hath blessed thee in all thy increase, and in all the 
 works of thine hands, therefore thou shalt surely rejoice." Deut. xvi. 15. 
 
 ''Peace be within thy walls, and prosperity within thy palaces." Ps. cxxii. 7. 
 
 It affords pleasure to God (Ps, xxxv. 27) and to men (Prov. xi, 10 ; 
 xxix. 2) to see piety and virtue in a state of prosperity. 
 
 And let those individuals who, from their talents, their wealth, or their 
 position, have the power of influencing the conduct of public companies, 
 recollect they are responsible for the exercise of the influence they pos- 
 sess ; and although these companies will cease to exist with the present 
 world, yet individuals will not. And those who from Christian motives 
 may cause the companies with which they are connected to pay higher 
 attention to their moral and religious duties, and who thus shall " turn 
 many to righteousness" (Dan. xii. 3), may expect that, after they have 
 served their generation (Acts xiii. 36), according to the will of God, they 
 will be permitted, through Divine grace, to join the company of angels, 
 and the spirits of just men made perfect (Heb. xii. 22, 23), whose names 
 are written in the Lamb's Book of Life. Rev. xxi. 27. 
 
 20
 
 A Treatise on Banking. 
 
 Section K. — TEN MINUTES' ADVICE ABOUT KEEPING A 
 
 BANKER.* 
 
 ' He that hearkeneth unto counsel is wise." — Pbovebbs. 
 
 1. A BANKER is a man who has an open shop with proper counters, 
 clerks, and books, for receiving other people's money in order to keep it 
 safe, and return it upon demand. 
 
 2. The building or shop in which this business is carried on, is usually 
 called in London a " Banking-house," but in Scotland, and in the country 
 parts of England, it is called a " Bank." The word " bank" is also em- 
 ployed to denote the partnership or company who carry on the business 
 of banking. Thus we say, the Bank of Scotland, the London and West- 
 minster Bank, the Bank of Messrs. Coutts & Co. 
 
 3. When a company of this kind does not consist of more than six 
 partners, it is called a " Private Bank " ; but when the company consists 
 of several hundred partners, it is called in Scotland a " Public Bank," 
 and in England a " Joint-stock Bank." 
 
 4. A private bank is usually managed by one or more of the partners, 
 and all the partners are styled bankers. A public bank is managed by a 
 principal officer, who is usually styled a manager. In England a bank 
 manager is not commonly called a banker ; but in Scotland all managers 
 of banks, and managers of branch banks, are called bankers. So mind, 
 when I use the word " banker," you may apply it to either a private 
 banker, or to a bank manager, whichever you please, as my observations 
 will be as applicable to one as to the other. A banker is a man who car- 
 ries on the business of banking ; and whether he carries it on upon his 
 own account, or as the agent of a public company, it appears to me to 
 make no difference as to his claims to be called a banker. 
 
 5. It is the business of all these banks to receive other people's money, 
 and to return it upon demand. And when any person puts money into 
 one of these banks he is said to open an account with the bank ; and 
 when he has thus opened an account, and continues to put in and draw 
 out money, he is said to have a current account, or, in London phraseolo- 
 gy, " to keep a banker." 
 
 6. In Scotland almost every man has an account of some sort with a 
 bank. The rich man in trade has an account because of the facility of 
 conducting his operations ; the rich man out of trade has an account be- 
 cause he gets interest upon his lodgments, and he keeps his money in the 
 bank until he has an opportunity of investing it elsewhere at a better rate 
 
 * I published this Section separately, in the year 1839, under the title of "Ten 
 Minutes' Advice to the Middle Class of Peo,ile about Keeping a Banker. By a Prac- 
 tical Banker." 
 
 424
 
 Ten Minutes'' Advice. 
 
 of interest. The middle class of people have an account because of the 
 convenience of it, and because they obtain the discount of their bills, and 
 perhaps loans, on giving two sureties, which are called cash credits. The 
 poorer classes lodge their small savings in the bank, because of the secu- 
 rity, and because they get interest on the sums which are lodged. 
 
 7. But in London the practice of keeping an account with a bank is by 
 no means so common as in Scotland, The London banks are banks only 
 for the j"ich. The bankers require that every person opening an account 
 shall always have a sum to his credit ; and if the sum thus kept is not 
 what they deem sufficient, they will close the account. Hence the mid- 
 dle class of people in London have no banker at all, and the poorer class 
 lodge their money in the savings banks, where they get interest, which 
 they would not get from the London banker. It should also be stated, 
 that besides keeping a sufficient balance, a party opening an account with 
 a London banker is expected to give a certain sum every year to the 
 clerks. This is called Christmas money, and the object is merely to en- 
 able the banker to pay a less salary to his clerks, at the expense of his 
 customers. 
 
 8. But, within a few years, public or joint-stock banks have been es- 
 tablished in London. These banks, or at least some of them, will allow 
 you to open an account without promising to keep a large balance, or 
 even any balance at all, provided you pay a small sum annually as a com- 
 mission. This sum is fixed when you open the account, and it is about 
 the same that you would be expected to give as Christmas-money to the 
 clerks of a private bank. Hence people of moderate incomes, and those 
 who can employ the whole of their capital in their business, are now able 
 to keep a banker. These banks, too, give interest on deposits, whether 
 the sums be large or small, as I shall hereafter explain. 
 
 9. The first public or joint-stock bank established in London was the 
 London and Westminster Bank. This bank is in Lothbury, and it has 
 branch establishments at No. 1 St. James's Square; No. 214 High Hol- 
 born ; No. 3 Wellington Street, Borough ; No. 87 High Street, White- 
 chapel ; and No. 4 Stratford Place, Oxford Street. The success of this 
 bank has led to the formation of several others. You will observe, that 
 all banks which have branches conduct their business on the same terms 
 at the branches as they do at the central office. 
 
 10. Since, then, the Scotch system of banking is established in Lon- 
 don, why should not the keeping of a banker be as general in London as 
 in Scotland ? I have stated, that, under the old system, those chiefly who 
 were denied banking facilities were the middle class of people. Now, 
 these people may be subdivided into two classes, — those who are en- 
 gaged in trade, and those who are not. I shall address myself, in the 
 first place, to the former class. 
 
 11. Now, I ask you, why don't you keep a banker.'' You say you 
 have been in business several years, and have never kept one. Of course, 
 if no banker would take your account, you could not do otherwise ; but 
 now there are bankers willing to take your account. But you say, you can 
 do without a banker. Of course you can. The question is, not whether 
 by possibility you can do without a banker, but whether you cannot do 
 
 425
 
 A Treatise on Banking. 
 
 better with one. But you reply, it would not be worth any banker's 
 while to take your account. That is for his consideration, not for yours. 
 The question for you to decide is, not whether your keeping a banker 
 would be of use to him, but whether it would be of use to yourself I 
 shall point out to you some of the advantages. 
 
 12. In the first place, by keeping a banker your money will be lodged 
 in a place of security. You have now <£ 50 or ■£ 100, or perhaps some- 
 times £ 200, that you keep in your own house ; you take it up into your 
 bedroom at night, and when you go out on Sunday you carry it in your 
 pocket. Now, you may lose this money out of your pocket, the till may be 
 robbed by your servants, or your house may be broken open by thieves, 
 or your premises may take fire and the money may be burnt. But even 
 should you escape loss, you cannot escape anxiety. When you have a 
 little more money than usual, you have fears and apprehensions lest some 
 accident should occur. Now, you will avoid all this trouble by keeping a 
 banker. 
 
 13. The banker will not only take care of your money, but also of any 
 thing else you commit to his charge. You can get a small tin box with 
 your name painted on it, and into this box you can put your will, the 
 lease of your house, policies of insurances, and any deeds or other docu- 
 ments that require particular care. You can send this box to your 
 banker, who will take care of it for you ; and you can have it back 
 whenever you like, and as often as you like. If your premises are in- 
 sured, it is clearly improper to keep the policy on the premises : for if the 
 house be burnt, the policy will be burnt too ; and where then is your evi- 
 dence of claim upon the insurance office .'* 
 
 14. Another advantage is the saving of time. When you receive 
 money you will send it in a lump to the bank ; and when you pay away 
 money you will draw cheques upon the bank. Now to draw a cheque 
 takes up much less time than counting out the money that you have to 
 pay, and perhaps sending out for change because you have not the exact 
 sum. Besides, you sometimes hold bills which, when due, you have to 
 send for payment ; now you can lodge these with your banker, who will 
 present them for you. And when you accept bills, you will make them 
 payable at your banker's, instead of making them payable at your own 
 house. Now in all these cases there is a great saving of time ; and, be- 
 sides, your bills, from being made payable at a bank, will be considered 
 more respectable. 
 
 15. Another advantage of keeping a banker, is, that it will be a check 
 upon your accounts. I need not speak to you, as a trader, of the impor- 
 tance of correct accounts. Your banker's book will be an authentic rec- 
 ord of your cash transactions. If you make a mistake in your trade 
 books, the banker's book will often lead to a detection of the error. If 
 you have paid a sum of money, and the party denies having received it, 
 you can refer to your banker's account, and produce your cheque, which 
 is as good as a receipt. By means of a banker's account, you could trace 
 your receipts and payments, even after a number of years had elapsed ; 
 and hence disputed accounts could be readily adjusted, and error, arising 
 from forgetfulness or oversight, be speedily rectified. 
 
 426
 
 Ten Minutes'' Advice. 
 
 16. I could mention several other reasons why you should keep a 
 banker.* But what I have said will be enough to induce you to make a 
 trial ; and when you have once opened an account, you will find so much 
 convenience from it, that you will require no further reasons to induce 
 you to continue it. If it should not answer your expectations, you can, 
 whenever you please, close it again. 
 
 17. Now, then, as you have made up your mind to keep a banker, the 
 next thing is to determine at what bank you will open your account. On 
 this point I must leave you to make your own choice. All the public 
 BANKS issue prospectuses, containing a list of their directors, the amount 
 of their paid-up capital, the names of the bankers who superintend their 
 respective establishments, and their rules for transacting business. You 
 can get a prospectus from each bank, compare them together, and please 
 your own fancy. But if you have no other grounds for preference, I ad- 
 vise you to open your account with the bank or branch bank that is 
 NEAREST TO YOUR OWN PLACE OF BUSINESS. You will often have to go 
 or send to the bank, and if it be a great way off, much time will be lost, 
 and you will at times be induced to forego some of the advantages of keep- 
 ing a banker rather than send to so great a distance. On this account, 
 let your banker be your neighbour. Recollect, time is money. 
 
 18. There is no difficulty in opening an account. You will enter the 
 bank, and ask for the manager. Explain to him what you want to do. 
 He will give you every information you may require, and you will re- 
 ceive, without charge, a small account book called a Pass-book, and a 
 book of cheques. I advise you to keep these two books, when not in use, 
 under your own lock and key. 
 
 19. You now require no further advice from me, as your banker will 
 give you the most ample ioformation respecting the way of conducting 
 your account. Nevertheless, I may mention a point or two for your own 
 government: — Do not depend entirely upon your banker's Pass-book, 
 but keep also an account in a book of your own. Debit your banker 
 with all cash you may pay into the bank, and credit him for all the 
 cheques you may draw at the time you draw them. Send your Pass- 
 book frequently to be made up at the bank ; and when it returns, always 
 compare it with your account-book. This will correct any mistake in the 
 Pass-book. Besides some of your cheques may not be presented for pay- 
 ment until several days after they are drawn ; and if, in the mean time, 
 you take the balance of the banker's Pass-book, you will seem to have 
 more ready cash than you actually possess, and this may lead you into 
 unpleasant mistakes. 
 
 20. When you lodge any money at the bank, always place the total 
 amount of the cash and your name, at full length, upon the outside of the 
 parcel, or on a slip of paper. The cashier will then see at once if he 
 agrees with your amount. This will save time, and prevent mistakes. 
 
 21. Be always open and straightforward with your banker. Do not 
 
 * The reasons assigned here have a reference chiefly to London banking. The ope- 
 rations of country banking are familiarly described i« " The Anatomy and Philosophy 
 of Banking; or, the True Character and Value of Banks briefly explained to the 
 Middle Classes of Society. By James Strachan." (Groombridge, publisher.) 
 
 427
 
 A Treatise on Banking. 
 
 represent yourself to be a richer man than you are ; do not discount with 
 your banker any bills that are not likely to be punctually paid when 
 due ; and should any be unpaid and returned to you, pay them yourself 
 IMMEDIATELY. Do not attempt to OVERDRAW your account ; that is, do 
 not draw cheques upon your banker for more money than you have in his 
 hands, without first asking his consent ; and if you make him any prom- 
 ises, be sure that they be strictly performed. If you fail once, the bank- 
 er will hesitate before he trusts you again. 
 
 22. Should you be dissatisfied with any thing connected with your ac- 
 count, make your complaint to the banker himself, and not to the clerks. 
 Let all your communications be made in person, rather than by letter. 
 But do not stay long at one interview. Make no observations about the 
 weather or the news of the day. Proceed at once to the business you 
 are come about, and when it is settled, retire. This will save 5four bank- 
 er's time, and give him a favorable impression of your character as a man 
 of business. 
 
 23. If you are in partnership, besides opening an account with your 
 banker in the names of the firm, you should open a private account for 
 yourself, that your personal affairs may be kept separate from those of 
 the partnership. Or if you are in an extensive way of business, and 
 have a large family, it is advisable that you open a separate account with 
 your banker in the name of your wife, that your trade payments and your 
 household expenses may not be mixed up together in the same account. 
 This is a good way of ascertaining the exact amount of your family ex- 
 penditure. 
 
 24. If you are appointed executor or assignee to an estate, or become 
 treasurer to a public institution or charitable society, open a separate ac- 
 
 ■ count with your banker for this office, and do not mix other people's 
 moneys with your own. This will prevent mistakes and confusion in 
 your accounts. These separate accounts may be kept still more distinct 
 by being opened with another banker, or at another branch of the same 
 bank. 
 
 25. There are a good many of the middle class of people who are not 
 in trade, and I must now address them. Perhaps you are a clergyman, 
 or a medical man, or you are in a public office, or arc living on your 
 rents or dividends. At all events, whatever you may be, I conclude you 
 are not living beyond your means. If you are, I have not a word to say 
 to you about keeping a banker ; you will soon, most likely, be within the 
 keeping of a gaoler. 
 
 26. Several of the reasons I have given to the trader will also apply to 
 you ; but there is one that applies with much greater force, — the ten- 
 dency to insure accurate accounts. As you are not a man of business, 
 I shall not advise you to keep an account of your receipts and your ex- 
 penditure. I know you will do no such thing. Should you ever com- 
 mence to do so, you will get tired before the end of the year, and throw 
 the book aside. Now, if you keep a banker, he will keep your accounts 
 for you ; his Pass-book will show you the state of your accounts. All 
 the money you receive you must send to the bank, and all your payments 
 must be made by cheques upon the bank. If you want pocket-money, 
 
 428
 
 Ten Minutes^ Advice. 
 
 draw a cheque for £5 or .£10, payable to cash, but by no means dis- 
 burse any money but through your banker. Your book will be balanced 
 every half-year. You will then see the total amount of your receipts dur- 
 ing the half year, and your various payments to the butcher, the baker, 
 the tailor, &c. The names to which the cheques are made payable will 
 show you for what purpose they were given ; and you should write these 
 names in a plain hand, that the clerks may copy them correctly in the 
 Pass-book, Now, if you look through your book once every half year 
 in this way, you will probably see occasion to introduce some useful re- 
 forms into your domestic expenditure. But if you are too lazy to do this, 
 hand the book to your wife, and she will do it for you, 
 
 27. I shall now address another class of people. Perhaps you are a 
 clerk, or a warehouseman, or a shopman, or a domestic servant. Well, 
 you have no occasion to keep a banker ; that is, you have no occasion to 
 open a current account. But you have got a little money which you 
 would like to put into a safe place, and upon which you would like to re- 
 ceive interest. Well, now, listen to me. 
 
 28. If the sum be under £ 10, or if the sum be above £ 10, and you 
 are not likely to want it soon, put it into the savings banks ; you will re- 
 ceive interest for it at the rate of about £ 3 for every £ 100 for a year. 
 But mind, you can only put money into the savings bank at certain hours 
 in the week, when the bank is open ; and you cannot put in more than 
 .£30 in any one year, nor more than £ 150 altogether, and you will re- 
 ceive no interest for the fractional parts of a month, and you cannot draw 
 out any money without giving notice beforehand, 
 
 29. If, then, your money is more than £ 10, and you have already 
 lodged =£30 this year in the savings bank, or £ 150 altogether, or if you 
 will have occasion to draw out your money without giving notice, then 
 lodge it in one of the public banks. These banks are open every week 
 day from nine o'clock in the morning till four in the evening ; they will 
 take lodgments of money to any amount, and interest will be allowed 
 from the day it is lodged until the day it is drawn out ; and if the sum is 
 under £ 1,000, no notice is required. For all sums lodged on interest the 
 bankers give receipts called deposit receipts. 
 
 30. When you go to tlie bank to lodge upon interest any sum under 
 £ 1,000, you need not inquire for the manager. Hand your money to 
 any clerk you may see standing inside the counter, and ask for a deposit 
 receipt. You will be requested (the first time you go) to write your name 
 and address in a book which is kept for that purpose, and then the deposit 
 receipt will be given to you without any delay. 
 
 31. Mind, this deposit receipt is not transferable ; that is, you cannot 
 lend it or give it to any body else. When you want the money, you must 
 take it yourself to the bank, and ask the cashier to pay you the amount. 
 You will then be requested to write your name on the back of the deposit 
 receipt ; the cashier will see that the signature corresponds with the signa- 
 ture you wrote in the book when you lodged the money, and will then 
 pay you the amount, and keep the receipt. 
 
 32. Although you cannot lodge upon a deposit receipt a less sum in the 
 first instance than £ 10, yet, havinjj lodged that sum, you can make any 
 
 -•^9
 
 A Treatise on Banking. 
 
 additions to it you please. Thus, if you wish to lodge £ 5 more, you can 
 take your <£ 5 note and your deposit receipt for £ 10 to the bank, and get 
 a new receipt for £ 15. If, after having lodged £ 10, you wish to lodge 
 £ 10 more, you can get a separate receipt for the second £ 10, or have a 
 new receipt for £ 20, whichever you please ; and, observe, whenever any 
 addition is made to a former receipt, the old receipt is cancelled, and the 
 interest due upon it is either paid, to you in money, or added to the 
 amount of the new receipt, as may be most agreeable to yourself. 
 
 33. The interest allowed you by the bank will at present be at the rate 
 of 2 per cent ; that is to say, after the rate of <£ 2 upon every £ 100 for 
 a year. 
 
 34. Upon sums above £ 1,000 the interest allowed is sometimes more 
 and sometimes less than 2 per cent., according to the value of money, 
 that is, according to the rate at which the bankers can employ it again ; 
 and a few days' notice is usually required before the money is withdrawn ; 
 but upon sums under £ 1,000 the rate of interest varies less frequently, 
 and they are always repayable upon demand. 
 
 35. You will be surprised to find how the desire of lodging money in a 
 bank will grow upon you. When you had the money in your pocket, you 
 were anxious to find reasons for spending it. When you have placed it 
 in the bank, you will be anxious to find reasons for not spending it. All 
 habits are formed or strengthened by repeated acts. The more money 
 you lodge in the bank, the more you will desire to lodge. You will go 
 on making additions, until, at last, you will probably have acquired a sum 
 that shall lay the foundation of your advance to a higher station in 
 society. 
 
 450
 
 Inde.x Reading. 
 
 Section X. — INDEX READING. 
 
 This book Is now brought to a close. Our aim has been to put into 
 t such matters as shall be practically useful. We have endeavoured to 
 render it more useful by making an Index. We shall now point out the 
 uses of this index. 
 
 By means of an index we can refer to any thing that we remember to 
 have read. This facility of reference is a great advantage. Without 
 It we may have to make a long search, and to read over a good many 
 pages, before we find the page we Avant. An index is also useful in ena- 
 bling us to call to mind those parts of a book that we have forgotten. 
 After having read through a book, if we read through the index we shall 
 be reminded of parts that would otherwise have escaped our recollection. 
 And if we continue an occasional perusal of the index, we shall impress 
 the whole substance of the book on our memory. An index will often 
 bring together those parts of a book in which the same subject is discussed, 
 and thus we shall obtain a fuller knowledge of the subject in all its bear- 
 ings and relations than we should obtain by our reading without the index. 
 An index may be employed as a means of self-examination. If the index 
 does not suggest to the mind of a party the main ideas to which it refers, 
 he must have read the book very inattentively, and he has yet more to 
 learn respecting the subject discussed. The index will thus be a test of 
 his attainments. To render the index more useful in this respect, I 
 have made some of the references in an interrogative form. The index 
 may thus be made to serve the purpose of a catechism. I advise the 
 young student in practical banking to endeavour to answer these questions 
 without referring to the book, and to answer them aloud. By this means 
 he will impress the matter more deeply on his mind, and at the same 
 time acquire a facility of expression. 
 
 An index may be rendered useful, not to those only who have read the 
 book, but to those who have not read it, and who never will read it. The 
 index contains a syllabus of the work. Under a single word is sometimes 
 placed a summary of the facts and principles of a whole section. We 
 may thus become acquainted with the substance of a book in a short space 
 of time. It is true that in this railway mode of obtaining knowledge we 
 must forego any gratification that might arise from the style or the illus- 
 trations. But the exercise would be profitable. In this way revie\yers 
 and others are able to acquire a good knowledge of a book, and to form 
 a fair opinion of its merits, without reading many pages consecutively. 
 But without an index this cannot be done, either so well or so rapidly. 
 Intelligent men do not wish to read through a large book on a subject with 
 which they are pretty well acquainted. They desire to refer to those 
 Doints only on which their own information may be deficient, or on which 
 
 431
 
 A Treatise on Banking. 
 
 they would desire to know the sentiments of the author. This they can 
 easily do by means of an index. Men in business, too, must husband their 
 time, and they can afford to read only those parts of a book which they 
 deem the most interesting. They may be guided to those parts by means 
 of an index. 
 
 There are certain states of body and of mind in which a man is 
 not disposed for continuous reading. At such a time it is refresh- 
 ing to saunter over an index. Some word may catch the eye, or some 
 new idea be excited in the mind, and the faculties may be at once enliv- 
 ened and invigorated. In this kind of intellectual loitering we may per- 
 chance pick up in our path a flower or a pebble that shall awaken the 
 spirit of inquiry, set in motion our powers of investigation, and lead the 
 mind into a coui-se of agreeable and profitable meditation. 
 
 432
 
 Appendix. 
 
 APPENDIX. 
 
 The following paragraphs were omitted : — 
 
 To the statement of the affairs of the bank at page 173, add the follow- 
 ing note : — 
 
 Those joint-stock banks that have branches make out a similar statement every week. 
 It comprises the balances of the General Ledger at the head-oifice, and of that of each 
 branch. Tlie balance-sheets are printed, and are bound together beforehand, so as to 
 form a book ; it is called the Statement Book, and is laid before the directors at their 
 weekly meetings. 
 
 Add the following to the end of the section at page 183 : — 
 
 A balance-sheet of the affairs of a commercial house is made out in 
 much the same way as that ef a bank. The liabilities are placed on one 
 side of the account, and the assets on the other. The items of which 
 each side is composed will vary according to the nature and extent of the 
 business. Many commercial balance sheets have unfortunately been 
 recently brought under the notice of the public ; most of them, as well as 
 the annual balance-sheets of some of the joint-stock banks may be found 
 in the pages of the Bankers'' Magazine. 
 
 THE BANK OF FRANCE. 
 
 The following evidence was given by the late Lord Ashburton, before 
 the Committee of the House of Lords on Commercial Distress m 1848 : — 
 
 " Have you any statement which you are desirous of making to the 
 committee of information received by you relative to the proceedings of 
 the Bank of France ? 
 
 " Having observed that the committee were desirous of knowing some- 
 thing about the construction of the direction of the Bank of France, and of 
 the conduct of that bank with respect to the several circumstances which 
 have been matters of inquiry here connected with the Bank of Eng- 
 land, I took the opportunity of making inquiry of a gentleman who was in 
 London about ten days ago, who was a director of the Bank of France, 
 and who would readily have come and given evidence himself if he had 
 no tbeen under the necessity of immediately returning to his own country. 
 The inquiry I made of that gentleman related, first of all, to the construction 
 of the direction of the Bank of France, and to what extent that direction 
 was considered to work well. Then I made inquiry upon some of the 
 points more immediately connected with the subject of our inquiries, 
 namely, the conduct of the Bank of France with respect to its discounts, 
 
 433
 
 A Treatise on Banking. 
 
 with respect to the charge of interest, and with respect to any hmitation 
 or regulation that may be put upon the operations of the bank analogous 
 to those which are imposed upon the transactions of our own bank. I 
 will first of all state to the committee the facts with respect to the con- 
 struction of the bank direction. The Bank of France, as probably most 
 of your lordships know, has existed since 1803 ; it was established quite 
 at the beginning of the power of Napoleon, and is constituted to this 
 day under the same administration ; and I think it may be stated, 
 that under all the different variations of government, and the difficulties 
 through which that country has passed, the management of the bank has 
 been singularly successful and fortunate. There has been at no time any 
 suspension of its payments or any material difficulties of any kind ; and 
 it seems to have answered perfectly well the object for which that bank, 
 like our own, was instituted, namely, as a bank to give proper facilities to 
 the circulation and commerce of the country, and at the same time to 
 be the bankers of the Government, and to give every proper and legiti- 
 mate facility to the operations of the Government. The direction is 
 formed in this manner : There is, first of all, a governor, who has a house 
 and 60,000 francs a year. There are then two sub-governors, each with 
 30,000 francs a year. The governor and sub-governors are both named 
 bv the Government, and, it is understood, removable by the Government, 
 but in point of fact they never are removed. The present governor, 
 Monsieur D'Argout, is the third governor of the Bank of France in forty- 
 five years ; so that it has been generally considered that, though legally 
 removable by the Government, practically they have not been removed. 
 Then, besides this governor and two sub-governors, there are three re- 
 ceivers-general. Your lordships are probably aware what the position of 
 receivers-general is in the financial economy of France. Those three 
 receivers-general are selected by the proprietors out of the class of the 
 receivers-general ; but the receivers-general are naturally more or less 
 connected with the Government and finance department of the country. 
 There are then three censors, who are to be elected from the ' Etat In- 
 dustrie!' of Paris, — what we should call the manufacturers of Paris. 
 It is so regulated by the charter that they must be taken from that class 
 of persons ; but although they are called censors, I do not find that they 
 have to perform any duty in the direction but the same which is performed 
 by the other directors. Then in addition to those there are twelve ordi- 
 nary directors, elected in the way in which our bank directors are elected. 
 
 " Are the directors generally paid } 
 
 " None of them are paid but the governor and the two sub-governors, 
 except that there is, I think, ten francs paid upon each attendance, mere- 
 ly for the purpose of marking the attendance of persons to their duty, but 
 no amount of payment that can be of any importance. The twelve di- 
 rectors arc taken from the body of merchants, bankers, and leading per- 
 sons at Paris, at the discretion of the stockholders. That is the constitu- 
 tion of the Bank of France. Upon making inquiry of the gentleman I 
 have mentioned as to the system of management, he told me that the real 
 detail of the management of the bank is mainly with the two sub-govern^ 
 
 434
 
 The Bank of France. 
 
 ors. They are stated to be very able men, thoroughly acquainted with 
 all the circumstances of Paris, and all the persons likely to come to the 
 bank for business. And, in short, upon them seems to devolve mainly 
 the duty of attending to the details of the management of tl>e bank ; and 
 the directors themselves seem to be more checks upon those sub-govern- 
 ors, than to be themselves the managers of the bank. At the same time 
 the directors have the power, which the directors of our bank have, to 
 vote and to decide upon any measures that are before them. This gen- 
 tleman stated to me that he considers the system to work well ; that there 
 is no complaint of it. He does not find that the governor and sub-gover- 
 nors pursue any interests of the Government as against those of the bank 
 and of trade, and the power which they have with the directors is a suffi- 
 cient check ; in short, that they have nothing material to complain of in 
 the administration. So much for the direction of the bank. Then I pro- 
 ceeded to inquire upon several points relating to the management of the 
 affairs of the bank ; and first as to the charge of interest. The legal in- 
 terest in France is 6 per cent, for moneyed securities, and 5 per cent, for 
 land. It is limited, as the interest of this country is limited, to 5 per 
 cent, for mortgages upon land, and 6 per cent, as the maximum of legal 
 interest for any purpose. The transactions of the Bank of France may 
 be said to have varied very little indeed from the limits of 4 to 5 per cent.; 
 they never exceed 5, and they have hardly ever been under 4. Un- 
 der all circumstances, they have kept that equable rate of interest for 
 their discounts and for their general transactions. I should state that the 
 discounts of commercial paper by the Bank of France, so far from being 
 insignificant, as has been intimated, are in reality very large. I take it 
 that upon the average of years the discount of commercial paper by the 
 Bank of France, is larger than the discount of commercial paper by the 
 Bank of England. They make no distinction between any qualities of 
 paper ; all paper is done at the same rate ; but they rather favor what 
 they call the paper connected with the common trade of the place. 
 Therefore a much larger portion of their discounts is in small bills in the 
 regular trade of the place, upon which this gentleman says the loss was 
 very insignificant indeed ; that paper usually having three signatures upon 
 it, and being founded upon real business, is very seldom attended with 
 any loss. What I have stated with respect to the interest that the Bank 
 of France charge is in answer to a further question which I put, whether 
 they regulated the amount of their discounts at all by demanding a high- 
 er rate of interest, as our bank has done of late years. He says they 
 have not done that on any occasion ; that the rate has remained, as I have 
 stated, uniform, — between 4 and 5 per cent., — and they never attempt 
 to lessen the applications by asking a larger rate of interest. 
 
 " Have they any legal minimum of interest .? 
 
 " No ; they have no legal minimum of interest ; but when the inter- 
 est comes down very low they consider that a symptom that bank ac- 
 commodation is not required. 
 
 " Though they do not alter the rate of interest, do not they vary from 
 time to time the rules with respect to the echeance of bills ? 
 
 435
 
 A Treatise ow Banking. 
 
 " That I cannot state. Then he stated further that he has no recollec- 
 tion at any time of their refusing the common trade bills of the coun- 
 try. If they want to regulate the state of their afllvirs they do it by in- 
 creasing or diminishing what they may hold of public securities, but they 
 never reduce or materially vary their transactions with the merchants of 
 the country. 
 
 " Then in what sense may they be said to favor one particular des- 
 cription of paper ? You said that they rather favored one sort of pa- 
 per. In what way do they favor it ? 
 
 " They favor the paper of what I should call legitimate business, — 
 paper connected with the real ordinary trade of the country, — in pref- 
 erence to the bills of stock-jobbers or large speculators. 
 
 " Then in order to give effect to that distinction they must reject paper 
 
 m some cases 
 
 " Undoubtedly ; but it is the paper of ordinary trade that they nevex* 
 reject. 
 
 " Have they any rule as to the length of bills ? 
 
 " I cannot state what their rules are in this respect. Then I have only 
 lastly to state that there is no limitation as to their issues by law, nor 
 is there any regulated limitation among themselves other than what arises 
 from their own discretion from day to day as they come to manage their 
 affairs. 
 
 " In the exercise of their discretion has not the fact been that the 
 amount of bullion kept by the Bank of France has been very large ? 
 
 " Yes ; generally speaking, I believe it has. This gentleman stated to 
 me that they had never at any time been under any apprehension as to 
 their ability to pay their notes, though undouljtedly we, looking at the 
 returns, should think that their condition was rather questionable. 
 
 " You cannot state what proportion the amount of bullion in their hands 
 has generally borne to the number of notes they have issued ? 
 
 " I am not able to answer that myself ; but a return is regularly made ; 
 it is very easy to know that. 
 
 " Do you know in point of fact that though it is called the Bank of 
 France, their notes were not current throughout the whole of France ? 
 
 "Yes; their circulation is very much confined to Paris; but at the 
 same time, nine tenths of the business of France, like the business in our 
 own country, is done by bills upon Paris, and Paris really is the heart of 
 the whole circulation. I have only further to state, that of late years they 
 have had branch banks, as our bank has had ; but this gentleman says 
 the directory did not think favorably of the working of those branch 
 banks ; he thought that they had not been profitable to them, and that 
 they had rather disturbed their circulation. 
 
 " During the greater part of the time to which your observations have 
 applied has not the law confined them to a minimum note of 500 francs ? 
 
 " Yes ; it is only lately that they have come to notes of 100 francs. 
 
 " Did he state what amount of securities they have generally held ; 
 what we should call Government securities ? 
 
 " That is stated in the returns which are periodically published. 
 
 " Supposing that the natural value of money in France was 6 per cent. 
 
 43G
 
 The Bank of France. 
 
 and that the ordinary market rate of interest was 6 per cent., does your 
 information enable you to state to the committee what the Bank of 
 France would do in order to answer the demands which must be made 
 upon it if it maintained its own rate of discount at between 4 and 5 per 
 cent. ? 
 
 " I should think that if the Bank of France limited their interest to 5 
 per cent, they would, except under very extraordinary circumstances, 
 guide and regulate the general interest of the place, and that under those 
 circumstances they would do the whole of the real commercial paper that 
 is presented. What is more singular, the banks in America never go be- 
 beyond the legal interest. None of the banks in America discount at a 
 higher interest than 6 per. cent., although the market rate of interest in 
 that country is veiy often 10, 15, and 18 per cent. 
 
 " What check do they apply .? If they do not impose a restriction by 
 raising the rate of interest, must not they impose some other restriction, 
 either in the date of the bills or in the securities ? 
 
 " No, it does not necessarily follow ; because those variations in the 
 interest do not materially alter the real business connected with drafts from 
 Lyons and Havre and other places, and the paper connected with the real 
 business of the country. If Mr. Rothschild or any great person were to 
 send them in a mass of paper, for the purpose of taking advantage of the 
 rate of interest, they would not do it for him. When I say they do ah 
 the paper sent in, I should explain that they distinctly make that condi- 
 tion, that it shall be paper resulting from the real trade of the country, and 
 that seldom materially varies. 
 
 " What is the nature of their relation with the Government .'' Do they 
 receive the Government deposits and securities .'' 
 
 " It is as nearly as possible the same as that of our Bank of England. 
 
 " Do they pay the dividends on the French rentes .'' 
 
 " No ; they have nothing to do with the dividends. 
 
 " They are not liable to be called upon by the Government to advance 
 money for that particular purpose .'' 
 
 " Yes ; if the Government want assistance they stand exactly in that 
 respect in the same relation that our bank do to our Government. 
 
 " Does their charter require them to make advances of that kind when 
 demanded, or is it optional .'' 
 
 " It is optional. 
 
 " They may act just as they do with the general trade of the country } 
 
 " Yes. They stand in exactly the same relation to the Government as 
 the Bank of England does, except that they have nothing to do with the 
 payment of the dividends ; but they hold the deposits of the Government, 
 and in fact are the bankers of the Government. 
 
 " Is it optional with them to pay their notes in gold or in silver ad 
 libitum 7 
 
 " It is optional to pay either in gold or in silver, but of course they pay 
 only in silver at present ; there is a premium at present upon gold of 
 about 8 per cent., which has not been known for a long time. 
 
 " What has been the lowest denomination of note that they issue ? 
 
 " I think it is now 100 francs. 
 
 437
 
 A Treatise on Banking. 
 
 " What is it in ordinary circumstances ? 
 
 " Until lately there were no notes under 500 francs. 
 
 " Will you explain a little more fully the statement you made as to the 
 amount of discounts afforded by the Bank of France being larger than 
 that afforded by the Bank of England, because the transactions of the two 
 institutions certainly are not equal ? 
 
 " If we look back to the returns we see for a long time about the same 
 amount of discounts of bills bv the Bank of England, — .£2,800,000, 
 £2,700,000, ^2,800,000, £ 2,900,000, and so on. If you take the av- 
 erage of the last ten years, I think you will find the discounted bills larger 
 in amount in Paris than here. 
 
 " Have the Government any power, not merely of supervising the acts 
 of the bank, but of compelling them to adopt any steps that they may 
 think fit .? 
 
 " No ; they have not. The bank are perfectly independent, and that 
 independence has been respected even under Napoleon's government. 
 
 " With respect to those persons called censors, what are their functions 
 in the bank ? Are they chosen by the bank proprietors ? 
 
 " They are chosen from among the manufacturers of Paris. It was in- 
 tended to provide that there should be three at least of the class of manu- 
 facturers of Paris in the direction, and three of the receivers-general. 
 
 " Are the receivers-general official members .'' 
 
 " I am not quite sure whether the receivers-general were named by the 
 crown, or whether they were elected by the stockholders from the general 
 body. 
 
 " They are the receivers-general of taxes .'' 
 
 " They are ; there is a receiver in each department." 
 
 Note. — On the night of the 15th March (1848), the Provisional Government consented to the issue 
 of an edict exempting the Bank of France from the payment of its notes in specie, — rendering the pre- 
 sentation of these notes in payment throughout the territory of France a legal tender ; fixing 350 mil- 
 lions of francs as the Tnaximum of the outstanding circulation of the bank at one time ; authorizing the 
 immediate issue of notes for 1(X) francs (£-4) each; and finally directing the publication every week, in 
 the Moniteur, of a full abstract of the bank's balance sheet. 
 
 Subsequent decrees of the 27th April, 1848, and 2d May, 1848, authorized the incorporation with the 
 Bank of France, of the nine "departmental banks" (that is, local joint-stock banks), at Bourdeaux, 
 Rouen, Nantes, Lyons, Marseilles, Havre, Lille, Toulouse, and Orleans; and extended the privilege of the 
 Restrictions to the issues of these banks, by augmenting the maximum limit of the total circulation of 
 the Bank of France, and all its branches, from 350 millions to 452 millions of francs, or from £ 14,000,(X)0 
 sterling to £ 13,000,000 sterling. 
 
 On the 6lh August, 1850, the National Assembly of France gave the sanction of a definite law to a pro- 
 posal submitted by M. Gouin in the name of a Committee, in favor of the immedi.ate resumption of pay- 
 msnls in specie by the Bank of France. Few men in France have distinguished themselves more than 
 M. Gouin in the defence of all the best institutions of his country ; and it will be universally felt that 
 the introduction of a measure of so much delicacy and importance could not have been undertaken by any 
 member of the Assembly having a belter title than M. Gouin to connect hi.s name with the reEstablish- 
 ment of the credit circulation of France upon a sound basis. — London Bankers' Magazine, Sept., 1850 
 
 438
 
 The Bank of France. 
 
 THE CONDITION OF THE BANK OF FRANCE ON THE 
 
 7th OF JUNE, 1849. 
 
 Debtor. fcs. C 
 
 Capital of the Bank, 67,900,000 
 
 Ditto of the ex-Departmental Banks, 23,350,000 
 
 Reserve of the Bank, 10,000,000 
 
 Ditto of the ex-Departmental Banks, 2,980,750 
 
 Reserve of the Bank in Landed Property, 4,000,000 
 
 Bank Notes in Circulation, 362,574,900 
 
 Ditto of the Branch Banks, 29,221,600 
 
 Bank Notes to Order, 920,941 75 
 
 Treasury Account Current Creditor, 23,591,142 45 
 
 Sundrv Accounts Current, 109,762,124 54 
 
 Ditto in the Branch Banks 29,467,205 u 
 
 Receipts payable at Sight, 3,955.300 
 
 Ditto in the Branch Banks, 1,212,782 
 
 Draughts of the Branch Banks payable by the Bank, .... 6,745,395 61 
 
 Ditto of the Bank pavable by the Branch Banks 4,697,068 
 
 Dividends payable, " 203,369 25 
 
 Liquidation of the Algiers Branch Bank, 180,952 44 
 
 Sundry Discounts anticipated, 3,574,784 09 
 
 Ditto of the Branch Banks, 1,991,956 
 
 Re-discounted during the last half-year, 246,109 85 
 
 Ditto in the Branch Banks, 460,661 
 
 Sundries, 412,355 86 
 
 Total Francs, 687,449,397 84 
 
 Creditob. Fcs. C. 
 
 Cash in hand, 204,432,108 15 
 
 Ditto in the Branch Banks, 129,579,652 
 
 Commercial Bills Overdue, 172,390 6 
 
 Commercial Bills Discounted, but not yet due, of which 14,556,742f. 
 
 were received from the Branch Banks, 47,680,034 90 
 
 Ditto in the Branch Banks 78,395,013 56 
 
 Advanced on a deposit of Bullion, 10,770,400 
 
 Ditto by the Branch Banks, 1,304,193 
 
 Advanced on French Public Securities, 25,064,517 40 
 
 Ditto by the Branch Banks, 1,438,405 
 
 Advanced by the State on Treasury Bonds of the Republic, . . 50,000,000 
 Advancedby the State on the Loan of 150,000,000f, . , . 50,000,000 
 
 Loan of 10,000,000f, to the city of Paris, 1,000,000 
 
 Loan of 3,000,000f., to the city of Marseilles, 1,000,000 
 
 Loan to the Department of the Seine, 3,000,000 
 
 Government Stock reserved, 10,000,000 
 
 Ditto disposable, 42,581,488 13 
 
 Vested in Public Securities by the New Branch Banks, . . 12,779,541 30 
 
 Hotel and Furniture of the Bank, 4,000,000 
 
 Landed Property of the Branch Banks, 2,284,653 
 
 Interest in the National Discount Office, 200,000 
 
 Ditto of the Branch Banks, 230,000 
 
 Commercial Bills protested, and not yet honored, .... 5,997,353 39 
 
 Ditto in the Branch Banks, 3,557,217 
 
 Expenses of the management of the Bank, 571,020 86 
 
 Ditto of the Branch Banks, 486,871 
 
 Sundries, 924,538 95 
 
 Total Francs, 687,449,397 84 
 
 2D 439
 
 A Treatise on Banking. 
 
 No. IV. 
 A Law relating to Banking in Neio York. 
 
 The following " Act, to amend an Act entitled ' An Act to abolish the 
 Office of Bank Commissioner, and for other Purposes, passed April 
 18th, 1843,'" passed the Legislature of New York, December 4th, 
 1847: — 
 
 The people of the State of New York, represented in Senate and As- 
 sembly, do enact as follows : — 
 
 § 1. The third section of the Act entitled " An Act to Abolish the 
 Office of Bank Commissioner, and for other Purposes," passed April 18th, 
 1843, is hereby amended, so as to read as follows : — 
 
 It shall be the duty of the comptroller, secretary of state, and treasurer, 
 on or before the first Tuesday of January, April, July, and October in 
 each year, to fix upon and determine some Saturday in the quarter of 
 the year then ended, in respect to which every incorporated bank, bank- 
 ing association, and individual banker in the State, shall make a report 
 of the character hereinafter specified. Immediately after each determi- 
 nation of such Saturday, the officers hereinbefore named shall cause no- 
 tice thereof to be published daily, for six successive days, in such news- 
 paper published in the city of Albany as shall for the time being have 
 the publication of legal notices, under the Act entitled " An Act to Pro- 
 vide for the Public Printing," passed March 5th, 1846, or shall serve a 
 copy of such notice upon each incorporated bank, banking association, or 
 individual banker in the State, by delivering the same to some officer or 
 clerk thereof, at their respective places of business, or by depositing the 
 same in the post-office, directed to each of such banks, banking associa- 
 tions, and individual bankers, or some officer thereof, at their places of 
 business respectively. 
 
 It shall be the duty of every incorporated bank, banking association, 
 or individual banker in the State, on or before the first day of February, 
 May, August, and November, of each year, to make and transmit to the 
 comptroller a quarterly report, which report shall be made on the oath of 
 the president and cashier, and shall contain a true statement of the con- 
 dition of the bank, banking association, or individual banker making such 
 report, before the transaction of any business, on the morning of the day 
 specified in the notice of the comptroller, secretary of state, and trea- 
 surer, next preceding the date of such report, in respect to the following 
 items and particulars ; to wit : — 
 
 Loans and discounts, overdrafts, due from banks, due from directors of 
 the banks or banking associations making the report ; due from brokers, 
 real estate, specie, cash items, stocks and promissory notes, bills of sol- 
 vent banks, bills of suspended banks, loss and suspense account, capital, 
 circulation, (distinguishing that received from the comptroller from the 
 old outstanding bills,) profits, amount due to banks, amount due to indi- 
 viduals and corporations other than banks, amount due to the treasurer of 
 the State, amount due to the commissioners of canal fund, amount due 
 to depositors on demand, amount due, not included under either of the 
 
 440
 
 Banking in New York. 
 
 above heads. And it shall be the duty of the comptroller to publish such 
 reports toffcthcr in the newspapers printed in the city of Albany, in this 
 section before named, accompanied with a summary of the items of cap- 
 ital, circulation and deposits, specie and cash items, public securities and 
 private securities ; and the separate report of each bank, banking asso- 
 ciation, and individual banker, shall be published in a newspaper pub- 
 lished in the county ; if a newspaper is published in the city or town in 
 which any bank is situated, such publication shall be had in such papers 
 in which such bank, or banking association, or banking-house of such in- 
 dividual banker shall be situated, at the expense of such bank or bank- 
 ing association, or individual banker. 
 
 § 2. Section four of the Act in the first section of this Act referred 
 to, is hereby amended so as to read as follows ; to wit : — 
 
 The comptroller shall publish the reports and summary required by 
 the third section of this Act, together in one paper, on or before the 25th 
 day of August, November, February, and May, in each year ; and the 
 expense of such publication shall be defrayed by a percentage assessed 
 upon the capital stock of all the banks, and banking associations, and in- 
 dividual bankers doing business under the " Act to Authorize the Busi- 
 ness of Banking," passed April 18th, 1838, or of any Act amending the 
 same in the said State ; and if any such bank, banking association, or indi- 
 vidual banker shall fail to furnish to the comptroller its quarterly report 
 in time for such publication, it shall forfeit and pay to the comptroller the 
 sum of one hundred dollars, to be applied by him to the expense of publish- 
 ing the quarterly reports. And if any bank, banking association, or in- 
 dividual banker, shall neglect or refuse to make the quarterly report re- 
 quired by the third section of this Act, for two successive quarters, it shall 
 forfeit its charter (if an incorporated bank), and its privileges as a bank- 
 ing association or individual banker, if organized or doing business under 
 the Act of April 18th, 1838, in this section before referred to; and every 
 such bank, banking association, and individual banker may be proceeded 
 against, and its affairs closed, in any manner now required by law in case 
 of an insolvent bank or banking association. 
 
 § 3. Whenever, in the opinion of the comptroller, there shall be good 
 cause to report that any bank, banking association, or individual banker, 
 has made an incorrect or imperfect quarterly return, or is in an unsound 
 or unsafe condition to do banking business, it shall be his duty to have 
 the books, papers, and affairs of such banks, banking associations, or in- 
 dividual banker, examined by some competent person, to be designated 
 by him, who shall examine fully into his books, papers, and affairs, forth- 
 with, and report to the comptroller, on oath, the result of such examina- 
 tion ; a copy of which report shall be forthwith published, in the manner 
 prescribed in the first and second sections of this Act, in respect to the 
 publication of quarterly returns. The reasonable costs and expenses of 
 every examination shall be defrayed in the manner prescribed in the 
 second section of this Act for paying the expenses of publishing quarterly 
 returns. 
 
 ^ 4. All individual bankers, and all banking associations, which are 
 now or shall be hereafter engaged in the business of banking, under the 
 
 441
 
 A Treatise on Bankirig. 
 
 provisions of the Act entitled " An Act to Authorize the Business of 
 Banking," shall be subject to taxation on the full amount of capital ac- 
 tually paid in, or secured to be paid in, as such capital, by them severally, 
 at the actual market value of such securities, to be estimated by the 
 comptroller, without any reduction for the debts of such individual banker, 
 or banking association ; but in no case shall the capital of any such bank- 
 ing association, or individual banker, be estimated at a less sum than the 
 amount of circulating notes delivered to such banking association, or indi- 
 vidual banker, and not returned to the comptroller ; and, in case the cap- 
 ital of such banking association has been reduced by the surrender of 
 any securities to the stockholders thereof, and the certificates of stock 
 held on account of such securities being surrendered to such banking as- 
 sociation and cancelled, such banking association shall not be subject to 
 taxation upon such part of hs capital. 
 
 § 5. Nothing in this Act contained shall apply to any bank or banking 
 association which has reduced its capital stock in violation of the twenty- 
 eight section of an Act entitled " An Act to Authorize the Business of 
 Banking," passed April 18th, 1838. 
 
 The following is a summary of all the Banks in the United States : * — 
 BANK CAPITAL OF THE SEVERAL STATES. 
 
 States 
 
 Maine, . 
 
 New Hampshire, 
 
 Vermont, 
 
 Massachusetts, . 
 
 Rhode Island, , 
 
 Connecticut, 
 
 New York, 
 
 New Jersey, 
 
 Pennsylvania, . 
 
 Delaware, . . 
 
 Maryland, 
 
 District of Columbia, 
 
 Virginia, 
 
 North Carolina, 
 
 Soulli Carolina, 
 
 Georgia, , 
 
 Ohio, 
 
 Kentucky, . 
 
 Indiana, . 
 
 Michigan, , 
 
 Tennessee, 
 
 Alabama, . 
 
 Louisiana, , 
 
 Mississippi, 
 
 Missouri, 
 
 Iowa, . 
 
 Wisconsin, 
 
 Texas, . . 
 
 Florida, , 
 
 Illinois, 
 
 Arkansas, . 
 
 Totals, . 
 
 Population 
 1850. 
 583,000 
 318,000 • 
 314,300 
 985,000 
 147,500 
 372,000 
 
 3,099,200 
 480,300 
 
 2,250,000 
 
 90,400 
 
 575,100 
 
 54,000 
 
 I,42S,S00 
 870.500 
 63'J,100 
 9.)0,IHHJ 
 
 2.150,000 
 ■988,000 
 
 1,2.50,000 
 397,60(J 
 
 1,050,000 
 800,000 
 625,000 
 580,000 
 681,500 
 175,000 
 305,000 
 175,000 
 85,0<K) 
 850,000 
 198,700 
 
 23,368,000 
 
 No. of 
 Banks. 
 
 3o 
 
 22 
 
 27 
 
 130 
 
 63 
 
 42 
 195 
 
 26 
 
 53 
 9 
 
 24 
 4 
 
 35 
 
 19 
 
 14 
 
 17 
 
 26 
 
 13 
 
 6 
 
 21 
 
 Bank 
 Capital. 
 
 3,548,a)0 
 
 2,205,000 
 
 2,225,000 
 
 38,260,000 
 
 ll,189,0fX) 
 
 10,073,000 
 
 51,000,000 
 
 3,754.900 
 
 1S.675,(HX) 
 
 1)440,000 
 
 9,072,(X)0 
 
 1,182,300 
 
 9,713,000 
 
 3,650,tHX) 
 
 1I,431.00(J 
 
 5,3:iO,0(JO 
 
 7.4'jn,()i)0 
 
 10,180.000 
 
 2,(H3.(KH) 
 
 762,000 
 
 8.165.000 
 
 2.000,000 
 
 13,600,000 
 
 100.000 
 
 I,208.0fiO 
 
 200.000 
 
 225,000 
 
 300,000 
 
 Bank 
 Circulation. 
 
 2,600,000 
 
 l,75t1,000 
 
 2,850,000 
 
 17,0('KI,(K10 
 
 2,.550,000 
 
 5,2(X),(J00 
 
 26,000,1 KM) 
 
 3,04(),rXX) 
 
 11,9S(I,(»(W 
 
 8(Wi0O0 
 
 13,380,000 
 
 1 30O.(X)O 
 
 8,200;0fj0 
 
 3,600.0<JO 
 
 1 7,700.000 
 
 1 4,500,000 
 
 11,IK)*I.OOO 
 
 8,0(10,01)1) 
 
 3,5(K 1,1 Kill 
 
 7S(I,IKK) 
 
 t5.600.0(X) 
 
 t 3.5IX),(»(X) 
 
 6.50(),aX) 
 
 t loyioo 
 2,400,0(W 
 t2(ll).0()0 
 t 3(10,000 
 1 300,000 
 
 Bank Coin. 
 
 475,000 
 150,000 
 
 127,000 
 
 3.0(X),000 
 
 'iiG2,0(K) 
 
 6:!S,0(X) 
 
 12 OOO^OIK) 
 
 622,000 
 
 7,200,(H)0 
 
 20(I,0(K) 
 
 t2,812,(X)0 
 
 1 280,000 
 
 2,527,000 
 
 1,500,000 
 
 1 2.500,000 
 
 t 1,500,000 
 
 2,750.0(10 
 
 2.8lK).(X)0 
 
 1,1 97,01 H) 
 
 120,(KI0 
 
 tl.. 500,000 
 
 ■t 1,500,000 
 
 8.00(l,(M)0 
 
 ■t50,(VKI 
 
 1.. 500,000 
 
 1 50,0110 
 
 t 100,000 
 
 t 100,000 
 
 855 8 229,061,200 8143,630,000 8 55,460,000 
 
 * In lieu of the table published in the English edition we insert a statement brought down to the year 
 »85l, from recent documents, for which we are indebted to the Bankers' Magazine, published at Bos 
 ton. — Am. Pub. 
 
 t Estimated in part. 
 
 442
 
 ALPHABETICAL INDEX 
 
 TO THE SUBJECTS CONTAINED IN 
 
 A PRACTICAL TREATISE ON BANKING, BY J. W. GILBART. 
 
 The reader is reminded that he is advised to answer all references in this form without looking into 
 the book, and aloud. See the Section on Index Reading. A book is described by stating its uses, how 
 it is ruled, how the entries are made, and against what books it will mark. See paige 155. 
 
 Abolitton of notes under £5. In Scotland, 330; 
 in Ireland, 375. 
 
 Abundance of money. Usually precedes a season 
 of pressure, .52, 57 ; and follows it, 60. 
 
 Acceptance-book. Describe it, 163. 
 
 of a bill of exchange should not be 
 
 written on the back of the bill, 30. 
 
 Accepter or Acceptor of a bill of exchange. 
 Which should we write? 10. 
 
 Accommodation bills. In what cases a party can 
 enforce payment, 36; how are they known? 
 21,40. 
 
 Account current. What is the difference between 
 an account current and a current account ? 164. 
 
 , mode of opening one, 154. 
 
 Accountant. His books should be a check upon 
 the cash department, 131 ; his department, 137. 
 
 Acts of Parliament quoted. Bank Charter Act of 
 1832, 233 ; Bank Charter Act of 1844, 233, 284, 
 283; Act of 1844 to regulate Joint-Stock Banks 
 in England, 308; Joint-stock Companies Wind- 
 ing-up Act, 1843,311 ; Hibernian Bank Act, 369; 
 Act of 1845 for Regulating Banks in Ireland, 
 372. 
 
 Addresses. Desirable to indorsements of bills of 
 exchange, 30. 
 
 Administration of the office, 126. 
 
 Administrative functions in a bank. Their distri- 
 bution, 107; by whom ought they to be exer- 
 cised ? t6. 
 
 Advances. Different ways in which advances are 
 made by bankers, 2. 
 
 on its own shares, no banking company 
 
 allowed to do so that is formed under the new 
 Act, 309. 
 
 Advice book.. Describe it, 163. 
 
 journal. Describe it, 163. 
 
 Age. Expectations of life at different ages, 27; of 
 directors, 104 ; different tables of, 231 ; at which 
 clerks are admitted into a hank, 129. 
 
 Agreements with the Bank of England. Provi- 
 sions in the Act of 1844 respecting banks that 
 had formed them, 238 ; a list of lliose banks, 289. 
 
 Agricultural and Commercial Bank of Ireland, 
 372; their stoppage, 55; their mode of book- 
 keeping, 117. 
 
 Allotment of share-i in a new bank, 203. 
 
 Almsgiving. Kindness to the poor need not al- 
 ways take this form, 410. 
 
 Alteration. Material, in a bill of exchange, viti- 
 ates the bill, 35 ; what is a material alteration ? 
 ih. 
 
 Alterations. In deeds of settlement, how made, 
 301. 
 
 America. Money table of the United States, 197; 
 
 the par of exchange between, and London, 196; 
 
 laws respecting the circulation of gold coins, 197 ; 
 
 value of sovereigns in, 198; the expenses of 
 
 sending gold to, ih. ; trade with India, 342; a 
 
 summary of all the banks in, 442 ; pressure in, 
 
 in 1836, 55. 
 American dollars. How turned into pounds ster- 
 
 ;jng, 191. 
 
 securities. Large suras invested in, in 
 
 443 
 
 1838, 56. 
 
 Amsterdam. Mode of ascertaining the relative 
 value of gold at, 221. 
 
 Amusements of a banker, 14. 
 
 Analogy. Arguments from, the nature of, 391. 
 
 Anderson, J. A., general manager of the Union 
 Bank of Scotland. His opinion as to bankers 
 holding their reserves in bills of exchange, 46. 
 
 Angel. The name of an old English coin ; the 
 origin of the application, 223. 
 
 Annual dinner to clerks. A good practice, 401. 
 
 Annuities granted by the Provident Clerks' Asso- 
 ciation, 229 ; on what terms they can be pur- 
 chased at the savings banks, 230 ; Long Annui- 
 ties, how a purchase of is entered in the banker's 
 books, 191. 
 
 Application for shares la a new bank. Form of 
 one, 203. 
 
 Apprenticeship. None required to carry on busi- 
 ness as a banker, 1. 
 
 Approaching failure. Symptons of, which a bank- 
 er should observe, 27. 
 
 April. The highest calculation of the country 
 banks is in this month, 293, 294. 
 
 Arbitration of exchanges. What is it? 194; ex- 
 amples, 195, 201. 
 
 Arrangement of counters and desks in a bank, 128. 
 
 Art. Scriptural, of getting rich, 418. 
 
 Artificial memory. Applied to figures, 199. 
 
 Ashburton, Lord. His evidence respecting the 
 Bank of France, 433. 
 
 Assets and liabilities of a bank must, under the 
 new Act, be published every month, 309. 
 
 Assimilation of the currency in England and Ire- 
 land, 337. 
 
 Assistance in times of pressure. Great prudence 
 necessary in granting, 59. 
 
 Attendance, punctual, of bank clerks in the morn- 
 ing, 140. 
 
 Auditors. Under the new Act, two or more not 
 being directors, must be chosen at a general 
 meeting of shareholders, .309. 
 
 August. The lowest circulation of the country 
 banks is in this month, 293, 294.
 
 A Treatise on Banking. 
 
 Authnrizcd issues. Of all the banks in the United 
 Kingdom, 290; of each joint-stock bank in Eng- 
 land, 304 ; of each bank in Scotland, 329 ; of 
 each bank in Ireland, 379. 
 
 Authors, Scotch, write "accepter," instead of 
 "acceptor," of a bill of exchange, 10; " indor- 
 sation" more frequently than "indorsement," 
 11 ; tliey speak highly of their system of ex- 
 changes, 323, 324; they censure the English 
 banks lor re discounting their bills, 323 ; and for 
 not allowing interest on current accounts, 325; 
 and for charging commission, ib. ; and for hav- 
 ing too small a paid-up capital, 320. 
 
 Avoirdujxiis weight, 196. 
 
 Babbage. Charles. His observations on the dex- 
 terity of clerks, \7C>. 
 
 Bacon, Lord. His observations, applied to bank- 
 ing. 149. 
 
 Bad manajement. The cause of the failure of 
 joint-stock banks, 113. 
 
 Balance, amount of, an indication of the circum- 
 stances of the party, 27. 
 
 , to. What is it, and how performed, l.W. 
 
 , daily. How made, 169; tends to tlie 
 
 improvement of the clerks, 146; weekly, 170; 
 halfyearly, 171. 
 
 sheet. Exhibited at the general meeting 
 
 of shareholders of joint-slock banks, 110; objec- 
 tions to it, ib. 
 
 Provision of deeds of settlement 
 
 respecting, 301. 
 
 sheets. Form of one, 166; form of an- 
 other, 173. 
 
 Bank. The word derived from "banco," the Ita- 
 lian word for " bench," 1 ; is it singular or plu- 
 rul, 8 ; state the cases in which it is used in the 
 singular, and in which it is used in the plural, 8. 
 
 , the building. Should be in a respectable 
 
 part of the town, 126 ; should be a handsome 
 building, ih. 
 
 Bank Charter of 1844. Divided the bank into two 
 departments, 62; the issue department to issue 
 .£ 14,(X)(I,000 upon securities, 62; compelled the 
 bank to issue notes against gold, at £3 17s, 9d. 
 per ounce, ib. ; the bank may extend her issue 
 ujider certain circumstances, ib. ; remarks on the 
 Act, 62; its suspension, 63; was fairly tried, 
 74, 75; is said to have secured the convertibili- 
 ty of the note, 6-4 ; advantages supposed to have 
 been expected from it, 66 ; produced abundance 
 of money, 67 ; caused a low rate of interest, 68 ; 
 led to speculations, ib. ; its effects on the bank 
 management, 69 ; does not admit of those expan- 
 sions of the currency that are required by the 
 domestic transactions of the country, ib. ; its ef- 
 fects in respect to the railway deposits, 70 ; in re- 
 gard to exportalions of gold for specific purposes, 
 ib. ; in regard to a demand fiir gold by Scotland 
 or Ireland, or the country banks of England, 70 ; 
 its effects in producing and aggravating pressure, 
 71 ; tends to create panic, as well as pressure, 
 72 ; deprives the Bank of England of the power 
 of granting adequate assistance during a pres- 
 sure, 73: what we have yet to learn respecting 
 it. 75 ; principles on which bankers should con- 
 duct their e,stablishments during its continuance, 
 76 ; gives advantage to capitalists, 81 ; effect on 
 the branches of the Bank of Engl.and, 240; Gov- 
 ernment letter suspending it, 247; comparative 
 view of its effects in Scotland, Ireland, and Eng- 
 land, 3S0. 
 
 of England. Original establishment, 2.32; 
 the charters of, 2.33 ; term of that granted in 
 1844, 233; the principles of its administration, 
 237; its branches, 23S; principles of their ad- 
 ministration, 240; the laws of the currency with 
 reference to the Bank of Ensland, ib :'objer- 
 tions to one bank of issue, 243 ; letter from llie 
 
 444 
 
 Government to Directors, suspending the Act of 
 1844, 247 ; the periodical returns will be observed 
 minutely in seasons of pressure, 60 ; bankers 
 cannot depend on them for assistance in seasons 
 of pressure, 79. 
 
 • , administration of the office. 
 
 salaries to clerks, 134; holidays, 143; surety 
 bonds, 136; medical attendance, 141. 
 
 of France. See France. 
 
 of Ireland. See Ireland. 
 
 of Scotland. See Scotland. 
 
 Banker. What is one? 1, 424; does not legally 
 require an apprenticeship, 1 ; his qualifications, 
 12; should be a man of wisdom rather than of 
 genius, ib.; should possess decision, 13; and 
 firmness, ib. ; not of a hasty temper, ib. ; not 
 swayed by a personal or constitutional prepos- 
 session, ib. ; should know himself, ib. ; of pru- 
 dent habits, 14 ; should know how to select suit- 
 able instruments. 15; should know how to work 
 through others, 16. ; should economize his own 
 time, ifj. ; observe a principle of order, 21 ; 
 shorten his interviews, ib. ; should have a talent 
 for obtaining and recording information, 16 ; 
 should get a knowledge of the means and trans- 
 actions of his customers, 18 ; should always 
 have general principles, ib. ; should cultivate 
 chiefly some main branches of business, 19; 
 should exercise due caution in taking new ac- 
 counts, ib. ; a small banker should not take 
 large ficcounts, 19; should study the rules of dis- 
 counting bills, 20; should guard against forge- 
 ries, 21 ; should avoid dead loans, 23: even to 
 rich men, ib. ; advances on deeds should only be 
 made on special occasions, 25 ; bills of lading and 
 dock-warrants should be avoided, 26 ; and so 
 should policies of insurance, ib. ; he should ob- 
 serve the signs of approaching failure in his cus 
 toniers and others, 27; should understand the 
 " nursing" of an account, 27, 
 
 Bankers, London. In the year 1746, were usually 
 members of the company of goldsmiths, 1 ; do 
 not usually grant interest on deposits, 3. See 
 London. 
 
 Banker's Clerk, The. Quotation from an excellent 
 book so called, 140. 
 
 Bankers' Magazine, Quotation from, 18; reasons 
 for all bankers promoting its circulation among 
 their officers, 148; is a record of banking and 
 currency, 329. 
 
 Banking Department of the Bank of England. 
 Separated from the issue department by the Act 
 of 1844, 83; its state on Septemlwr 7, 1844, 84; 
 viewed as an independent bank, it has ton laree a 
 capital, ib ; and too large a rest, ib. ; classifica- 
 tion of its deposits, 86; how far permanent, S7; 
 how its deposits are affected by the foreign ex- 
 changes, ib.; its inve.stments, ib ; whether or 
 not convertible, ib. ; Government stock and an- 
 nuities, 66; short loans, ib ; advances on defi- 
 ciency bills, 89 ; the reserve, ib. ; how affected 
 by the importations of gold, 90. The operations 
 of the banking department from f^epiember, 
 I'm, to September, 1845,90; reduced the rate of 
 discount to 2J per cent., 90; adopted the princi- 
 ple of a minimum rate of discount, ib. ; compe- 
 tition for discounts, ib. ; inquiry how far the 
 bank rate of discount governs the market rate, 
 16.; the true principles of banking. 91 ; tenden- 
 cy of a low rate of interest to produce specula- 
 tions, ib. ; the public duties of the banking de- 
 piirtment, ib ; administration of, from Septem- 
 ber, 1845, to September. 18-16, 92; various rates 
 of interest, ib. ; principles on which the rate of 
 interest is regulated, ib. ; railway deposits, how 
 managed. 92; administra'ion of, from September. 
 IS46. to September, 1847, ib. ; various rates of 
 interest, ib. ; unfavorable course of exchange, 93 ; 
 deficient harvest, 16 ; deficiency bills, ib. ; pres-
 
 Alphabetical Index. 
 
 sure in April, 93; restricted their discounts, ib. ; 
 refused to grant loaiia on exchequer bills, ib. ; 
 borrowed money on consols, ib. ; censures on 
 the bank directors, t6 ; practice of Uindon 
 bankers, 94 ; question as to the publication of 
 the bank's reserve, 16. ; adminislralion of, 
 from September 1S47, to September 18-J8, ib.; 
 rales of interest charged, 16. ; failures of houses 
 in tlie corn trade, and of other larsre commercial 
 houses, 9-); ail varices made by the bank, ib. ; 
 lent stock, exchequer liills, and India twnds, 9G ; 
 deputation from the London bankers waited on 
 the Government, ib. ; letter from the Govern- 
 ment suspendinic the Act of IS14, 96; state of the 
 bank's reserve, ib. ; decline of the pressure, 97; 
 distinctive characteristics of the first four years 
 of the operations of the banking department, 93 ; 
 importance of this review, ib. 
 
 Bankrupt. The word derived from two Italian 
 words, which sijnify a broken bench, 2 ; joint- 
 stock l)anks are sutjject to the laws of bankrupt- 
 cy, 310; those of Scotland and Ireland excepted, 
 by 9 & 10 Vic. cap. 85, 3-5I. 
 
 Bankrupts. If all the parties to a bill are bank- 
 rupl.i. the holder may jirove for the full amount 
 Under each commission, 34. 
 
 , fraudulent. In no case should bankers 
 
 retake their accounts, 396. 
 
 Banks. How divided, 1 ; the business of, ib. ; the 
 disposable means of, 2 ; the expenses of, ib. 
 
 Belfast, banks in, 371 ; table of their capital, &c., 
 iV.. 
 
 Banking Company. Its origin, 371 ; its 
 
 branches, ifi. 
 
 Bell, Givin Mason, author of the Philosophy of 
 Joint-slock Banking. Quotations from, on the 
 qualifications of directors, 104; ditto of mana- 
 gers, 107. 
 
 Bell Robert, manager of the City of Glasgow Bank 
 in Edinburgh. His first letter to Ihe author, 320; 
 his second leller, 32.J. 
 
 Binevolence. the duties of. Inculcated by Moses, 
 40? : by Job, 403 ; by Solomon, ib. ; in the New 
 Terilament. ib ; the rule by which it should be 
 exercised, ib. ; should not be indiscriminate, 409. 
 
 Bequest. Form of one to the Provident Clerk's 
 Association, 229. 
 
 Bible, a code of laws, not a book of adjudged cases, 
 39.^: its political economy, 418. See Scripture. 
 
 Bill-brokers. Bankers' loans to, 48 ; failure of ib. 
 
 people who discount with, when money 
 
 is abundant and cheap, return to their banker in 
 seasons of pressure, 59. 
 
 • banks should not depend on them for 
 
 assistance in seasons of pressure, 79. 
 Bill committee. 302. 
 
 journal. Describe it, 159. 
 
 ledger. Describe it, 159. 
 
 resister. Describe it, 1.59. 
 
 Bills offered for discount. Various classes of, 20; 
 
 topics of inquiry about them, 21. 
 
 presented for payment by bankers. 5. 
 
 if a banker misapplies bills lodged by his cus- 
 tomer, who loses ? 'Vi. 
 
 of exchanse. What is one ? 29 ; the form, 
 
 ib. ; who are Ihe parlies to one 1 30 ; how are 
 they divided? 20; what is a set of bills? 31 ; 
 what stamps are required ? 33 ; when must a bill 
 be pre-iented ? 32; when must a notice of dishon- 
 or be given ? (See Notice) ; formed a large part of 
 the circulation of Lancashire, 40; firms of for- 
 eign bills, 39: some bankers hold their reserves 
 in. 46. 
 
 of lading. Not proper security on which a 
 
 banker should make advances. 26. 
 
 Bishop, the admonitions of have less effect upon 
 some people than Ihe frown of a banker, 7. 
 
 Blair. .Alexander, treasurer of the Bank of Scotland. 
 Organized the Edinburgh clearing-house, 324 ; 
 
 letter addressed to, by Mr. Kinnear, on exchange 
 companies, 349. 
 
 Boards of directors. Govern the joint-slock banks, 
 lOS, 301 ; should be composed of memljers of va- 
 rious ages, 104; should treat the manager with 
 kindness and confidence, 105 : should suard 
 against the undue ascendency of individual mem- 
 bers, 122, 3^2 ; should not be guided too much by 
 the applauses or admonitions of the shareholders, 
 12^; should be well paid for their services, 125; 
 duties of, towards the servants of the bank, 401. 
 See Director.^. 
 
 Boating, a serviceable recreation for bank clerks, 
 IJl. 
 
 Boi.ds of security. Form of, given by managers, 
 205; and by clerks, 206 ; cash credit bonds, 210; 
 of the Guarantee Society, 224. 
 
 Book-keeping. The importance of, 117; banks 
 shoulil estimate their losses, 1 IS ; should keep an 
 account of the bills re-discounted, 16. ; each branch 
 sliould have a good system of, 118. 
 
 banking. A system of, 150; the 
 
 horizontal, 176 ; comparison between commercial 
 and banking, 180; books connected with llie 
 clearing, 253. 
 Branches. Of the Bank of England, 239; of the 
 Banks of Scotland, 315; of the banks in Ireland, 
 358, 366, 371; of the country, private, and joint- 
 slock banks, 291, 321 ; of the joint-stock banks in 
 London, 279. 
 
 of ihe Bank of England at Manchester and 
 
 Liverpool diminished ihe bill circulation of Lan- 
 cashire, 40 ; the circulation of, in notes and 
 drafts, 239. 
 
 ■ of joint-stock banks. Their advantages, 
 
 103 ; give facilities for the transmission of money, 
 ib. ; are opened in pl.ices tha'. "ould not support 
 an independent bank, ib. ; promote the distribu- 
 tion of capital, 109 ; secure a belter system of 
 management, ib. ; require a proportionate paid- 
 up capital, ib. ; require competent managers, 
 and a good system of discipline, 110; comparison 
 between branch banks and indei^endent banks, 
 ib ; rules for governine, 113; of the London and 
 Westminster Bank, 266, 
 
 Branch departmenl, what books are kept there, 164. 
 
 Brokers' bills. First class bills so called, are dis- 
 counted by bankers, 45-48. 
 
 Bullion, Thomas. A signature to a series of letters 
 to a branch manager in the Bankers' Magazine, 
 13. 
 
 Business habits. What are they ? 147. 
 
 Calculating boys. Principles of their operations, 
 199. 
 
 Calculations, haiiking, with reference to. The dis- 
 count of hills, 184; interest al 6 per cent., 184; 
 interest at 5 per cent., 186 : use of interest tables, 
 ib. ; interest on current accounts, 187 ; com|X)3i- 
 tion for stamp duties, 138; time that notes re- 
 main in circulation, ib. ; to calculate commis- 
 sions. 189; dividends on slock, ib. ; long annui- 
 ties, 191 ; stockbrokers' charges, ib. ; American 
 dollars and French rentes, 191 ; foreign bills of 
 exchanse, 192 ; arbilralion of exchanges. 194 ; 
 the value of gold in ditferent countries, 195 ; par 
 of exchange, 196; money table of the United 
 Slates, 197; value of sovereigns in America, 198; 
 money table for India, ib. ; to ascertain how 
 many persons enter a bank in the course of a 
 day, 199 ; calculating boys. ib. ; systems of arti- 
 ficial memory, 16 ; questions for calculation, 201. 
 
 Call over. What is it, and how should it be per' 
 formed? 153, 175. 
 
 Calmness. A banker should always maintain a 
 feeling of, 16 ; should observe it in his reproofs, 
 1.50. 
 
 Cancelled. How is a check cancelled, and wheii 1 
 154. 
 
 445
 
 A Treatise on BanJcins. 
 
 Capital. Banks should have a sufEcienl amount of, 
 to secure pelf-depeudence, 80. 
 
 paid-up, of a joint-slock bank, 100; evils 
 
 of too small a capital, ib. ; evils of too much cap- 
 ital, 100, 264; proporlionof capital to liabilities, 
 101 ; modes of increasing capital, ib. ; advan- 
 tages of a nominal capital, 101 ; provisions of 
 the new Act with reference to capital, 102, 312; 
 the capital of all the joint-stock banks in Eng- 
 land, 305. 
 
 ■ of each of the joint-stock banks in Lon- 
 don, 2S0; of each in the country, 302; of each in 
 Scotland, 315 ; of tlie banks in Ireland. See Ire- 
 land. 
 
 Capitalists. Advantages they derive from banks, 
 2, 337. 
 
 Case of need. What is it ? 30. 
 
 Cash. Origin of the word, 223. 
 
 account with branches. How is it kept, 169. 
 
 book. Describe it ? 157. 
 
 credits. What are they ? 332 ; wherein do 
 
 they differ from overdrawn accounts? 333; utility 
 of, 333 - 335 ; wherein they differ from discounts, 
 
 3a3. 
 
 • not adopted by the London and 
 
 Westminster Bank, 265; form of bond, 210 ; di- 
 minished in Scotland by the Act of 1835, 329; 
 their advantages, 333; diminished in Ireland by 
 the runs for gold, 380. 
 credit bond, forms of, 210. 
 
 department, books used in the, 155. 
 
 Cashier's department, 137; his qualifications, t6. ; 
 his deficiencies, 143 ; checks on their accuracy, 
 131. 
 
 Cast, to. or cast-up. What is it? 155; how to do 
 it well, 152, 17,5. 
 
 Catechism. An Index may be used as one, 431. 
 
 Causes. Of the failure of joint-stock banks, 113 ; 
 taking over the unsound business of private 
 banks, ib. ; making advances on dead security, 
 114 ; granting accommodation to parlies engaged 
 in speculative undertakings, 116 ; a want of sys- 
 tem and discipline in conducting its affairs, 117; 
 making no provision against contingencies, 119 ; 
 defects in the constitution of the bank, tlie ap- 
 pointment of incompetent persons, or an unwise 
 distribution of the administrative functions, 120; 
 injudicious proceedings of meetings of proprie- 
 tors, 122. 
 
 Causes of the prosperity of the Provincial Bank of 
 Ireland, 366. 
 
 Certificates of shares, forms of, 203-216. 
 
 Chain rule. What is it? 194. 
 
 Change, small, obtained from banks, 4. 
 
 Character, personal, of parties. An element in a 
 banker's calculation as to the credit they are en- 
 tilled to, 18. 
 
 Chartered banks, 354 ; charter of the Bank of Eng- 
 land, 232 ; of the Bank of Ireland, 3,55 ; of hanka 
 in Scotland, 312-319; of the new joint-stock 
 banks in England, 309, 382. 
 
 Check-ledger. Describe it, 180 : advantages of, 
 182. 
 
 Checks upon the issues of cotmtry banks, 296. 
 
 Cheque. Less trouble to write one than to count 
 out the money, 5 ; useful in proving payments, 
 6; must not be drawn on a bank more than fif- 
 teen miles distant, 32; should we write "cheque" 
 or "check," 12. 
 
 Cheques. Are multiplied by the business of the 
 Stock Flxchange, 2.55; utility of crossing, 258. 
 
 Chief accountant. His duties, 137. 
 
 clerk. His desk, where to be placed, 138 ; 
 
 his qualifications, 128 ; his duties, ib. ; should not 
 have much manual labor, 144 ; his office a good 
 training for a man.iger, 148 ; his duties often per- 
 formed by the banker, 149. 
 
 Circular notes. Form of those issued by the Lon- 
 don and Westminster BaiJc, 218. 
 
 Circulation. Different meanings of the word, 242; 
 the Parliamentary nieanins, 379. 
 
 Cities. Analogy between cities and public compa- 
 nies, 392. 
 
 Class of society from which bank clerks are usually 
 taken, 129. 
 
 Classes of bills offered to a banker for discount, 20. 
 
 Classification of accounts according to the profes- 
 sion of the parties, 16. 
 
 Clay, Sir William. His motion respecting joint- 
 stock banks, 53 ; his questions to the Governor 
 of the Bank respecting the clearing, 283. 
 
 Clearing. Between the London bankers, 252 ; in- 
 crease of, by the business of the Slock Exchange, 
 254 ; a clearing balance-sheet. 256 ; amount of 
 transactions by each banker, ib. ; amount of in 
 each month, 2,57; books connected with, 253; 
 joint-stock hanks excluded from, 281. 
 
 between the Bank of England and the 
 
 London bankers, 257. 
 
 between the banks at Newcastle-upon- 
 
 Tyne, 258. 
 
 house. The presentment of a bill for pay- 
 
 ment there is a legal presentment, 36; operations 
 of the, described, 252. 
 
 Clerks. Their selection and appointment, 129; dis- 
 tribution of their duties, 131 ; amount of their 
 salaries, 132; their securities, 135; the system 
 of promotion, 136; the rules of discipline, 139; 
 their holidays, 141 ; training of clerks for higher 
 offices, 144 ; chief clerk, where he should be 
 placed, 12S; his duties, 139. 
 
 Coin. Origin of the word, 222 ; the word " money " 
 applied to, 156. 
 
 Collective responsibility of nations, 390; families, 
 391 ; cities, 392 ; public companies, 388. 
 
 Comme*cial Bank of London. Its formation, capi- 
 tal, profits, dividends, and surplus funds, 275 ; its 
 prospectus, 277. 
 
 Exchange Company at Glasgow, 
 
 350. 
 
 Commission accounts taken by the London and 
 Westminster Bank, 265, 424. 
 
 Commissions. How to calculate, 189. 
 
 Committees. Of the Lords and Commons, upon 
 the abolition of small notes in Scotland and Ire- 
 land, in 1826, extracts from their reports, 312, 
 335, 375. 
 
 Committee of the House of Commons, on the Bank 
 of England Charter, in 1832, 67; extract from 
 the evidence of Mr. Horsley Palmer, 53; ditto, 
 Mr. George Glyn, 251. 
 
 of the House of Commons, on joint- 
 
 stock banks, in 1836, 54 ; extracts from their re- 
 port, 301. 
 
 of the Hou.5e of Commons, on banks of 
 
 issue, in 1810, extracts from the author's evideijce 
 before them, 240, 243, 294. 
 
 of the Lords and Commons, appointed 
 
 446 
 
 to inquire into the causes of the distress of 1847, 
 61; ofllie House of Commons, reported in favor 
 of the continuance of the Act of 1844, 65; of the 
 House of Lords, extracts from their report as to 
 the cause of the distress of 1S47, 64. 
 
 Compensation. By the Act of 1844, to banks that 
 issued Bank of England notes, 288. 
 
 Composition for stamp-duty on notes. How calcu- 
 lated, 188. 
 
 Consols. The best kind of Government securities 
 for bankers to hold, 44; should hold other stock 
 too, 45. 
 
 Constitutional failings. A banker should guard 
 against, 13. 
 
 Convertibility of the bank note. What it means, 
 64 ; the Act of 1844 said to have secured it. ib. 
 
 Copland, Charles, manager of the Royal Bank of 
 Ireland, formerly a nianager in the Provincial 
 Bank of Ireland, .370. 
 
 Copper. Its specific gravity, how coined, 196.
 
 Alphabetical Index. 
 
 Com merchants. Banks have made great losses 
 through advances to, 116. 
 
 Correlalivo terms. Drawer drawee, payer payee, 
 mortgager mortgagee, iiidorser indorsee, discount- 
 er diseountee, noder nodee, 30. 
 
 Cotton, William, governor of the Bank of England 
 in 1814. His evidence as to discounting for 
 country banks of issue, 291. 
 
 Coulthart's Interest Tables, 188. 
 
 Counterfeit coin. Less through banking, 5. 
 
 Counters. Arrangement of, in a bank, 128 ; should 
 at all times be properly appointed, 128. 
 
 Country banker. How atfecied in seasons of pres- 
 sure, 53 ; has greater facilities in obtaining in- 
 formation than London bankers, 18. 
 
 Country bankers. Advance money on a deposit of 
 deeds, 26 ; make advances by way of overdraft, 
 23. 
 
 banks. Circulation of, restricted by the 
 
 Act of 1814, 286 ; opinions of the joint-stock 
 banks respecting the country circulation, 357. 
 
 •department in a bank, 162; what books 
 
 are kept in the, 163. 
 
 ■ private banks, 234 ; the principles of their 
 
 administration, ib. ; the provisions of the Act of 
 1844, t6. ; the regulations imposed on such as 
 are banks of issue by the Act of 1844, ib. ; the 
 laws of the currency with reference to the coun- 
 try banks, 292 ; examination of the author on the 
 subject by Sir Robert Peel, 294 ; the clearing be- 
 tween country banks, 297. 
 
 Courtesy. Of managers, 106; of clerks, 400; of 
 shareholders, ib. ; of directors, 402 ; of annual 
 reports, 400. 
 
 (■redil-book. Describe it, 163. 
 
 Credits on agents. How entered in the books, 167. 
 
 Cross firing. What is it ? 27. 
 
 Crossing of cheques. The uses of, 2.58. 
 
 Currency and banking. " A Review of some of 
 the Principles and Plans that have recently en- 
 gaged public attention with reference to the Ad- 
 ministration of the Currency," a quotation from, 
 ill reference to the principle of the Act of 1844, 
 62. 
 
 Customers. A banker should get a knowledge of 
 his, 17. 
 
 books. Should be correctly and neatly 
 
 written up, 143; are checked against the ledger, 
 ib. 
 
 Cutbill, Alfred R., manager of the Commercial 
 Bank of London, previously sub-manager of the 
 London and County Bank, 275. 
 
 Daily balance. Describe it, 146, 169. 
 
 Danish bill of exchange. The form of one, 39. 
 
 Dates. Bank of England commenced 1694, present 
 charter to expire at the expiration of twelve 
 months' notice to be given after the 1st day of 
 August, 1855, 237. 
 
 . The London and Westminster Bank, opened 
 
 on the Ultfi March, 1831, 259 ; the London Joint- 
 stock Bank on the 2\st November, 1S36, 27fl; the 
 Union Bank of London, on the ith Fehruary, 
 
 1839, 274; the Commercial Bank of London in 
 
 1840, 275 ; the London and County Bank, in 
 September, 1836, 277. 
 
 I of the establishment of all the joint-stock 
 
 banks in England, 302; of those tliat have ceased 
 305, 3t)6. 
 
 of the origin of the banks in Scotland, 315 ; 
 
 of the provisions of the Act of 1845 in Scotland, 
 313; in Ireland, 352. 
 
 The B.ink of Ireland commenced the 2ruh 
 
 June, 1783; Provincial Bank in 1825; National 
 Bank in 1834; Hibernian Bank in lf^2l; Royal 
 Bank in 1836; Northern Bank in 18-25; Belfast 
 Banking Company in 1827 ; Ulster Bank in 
 1837. See these hanks. 
 
 tober, lftl7, 217 ; suspension removed on t/ie 23d 
 November, 1847, 24S. 
 
 David. His gratitude and humility, 404. 
 
 Day-book. Describe it, 157. 
 
 Days. The number of, that Bank of England notes, 
 of various denominations, remain in circulation, 
 189. 
 
 Dead loans. How they arise, 20 ; cannot be called 
 up in seasons of pressure, 58. 
 
 security. Some Uiriks have lost money by 
 
 making advances on, 23, 114. 
 
 Debt, National. The amount of, 51. 
 
 Decision. Very necessary in a banker, 13, 107. 
 
 Declarations of secrecy. Form of, signed by direc- 
 tors and officers of joint-stock banks, 207. 
 
 Deed of settlement, 205; provisions of, with re- 
 gard to altering the regulations of the company, 
 301 ; as to the mode of conducting the business 
 of banking, ib. ; as to the degree of publicity to 
 be given to the proceedings, ib. ; as to the terms 
 on which the company is to be dissolved, 3(.I2 ; 
 provisions of, under the new Act, 309. 
 
 of transfer. Form of, 216. 
 
 Deeds lodged as security for loans. Rules to be ob- 
 served respecting, 25. 
 
 Defects of character in a banker, 13. 
 
 Deficiencies of cashiers. How provided for, 143. 
 
 Department of tellers, 136 ; of cashiers, 137 ; of ac- 
 countants, ib. 
 
 Deposit receipts. Form of, 213 ; use of, 429. 
 
 Deposit-receipt-took. Describe it, 158. 
 
 Deposits in a bank. Are reduced in seasons of 
 pressure, 58 ; the system of, in Scotland, 336. 
 
 Amount of, in each of the joint-slock 
 
 banks of London, 280. 
 
 Desks. Arrangement of, in a bank, 128. 
 
 Difference between the pressures of 1836 and 1839, 
 56. 
 
 Diligence in business, a source of wealth, 417. 
 
 Direction, or notice, left by a bank clerk when a 
 bill is not paid on presentation, 32. 
 
 Director. Should be a man enjoying public confi- 
 dence, 102 ; should possess a knowledge of com- 
 mercial business, 103 ; should be a man of strict 
 integrity, ib. ; a man of influence and respecta- 
 bility, ib. ; in good pecuniary circumstances, 
 104 ; should have time to give attention to the 
 bank, ib. 
 
 Directors. At first they had no banking experience, 
 121 ; were chosen because out of business, ib. ; 
 evil of managing directors, 122, 348; and secret 
 committees. 122 ; provisions of the new Act re- 
 specting, 309, 382. 
 
 of the Bank of England. Their number 
 
 and qualifications, 83; have always been liberal 
 towards the clerks of the establishment, 136. 
 • Ireland, 356, 382. 
 
 Discipline. Rules of, in a bank, 118, 139. 
 
 Discount of bills. Mode of calculating, 134. 
 
 Discount balance book. Describe it, 16. 
 
 journal. De.scribo it, 1.59. 
 
 ledger. Describe it, 159. 
 
 register. Describe it, 159 ; abolition of, 
 
 179. 
 
 Discounting bills. Lar?e part of a banker's busi- 
 ness, 20; classes of bills offered for discount, ib. ; 
 rules of, 21 ; points of examination with refer- 
 ence to bills discounted, 26., 23. 
 
 Discrimination of character. A necessary qualifi- 
 cation in a banker, 15. 
 
 Dissolution of a banking company. How made, 
 302. 
 
 Dividends, high. Bankers should not expect them 
 under the Act of 1844, 80. 
 
 rate of, paid by the joint-stock banks of 
 
 London, 230; by the country joint-stock banks, 
 302; paid by e.icb bank in Scotland, 315. 
 
 . How to calculate. 139. 
 
 Act of 1314 was suspended on the 2'Hh Oc- 1 Division of labor. Necessary hi a bank, 131, 174 
 
 447
 
 A Treatise on Banking. 
 
 Dirine Character. A lovely exhibition of the, in 
 the words, " He haih pleasure in the prosperity 
 of liis servants," 4U2. 
 
 Dock warrants. A banker should not make advan- 
 ces on them, except occasionally for the accom- 
 modation of a customer, 26. 
 
 Documejits. Banking, 202. Documents connect- 
 ed with the formation of a joint-stock bank, 
 ib. ; the deed of settlement, 2()5 ; bonds of secu- 
 rity for the officers, ib. ; declarations of secrecy, 
 2U7; letters of guarantee, 2(N ; letters on lodging 
 deeds or other securities, 209 ; memorandum of 
 agreement with reference to deeds, ib. ; cash 
 credit bond, 210; letters of credit, 212; deposit 
 receipts, 213 ; requisition notes, ib. ; letter call- 
 ing a general meeting, 215; special contracts, 
 216; notices of calls, 16. ; certilicales of shares, 
 ib. ; deed of transfer. 21S ; circular notes issued 
 by the London and Westminster bank, ib. ; a ta- 
 ble showing the relative value of gold in London 
 and P.iris, Hamburgh and Amsterdam, 221; a 
 table of English money reduced into foreign, 222 ; 
 bond of tlie Guarantee Society, 224; Provident 
 Clerks' Benevolent Fund, 2i6; terms of savings 
 bank annuities, 2:30; comparative view of the 
 exiiectation of life, 231. 
 
 Domine Dirige Nos. The motto of the City of 
 London, 404. 
 
 Double entry, book-keeping by. Describe it, 181. 
 
 Draught, or draft, which should we write ? 11. 
 
 Duneilin Bank. Extract from their prospectus, 321. 
 
 Dutch bill of exchange. The form of one, 39. 
 
 coin, Engli.sh money reduced into, 222. 
 
 Duties of clerks. The distribution of, 132. 
 
 of pulilic companies, 393. 1. Duties of pat- 
 riotism, 393. — 2. Duties of social relationslnp, 
 39.5. —3. Duties of religion, 404. —4. Duties of 
 benevolence, 407. 
 
 East India bonds. Bankers' investments in, 45. 
 
 Ecimoniy, dome.stic. Promoted by banking, 6. 
 
 should not be too strictly regarded by 
 
 public companies. In their expenditure, 394 ; in 
 their buildings, 126; in their salaries, 124; in 
 their hospitality, 400; in tlieir pensions, 401. 
 
 Education. The duty of educating the poor bind- 
 ing on public companies, 406; ways in which 
 the duly should be discharged, 407. 
 
 Education. A religious one, a strong recommenda- 
 tion in a candidate for the office of bank clerk, 
 130. 
 
 effect on the population, 410 ; advantage 
 
 to banks of having educated servants, 412 ; many 
 public companies owe their existence to, 411. 
 
 English money. Reduced into Prussian, Frankfort, 
 Dutch, and French coin, 222. 
 
 Em[)loyment previous. To be inquired into before 
 appointment as a hank clerk, 130. 
 
 Envy. The prosperity of the wicked should not be 
 envied, 421. 
 
 Equivalent numbers. Great facilities to calculation 
 by substituting, 199. 
 
 Evil speaking should not be practised between pub- 
 lic companies, 397. 
 
 Examination of the author by Sir Robert Peel, on 
 tlie circulation of country banks, 294. 
 
 Example. The effects of 39.'). 
 
 Exchange banks and companies, 316 ; letter of the 
 author respecting, ib. ; extract from Mr. Kin- 
 near's pamphlet respecting, 349 ; those estab- 
 lished in Scotland, 3o0 
 
 Exchanges. Between bankers in London, 252; be- 
 tween bankers in the country, 297; between 
 bankers in Scotland, 32;?, 344 ; in Ireland, 383 ; 
 in Newcastle on-Tyne. 25S. See " Clearing." 
 
 foreign, unfavorable, usually precedes 
 
 a season of pressure, .52. See Foreign. 
 
 Execui ir. Should open a separate account at a 
 
 bank, 428. 
 
 E.xchequer bills. A banker may have to sell or 
 borrow on them in seasons of pressure, 05; loans 
 on. refused by the bank in April, 1S47, 70; some 
 banks keep their reserves in, 45; Bank of Eng- 
 land did so, but have changed for stock, 45. 
 
 Expectation of life. A short mode of ascertaining, 
 27. 
 
 Expenditure. A record of, preserved by keeping a 
 banker, 6 ; enumerate the accounts that are 
 placed under this head in the general ledger, 166 ; 
 how entered in the books, 169. 
 
 Expenses of a bank. What are they ? 2, 1C6. 
 
 Failure. When a banker failed in Italy his bench 
 was broken by the populace, 1 ; signs of ap- 
 proaching failure, 27. 
 
 Failures of joint-stock banks. Causes of, 113; 
 lunnber of, 306. 
 
 False dealing forbidden, 395. 
 
 Families. Analogy between families and public 
 companies, 391 ; instances of families being re- 
 warded or punished for their actions, 392. 
 
 Farthing. Origin of the word, 224. 
 
 Figures. Should be made plain, 151. 
 
 Firmness. Want of, a defect in a banker, 13. 
 
 Fluctuations. Great in the amount of the circula- 
 tion, the rate of interest, and the price of the 
 public securities, during 1847, 66 ; their effect on 
 trade, 82. 
 
 Foreign bills of exchange may be accepted verbally, 
 31 ; always protested for non-acceptance or non- 
 payment, 32 ; usually drawn in sets, 31 ; of\en 
 drawn at a usance, 31 ; bills drawn from Scotland 
 or Ireland are considered as foreign, ib. ; form 01 
 in several languages, 39. 
 
 Foreign countries, bills on. How they arise, 192; 
 how calculated, 194 ; arbitration of exchanges, 
 194. 
 
 exchanges. Country bankers do not reg- 
 
 ulate their issues by, 295. 
 
 may be adjusted by other 
 
 means tlian the transmission of gold, 66. 
 
 Forgeries. Various kinds of, 21 ; how to guard 
 agauist, 22; in signing deeds, ib. 
 
 Form. Of a bill of exchange, 29 ; of a promissory 
 note, .30; of a cheque, 32. 
 
 Foster, B. F. His "Bookkeeping" quoted. 15C, 
 176. 
 
 France, Bank of Formed in 1803, 434 ; is gov- 
 erned by a governor, two sub-governors, three 
 receivers-general, three censors, anl twelve ordi- 
 nary directors, 16. ; how are they paid, ib. ; the 
 rale of interest charged, 4:i5 ; principles of man- 
 agement, ib. ; their circulation of notes, 436; 
 branches, ib. ; connection with the governmenl, 
 438 ; its condition, 439. 
 
 Francis, John. His " History of the Bank of Eng- 
 land " quoted, 175. 
 
 Frankfort coin. English money reduced into, 222. 
 
 Freo-trade in banking does not produce numerous 
 banks, but the reverse, 318, 
 
 French. Form of a bill of exchange drawn in, 39 
 
 coin. English money reilucod into, 222. 
 
 stock. How calculated, 191. 
 
 Gamblers. Bankers should discountenance, 7. 
 Gambling in the funds orinshares. Bankers' cleiks 
 
 should not do so, 144. 
 Gardening. A highly beneficial recreation for bank 
 
 clerks, 141. 
 General account of cash. How kept in the books, 
 
 169. 
 
 balance book. Describe it, 16, 166. 
 
 ledger. Describe this most important 
 
 book, 165; how are the accounts cla,ssified ? 166; 
 
 how is it posted from the daybook ? 165, ISl ; is 
 
 it kept by double entry ? 181. 
 principles. A banker should always have 
 
 them, 18. 
 
 448
 
 Alphabetical Index. 
 
 Gentlemanly manners. Clerics should observe to- 
 wariU each other, 129. 
 
 German bill. The form of one, 39. 
 
 Gilbarl, James William, the author. Wjis mana- 
 ger of the Provincial Bank of Ireland, at Water- 
 ford, 26S; e.vlract from his History and Princi- 
 ples of Banking, 20 ; extracts from his Inquiry 
 into the Ciuses of the Pressure on the Money 
 Market during the year l-<59. 52, 72, 81 ; extracts 
 from his Currency and Banking, reprinted from 
 the Wi^stminster 'Hi>riew, 62, 31S, 32S ; extracts 
 from his letticrs of Nehemiah, 74, 76, 298 ; extracts 
 from his Laws of the Currency, published in the 
 Fomi^n and Colonial Review, 241,292, 327, 
 372 • extracts from his History of Banking in 
 America, 22. 5:3, 72,99, 197; exlracls from his 
 History of Banking in Ireland, 354,358; extracts 
 from his Lectures on Ancient Commerce, 14, 147, 
 151; extracts from his Evidence before a Com- 
 mittee of the House of Commons, respecting one 
 bank of issue, 243.; ditto, ditto, respecting the 
 circulation of country banks, 294; ditto, ditto, 
 re-ipecting the circulation of Ireland, 373. 
 
 Glaihloae, J., m. p His evidence upon the bill cir- 
 culation in Lancashire, 40. 
 
 Gl.asgow Exchange Company, 351. 
 
 Glyn, George Carr, m p. His evidence respecting: 
 the London bankers in 1832, 251 ; his questions 
 respecting the clearing, 25S ; his anticipations 
 respecting the issues of the Bank of England, 67. 
 
 Gold, How weighed, 195; how coined, 196; its 
 specific gravity, ib. ; the amount in circula- 
 tion, ib. 
 
 Goldsmiths, Company of. Formerly most bankers 
 belonged to that company, 1. 
 
 Goodness, Always associated with some degree of 
 wisilom, 131, 
 
 Government securities. The Bank of England pre- 
 fer holding stock to exchequer bills, 45; amount 
 held by them in Seplemher, 1844, 84; and at oth- 
 er times, 97; bankers will probably hold a le-is 
 amount from their experience of the Act of 1844. 
 77; proper for bankers to hold their reserves in, 
 44, is. 
 
 Grace, Three days of, allowed on bills of exchanse, 
 30, 
 
 Grammar, Is the word bank a singular or a plural 
 noun ? 8 ; should we write accepter, or acceptor ? 
 10; indorse, or endorse? 11; indorsement, or in- 
 dorsation? ib. ; presentment, or presentation? 
 12 ; draught, or draft ? ib. ; check, orchecjue ? ib. 
 
 Gratitude, debt of Due from public companies to 
 the cause of mental cultivation, 411, 
 
 Grey, Dr, His system of artificial memory, 200, 
 
 Groat, Origin of the word, 22J. 
 
 Grudging. Hospitality should be exercised with- 
 out, 400: and also benevolence, 410; 
 
 Guarantee Societies, 135 ; form of their bond, 224, 
 
 Fund. See Surplus Fund, 
 
 Guinea, Why a gold coin was so called. 22.3. 
 
 Gurney. Samuel. His opinion as to bankers hold- 
 ing their reserves in bills of exchange, 47. 
 
 Habits, How formed, 4-30; imprudent, voluptu- 
 ousness, drunkenness, gluttony, idleness, sloth, 
 gay company, improvidence, gossiping, lend to 
 poverty, 417, 
 
 of business. What are they ? 146 
 
 Half-yearly balance. What is then done ? 171 
 — book. What does it contain ? 
 
 171. 
 
 sheet. Describe it, 173. 
 
 Hamburg. Way of estimating the relative value 
 of gold in, 196, 
 
 Happfness. Outward circumstances no certain in- 
 dex of, 413, 
 
 HeadolTice. List of all the joint-stock banks in 
 England, arransed alphabetically according to 
 the head-olhce, 302, 
 
 Health. A banker should pay regard to his own, 
 especially in seasons of pressure, 61 ; means oif 
 promoting the health of clerks, 127, 128, 140; 
 holidays have a tendency to promote, 142; great 
 inconvenience from the bad health of clerks, 140 ; 
 conduct of the Bank of England with regard to 
 the health of their clerks, 141. 
 
 Hewat, Thomas, The secretary of the Provincial 
 Bank of Ireland, 365. 
 
 Hibernian Bank, 369; its origin, i6. ; obtained an 
 Act to sue and be sued by its registered officer, 
 ib. ; the last statement of its afTairs, 370. 
 
 High salaries to clerks. Not advisable at first, 1.34. 
 
 History and Principles of Banking. Quoted with 
 reference to bills offered for discount, 20. 
 
 of banking in America. Quoted with ref- 
 
 449 
 
 erence to the re-discounting of bills, 22; with 
 reference to pressures, 55, 72 ; with reference to 
 joint-stock banks, 99 ; with reference to the coins 
 of the United States, 197. 
 
 Hoardins. The effect of panic, 72; the extent of 
 in 1847, 73. 
 
 Holidays. All clerks should have, 141 ; promote 
 their health and mental enersy, 142; a means of 
 improving the clerks, ib., 145; a security for 
 their honesty, 142 ; rules of the Bank of England 
 with re?ard to, 143, 
 
 Honiton Bank. Neglectful in book-keeping, 117, 
 
 Honor Deo. The motto of the Mercers' Company. 
 405. 
 
 Honor. Acceptance for honor; what is it? 31. 
 
 Horizontal system of book-keeping. Describe it, 
 176 ; what are its advantages ? 178. 
 
 Hospitality. Cases in which public companies 
 should exercise it, 401. » 
 
 Ignorance, To remove the ignorance of the poor 
 is as much a duty as to relieve their distress, 410. 
 
 Illegal considerations for a bill of exchange. Such 
 bills cannot be enforced by the drawers, but may 
 by third parlies who had no knowledge of the 
 illegal consideration, 33, 
 
 Illne.ss of Clerks, Inconveniences of, 140; means 
 of preventing, ib. ; conduct of the Bank of Eng- 
 land with respect to, 141 ; why should not banks 
 engage medical men to attend to? 141. 
 
 Impartial system of promotion. Tends to the im- 
 provement of the clerks, 145. 
 
 Improvements in book-keeping. 174 ; what is their 
 object? 176. 
 
 Inconvertible security. A banker should not make 
 advances on, 2.3. 
 
 Independence of mind essential to the development 
 of the intellectual character, 149. 
 
 Index, Uses of, — is a reference to what we have 
 read. — will remind us of what we have forgot- 
 ten, — frequent perusal of, will impress the book 
 on our memory, — will present in one view all 
 that is said on the same subject, — a means of 
 self e.xaminition, — a catechism, — a syllabus, 
 — points out those topics on which we may de- 
 si re in format ion,— enlivens the aitention, 430,431. 
 
 India, Money table for, 198; exchange with, ib.; 
 how regulated by the East India Company, ib. ; 
 how exchanse operations are conducted there, 
 311 ; form of hills remitted thither by the Scot- 
 tish banks, 343 ; the Bank of England issue bank 
 post bills in sets, at 60 days' sight, for remittance 
 thither, 344, 
 
 Indorsement of a bill of exchange. May be either 
 general or special, 29 ; where it should be placed, 
 30; should we write indorsement or indorsation • 
 1 1 ; indorse or endorse, ib. 
 
 Industrious classes. System of deposits useful to 
 337, 339, 
 
 Information, Kind of, given by bankers to each 
 other. 6 ; siven by a hanker to his customer, 7; 
 means of obtaining and recording, 16; country 
 bankers have great facilities in obtaining, 13.
 
 A Treatise on Banking. 
 
 Information book. Describe its importance, 17. 
 
 Innocent people suffer for the faults of those with 
 whom they are socially connected, 39'2. 
 
 Inquiry into the Causes of the Pressure on the 
 Money Maricet during the year 183y. Quotations 
 from, 52, 57, 72, 81. 
 
 Inspection-book. Describe it, 16. 
 
 Instruments, suitable. A banker should know how 
 to choose, 15. 
 
 Insurance companies. Their increase owing to the 
 increased attention paid to vital statistics, 410 ; 
 should be pitiful when policies become forfeited 
 through misfortune, 400; should not rejoice at 
 the misfortunes of rival companies, 39S ; their 
 policies not good security for bankers' advances, 
 26; the United Guarantee and Life Assurance 
 Company, 135 ; the Provident Clerks' Insurance 
 Company, 226. 
 
 Interest. A low rate of, usually precedes a season 
 of pressure. 53, 81. 
 
 how to calculate, IS-l. 
 
 more than 5 per cent, cannot be charged 
 
 where the security is real property, 26. 
 
 on deposits. Allowed by bankers. 3; not 
 
 generally by London bankers, ib. ; advantages of, 
 in Scotland, 337. 
 
 will advance in seasons of 
 
 1S6; Oilman's, 188; 
 
 pressure, 58, 60. 
 
 tables. Reader's 
 
 Coulthard's, ib. 
 
 what is the practice of the London private 
 
 bankers with resard to 1 3, 251 ; the London joint- 
 stock banks? 251, 265, 269, 271, 272, 273; the 
 countrv banks ? 3, 345 ; the banks of Scotland ? 3, 
 325,337. 344: the banks of Ireland? 36S,33I; the 
 Bank of England ? 237, 233 ; what rates has the 
 Bank of England charged at different times? 56, 
 90, 92, 94, 9S; what effects have her changes 
 upon the market rate of interest, 63, 93; what 
 connection is there between rates of interest and 
 se:isons of speculation or pressure, 53, 60, 66, 69; 
 how it checks the excessive issue of notes, 296, 
 325: what effects are produced on. by the Act of 
 1814 ? 69, 77, 91 ; what are the various modes of 
 calculating, 134- I'iS: what rates are charged by 
 the Bank of France? 436; and the Banks in 
 America, 437. 
 
 Interviews between a banker and his customers 
 should be short, 16. 
 
 Investments. Enumerate the accounts that are 
 placed under this head in the general ledger, 166; 
 how entered in the books, 167; in foreign stocks, 
 how far allowed. 301. 
 
 speculative. .Usually precede a sea- 
 son of pressure, 53, 81. 
 
 Ireland. Bills drawn from, regarded as foreign, 31. 
 
 banks of 3.52 ; provisions of the Act of 
 
 1345, ih. ; the Bank of Ireland, 3.'J4 ; the Provin- 
 cial Bank of Ireland, 3.53; ihe National Bank of 
 Ireland, :367; the Hibernian Bank, 369 ; tlie Roy- 
 al Bank of Ireland. 370; the private banks in 
 Dublin, 3.')4 ; the Northern. Belfast, and Ulster 
 Banks, at Belfast, 371 ; the Ti^iperary Joint- 
 stock Bank, 372; the laws of the Currency in 
 Ireland, ib ; the atMilition of notes under j£ 5, 
 375; respective bearings of the Acts of 1344 and 
 1845 (7 and 8 Vict. cap. 32; 7 and 8 Vict. cap. 
 113. and 9 and 10 Vict., cap. 35) upon the banks 
 of England, Scotland, and Ireland, 330 ; settle- 
 ment of the exchanges in Dublin, 3S3. 
 
 Isle of Man. Two joint-stock banks have failed 
 there 307. 
 
 Isle of Wight. A joint-stock bank there took 
 the business of a private bank, 114; after- 
 wards merged in the National Provincial Bank, 
 307. 
 
 Issue Department of the B.mk of England. Is re- 
 quired to give notes for gold, at the rale of £ 3 
 17«. 9d. per ounce, 62 ; i:ot to issue more than 
 
 £ 14,000.000 against securities /rojn t?ie thirty- 
 first day of August, 1344, 234. 
 Issue Act ol 1344. No bank in any part of the 
 United Kingdom, who did not issue notes on the 
 sixth day of May, 1844, shall have the power of 
 issuing notes, 234; the amount of notes a country 
 bank in Eneland may issue must not exceed the 
 average amount in circulation during the twelve 
 weeks ending the tweniysevetith day of April, 
 1844, 235; upon an average of four weeks, no 
 banksr must have more than the above amount 
 in circulation from the tenth day of October, 
 13-14, 236. 
 
 No bank can issue notes in Scotland or 
 
 Ireland, who did not issue on the first day of 
 May, 1845, 313; the fixed issue of each bank is 
 the average amount it had in circulation during 
 the year ending ihe first day of May, 1345, i6. ; 
 upon the average of four weeks, no bank to have 
 in circulation a larger amount than this fixed 
 issue, after the sixth day of December, 1845, ib. 
 Italian bill of exchange. The form of one, 39. 
 
 Jackson, John Stanway. Manager of the Bank of 
 Mona, 303. 
 
 James, Paul Moon. His opinion as to bankers 
 holding their reserves in bills of exchange, 46. 
 
 Job. His controversy with his friends, 412; his 
 reflections, when in distress, on his prerioua 
 conduct towards his servants, 402 ; his kindness 
 to the poor, 41.3. 
 
 Joint-stock banks. Committee of the House of 
 Commons respecting, 53 ; their report, 54 ; 
 points in which they differ from private banks, 
 99 ; their paid-up capital, 100 ; are governed by 
 a board of directors, 102 ; have a chief officer, 
 called a manager, 1(M; distribution of their ad- 
 ministrative functions, 107 ; advantages of their 
 branches, 1(13; their annual meetings of share- 
 holders, 114; their balance sheets, ib.; their 
 profits, and the modes of distribution, 112; 
 causes of their failures 114; their advantages, 
 278. See Causes. 
 
 in London. Points on which 
 
 they differ from the private bankers, 263: num- 
 ber of partners, ib. ; a known amount of capital, 
 264 ; grant interest on lodgments, 265 ; no 
 Christmas boxes to clerks, ib. ; have branches, 
 266. Points in which they differ from each 
 other: — three give interest on the minimum 
 balance of a current account, 270. 272, 274, 279; 
 two take commission accounts, 264, 279 ; one has 
 branches in the country, 278. 
 
 in the country. Origin of, 
 
 300; provisions of their deeds of settlement, 301 ; 
 a list of those now in existence, 302; of those 
 that have stopped payment, ;*16 ; of tho.-!e that 
 have wound up, ib. ; of those that have slopped 
 and resumed, 307; of those that have merged in 
 other joint-stock banks, ib. ; see, also, 431. 
 Journal. Merchants', describe it, 180; bill journal 
 and discount journal, 159. 
 
 Keeping a banker. "What is it? 424 ; more gener- 
 al in Scotland than in England, ib. ; reasons for 
 doing so, 425; which banker should we choose, 
 426; mode of opening and keeping the account, 
 ib. ; interviews with tlie banker, 427. 
 
 Kindness to the poor. A source of wealth, 
 417. 
 
 Kinncar. Georse, manaeer of the Commercial Ex- 
 chancre Company. Extracts from his letter to 
 Mr. Blair, 3^19 : extracts from his pamphlet on 
 Exchanse Companies, ib. 
 
 Knowledge. The advantages of, 40.5. 
 
 of his customers, of great importance 
 
 450 
 
 to a banker, 17,
 
 Alphabetical Index. 
 
 Labor. Division of, among clerks^ 131 ; one of- 
 fice should be a training for the next above it, 
 145. 
 
 Laboring classes. Advantages they derive from 
 banlts, 337, 339. 
 
 Lancashire, circulation of. CJonsisted mainly of 
 bills of exchange, 40 ; how altered, i6. 
 
 Large accounts. Should not be taken by small 
 bankers, 19. 
 
 ■ advances to one customer. Not desirable, 
 UG. 
 
 ——^— hanks. The formation of, prevented by the 
 Act of 1844, 2S7. 
 
 Laws of the currency. With reference to the Bank 
 of England. '210; to the country banks, 292; to 
 Scotland, 327 ; to Ireland, 372. 
 
 Law suits. Rules to be observed with respect to 
 them, 393. 
 
 Lawyers. Opinions of, with regard to a sjjecial fol- 
 lowing a general indorsement of a bill of ex- 
 change, 29 : banks should employ none but hon- 
 est ones, 400. 
 
 Leatham, Mr. His calculation as to the amount 
 of bills of exchange in circulation, 40, 41. 
 
 I.ectures on ancient commerce. Quotations from, 
 on the amusements of a merchant, 14; on bad 
 writing, 151 ; on habits of business, 146. 
 
 Ledger, current account. Describe it, 158; pro- 
 gressive, describe it, ib. 
 
 general. Describe it, 165; merchant's, de- 
 scribe it, 131. 
 
 keeper. His desk, where placed, 123. 
 
 Leeds. A bank that failed there is said to have ad- 
 vanced money on shares, 116: its banks have 
 sometimes advanced money on mills, 115. 
 
 Legislation. Has made banks too numerous, 318 ; 
 prevents the formation of large banks of issue, 
 381. 
 
 l^etters addressed to the author. By Mr. Robert 
 Bell, 320, 325 ; by an Irish banker, 384 ; from In- 
 dia, 341. 
 
 -^— ^ between the Government and the Bank, re- 
 specting the .'Vet of 1844, 247. 
 
 of bankers. Form of 162. 
 
 of credit. Form of, 212. 
 
 of guarantee. Forms of, 208 ; of deposit of 
 
 deeds, 209; of credit, 212. 
 
 addre.ssed to banks, as security 
 
 for bills discounted, 208; to accompany a lodg 
 ment of deeds, 209. 
 
 of Nehemiah. Quoted, 74, 76, 288. 
 
 to a branch manager. Quoted, 18. 
 
 to shareholders. Forms of, 203, 215. 
 
 Lettre d'Indication. What is it ? 218. 
 
 Liability of shareholders in joint-stock banks. 
 Not limited by charters granted under the new 
 Act, 310. 
 
 in the Guarantee Society the shareholders 
 
 are not liable on their policies beyond the 
 amount of their shares, 225 ; and ratably only 
 with other parties, 226. 
 
 Liberality in the cause of religion. A source 
 of wealth, 406, 413 ; rules for its exercise, 
 410. 
 
 Library, a banking. Every hank should have, 143. 
 
 Licenses to issue notes. Alteration made by the 
 Act of 18-14, 287. 
 
 Life policies. A banker should not make advances 
 on, 26 ; the value of 27. 
 
 Light. Regard should be paid to, in fitting up an 
 office, 127; prevents mistakes, 12S ; produces 
 cheerfulness, ib. ; hnw it should fall. ib. 
 
 Lists. Describe the bonks so called, 160. 
 
 Literary societies. Bank managers should pro- 
 mote, 412. 
 
 Liverpool bankers have made advances on cot- 
 ton, 23. 
 
 Loans, to stock or bill brokers, 48 ; loans to clerks, 
 144, 228 
 
 451 
 
 Loans. Hmv male in Loiidun, anJ how in the 
 country, 23 ; when are they dead ? ib. ; t|uotation 
 from Mr. Taylor, respecting, 2i5; liow entered in 
 the books, 168. 
 
 and discounts. The demand for them will 
 
 incre.ase in seasons of pressure, 58. 
 
 Local directors of branches. Not now appointed 
 generally in England, 119; of the Provincial 
 Bank of Ireland, 362. 
 
 Locality. What is the best for a bank ? 126. 
 
 Lodgments. Enumerate the arcnunts that are 
 placed under this heail in the general ledger, 1G6. 
 
 London bankers give information to each other, 
 6; do not reissue country notes or bills of ex- 
 change, 251 ; difference between City and West- 
 end bankers, 19. 
 
 private bankers, 249; list of, 250; the 
 
 principles of their administration, 251 ; the oper- 
 ations of the clearing-house, ib. 
 
 joint-stock banks, 2-39 ; theirnumber. ib., 
 
 279; abstract of their returns to the Stamp-office, 
 2S0 ; statement of their affairs from their last re- 
 ports, ib. 
 
 and Westminster Bank. Form of their 
 
 circular notes, 218; list of foreign bankers who 
 pay them, 219; its history, 2.59; its principles, 
 263 ; its branches, 2G6 ; its government, 268 ; its 
 paid-up capital, profits, dividends, and surplus 
 fund, 269; its prospectus, ib. 
 
 -Joint-stock Bank. Its formation, 270; its 
 
 capital, profits, dividends, and surplus fund, 273; 
 its prospectus, ib. 
 
 and County Bank. Its original title, 277; 
 
 private banks merged in, 27S ; its prospectus, i6. 
 
 and Dublin Bank. Merged in the Nation- 
 al Bank of Ireland. 368, 372. ^ 
 
 I/3ng Annuity. How a purchase of, is passed 
 through the hooks, 191. 
 
 Lord Bacon. His observation on reading, writing, 
 and conversation, applied to bankers, 148. 
 
 Lost bill of e.xchange. What is the law respecting 
 it? 34. 
 
 Love thy neighbour as thyself. How can a banket 
 do this ? 393 ; not practised by street cigar-smok- 
 ers, 403. 
 
 Loyd, Lewis. His evidence upon the bill-circula- 
 tion of Lancashire, 40. 
 
 Samuel Jones. Reply to his observations 
 
 in favor of the currency principle, 62; his liber- 
 ality to his clerks, 33. 
 
 McCtJLLOCH, Mr. His observations on the clear- 
 ing, and his description of the advantages of the 
 clearing-house, 253. 
 
 Mammon, temples of Buildings of public compa- 
 nies should not be so. 423. 
 
 Manager. Should be selected solely on account of 
 his banking talents, 105 ; should be characterized 
 by circumspection and uprightness, ib. ; his va- 
 rious duties, lOG; must not be engaged in any 
 other employment, ib ; his conduct towards the 
 customers, ib. , should be prompt and decided, 
 107; in some banks the administrative power is 
 vested solely in the manager, 103. 302; large 
 banks can command the services of the most tal- 
 ented managers, 114; should study his weekly 
 balance-sheet. 113; in 193G joint-stock banks 
 were formed fa.sler than good man.T^ers could be 
 obtained, 121; his elficiency will depend on his 
 social position, ib. ; the most important of a 
 manager's functions is to give advice to the di- 
 rectors, 122; evils of a manager being badly paid, 
 124 ; an instance of literal feeliiig in the share- 
 holders of a joint slock bank towards their man- 
 ager, ib. : how clerks are trained to become man- 
 agers, 146 ; names of the managers of all the 
 joint-stock banks. .302 ; under the new Act a bank 
 tnust have one, 310; oftjranches. iiO.
 
 A Treatise on Banking. 
 
 Manager 3 house. Shoiild be wholly separate from 
 the bank office, 127. 
 
 Manchester. Banks at, advanced money on mills, 
 2.3, 114; made advances to some of their own 
 directors, 117 ; services of plate were presented to 
 directors shortly before their banks slopped pay- 
 ment, 123. 
 
 the Bank of, extract from its first re- 
 port, 122 ; evidence of its directors before the Par- 
 liamentary Commillee, »6. ; failure of, ib. ; had a 
 large amount of drafts on London in circulation, 
 115. 
 
 Manufacturers in Scotland have no inducement to 
 become bankers. Why ? 334. 
 
 Marshall, James, the late secretary of the Provin- 
 cial Bank of Ireland. His evidence as to wheth- 
 er banks should hold their reserves in Govern- 
 ment securities, 44 ; his evidence as to the for- 
 mation and management of the Provincial Baxik 
 of Ireland, 36(1. 
 
 Masters. Duties of towards their servants, applied 
 to banks, 4U1. 
 
 Memorandum. What document is so called? 162. 
 
 of agreement, with regard to a lodg- 
 ment of deeds in a bank as security for advances, 
 209. 
 
 Memory, artificial. Different systems of, 199 ; 
 sometimes useful as applied to figures, 200. 
 
 Merchants. Advantages to, from keeping a bank- 
 er, !)■ their book-keeping, compared with the 
 banker's book-keeping, 180. 
 
 Mercury. Thi? god of merchants and bankers, who 
 went in public procession to his temple at Rome 
 every year, 404. 
 
 Merits of clerks. Different ways of ascertaining, 
 144 ; should H?fluence their promotion, 136, 13S, 
 145. 
 
 Metropolitan Bank. Wound up, and its business 
 transferred^ to the Union Bank of London, 281. 
 
 Mind. Reproofs have most effect on the, when ad- 
 ministered in seasons of alliiction, 59; men of 
 business apt to overlook, though among no cla.ss 
 are menial phenomena more strikingly exhibited, 
 124 ; its energies are depressed by the fear of 
 censure, or the dread of responsibility, 149; a 
 sense of independence essential to Ihe full devel- 
 opment of its powers, ih. ; how its faculties are 
 affected l)y kindness and generosity, 125; how 
 the minds of manasers are influenced by the 
 amount of their salaries, ib. ; and lho.se of direct- 
 ors, ii. ; and those of clerks, 133, 13-! ; its general 
 cultivation renders its faculties more effective 
 in every particular application of them, 412; 
 public companies are triumphs of, ib. ; advanta- 
 ges to public companies from servants of cultivat- 
 ed minds, ib. 
 
 Mines. Royal. The governor and company of re- 
 ceived assistance from the Bank of England, 114. 
 
 coal. Not good security fora bank advance, 
 
 115; forbidden in some deeds of .settlement, .301 ; 
 mining associations should not rejoice when ac- 
 cidents occur in rival mines. 398. 
 
 Minors, under twenty-one years of age. In what 
 ca.ses they may accept bills of e.vchange. 34. 
 
 Mona, Bank of. A branch of the City of (31asgow 
 Bank, in the Isle of Man, has a charter from the 
 local government under this title, 308. 
 
 Money. A banker is a dealer in. 1 ; bank a safe 
 place of deposit for, 2 ; effect of its increase, 52, 
 71, 86. 
 
 origin of the word, 222; applied only to 
 
 coin in banking book-keepinir, 155. 
 
 book. Describe it, 156; how superseded, 
 
 177. 
 
 Moral agents. What constitutes moral agency, 
 3-f7, 413; are hanking companies moral aeenls? 
 387; what duties have they to perform? 393; 
 what reward or punishment follows the perform- 
 ance or nonperformance of these duties ? 413. 
 
 An element cf ths 
 iiiproves the 
 
 Moral character of a party, 
 banker's security, 7. 
 
 feelings. Tlie cullivation ol, 
 
 intellect, 401. 
 
 sense. What is it, 413; absurdity of deny 
 
 ine its existence, if>. 
 
 influence. Of banking, 7 ; of cash credits, 
 
 334; of dejiosils, 339. 
 
 Morris, James, Governor of the Bank of England 
 in 1S18. His evidence as to the cause of the 
 pressure in 1847, 64 ; his statement as to the 
 liberality of the Bank of England, 95 ; his opin- 
 ion as to the Bank of England discounting for 
 country banks of issue, 291 ; his evidence as to 
 the increase of notes required for circulation 
 through the exclusion of the joint-stock banks 
 from the clearing-house, 283. 
 
 Moses. An example to bankers, 15; was instruct- 
 ed to make use of other men, ib. ; taught the 
 doctrine of national responsibility, 390 ; his law 
 against muzzling the mouth of the ox that tread- 
 eth out the corn, 402 ; cautions the Israelites 
 against forgetfulness of God in the time of their 
 prosperity, 404: his laws framed on a principle 
 of righteous retaliation, 420; made laws in favor 
 of the poor, 408 ; and, moreover, exhorted the 
 people to voluntary benevolence, 16. 
 
 Murray. Robert, chief officer of the Provincial Bardc 
 of Ireland, 365; his evidence as to one bank of 
 issue, 374 ; the tables he presented to the Lords 
 Committee, 379. 
 
 Names of talented men should not bias us in our 
 mquiries after truth, 62. 
 
 National Bank of Ireland, 367 ; extracts from ila 
 prospectus, ih. ; adopted the local shareholder 
 principle, ih. ; its chief connections at first among 
 the Repealers, ib. ; took the business of the Lon- 
 don and Dublin Bank, 368 ; acts in some cases 
 a-s d savings bank, ib. ; the last statement of ila 
 afl^airs, ib. ; its branches, ib. 
 
 Exchange Company at Glasgow, 351. 
 
 Nations Are moral agents, 390 ; can only be pun- 
 ished in their collective capacity in the preseni 
 world, 412 ; in what way are they thus punished 
 or rewarded ? 390; the analogy between nation* 
 and public companies, 391. 
 
 Nehemiah, The letters of, quoted with reference 
 to the Act of 1844, 74, 76. 
 
 New accounts. Precautions in taking, 19. 
 
 connections. The best way of gelling them, 
 
 joint-stock banks in England. Provisions of 
 
 the Act for regulating, 308. 
 
 Newcastle. Banks at, advanced money on collier 
 ies, 114: and to corn merchants, 116. 
 
 New York. Par of Exchange between, and Eng- 
 land, 196 ; an Act passed in that Stale relating to 
 banking, 440. 
 
 Nineveh. Jonah's prophecy against. 392. 
 
 Northampton Tables. The probability of life by 
 27. 
 
 Northern and Central Bank. Stopped payment in 
 December, 1836, 55: could not have been a.ssist- 
 cd by the Bank of England in 1836 had the Act 
 of 1.S44 been then in ope.'-ation, 63; sold their 
 branch at Leeds for £6, .500, 114; debts due to 
 the bank by their directors. 125 ; wound up, un- 
 der the superintendence of the Bank of England. 
 306. 
 
 Northern Banking Company at Belfast. Its origin, 
 371 : its capital, &c. . ib. ; its branches, ib. 
 
 Note department. What books are kept in ihe, 
 164. 
 
 register. Describe it, 1C4. 
 
 Noted. Irdand bills are noted, foreign bills pro 
 tested. 31. 
 
 Notes of hand. Adv.i.ices ^n. belter than loam 
 25. 
 
 452
 
 Alphabetical Index. 
 
 Notes in circulation. How entered in tlie books, 
 167; liow 10 calculate the lime they remain in 
 circulation, ISS. 
 
 o!' life, by J. Taylor, quoted with reference 
 
 lo money, 13; with re.l'-reiice to loans, 25. 
 
 Nolice of thedishcinor of a bill of exchange. What 
 it should import, 36; lifio should give it, ib. ; 
 u-hen it should be given, 37 ; lo whom it should 
 be given, ib. ; must it be in writing 1 ib. 
 
 Notices of calls on shares. Form of, 216. 
 
 Nuinher of clerks. Should not be loo dispropor- 
 tionate to the work, 145. 
 
 of persons who enter a bank. How to as- 
 certain, \'M. 
 
 of banks of issue in the United Kingdom, 
 
 2j1 
 
 .Vumerous banks. Not the result of competition, 
 hut of legislation, 318. 
 
 .Vursing an account. What is it? 27. 
 
 Oath of secrecy. Required in a bank deed of set- 
 tlement, 301. 
 
 Obedience to the laws. The duty of a public com- 
 pany, 394, 397. 
 
 Ofiice. The arrangement of the, 126 ; administra- 
 tion of the, 127; the arrangement of, with re- 
 gard 10 space, light, and ventilation, ib. ; selec- 
 tion and appointment of the clerks, 129 ; the dis- 
 tribution of their duties, 131 ; the amount of 
 their salaries, 132 ; ihe system of promotion, 136 ; 
 rules of discipline, 139; training of clerks for 
 higher offices, 144. 
 
 One bank of issue. A summary of the author's 
 evidence respecting its probable effects, 243. 
 
 Opinion, good, of their banker, has been the means 
 of raising people from obscurity lo wealth, 7. 
 
 Opinion of clerks as lo each other's qualifications 
 are generally correct, 144. 
 
 Order. A banker should always observe a princi- 
 ple of order, 16, 117. 
 
 PAiD-rrp capital. How is this account keot in the 
 bnoks, 169. 
 
 Palmer, John Horsley, Governor of the Bank of 
 England in 1S32. His evidence of the causes of 
 the pressure of 1825, 53. 
 
 Panic. Wherein panic differs from pressure, 52, 
 72, 73 : produces hoarding, 73. 
 
 Par of exchange. What is it? 196. 
 
 Parentage Of a candidate for a clerkship, to be 
 inquired into, 130, 
 
 Paris. The way of estimating the relative value 
 of gold in Paris and London, 196. 
 
 Partners. Number of, in the joint-stock banks in 
 England, 306 ; in each of the Scotch banks, 315 ; 
 in each of the London private banks, 2.50 ; in 
 each of the joinl-slock banks in London, 250. 
 
 Pass-book. Describe it, 1.54, 427. 
 
 Past-due bills. How entered in the books. 163. 
 
 Patriotism. The duties of, 393 ; obedience lo the 
 laws, .394 ; to enforce the laws upon others, ib ; 
 to support the civil power, ib. : lo encourage the 
 industry, trade, and fine arts of the country, ib. ; 
 lo maintain a high-toned morality, 395. 
 
 Paul. St. Has twice quoted the enactment of Mo- 
 ses against muzzling the ox that Ireadelh out the 
 corn, and applied it lo the case of servants, 402. 
 
 Payment lo the Bank of England for conducting 
 the public business, 2.35. 
 
 Peel's, Sir Robert, Act of 1844. The practical ad- 
 minislralion of a bank under, 61 ; objections to 
 the principle, 62; the amount of currency must 
 fluctuate with the foreign e.vchange.s, ib. ; and 
 also from a domestic demand for gold, ib. : a 
 separation must take place between the banking 
 and issuing dep.irUnent3 of the Bank of England. 
 i6 ; gre;U flnclualions would lake place in the 
 prices of the Government securities, 63 ; the 
 
 453 
 
 bank would be unable lo afford a.ssistance to >ne 
 commercial classes in seasons of pressure, .j6. 
 
 Peel, Sir Hoherl, his examination of the author in 
 the Committee on Banks of Issde, '.i94. 
 
 Penally. On drawing cheques on a liank beyond 
 fifteen miles distant, 32 ; on banks that issue 
 notes beyond the authorized amount, 2»6. 
 
 Peiniy. Origin of the word, 224 j history of the 
 penny, ib. 
 
 Periods in a cycle of the currency, 81. 
 
 Philosophy of joint-slock banking, by Mr. Bell. 
 Quotations from, 102-104. 
 
 Phrenology. Not necessary lo enalile a banker to 
 know tiie character of his customers, 18. 
 
 Pocket-money. How passed through ihe bank ac- 
 count, 427. 
 
 Political economy of the Bible, 418. 
 
 Pollard, George, manager of the London Joint-stock 
 Bank, previously chief clerk in the private bank 
 of Messrs. Williams, Deacon, &, Co., 270. 
 
 Population of the United Slates, and the number of 
 banks, 442. 
 
 Portuguese bill. The form of one, 39. 
 
 Poverty. It is belter to prevent than to relieve, 
 410; produced by want of diligence, injustice, 
 imprudent habits, neglect of religion, unkind- 
 ness lo the poor, 417. 
 
 Pound. What is a pound ? 196, 222. 
 
 Prayer. It is the duty of llie servants of public 
 companies lo pray for the prosperity of the com- 
 pany whom they serve, 403. 
 
 Preliminary expenses. How is this account kepi 
 in the books ? 169. 
 
 Pre.sentment of a bill. For acceptance, 32 ; for 
 payment, ib.; when in reasonable lime, 35; for 
 payment, is legal at the clearinghouse, 36 ; should 
 we write presentment or presentation ? 11. 
 
 Pressure on the money market. Definition of, .52, 
 71 ; preceded by a low rale of interest, specula 
 live investments, and an unfavorable course of 
 the foreign exchanges, .52; the pressure of 182£ 
 was preceded by a reduction of interest on the 
 public funds, acknowledgment of the South 
 American Republic, speculation in commercia; 
 produce and foreign loans, failure of the banking 
 house of Sir Peter Pole & Co., 53; pressure of 
 1836 was preceded by speculations of all kinds, 
 high prices, rejection of American bills by the 
 Bank of England, reports on the joinl-slock 
 banks, failure of the Agricultural Bank of Ireland 
 and the Northern and Central Bank of England, 
 53-55 ; pressure of 1839 preceded by abundance 
 of money, — Bank of England sent gold to Amer- 
 ica, — importation of American securities, — un- 
 favorable harvest, 55 ; the Bank of England ob- 
 tained assistance from the Bank of Fr.ance, 56: 
 comparison between the pressures of 1836 and 
 of ly39, ib. ; pressure of 1847 preceiled by a low 
 rale of interest, speculations in railways, bad 
 harvests and a high price of corn, failure of 
 houses in the East and West India trade, liicili- 
 lies given to credit by the Bank of England and 
 subsequent restrictions, failures of banks and 
 discount brokers, 63, 64 ; admiBistralion of a 
 bank in a season of pressure, 57 : a banker who 
 wishes to be easy in a lime of pressure must act 
 wi-sely in the previous season of speculation, ib. ; 
 steps to be adopted on Ihe approach of pressure, 
 58 ; in the pres.iure a banii.er has three demands 
 on his funds, ib, ; meana to be taken to meet 
 them, ib. ; no use lo call up dead loans, or at- 
 tempt lo reduce discounts, ib. ; a banker will 
 have lo give many refusals, 59; should be cau- 
 tious in taking accounts from other bankers, ib. ; 
 should not attempt to gel away the customers 
 of other banks, ib. ; how he should treat wealthy, 
 but wandering customers, (6. ; how lie should 
 treat customers in ditHculties who apply for as- 
 sistance, 6U ; wiielher he should increase his al-
 
 A Treatise on Bankvig. 
 
 lowance of interest on deposits, j6. ; sliould pay 
 great attention to tlie published returns of the 
 Banlc of Kiiglaiid, it. ; will extend his accommo- 
 dation as the pressure declines, ib. ; during the 
 pressure a banicer should pay great attention to 
 the state of his health and the discipline of his 
 mind, 61. 
 Pressure of the year 1825, 53 ; of the year 183fi, 55 ; 
 of the year 1S:3'J, i6. ; of the year lo-l", its effect 
 on the circulation of country banks, 2iM. 
 
 how a banker should act in anticipation 
 
 of one, 53 ; how during one, ib. 
 
 Preston Banking Company. The only bank in 
 England having a charter under the Act of 1844,* 
 36y ; a return of their assets and liabilities, ib. 
 
 Private banks. The administrative functions of 
 the several partners, 107 ; how prevented in 
 Scotland, 334 ; private accounts, who inspects 
 Ihem, 301. 
 
 Taking the unsound business of, 
 
 the cause of the failure of some joint-stock banks, 
 113. 
 
 Proceedings of a general meeting of shareholders, 
 203. 
 
 Profit. The source of a banker's, 2 ; how appro- 
 priated, 112; amount of the London and West- 
 minster Bank, 269; of the London Joint-stock 
 Bank, 273 ; of the Union Bank of London, 275; 
 of the Commercial Bank of London, ib. 
 
 and loss account balance-sheet. Describe 
 
 it, 171. 
 
 Profits, large. Bankers must not expect, under the 
 Act of 1844, 80. 
 
 Progressive-ledger. Describe it, 158 ; how are the 
 balances brought out .' 153. 
 
 Promises. Must'be kept, even when the keeping 
 would be injurious to the parties who made them, 
 396. 
 
 Promotion. Should go by seniority, unless there 
 is great superiority of merit, 138 ; should not be 
 too rapid, ib. 
 
 Property. Has its duties as well as its rights, and 
 its rights as well as its duties, 405; its rights are 
 the first that are disregarded by an irreligious 
 population, ib. 
 
 Proprietors. Proceedings of, have sometimes been 
 injurious to their banks, 122-124. 
 
 accounts. Enumerate those accounts 
 
 which are placed under this head in the general 
 ledger, 166; how are they kepi 't 169. 
 
 Proprietors' ledger. Describe it, 174. 
 
 Prosecution. The Guarantee Society have power 
 to prosecute all parties whose frauds tliey make 
 good, 225. 
 
 Prospectus of a new bank. What it contains, 
 203. 
 
 Prosperity. Acquired by unrighteous means is 
 transient, 422 ; and is not to be envied, ib. ; ob- 
 tained by virtue and piety should excite joy and 
 thanksgiving, 423 ; it affords pleasure to God and 
 to men, ib. 
 
 Prosperous companies should examine if they have 
 properly discharged their moral and religious du- 
 ties, 422. 
 
 Proverbs. Not found among those of Solomon, 
 417. 
 
 Provident Clerks' Provident Fund. The rules of, 
 226. 
 
 Provincial Bank of Ireland, 358 ; Act under which 
 it was formed^ 359; its objects, 360; state of 
 banking in Ireland at the time of its formation, 
 ib. ; its constitution, 361 ; the selection of olli- 
 cers, ib. ; the choice of directors, ib. ; the daily 
 committee, .361 ; the inspection of branches, 
 365 ; the declaratitm of a dividend, ib. ; the 
 causes of its prosperity, .366 ; last statement of 
 ;t8 affairs, ib. ; its branches, ib. 
 
 Provisions of the Act of 1845, whicli regulates the 
 issue of notes in Scotland, 313. 
 
 for regulatmg the ia 
 
 sue of bank-notes in Ireland, 35a. 
 
 Proxy, voting by. Form of letter, 203. 
 
 Prudent habits. A source of wealth, 417. 
 
 Prussian coin. English money reduced into, 222. 
 
 Public companies. This is the age of, 387; are 
 they moral agents, ib. ; what are their duties to- 
 wards the stale, 393; what are tlie duties arising 
 from their social relation, 395 ; what are their re- 
 ligious duties, 404 ; what are their duties to- 
 wards the poor, 408 ; will they be rewarded for 
 the performance of moral and religious duties ? 
 412; when? ib.; how? 415; in what manner, 
 418 ; what are the deductions from this doctrine ? 
 421. 
 
 works in Scotland. Promoted by means of 
 
 cash credits, 334. 
 
 Punishments. How should they be administered ? 
 150; of banks, 415 ; future, 414. 
 
 Questions. With reference to the discounting of 
 bills, 21. 
 
 , a series of, on banking calculations, 
 
 201. 
 
 Quotations. From Taylor's Notes on Life, 13, 25; 
 Taylor's Statesman, 13, 104, 134 ; Bankers' 
 Magazine, IS; Evidence given before Parliamen- 
 tary Committees, 40, 282, 294; Sir W. Clay, 53; 
 Reports of Lords' Committee, 63, 66 ; President 
 of America, 75, 77 ; Bell's Philosophy of Joint- 
 stock Banking, 102, IW ; Blill's Political Econo- 
 my, 132 ; Adam Smith's Wealth of Nations, 132, 
 175; Guarantee Society's Prospectus, 135; 
 Times newspaper, 143, 344 ; Foster's Double En- 
 try Elucidated, 150, 175; Ribbage's Economy of 
 Machinery and Manufactures, 175; Francis's 
 History of the Bank of England, ib. ; Wallace's 
 Pocket Guide to Commercial Bookkeeping, 183; 
 Waterslon's Commercial Dictionary, 192: Wa- 
 terston's Manual of Commerce, 201, 222; Notes 
 of a Book Worm, 222 ; Rules of the Provident 
 Clerks' Benevolent Fund, 226 ; the Cambrian, a 
 Welsh newspaper, 238; M'Culloch's Commercial 
 Dictionary, 258 ; Dr. Franklin, 6 ; Bailey on the 
 Laws of Bills of Exchange, 10, &c. ; Chitty, on 
 ditto, ib. ; Byles, on ditto, 36; Glen, on ditto, in 
 Scotland, 10, &c. ; the Fifth Report of the Lon- 
 don and Westminster Bank, 261 ; Foreign and 
 Colonial Review, 241, 292; Reports of Parlia- 
 mentary Committees, 301, 312; Bell's Letters to 
 J. W. Gilbart, 320, 323, 326; Kinnear on Ex- 
 change Companies, 348. 
 
 Railway deposits. How managed through the ' 
 lianking department of the Bank of England, 
 70, 92. 
 
 Railways have diminished the amount of country 
 notes in circulation, 293; railway speculators 
 are dangerous customers to a bank, 116 ; compa- 
 nies should not rejoice when accidents occur on a 
 rival line, 398; "have very properly prohibited 
 smoking in their carriages, 403. 
 
 Reader's Time Tables, 186. 
 
 Reasonable time for presenting a bill or cheque 
 What is it; 35. 
 
 Receipts. Not usually given by London bankers, 
 154 ; what is the form of a siiop receipt, ib. 
 
 Re-discounting of bills. Advantages and abuses ol 
 the practice, 22 ; not done by Loudon bankers, 
 47 ; why not by tlie Scotch banks, 323. 
 
 Reduction in the amount of fixed issues of ^al.ka 
 since the passing ol the Act of 1844, 291. 
 
 Refusals. A banker will have to give many in sea- 
 sons of pressure, 59 ; should always be giv«a 
 with courtesy, 106, 402. 
 
 * Another has been recently formed, in London, called the British Bunlf. 
 
 454
 
 Alphabetical Index. 
 
 RBgTjIations for settling the hank exchanges at Ed- 
 inburgh, 344 ; at Dublin, 3S5. 
 
 Relief granleit to riistresseJ clerics, 22S. 
 
 Religion, pure. What is it? 403; \a the friend and 
 guardian of the poor, 407. 
 
 Religious duties. The foundation of 390; puhlic 
 companies are bound to perform, 337; what are 
 the chief that devolve upon public companies, 
 403 ; in what way will their performance be re- 
 warded, 413. 
 
 Remittance. Banks of, 4. 
 
 Reports. Required from the banks of New York, 
 440; made quarterly to the Government, 411; 
 what it must contain, ib. ; to be published in the 
 local newspaper, ih. ; penalty for noncompliance, 
 441 ; the comptroller may appoint a competent 
 person to e.xamine into the affairs of any bank, 
 xh. ; the capital of banks subject to taxation, ib. ; 
 table of all the banks in the States, 442. 
 
 Reproofs. How should they he administered, 150. 
 
 Requisition Notes. Forms of 213. 
 
 Reserves of bankers. In what should they be held, 
 44 ? of the Bank of England, 89. 
 
 Respectability. A banker i.s a referee as to the re- 
 spectability of his customers, 6. 
 
 Responsibility, national. The doctrine of, taught 
 by Moses, 390; proved by history, 391; is not 
 destructive of personal respwnsibility, ib. ; of in- 
 dividuals connected with public companies, 
 393. 
 
 Restrictions. On the issue of the country banks, 
 70 ; on the banks of Scotland, ib. \ and of Ire- 
 land, ib. 
 
 Retaliation. A principle of righteous retaliation is 
 the prevailing principle of the Divine govern- 
 ment, 419; is the principle of the Mosaic law, 
 ib. ; recognized in the denunciations of the 
 prophets, ib.; illustrated by historical facts, 420; 
 is agreeable to the feelings of human nature, ib. 
 
 Retired. When is a cheque or note said to be so ? 
 154. 
 
 Returns. All banks to make a return to the stamp 
 office of the names of their partners, on the 
 first day of January in each year, or within 
 fifteen days afterwards ; the commissioners 
 shall publish their names in some local news- 
 paper before the first day of March following, 
 249: monthly returns of the assets and liabilities 
 required under the new Act, 309. 
 
 Rewards and punishments. Essential to moral 
 agency, 412 ; when bestowed on public compa- 
 nies, ib. ; what is their nature, 415 ; in what 
 manner are they bestowed ? 413 ; what effects 
 should they produce ? 424. 
 
 Rich men. Advances to, sometimes become dead 
 loans, 2.3. 
 
 Righteousness in dealing. A source of wealth, 
 417. 
 
 Rights of property. Are aa sacred as any other 
 rights, 405. 
 
 ■ social. Divided into perfect and imperfect, 
 40G. 
 
 Rivalry between bankers. Injurious, 123; not ad- 
 visable in seasons of pressure, -59. 
 
 Rogers's Chapters on Country Banking. A useful 
 work, 203. 
 
 Rome. In ancient, the merchants and bankers had 
 an annual procession to the temple of Mercury, 
 401. 
 
 Royal Bank of Ireland. Its formation, 371 ; the 
 last statement of its affairs, ib. 
 
 —Exchange. Exhibits the religious mottoes 
 
 of the City of London and the Mercers' Com- 
 pany. 404. 
 
 Rules of di.scipline in a bank, 139. 
 
 Rumors are rife in seasons of pressure, 59; a bank- 
 er should not occcision, 61. 
 
 Saebath-dat. The duty of public companies to 
 
 reverence, 40G ; its design, ib. ; its abolition 
 
 would be injurious to the poor, 107. 
 Salaries. Of clerks, rules respecting, 132 ; of 
 
 managers, 124 ; of directors, 125. 
 Sanderson & Co., bill-brokers. Stopped payment 
 
 through the failure of Lesley, Alexander, «fc Co., 
 
 corn merchants, IIG. 
 Savings banks. In what cases money should be 
 
 placed there, 430. 
 
 at St. Clement Danes. Terms for 
 
 granting annuities, 230; the National Bank of 
 
 Ireland acts as one, 363. 
 Scale of salaries. Desirable, 133. 
 Scrimgeour, William Wilson. General manager of 
 
 the Union Bank of London, previously a chief 
 
 olficer in the discount department of the Bank of 
 
 England, 274. 
 Scotch banks. Their investments in Government 
 
 securities, 44,46. 
 Scotland. Principles of banking in, 3 ; bills drawn 
 
 from, regarded as foreign, 31. 
 
 the laws of, with reference to banking, 
 
 311; the existing banks of, 314; comparison be- 
 tween the banks of Scotland and those of Eng- 
 land, 319 ; the laws of the currency in Scotland, 
 327 ; its cash credit system, 332 ; its deposit 
 system, 336 ; remittances to India, 340 ; regula- 
 tions for settling the e-xchanges, 344 ; exchange 
 banks and e.xcliange companies, 346 ; different 
 effects of the Bank Acts of 1345 in Ireland and 
 in Scotland, 3-53, 379 ; keeping a banker more 
 general in Scotland than in England, 325, 426. 
 
 banks in. List of those in existence in 
 
 1326,314: of those formed since, ib.\ of those 
 now in existence. 315 ; of the changes that have 
 taken place, 316 ; of those that have filled or 
 wound up, 313 ; of the nine that remain, ih. ; 
 of tliose in Edinburgh, 319; of those in Glas- 
 gow, ib. ; difference between Scotch banks and 
 English banks, ib. ; capital of all the banks in 
 Scotland, 321. 
 
 ■ branch banks in. Number of, 291 ; more 
 
 general in Scotland than in England, 319 ; aver- 
 age amount of capital and of circulation to each 
 branch, 321 ; branch system leads to uniformity 
 in charges all over Scotland, 322; branches of 
 the Edinburgh banks have been opposed and 
 sometimes defeated by the local banks, 323; 
 branches enable the bank to avoid re-discount, 
 ib. ; produce uniformity in the mode of making 
 the exchanges, ih. ; enable the large banks to 
 exercise a surveillance over the small ones, 326 ; 
 the number of would be diminished if the notes 
 under f 5 were abolished, 331. 
 
 Scripture. Proves that relations imply corre.'?pond- 
 ing duties, 333; proves national responsibility, 
 390 ; family responsibility, 391 ; collective re- 
 sponsibility of cities, 392; slates the principles 
 of social duties, 395; denounces those wlio vio- 
 late the Sabbath-day, 406 : enforces the duty of 
 benevolence to the poor, 403; gives the rule fir 
 exercising it, 409; concurs with reason in regard 
 to a future judgment, 414; all its threatenings 
 against public bodies of men have reference to 
 the present world, 415 ; do not teach that wealth 
 is an evil, ib. ; nor that its enjoyments are sin- 
 ful, 416; promises wealth as a reward to the 
 pious and the virtuous, ib. ; specifies the vir- 
 tues which are followed by wealth, 417; de- 
 clares the doctrine of a righteous retribution in 
 the present world, 419. 
 
 Seasons of pressure. Characteristics of, 53. 
 
 • of speculation. How a banker should act 
 
 in them, 57. 
 
 Securities. A banker will probably have to realiw 
 some in seasons of pressure, 53. 
 
 for clerks, 135 ; Guarantee Societies, ib. 
 
 Secrecy. On the part of directors and clerks ea- 
 
 455
 
 A Treatise on Banking. 
 
 joined in deeds of setUement, 301 ; form of a 
 declaration of, 207. 
 Selfdeperidence. Bankers should conduct their 
 banks on a principle of, 73 ; should not depend on 
 the Bank of England for assistance in seasons of 
 pressure, 79; nor on bill-brokers, ib. ; nor on oth- 
 er banks, 80. 
 
 knowledge. Necessary to a banker, 13. 
 
 Seniority. Should be observed in the promotion of 
 clerks, unless there are special reasons for the 
 contrary, 138. 
 
 Servants. He who keeps a banker need not trust 
 his money to his servants, 3; duties of banks to- 
 wards, 401 ; duty of servants towards the bank, 
 402; advantages of religious ones, 411; advan- 
 tage to a bank of educated ones, 412. 
 
 of banks and otlier public companies. 
 
 Wliat are their duties ? 402. 
 
 Shareholder's register. Describe it, 171. 
 
 in joint-stock banlcs. Are liable to 
 
 the full extent of their property for all the debts 
 of the bank, 263, 300; the same under the new 
 charters, 310; the same in Scotland, 311, 319; 
 and in Ireland, 357; they choose the directors, 
 301 ; can dissolve the company, ib ; have 
 sometimes acted unwisely, 123; their conduct 
 towards the servants of the bank, 400. ' 
 
 Shares in bank. Under the new Act cannot be less 
 than .£100, 309; amount of in the joint-stock 
 banks of London, 230 ; of the banks of Scotland, 
 315; of the banks at Belfast, 371 ; banks formed 
 under the new Act not allowed to purchase or 
 make advances on their own shares, 309 ; exist- 
 ini,' banks not thus restricted, 301 ; prices of 
 shares in the banks of Scotland, 315. 
 
 in public companies. Advances on by 
 
 bankers, become dead loans, 24. 
 
 Shillings. The origin of the word, 223. 
 
 Signature-book. Describe it, 154. 
 
 Silver. Its specific gravity, 196; how coined, ib. 
 
 Sin. The besetting, 13, 124. 
 
 Singing. In moderation, good for the health of 
 bank clerks, 141. 
 
 Single entry. Wherein does it differ from double 
 entry, 183. 
 
 Singular. Is the word "bank" singular or plu- 
 ral ? 8. 
 
 Situation-book for clerks. Where is one kept ? 229. 
 
 Small banks. The evil of, 103; the result of legis- 
 lation. 318, 379. 
 
 Smee, Alfred. The sureeon of the Bank of Eng- 
 land, 141. 
 
 William Rae. Hia improvements in the 
 
 book-keeping of the Bank of England, 175. 
 
 Smith, Adam. His observations on wages, 132; 
 on the division of labor, 175. 
 
 Smoking. In the street and in places of public re- 
 sort, is improper, 404. 
 
 Smuggling. In what cases a smuggling considera- 
 tion vitiates a bill of exchange, 33. 
 
 Social duties, 395; speak ye every man the truth, 
 ib. ; ye shall not steal, nor deal falsely, ib. ; let 
 not wickedness dwell in thy tabernacles, 396; 
 speak not evil one of anotlier, 397; meddle not 
 with them which are given to change, ib. ; love 
 thy neighbour as thyself, 398; if thine enemy 
 be hungry, feed him, ib. ; do what is just though 
 the law may not require it, ib. ; be all of one 
 mind, pitiful, courteous, 400 ; use hospitality, 
 401 ; oppress not a stranger, ib. ; give to your ser- 
 vants what is just and equal, ib. ; servants, be 
 obedient to your masters, 402; visit the fatherless 
 and widows in their affliction, 403 ; do good unto 
 all men, ib. 
 
 Social position. The efficiency of a manager will 
 depend upon, 121 ; those who have risen in the 
 world should entertain kind feelings towards the 
 class from whence they have sprung, 401 ; social 
 life among the Hebrews, 403 
 
 456 
 
 Social relations. Are the foundation of social du 
 ties, 3S3 ; public companies are capable of sus- 
 taining, ib. 
 
 S<ivereignty of the Divine proceedings, 420. 
 
 Space. An important consideration in the con- 
 struction of a bank, 127. 
 
 Spanish bill. The form of one, 39. 
 
 Special contracts. Forms of, used previous to 1844, 
 when a banking company could not sue by its 
 public officer, 216. 
 
 Speculation, reckless. Has been the ruin of compa- 
 nies as well as of individuals, 397. 
 
 Speculations. Are produced by a low rate of intei 
 est, 53 ; are the precursors of pressure, 57. 
 
 Speculative customers. Troublesome to bankers, 
 57. 
 
 investments. Usually precede a sea- 
 
 son of pressure, 53. 
 
 Stamp-duty on notes. How to calculate the compo 
 sition of 188. 
 
 Stamps. On bills of exchange, 33; on receipts op 
 transfer of shares, 172; on bank notes, 2S4. 
 
 State. Duties of public companies towards the, 393. 
 
 Statement-book. A printed collection of the week- 
 ly statements of the alTairs of a bank bound to- 
 gether, is so called, 173, 433. 
 
 Statesman, the, by Rlr. Taylor. Quotations from, 
 on decision, 13 ; on making use of other men, 15 ; 
 on the age of members of public boards, 104 ; on 
 the union of wisdom and goodness, 131 ; on the 
 salaries of clerks, 134 ; on the rules of promotion, 
 139. 
 
 Stationery. In a bank, is under the care of the chief 
 clerk, 140. 
 
 St. Marylebone Bank. Wound up, and its business 
 transferred to the London and Westminster Bank, 
 281. 
 
 Stewart, P. M., m. p. Letter from the author to, 
 on the exchange banks, 346. 
 
 Stock-book. Describe it, 163. 
 
 brokers' charges, 191. 
 
 Exchange. Explanation of its operations, 
 
 49 ; bankers'^loans there, 50 ; the Dublin, 383. 
 
 jobbers. Wherein different from stock- 
 brokers, 48. 
 
 purchase of How to calculate, 191. 
 
 receipt. Form of one, 49. 
 
 Stolen note, or bill of exchange. The law respects 
 ing, 34. 
 
 Strahan, James. Has familiarly described the op- 
 erations of country banking. 426. 
 
 Stuckey, Vincent, the late. His opinion on invest- 
 ments, 44. 
 
 Supplementary- waste-books. Describe them, 179. 
 
 Suri)lus fund, a. The nature of, 112; how appro- 
 priated, ib. ; the advantages of, 113; how kept in 
 the books, 169 ; amount of among the joint-stock 
 banks, 303-305. 
 
 funds. Administration of a bank with re 
 
 eard to the employment of, 41. 
 
 Suspension of the Act of 1844. Was its condemna- 
 tion, 63; may be suspended again, 76. 
 
 Swedish bill. The form of one. 39. 
 
 System. A want of has caused the ruin of some 
 banks, 117 ; a banker should observe, 16. 
 
 Tahle. Showing the number of days the different 
 denomination of notes remain in circulation, 1S9 ; 
 showing the relative value of gold in London, 
 Paris, Hamburgh, and Amsterdam, 221 ; table of 
 English money reduced into foreign, 222; table 
 of the terms on which government annuities are 
 granted for £ 30 and under, 2'\0 ; comparative 
 view of the expectation of life according to dif- 
 ferent tables of mortality, 231 ; of the circulation 
 of notes by the branches of the Bank of England, 
 239; ditto, of drafts, ib. ; amount of transactions 
 in the clearing, 256, 2.57 ; capital, profits, divi 
 dends, and surplus fund of the London and West-
 
 Alphabetical Index. 
 
 minater Bank, 269; ditto, of the London Joint- 
 Slock Bank, 273; ditto of the Union Bank of Lon- 
 don, 275; ditto of the Commercial Bank of London, 
 il> ; of the affairs of all the London joint-slock 
 hanlu, 230 ; of stamjy-dulieH on country notes, 
 2^ ; reduction of the fixed issue of notes in Eng- 
 land, 291 ; circulation of the private and joint- 
 slock banks from 1*15 to 18-H, 291; of all the 
 country joint-stock banks in England. 302; the 
 joint-stock banks that have stopped, 305 ; those 
 that have wound up, 3(36 ; those that have slopped 
 and resumed, 307; those that have merged in 
 other banks, ib. ; banks of Scotland in 1826, 
 314; banks since formed, ib. ; existing banks in 
 Scotland, 315 ; changes in Scotch banks, ib. ; 
 circulation of notes in Scotland, 1834 to 1839, 
 327 ; ditto in 1846 to I.8-18, ib. ; notes and gold, 
 1842 to 1817, 328 ; circulation of each bank during 
 1&18, 329 ; ditto in March 1819, 330 ; of the banks 
 of Belfast, 371 ; circulation of notes in Ireland, 
 373 ; returns from the banks of issue in Ireland, 
 379 ; circulation and coin in Ireland, ib. 
 
 Taking accounts from other banks, 19, 59. 
 
 Talents, banking. As rare and as important as 
 those necessary to obtain eminence in any other 
 pursuit, 13. 
 
 Taxes. On the transfer of property, are pernicious, 
 313 ; restrictions on banks are taxes on the pub- 
 lic, 328. 
 
 Taylor's Notes on Life. Quotation from, on mon- 
 ey, 13; respecting loans, 25. 
 
 Statesman, quoted. On decisiveness, 13 ; 
 
 on the choice of instruments, 14 ; the correspond- 
 ence between goodness and wisdom, 131 ; on the 
 salaries of clerks, 131; on the promotion of 
 clerks, 133. 
 
 Teller's department in a bank, 136. 
 
 Temper, hasty. A defect in a banker, 13 ; is tried 
 by being kept waiting a long time at a banker's 
 counter, 128. 
 
 Terms. Used in book-keeping, 1-54. 
 
 Tester, an old coin. Why so called, 223. 
 
 Testimonials. To be received with caution, 131 ; 
 may be negatively useful, ib. 
 
 Till. The amount of cash a banker keeps in his till, 
 how regulated, 42. 
 
 Time. A banker should know how to economize, 
 15 ; modes of doing this, 16 ; time saved in keep- 
 ing a banker, 426. 
 
 bargains on the stock exchange explained, 
 
 50. 
 
 is saved. By the employment of assistants, 
 
 15; by methodical habits, 16; by the shortening 
 of interviews, ib. ; by a banker having general 
 principles, 18. 
 
 Tipperary Joint-stock bank, 372 ; its arrangement 
 with the Bank of Ireland, ib. ; its branches, 373. 
 
 Tradesman. Saves trouble in keeping a banker, 5. 
 
 Training. Of clerks for higher offices, 144; their 
 number should be proportionate to their work, 
 145 ; their labor should be so apportioned as that 
 each ofBce should be a training for the one above 
 it, t6. ; they should have reasonable holidays, 
 when the junior should do the work of his sen- 
 ior, 145 ; they should all be exercised at the daily 
 balance, 146; those in training for managers 
 should be assigned those duties which are the 
 most intellectual, 146 ; should not receive too 
 many minute instructions, 148. 
 
 Transfer of stock, 191 ; in Ireland, 333. 
 
 register. Describe it, 172; deed of trans- 
 fer, form of, 154. 
 
 1 ransniission of money. Effected by banks, 4, 284. 
 
 Travellers, commercial. Derive advantages from 
 banks, 5. 
 
 Trial paper. What is it 7 170. 
 
 Troy weiiht. Gold and silver weighed by, 195. 
 
 Truth. Cases in which public companies should 
 especially adhere to, 395. 
 
 Ulster Banking Company, at Belfast. lu forma 
 tion, 371 ; sutement of its affairs, ib. ; and 
 branches, ib. 
 
 Uncharitable. Public companies should not be so 
 in their judgment of each other, 421. 
 
 Union Bank of London. lus formation, 274; its 
 capital, profits, dividends, and surplus fund, 275: 
 its prospectus, ib. 
 
 Union Guarantee and Life Assurance Company, 
 135. 
 
 Exchange Company, Glasgow, 351. 
 
 United States of America. Their population, ar.I 
 the number, capital, and circulation of all their 
 banks, 450. See America. 
 
 Universality, a moral. Differs from one that is 
 metaphysical or physical, 413. 
 
 Unjust charges against banks of issue. Prevented 
 by the act of 18'44, 288. 
 
 Unpaid-list. Describe the book so called, 160. 
 
 Unsanctified property. Is transient, and is not to 
 be envied, 422, 423. 
 
 Unsuccessful companies. Should inquire if they 
 have properly discharged their moral and religious 
 duties, 423. 
 
 Usury. In what cases a usurious consideration viti- 
 ates a bill of exchange, 33 ; present laws of usury, 
 ib. 
 
 Utility of banking. Banks are places of security 
 for money, 3 ; interest allowed on deposits, ib. ; 
 make advances to people who want to borrow, 4 ; 
 transmit money from one part of the country to 
 another, ib. ; supply the kind of currency that is 
 required, 4 ; there is a great saving of time in 
 money transactions, 5; saves expense to mer- 
 chants and others who keep bankers, ib. ; are ref- 
 erees as to respectability, 6; are a means of ob- 
 taining information about parties, ib. ; supply a 
 record of annual expenditures, 6; are a secure 
 place of deposit for deeds, papers, or other prop- 
 erty, 7; means of obtaining useful information as 
 to monetary transactions, ib. ; have a powerftd in- 
 flaence on the ir-nrals of society, 7. 
 
 Ventilation. An important consideration in the 
 construction of a bank, 127. 
 
 Virtue. Always associated with wisdom, 131. 
 
 Virtues, commercial. Bankers are the public con- 
 servators of, 7; virtues that produce wealth, 4ie. 
 
 Wages. Those who pay, derive advantages from 
 banas, 5 ; laws by which they are governed, 132. 
 
 Waste-books. Received-Waste-Book, describe it, 
 1.55; who keeps this book? 156; how do you en- 
 ter Bank of England notes ? cheques ? country 
 notes and coins ? 155 ; how is it ruled in the hori- 
 zontal system, and how does it check itself? 176. 
 Paid- Waste- Book. How is it ruled? 156; when a 
 cheque is paid, how do you make the entry ? ib. ; 
 how is this book ruled in the horizontal system ? 
 177; how will it check itself? 178. Merchants' 
 Waste-Book, 180. 
 
 Waterslon's Commercial Dictionary quoted, 192; 
 his Compendium of Commerce referred to, 201 , 
 222, 
 
 Wealth. Is a blessing, 415 ; its enjoyments not sin- 
 ful. 416 ; the means of obtaining, ib. ; ill-gotten, 
 is soon lost, 422. 
 
 Weekly-balance, describe it, 170. 
 
 returns, under the Act of 1844, 97. 
 
 Weighing sovereigns. Troublesome, 5. 
 
 West of Scotland '^Exchange Investment Company, 
 351. 
 
 Westminster Review of January, 1841. An article 
 written by the author published in, 62. See Cur- 
 rency and Banking. 
 
 Widows. Public companies should have funds for 
 relieving, 403 ; mininc and railway companies 
 should relieve those whose husbands hava beeu 
 killed in their works, ib. 
 
 457
 
 A Treatise on Banking. 
 
 Wife. Should examine the banker's account when 
 the husband i? too lazy to do so, 430 ; chould have 
 a separate •■locount in her own name for domestic 
 expenses, 428 : her acceptance of a bill is not 
 binding on the husband unless she had his au 
 •Jiority to act as his agent, 34. 
 
 \\inding-up Act. 1848. An Act for winding up the 
 affairs of trading companies, including joiut- 
 .«tock banks, CIO. 
 
 Wisdom. More necessary than talents in a banker, 
 12; implies prudence and discretion, 14; to 
 hearken unto counsel, a proof of. 424. 
 
 Wisely to act. More difficult to a banker in a season 
 of speculation than in a season of pressure, 67. 
 
 Wool speculators. Banks have lost money through 
 advances to, 116. 
 
 I Worship, public. Public companies should sup- 
 
 I port, 40o. 
 
 I Wnght & Co., private bankers, in Henrietta-street 
 Convent^garden. Their premises now oecupieil 
 by the Commercial Bank of London, 275 ; sonio 
 of the partners engaged a.s managers of the M'est- 
 eru Branch of the London Joint-stock Bank, 271. 
 
 Writer. A good one should be appointed to write 
 up the customer's books, 143. 
 
 Writing well. Importance of, 151. 
 
 masters. Their mode of teaching, 151. 
 
 YoFNG men of good character. How benefited 'dj5 
 cash credits, 833. 
 
 458
 
 BANKING IN THE UNITED STATES.
 
 BA^^KOG U THE UNITED STATES. 
 
 From the article on Banks in Appleton's New American Cyclopedia 
 we take the following compendious account of — 
 
 "Banking in the United States. — The Bank of North America. 
 During the war of the revolution, the Congress of the United States ex- 
 perienced great difficulty in providing the requisite means for carrying on 
 hostilities.. On May 10, 1775, soon after the battle of Lexington, Con- 
 gress made preparation to issue continental paper — $2,000,000 of which 
 were put in circulation on June 22 following. From month to month 
 these issues, which in the aggregate reached $300,000,000, depreciated 
 until eventually they became entirely valueless, notwithstanding the pas- 
 sage of laws making them a legal tender for the payment of debts. On 
 May 17, 1781, a plan of a national bank was submitted to Congress by 
 Robert Morris of Pennsylvania, the principal provisions of which were as 
 follows :— The capital to be $400,000, in shares of $400 each ; that each 
 share be entitled to a vote for directors ; that there be twelve directors 
 chosen from those entitled to vote, who at their first meeting shall choose 
 one as president ; that the directors meet quarterly ; that the board be 
 empowered from time to time to open new subscriptions for the purpose of 
 increasing the capital of the bank ; statements to be made to the superin- 
 tendent of the finances of America; that the bank notes payable on 
 demand shall by law be made receivable in the duties and taxes of every 
 State, and from the respective States by the treasury of the United States ; 
 that the superintendent of the finances of America shall have a right at 
 all times to examine into the affairs of the bank. On May 26, Congress 
 passed the following : " llesolved, that Congress do approve of the plan 
 for the establishment of a national bank in these United States, submitted 
 for their consideration by Mr. R. Morris, May 17, 1781, and that they 
 will promote and support the same by such ways and means, from time to 
 time, as may appear necessary for the institution and consistent with the 
 public good ; that the subscribers to the said bank shall be incorporated 
 agreeably to the principles and terms of the plan under the name of * The 
 president, directors, and company, of the bank of North America,' so 
 soon as the subscription shall be filled, the directors and president chosen, 
 and application for that purpose made to Congress by the president and 
 directors elected." On Dec. 31 following. Congress passed "an ordinance 
 to incorporate the subscribers to the bank of North America." The first 
 
 461
 
 Banhing in the United States. 
 
 president was Thomas Willing, and the bank formed a most important 
 auxiliary in aid of the finances of the government to the final conclusion 
 of the war. This institution was incorporated by the State of Pennsyl- 
 vania, on April 18, 1782. The bank commenced business in Jan. 1782, 
 with a capital of $400,000, — of which $254,000 had been subscribed by 
 the government. In the year 1785, when an ill-feeling had arisen between 
 the government of the State of Pennsylvania and the bank, the former 
 repealed the charter which it had granted in 1782. The bank, however, 
 continued its operations under the charter granted by the general govern- 
 ment until in 1787, when it was rechartered by the State of Pennsylvania. 
 It has, from time to time, been rechartered, and now has a capital of 
 $1,000,000.— The First Bank of the United States. On the organization 
 of the government of the United States under the constitution, Alex- 
 ander Hamilton, in his masterly report on the finances in 1790, urged 
 upon Congress the importance of establishing a bank of the United 
 States. This measure, although it met with vigorous opposition in the 
 house of representatives, passed that body Feb. 8, 1791, — having on 
 Jan. 20 passed the senate with but slight resistance. The following 
 abstract of the twelve clauses of the charter will give an idea of the 
 act: 1. The capital shall be $10,000,000, to be divided into 25,000 
 shares of $400 each. 2. Any person, copartnership, or body politic, may 
 subscribe for such number of shares as he, she, or they may think proper, 
 not exceeding 1,000, except as regards the subscription of the United 
 States. The subscriptions, except those of the United States, shall be 
 payable one-fourth in gold and silver, and the remaining three-fourths in 
 certain six per cent, stocks of the United States. 3. The subscribers are 
 incorporated under the name and style of " The president, directors, and 
 company, of the bank of the United States," and to continue until March 
 4, 1811. The bank is authorized to hold property of all kinds, inclusive 
 of its capital, to the amount of $15,000,000. 4. Twenty-five directors 
 are to be elected by a plurality of the votes cast, on the first Monday in 
 January of each and every year, for one year only, and the directors are 
 empowered to choose one of their number for president. 5. As soon as 
 the sura of $400,000 is received on account of the subscriptions, in gold 
 and silver, on proper notice being given, the bank may be organized. 
 6. The directors are authorized to choose such other officers, clerks, and 
 servants, as may be necessary for the bank, and shall otherwise manage 
 the affairs of the bank. 7. This clause prescribes the " rules, restrictions, 
 limitations, and provisions which shall form and be fundamental articles 
 of the constitution of said corporation " 8. If the corporation or any 
 person or persons, for or to the use of the same, shall buy or sell any 
 goods, wares, or merchandise, whatsoever, contrary to the provisions of 
 the act, such person or persons shall forfeit and lose treble the value of 
 said goods, wares, and merchandise, one-half to the United States, and 
 the remainder to the informer. 9. If the corporation shall loan to the 
 government of the United States any sum of money to an amount exceed- 
 ing $100,000, or to any State to an amount exceeding $50,000, or to any 
 foreign prince or state (unless previously authorized by law), all and every 
 person concerned in any way in causing the same to be loaned, shall for 
 
 462
 
 Banking in the United States. 
 
 each and every offence, on conviction, forfeit and pay a sum treble the 
 value of said loan or loans — one-fifth to the informer, and four-fifths to 
 the United States. 10. Bills or notes of the bank payable in coin, shall 
 be taken in payments to the United States. 11. The president of the 
 United States may within eighteen months from April 1, 1791, cause a 
 subscription to be made to the stock on behalf of the United States, for 
 an amount not exceeding 82,000,000 to be paid out of the moneys which 
 shall be borrowed by virtue of either of two certain acts providing for 
 the payment of the debt of the United States, " borrowing from the bank 
 an equal sum to be applied to the purposes for which the said moneys 
 shall have been procured; reimbursable in ten years in equal annual 
 instalments ; or at any time sooner, or in any greater proportions than 
 the government may think fit. 12. That no other bank shall be estab- 
 lished by any future law of the United States during the continuance of 
 the corporation hereby created, for which the faith of the United States 
 is hereby pledged." The bank was established in Philadelphia, with 
 branches at different points. The dividends of the bank averaged from 
 eight to ten per cent, per annum — being much below those of the bank of 
 North America in previous years ; which, in the words of a distinguished 
 writer, now " gradually declined as other banks sprang into existence." 
 In 1808, three years prior to the expiration of the charter, application was 
 made to Congress for a renewal of the charter, and Mr. Gallatin, the able 
 head of the treasury department, in obedience to a resolution of the Sen- 
 ate, reported to Congress upon the memorial. Mr. Gallatin proposed some 
 changes in the new act of incorporation, and highly recommended the rein- 
 corporation of the bank, for which he gave his reasons in a clear and conclu- 
 sive manner. Nothing, however, was done. From time to time, the matter 
 was brought to the attention of Congress, until (Feb. 5, 1811) a bill was 
 brought forward, but was, on Feb. 20, defeated by the casting vote of 
 Vice-President Clinton. The bank was now obliged to wind up its affairs, 
 which was done without at all convulsing the country. Within about 
 eighteen months the stockholders had received eighty-eight per cent, on 
 their stock. On eventually winding up the affairs, the assets yielded to 
 the stockholders a premium over and above the par value of eight and one- 
 half per cent. An application had previously been unsuccesiifully made 
 to the Legislature of Pennsylvania for the recharter of this institution, 
 with a capital of $5,000,000. — Second Bank of the United States. Dur- 
 ing the war of 18 12-' 15, the government, which was embarrassed for the 
 want of means, had received important aid from the banks. By this means 
 the banks, with the exception of those in New England, were, in August 
 and September, 1814, driven to a suspension of specie payments. The 
 finances of the government were now in a terrible condition, when, on 
 October 6, Alexander J. Dallas was called to the head of the treasury 
 department. Never before had there been greater need of a master mind 
 in that important ofiice. Within less than a fortnight the new secretary 
 communicated to Congress a report of extraordinary ability, in which he 
 strongly recommended the establishment of a national bank, as the remedy 
 required again to bring the finances into order. Various plans for a bank 
 were brought forward in Congress, which resulted in nothing, until, on 
 
 463
 
 Banking in the United States. 
 
 January 20, 1815, a bill was passed. This bill was vetoed by President 
 Madison, on the ground that it would not accomplish the objects rendered 
 necessary by the state of the revenue, and the condition of the country. 
 On April 3, 1816, however, a bill for a bank of the United States, which 
 had previously passed the House of Representatives, was adopted by the 
 Senate, and, receiving the signature of the President, became a law. The 
 corporate title of this institution was ''the president, directors, and com- 
 pany of the bank of the United States." Its capital was to be $35,000,- 
 000, composed of 350,000 shares of $100 each, $7,000,000 of the stock 
 was to be subscribed by the United States, and the remaining $28,000,000 
 by individuals, companies, or corporations. The charter was to extend to 
 March 3, 1836, and the bank was authorized to organize and commence 
 business so soon as $8,400,000, exclusive of the subscription of the United 
 States, was paid in. It was prohibited from lending on account of the 
 United States more than $500,000, or to any State more than $50,000, or 
 to any foreign prince or power any sum whatever, without the sanction of 
 law previously being obtained. The bank went into operation January 7, 
 1817, and through its agency the other banks throughout the country 
 were enabled and induced to resume specie payments. — An unsuccessful 
 effort was made in 1818, to repeal the charter on the ground of alleged 
 mismanagement. President Jackson in his message of December, 1829, 
 intimated that "constitutional difficulties" might interfere to prevent its 
 recharter, and expressed the desire that Congress might take the matter 
 into early consideration. Committees of both houses reported favorably 
 to a recharter, but no application was made by the bank until the session 
 of 1831-'32. On July 4, 1832, a bill rechartering the bank was sent to 
 the President, who, on the 10th of the same month, returned it with a 
 message stating his objections. An effort now being made to pass the bill 
 over the veto of the President, but without success, the bank on March 
 3, 1836, ceased to act under the charter granted by the United States, but 
 was in the same year rechartered by the State of Pennsylvania, with the 
 same capital it had previously held. — On October 9, 1839, the bank of 
 the United States suspended specie payments for a second time, having 
 previously suspended in 1837, a measure which was adopted immediately 
 by all the banks throughout the State of Pennsylvania, and eventually, 
 with comparatively limited exception, throughout the country. On Jan. 
 15, in compliance with an act of the Legislature, it resumed specie pay- 
 ments — to suspend finally on February 4. On winding up its affairs, after 
 payment of its debts, there remained nothing to its stockholders — the 
 entire capital having been sunk. — The charter of banks throughout the 
 States is wholly in the hands of the State authorities, and there are at 
 present in existence, some 1,400 of these institutions, with their branches. 
 In the New England States, comprising INIaine, New Hampshire, Vermont, 
 Massachusetts, Rhode Island, and Connecticut, there were in 1856-'57, 
 507 banks and branches, with a capital of $114,611,752. The first bank 
 which went regularly into operation in any of the States was established 
 in the city of Boston, in 1784, where it still exists. In these States these 
 institutions are generally established under special charters — although 
 "free banking" laws have been enacted by Vermont, Massachusetts, and 
 
 464
 
 Banlcing in the United States. 
 
 Connecticut. These laws have been in almost each instance a dead letter, 
 comparatively little use having been made of them. An important ele- 
 ment in New England banking, and one which is worthy of notice, is 
 what is known as the " Suffolk bank system." This system was originally 
 established by five of the Boston banks for the purpose of collecting the 
 notes of foreign banks, appointing one member of a committee to superin- 
 tend and manage the operations of the " associated banks." This com- 
 mittee appointed an agent to receive and credit the amount of foreign 
 money taken by these banks, and to keep an account of the same. All 
 expenses of collection and keeping these accounts, as well as all losses on 
 foreign money, were to be borne by these institutions in proportion to the 
 amount received on deposit by each. The facilities thus granted in the 
 deposit of these funds, and in their redemption, and the operations becom- 
 ing more extended, the entire management of it was eventually placed in 
 the hands of the Suffolk bank. Each bank made a stipulated deposit, in 
 the aggregate amounting to $300,000, on which no interest was paid. As 
 by degrees the country banks made their deposits, those of the other banks 
 were from time to time reduced. The Suffolk bank now redeems at par 
 the bills of all New England banks making deposits with it, and through 
 the management of this agency is furnished with a working capital of 
 SI, 000,000, without any further cost than the salaries of the clerks em- 
 ployed in the work. The annual amount of the redemptions made by this 
 institution is about $350,000,000. The Bank of Mutual Redemption was 
 chartered in 1855, with a view to taking in part the place of the Suffolk 
 Bank, and has very recently gone into operation. — In September, 1856, 
 the number of banks in operation in the State of New York was 311, 
 with a capital of $96,381,301. Banking in this State commenced in the 
 establishment of the Manhattan Bank in 1799. The entire country hav- 
 ing passed through a period of disaster under which banks as well as indi- 
 viduals and corporations generally were ruined in great numbers, the 
 Legislature of this State was induced to pass in 1829 what was termed 
 " The Safety Fund System." The principal features of this experiment 
 were that each bank acting under it should contribute annually a sum 
 equal to one-half of one per cent, on its capital to a common fund to be 
 deposited with the treasurer of the State, as a bank fund until it should 
 amount to three per cent, on the capital of the banks. Such part of this 
 fund as might from time to time be necessary, was to be applied to the 
 payment of the debts of each and every bank failing, which had con- 
 tributed to it. Any diminution in the funds by such payments was again 
 to be restored by annual payments as before. The failure of ten banks 
 with liabilities to the amount of about $2,500,000, considerably more than 
 the entire fund, caused it eventually to be abandoned. In 1838, what was 
 termed a " free banking" law was enacted, which provided that any indi- 
 vidual or association might engage in the business of banking on deposit- 
 ing with the State comptroller the stocks of the United States or of any 
 State, which were equal to five per cent, stocks ; and bonds and mortgages 
 on real estate worth twice the amount of the mortgages over and above all 
 buildings thereon, and bearing interest at the rate of six per cent, per an- 
 num. On receipt of such securities, the parties furnishing the same were 
 
 465
 
 Banking in the United States. 
 
 to receive an equal amount of notes, numbered, registered, and signed. 
 Difficulties having arisen in converting these securities into funds sufficient 
 to redeem the notes, in 1840 the Legislature revised the law so that the 
 stocks of either the United States or of New York, or bonds and mort- 
 gages were required as security. — Weekly returns of the condition of the 
 banks in the city of New York are required to be published, and in Octo- 
 ber, 1853, a clearing house was established in that city. " Free banking," 
 or general banking laws, have also been enacted with varied success, in 
 the following States : New Jersey, Virginia, Indiana, Illinois, Wisconsin, 
 Tennessee, Louisiana, and Alabama. During the recent session of the 
 Legislature of Pennsylvania (1860) a general banking law has been passed 
 which it is believed will greatly aid in the development of the industrial 
 resources of that State, which have suflFered severely from a want of suffi- 
 cient banking capital. In all the remaining States of the Union, except 
 in California and Arkansas, where no banks exist, they are chartered by 
 special acts of the several legislatures. All legislation respecting these 
 institutions in the District of Columbia is under the control of the Con- 
 gress of the United States. In the autumn of 1857, nearly all of the 
 banks from one end of the Union to the other suspended specie payments, 
 in a majority of cases to resume within a few months, with but compara- 
 tively little loss to either stock or note holders. Among those, however, 
 which were unable to resume was the bank of Pennsylvania, in the city of 
 Philadelphia, with a capital of $1,875,000, which was compelled to make 
 an assignment in February, 1858." 
 
 The banking interest of the United States has attained an importance 
 in the varied concerns of this widely-extended country, and is so inter- 
 woven with all our commercial, manufacturing and agricultural pursuits, 
 that it must be conceded that it is a great motive power in our condition 
 of national prosperity, and secondary in its influence only to that of the 
 government itself. And yet there are few subjects of a practical nature 
 on which the people of the United States have so widely dififered in 
 opinion as upon the policy of banks and the substitution of a paper currency, 
 based even upon coin, for one purely metallic. On one side, the zealous 
 friends of banks have perhaps sometimes overrated the utility of paper 
 credit; on the other side, their opponents, without distinguishing between 
 the uses and abuses of banks, discerned, in these useful and indispensable 
 auxiliaries to commerce, manufactures and agriculture, nothing but mis- 
 chief, and regarded them as impeding the wealth of the nation, and even 
 as injurious to its morals as well as dangerous to its liberties. Both parties, 
 perceiving the glaring errors of their adversaries, have been strengthened 
 in their own opinions, and as each party has alternately come into power, 
 it has established or subverted, encouraged or rejected, the present bank- 
 ing policy of the country. A comparison of the amounts of bank capital 
 in several important years, from 1837 to 1860, will exhibit the fluctuations 
 which have taken place during the last twenty years : — 
 
 466
 
 Banking in (lie United States. 
 
 Tears. 
 1837 
 1840 
 1843 
 1846 
 1850 
 1854 
 1856 
 1860 
 
 Capital. 
 
 Banks. 
 
 Circulation. 
 
 $290,772,000 
 
 788 
 
 $149,185,000 
 
 358,442,000 
 
 901 
 
 106,968,0(10 
 
 228,861,000 
 
 691 
 
 58,563,000 
 
 196,894,000 
 
 707 
 
 105,552,0(10 
 
 217,317,000 
 
 824 
 
 131,366,000 
 
 301,376,000 
 
 1,208 
 
 204,689,000 
 
 347,423,000 
 
 1,371 
 
 177,157,000 
 
 425,982,000 
 
 1,600 
 
 190,000,000 
 
 These banks had, in the corresponding years, specie in their vaults, 38, 
 33, 33)!^, 42, 45, 59 and GO millions of dollars, and the amount of specie 
 in circulation steadily increased from 35 to 191 millions, in addition 
 thereto, according to the most reliable estimates, viz : — 
 
 Years, 
 
 
 
 Deposits. 
 
 Loans aud discount 
 
 1837 $127,397,000 
 
 $525,115,000 
 
 1840 
 
 
 
 75,696,000 
 
 462,806,000 
 
 1843 
 
 
 
 56,168,000 
 
 254,544,000 
 
 1846 
 
 
 
 96,913,000 
 
 312,114,000 
 
 1850 
 
 
 
 109,586,000 
 
 364,204,000 
 
 1854, 
 
 
 
 188,188,000 
 
 607,287,000 
 
 1856 
 
 
 
 237,964,000 
 
 634,183,000 
 
 1859 
 
 
 
 264,437,000 
 
 755,233,000 
 
 From the following table of the number of banks, amount of capital, 
 and circulation, it will appear that the number of banks has doubled in a 
 period of nearly twenty years ; while the capital and circulation have in- 
 creased only about 30 per cent, in the same time, which ratio is not equal 
 to the growth or increase in wealth of the country. 
 
 Treasury Report. 
 
 Tears. 
 1837 
 1838 
 1839 
 1840 
 1841 
 1842 
 1843 
 1844 
 1845 
 1846 
 1847 
 1848 
 1849 
 1850 
 1851 
 1854 
 1855 
 1857 
 1858 
 1859 
 
 Banks. 
 
 Capital paid in. 
 
 758 
 
 $290,000,000 
 
 829 
 
 319,000,000 
 
 840 
 
 327,000,000 
 
 907 
 
 363,000,000 
 
 784 
 
 313,000,000 
 
 692 
 
 260,000,000 
 
 691 
 
 22S,000,000 
 
 696 
 
 2lO,(KMi,(i(i() 
 
 707 
 
 20(3, 00(1,0(10 
 
 707 
 
 196,000,000 
 
 715 
 
 203,000,000 
 
 751 
 
 204,000,000 
 
 782 
 
 207,000,000 
 
 824 
 
 217,000,000 
 
 879 
 
 ^27,000,000 
 
 1,208 
 
 301,000,000 
 
 1,307 
 
 332,000,000 
 
 1,283 
 
 370,000,000 
 
 1,422 
 
 394,000,(100 
 
 1,570 
 
 398,000,000 
 
 
 467 
 
 Circulation. 
 
 $149,000,000 
 
 116,000,000 
 
 135,000,000 
 
 107,000,000 
 
 107,000,000 
 
 83,000,000 
 
 58,000,000 
 
 75,000,000 
 
 89,000,000 
 
 105,000,000 
 
 105,000,000 
 
 128,000,000 
 
 114,000,000 
 
 131,000,000 
 
 155,000,000 
 
 204,000,000 
 
 187,000,000 
 
 214,000,000 
 
 155,000,000 
 
 180,595,000 
 
 Specie. 
 $37,900,000 
 
 33,000,000 
 
 46,300,000 
 
 48,600,000 
 59,400,000 
 59,300,000 
 58,300,000 
 74,412,000 
 99,905,000
 
 Banking in the United States. 
 
 Tahle shoicinj the 
 
 Numher of Bai 
 
 Jcs, Capital, 
 
 Specie, etc., in 
 
 the United 
 
 1 
 
 States, made up 
 
 to January 
 
 1, 1859. 
 
 
 States. 
 
 
 Banks. 
 
 Capital. 
 
 Specie. 
 
 Circulation. 
 
 Maine 
 
 
 69 
 
 $7,439,200 
 
 $660,000 
 
 $5,000,000 
 
 New Hampshire 
 
 
 52 
 
 5,041.000 
 
 300,000 
 
 3,100,000 
 
 Vermont . 
 
 
 41 
 
 3,860,000 
 
 200,000 
 
 3,700,000 
 
 Massachusetts . 
 
 
 176 
 
 62,553,000 
 
 11,500,000 
 
 21,000,000 
 
 Rhode Island . 
 
 
 92 
 
 20,302,700 
 
 660,000 
 
 3,400,000 
 
 Connecticut 
 
 
 71 
 
 20,881,700 
 
 1,000,000 
 
 9,540,000 
 
 New York 
 
 
 298 
 
 105,800,000 
 
 29,800,000 
 
 26,600,000 
 
 New Jersey 
 
 
 48 
 
 7,345,100 
 
 900,000 
 
 3,700,000 
 
 Pennsylvania 
 
 
 80 
 
 25,627,000 
 
 9,500,000 
 
 13,000,000 
 
 Delaware . 
 
 
 12 
 
 1,740,000 
 
 260,000 
 
 1,000,000 
 
 Maryland . 
 
 
 30 
 
 12,150,000 
 
 3,900,000 
 
 4,700,000 
 
 District of Columbia 
 
 
 5 
 
 1,280,000 
 
 300,000 
 
 350,000 
 
 Virginia 
 
 
 66 
 
 14,940,000 
 
 4,000,000 
 
 12,000,000 
 
 North Carolina . 
 
 
 29 
 
 6,591,000 
 
 1,500,000 
 
 4,500,600 
 
 South Carolina . 
 
 
 20 
 
 14,888,000 
 
 3,600,000 
 
 7,600,000 
 
 Georgia 
 
 
 67 
 
 10,430,000 
 
 1,500,000 
 
 5,000,000 
 
 Alabama . 
 
 
 7 
 
 3,750,000 
 
 2.000,000 
 
 4,000,000 
 
 Illinois 
 
 
 58 
 
 7,000,000 
 
 630,000 
 
 6,200,000 
 
 Indiana 
 
 
 40 
 
 3,852,000 
 
 1,270,000 
 
 3,343,000 
 
 Iowa 
 
 
 8 
 
 413,000 
 
 200,000 
 
 200,000 
 
 Kansas 
 
 
 1 
 
 52,000 
 
 10,000 
 
 20,000 
 
 Kentucky . 
 
 
 4.3 
 
 13,030,000 
 
 5,000,000 
 
 13,500,000 
 
 Louisiana . 
 
 
 18 
 
 16,557,000 
 
 16,500,000 
 
 9,600,000 
 
 Michigan . 
 
 
 5 
 
 1,200,000 
 
 350,000 
 
 1,000,000 
 
 Minnesota 
 
 
 1 
 
 25,000 
 
 6,000 
 
 25,000 
 
 Mississippi 
 
 
 4 
 
 836,000 
 
 50,000 
 
 1,000,000 
 
 Missouri 
 
 
 20 
 
 7,050,000 
 
 1,500,000 
 
 1,200,000 
 
 Nebraska . 
 
 
 6 
 
 400,000 
 
 100,000 
 
 600,000 
 
 Ohio . 
 
 
 53 
 
 5,414,000 
 
 1,270.000 
 
 6,400,000 
 
 Tennessee . 
 
 
 60 
 
 10,476,000 
 
 2,000,000 
 
 3,500,000 
 
 Wisconsin 
 
 
 100 
 . 1,570 
 
 8,060,000 
 
 553,000 
 
 4,200,000 
 
 Total 
 
 $398,963,700 
 
 $99,906,000 
 
 $180,575,000 
 
 The following table of increase of bank deposits and circulation ; and of 
 population in the United States, for each year since 1834, is from reliable 
 data. The estimated increase of population between the years 1850 — 
 1859, is leased upon the increase for the ten years ending 1850. 
 
 
 
 
 Deposits and 
 circulation. 
 
 Population. 
 
 Money to each 
 person. 
 
 .Jan. 1, 1834 . . . $170,506,000 
 
 14,413,000 
 
 $11 83 
 
 " 1835 
 
 
 
 186,773,000 
 
 14,814,000 
 
 12 61 
 
 " 1836 
 
 
 
 255,405,000 
 
 15,230,000 
 
 16 77 
 
 « 1837 
 
 
 
 276,583,000 
 
 15,663,000 
 
 17 66 
 
 " 1838 
 
 
 
 200,830,000 
 
 16,113,000 
 
 12 46 
 
 " 1839 
 
 
 
 225,411,000 
 
 16,581,000 
 
 13 59 
 
 " 1840 
 
 
 
 182,665,000 
 
 17,069,000 
 
 10 70 
 
 " 1841 
 
 
 
 172,180,000 . 
 
 17,577,000 
 
 9 79 
 
 " 1842 
 
 
 
 146,142,000 
 
 18,105,000 
 
 8 07 
 
 « 1843 
 
 
 
 114,732,000 
 
 18,656,000 
 
 6 15 
 
 « 1844 
 
 
 
 159,718,000 
 
 19,229,000 
 
 8 31 
 
 " 1845 
 
 
 
 177,629,000 
 
 19,825,000 
 
 8 96 
 
 " 1846 
 
 
 
 202,465,000 
 
 20,446,000 
 
 9 90 
 
 " 1847 
 
 
 
 197,312,000 
 
 21,091,000 
 
 9 35 
 
 " 1848 
 
 
 
 231,733,000 
 
 21,764,000 
 
 10 65 
 
 " 1849 
 
 
 
 . 205,922,000 
 
 468 
 
 22,463,000 
 
 9 17
 
 Banking in the United States. 
 
 Jan. 
 
 1, 1850 
 
 
 1851 
 
 
 1852 
 
 
 1853 
 
 
 1854 
 
 
 1855 
 
 
 1856 
 
 
 1857 
 
 
 1858 
 
 
 1859 
 
 Deposits and 
 circulation. 
 
 Population. 
 
 Money to each 
 
 person. 
 
 ^240,053,000 
 
 23,191,000 
 
 $10 39 
 
 284,1 22,(i(i0 
 
 23,935,000 
 
 11 87 
 
 328,!)0(i,(t00 
 
 24,693,000 
 
 13 31 
 
 348,094,000 
 
 25,564,000 
 
 13 66 
 
 392,877,000 
 
 26,249,000 
 
 14 97 
 
 377,352,000 
 
 27,047,000 
 
 13 95 
 
 408,453,000 
 
 27,858,000 
 
 14 66 
 
 445,130,000 
 
 28,682,000 
 
 15 52 
 
 341,140,000 
 
 29,520,000 
 
 11 56 
 
 452,875,000 
 
 30,370,000 
 
 14 91 
 
 Average for 26 years 
 
 §11 95 
 
 This table is both instructive and suggestive. It shows at a glance the 
 bank movement from 1834 to the present time ; for it must be borne in 
 mind that the figures given under the head of " deposits and circulation" 
 express the precise extent to which the banks made use of their credit, by 
 loans, discounts and other investments in excess of capital, at the different 
 periods named. It will be seen that the movement has been very irregu- 
 lar — at some periods almost spasmodic. The highest degree of expansion, 
 as compared with population, was reached in 1837. This was followed by 
 a contraction, which reached its lowest limit in 1843. Then ensued an- 
 other expansion, which, with slight oscillations, continued until arrested 
 by the violent panic of 1857. This again led to a sudden and extreme 
 contraction, but which, in turn, has been followed by an equally sudden 
 and extreme expansion. The banks, it appears, were almost as much ex- 
 tended on the 1st January, 1859, as they were before the panic of 1857. 
 
 MAINE. 
 
 The first bank in Maine was established in the year 1814. The fol- 
 lowing is a list of existing sound banks ; the dates of charter and capital 
 all being of earlier incorporation than 1835. 
 
 Names of banks. 
 
 Where located. 
 
 When chartered. 
 
 Capital. 
 
 Augusta Bank 
 
 Augusta 
 
 Aug. 
 
 28, 
 
 1814 
 
 $83,000 
 
 Bank of Cumberland . 
 
 Portland 
 
 March 19, 
 
 1835 
 
 200,000 
 
 Calais Bank . 
 
 Calais 
 
 April 
 
 1, 
 
 1831 
 
 100,000 
 
 Canal Bank . 
 
 Portland 
 
 Feb. 
 
 19, 
 
 1825 
 
 600,000 
 
 Casco Bank . 
 
 Portland 
 
 Feb. 
 
 18, 
 
 1824 
 
 600,000 
 
 Eastern Bank 
 
 Bangor . 
 
 March 21, 
 
 1835 
 
 100,000 
 
 Freeman's Bank . 
 
 Augusta 
 
 March 
 
 2, 
 
 1833 
 
 100,000 
 
 Gardiner Bank 
 
 Gardiner 
 
 Jan. 
 
 31, 
 
 1814 
 
 60,000 
 
 Lincoln Bank 
 
 Bath 
 
 June 
 
 16, 
 
 1816 
 
 200,000 
 
 Manufacturers' Bank . 
 
 Saeo 
 
 Feb. 
 
 23, 
 
 1825 
 
 100,000 
 
 Manufacturers' and Traders' 
 
 Bk. Portland 
 
 Feb. 
 
 27, 
 
 1832 
 
 250,000 
 
 Merchants' Bank 
 
 Portland 
 
 Feb. 
 
 19, 
 
 1835 
 
 225,000 
 
 South Berwick Bank . 
 
 South Berwick 
 
 Jan. 
 
 31, 
 
 1823 
 
 100,000 
 
 Thomaston Bank . 
 
 Thomaston 
 
 Feb. 
 
 22, 
 
 1825 
 
 50,000 
 
 Ticonic 
 
 Waterville 
 
 April 
 
 1, 
 
 1831 
 
 125,000 
 
 York .... 
 
 Saco 
 
 April 
 
 1, 
 
 1831 
 
 125,000 
 
 At present there are 69 banks active; 2 in process of closing. The 
 aggregate capital of the State — about §7,300,000. The charters of all the 
 
 469
 
 Banking in tJie United States. 
 
 banks expire Oct. 1, 1867, and are renewed by Legislature in a lump. 
 They pay a State tax of i of 1 per cent, and are obliged to retain 5 per 
 cent of specie in their vaults. 
 
 The banks of Maine, as a whole, are reliable, and enjoy the confidence 
 of the community ; the stock standing, in most cases, above par. 
 
 The Legislature object to chartering more new institutions, and prefer 
 to increase old ones, yet there is a tendency to reduce capital rather than 
 to increase; with the exception of Portland, where a new bank, the In- 
 ternational, has lately been organized under most favorable auspices. 
 
 The State opposes the chartering of banks with a capital less than 
 $100,000, and some corporations have been chartered with this amount, 
 and the next winter reduced their capital to $50,000. , 
 
 In Maine a law prevails forbidding either officer of a bank leaving blank 
 signatures to certificates of stock for the use of the other, also a law re- 
 quiring banks which may have surrendered their charters, or are under 
 injunction, or in hands of receivers to destroy their plates, or rather to 
 send them to the Secretary of State to be destroyed. The loans are re- 
 stricted to double the capital. 
 
 By a new law, it is necessary to prove that a demand has been made 
 for the payment of a note or draft — at a specified place — before the com- 
 mencement of a suit. ~ 
 
 Banks are allowed no higher rate than 6 per cent. ; but they have a 
 way of keeping the exchange between two given places very high ! and 
 a?-e allowed to charge the existing rate of exchange ! 
 
 NEW HAMPSHIRE. 
 
 In New Hampshire there were, at the close of the year 1859, fifty-one 
 banks in operation, with a combined capital of $5,941,000, an average of 
 a little less than $1100,000 each : the largest capital being $200,000. 
 
 The comparative condition of these banks in September, 1857, and Decem- 
 ber, 1859, was as follows : — 
 
 Capital 
 Circulation 
 Deposits . 
 Miscellaneous . 
 
 Liabilities. 
 Resources. 
 
 Sept., 18.57. 
 $4,041,000 
 3,469,000 
 1,101,000 
 1,324,000 
 
 Dec, 1S59. 
 
 $5,041,000 
 
 2,136,000 
 
 1,274,000 
 
 361,000 
 
 Total 
 
 Loans 
 
 Specie on hand 
 Deposits in Boston, &c. 
 Bank notes, &c. 
 
 $9,935,000 
 
 $8,731,000 
 226,000 
 835,000 
 143,000 
 
 $8,812,000 
 
 $8,459,000* 
 286,000 
 
 67,000 
 
 Total 
 
 $9,935,000 
 
 $8,812,000 
 
 * Including deposits in Boston to meet the redemption of hills. 
 470
 
 Banking in the United Statet. 
 
 All the banks in New Hampshire transact business under special char- 
 ters. The free banking system has never been adopted in the State. Few 
 failures have taken place, and the increase of banks has been less than in 
 other New England States. 
 
 VERMONT. 
 
 The banks in Vermont are forty-one in number, with an aggregate 
 capital of $4,082,000, the largest being $300,000, and one only having 
 that amount of capital. The banks have special charters. 
 
 At the close of the year 1858, there were in Vermont forty-one banks 
 in operation, whose condition, compared with the close of 1859, was as 
 follows : — 
 
 Liabilities. 
 
 Dec, 1859. Dec, 1S58. 
 
 Capital $4,082,000 ^,041,500 
 
 Circulation 1,948,000 3,015,000 
 
 Deposits 629,000 677,000 
 
 Surplus, &c 301,000 241,500 
 
 Total .... $6,960,000 
 Resopeces. 
 
 Loans .• • • ' , \ \ $6,567,000 
 
 Deposits in Boston, New York, &c. / ' ' 
 
 Specie 170,000 
 
 Miscellaneous 223,000 
 
 $7,975,000 
 
 $6,170,000 
 843,000 
 178.000 
 784,000 
 
 Total 
 
 $6,960,000 $7,975,000 
 
 MASSACHUSETTS. 
 
 In twenty years the additions to the banking capital of Massachusetts, 
 have been fully fifty per cent., equivalent now to more than fifty dollars 
 for each inhabitant of the State. In the year 1851, a general banking law 
 was established in Massachusetts, somewhat similar to that of New York; 
 the first institution established under this system, commenced operations 
 in the year 1858. There are now four of this character, all in Boston. 
 
 The following table shows the liabilities and resources of the banks of 
 Massachusetts at the close of October, 1858 and 1859, separating those 
 of the city, 36 in number, from those of the country, 134 in number : — 
 
 1858. 
 
 1859. 
 
 Country. 
 
 r ' — ' 
 
 Boston. 
 
 Country. 
 
 Total. 
 
 $28,747,325 
 
 13,697,042 
 
 2,767,888 
 
 307,378 
 
 8,665,796 
 
 $33,931,700 
 7,012,878 
 3,298,854 
 6,571,484 
 20,436,447 
 
 $28,587,500 
 
 15,074,043 
 
 2,885,977 
 
 365,557 
 
 8,812,590 
 
 $64,510,200 
 
 22,086,921 
 
 6,154,832 
 
 6,937,042 
 
 29,249,037 
 
 $54,185,429 
 
 $73,251,364 
 
 $55,695,669 
 
 $128,947,033 
 
 $1,882,474 
 
 705,622 
 
 481,116 
 
 5,213,980 
 
 45,902,236 
 
 $5,803,175 
 
 S84,838 
 
 4,70S,o62 
 
 2,965,359 
 
 58,889,423 
 
 $1,270,471 
 
 716,233 
 
 474,897 
 
 4,247,171 
 
 48,527,894 
 
 $7,533,642 
 
 1,601,072 
 
 5,183,459 
 
 7,212,530 
 
 107,417,323 
 
 LiABrLirrES. Boston. 
 
 Capital .... $33,072,500 
 
 Circulation .... 7,142,395 
 
 Profits 3,263,943 
 
 Due other banks . . . 7,346,856 
 
 Deposits .... 23,410,209 
 
 Total, 1858-9 . . $74,235,903 
 
 Rbsourcbs. 
 
 Specie $9,230,241 
 
 Beal estate .... 879,262 
 
 Notes of other banks . . 4,452,311 
 
 Bank balances . . . 3,973,265 
 
 Loans 65,700,710 
 
 Total, 1858-9 . . $74,235,791 $54,185,429 $73,251,364 $55,695,699 $128,947,033 
 
 2 F 471
 
 Banking in the United States. 
 
 RHODE ISLAND. 
 
 The banks in this State are under special charters. Numerous failures 
 have occurred amonn; those that were started as merely banks of circula- 
 tion. Rhode Island has a larger bank capital, in proportion to its popula- 
 tion, than any other State — at present upwards of 820,000,000; with 
 thirty-eight banks in Providence, and fifty-three in the interior. 
 
 The annexed is the statement of the Rhode Island banks, showing their 
 condition on the 6th May, and 17 November, 1859. 
 
 
 
 May, 1859. 
 
 
 November, 1859 
 
 
 
 ' 
 
 
 * 
 
 38 
 
 53 
 
 91 
 
 
 Providence 
 banks. 
 
 Out of Provi- 
 dence. 
 
 Total. 
 
 Banks in 
 Providence. 
 
 Country 
 banks. 
 
 Total R. I. 
 
 Capital . 
 
 $14,763,550 
 
 $5,624,319 
 
 $20,387,869 
 
 $15,095,850 
 
 $5,641,410 
 
 $20,737,260 
 
 Circulation 
 
 1,009,163 
 
 1,538,161 
 
 3.547,324 
 
 2,098,610 
 
 1,582,885 
 
 3,681,496 
 
 Deposits 
 
 2,421,901 
 
 860,3.59 
 
 3,282,260 
 
 2,732,380 
 
 919,711 
 
 3,652,091 
 
 Due banks 
 
 946,691 
 
 85,359 
 
 1,032,050 
 
 1,043,439 
 
 89,057 
 
 1,132,496 
 
 Loans . 
 
 18,597,814 
 
 7,468,005 
 
 26,065,819 
 
 19,322,775 
 
 7,631,125 
 
 26,9.53,900 
 
 Specie . 
 
 378,196 
 
 164,296 
 
 542,492 
 
 334,249 
 
 137,895 
 
 472,145 
 
 Bank notes 
 
 814,763 
 
 134,014 
 
 948,777 
 
 92.-., 401 
 
 154,.592 
 
 1,079,993 
 
 Due by banks 
 
 660,869 
 
 398,940 
 
 1,059,809 
 
 669,502 
 
 368,755 
 
 1,038,258 
 
 CONNECTICUT. 
 
 Capital, Circulation, Specie, and Loans of the Banks of Connecticut, from 
 the year 1837 to 1858. From the Bank Commissioners' Report. 
 
 Year. 
 
 Capital. 
 
 Circulation. 
 
 Specie. 
 
 Loans. 
 
 Total resources. 
 
 1837 . . . 
 
 $8,744,000 
 
 $3,998,000 
 
 $415,000 
 
 $13,246,000 
 
 $15,691,000 
 
 1838 . . 
 
 8,754,000 
 
 1,920,000 
 
 535,000 
 
 9,769,000 
 
 12,302, 000 
 
 1839 . . 
 
 8,832,000 
 
 3,987,000 
 
 502,000 
 
 12,286,000 
 
 14,942,000 
 
 1840 . . 
 
 8,878,000 
 
 2,325,000 
 
 499,000 
 
 10,428,000 
 
 12,950,000 
 
 1841 . . 
 
 8,873,000 
 
 2,784,000 
 
 454,000 
 
 10,944,000 
 
 13,886,000 
 
 1842 . . 
 
 8,876,000 
 
 2,555,000 
 
 471,000 
 
 10,683,000 
 
 13,46^,000 
 
 1843 . . 
 
 8,580,000 
 
 2,379,000 
 
 438,000 
 
 9,798,000 
 
 12,914,000 
 
 1844 . . 
 
 8,292,000 
 
 3,490,000 
 
 455,000 
 
 10,842,000 
 
 14,472,000 
 
 1845 . . 
 
 8,359,000 
 
 4,102,000 
 
 453,000 
 
 12,477,000 
 
 15,243,000 
 
 1846 . . 
 
 8,475,000 
 
 4,565,000 
 
 481,000 
 
 13,032,000 
 
 15,892,000 
 
 1847 . . 
 
 8,605,000 
 
 4,437,000 
 
 462,000 
 
 12,781,000 
 
 15,784,000 
 
 1848 . . 
 
 8,726,000 
 
 4,891,000 
 
 517,000 
 
 13,424,000 
 
 16,808,000 
 
 1849 . . 
 
 8,985,000 
 
 4,511,000 
 
 575,000 
 
 13,740,t)(tO 
 
 16,947,000 
 
 1850 . . 
 
 . 9,907,000 
 
 5,253,000 
 
 640,000 
 
 15,607,000 
 
 19,122,000 
 
 1851 . . 
 
 . 10,575,000 
 
 6,639,000 
 
 774,000 
 
 18,190,000 
 
 21,999,000 
 
 .1852 . . 
 
 . 12,509,000 
 
 7,118,000 
 
 825,000 
 
 20,552,000 
 
 25,226,000 
 
 1853 . . 
 
 . 13,950,000 
 
 11,217,000 
 
 1,259,000 
 
 25,833,000 
 
 32,098,000 
 
 1854 . . 
 
 . 15,641,000 
 
 11,207,000 
 
 1,206,000 
 
 27,397,000 
 
 34,716,000 
 
 1855 . . 
 
 . 17,145,000 
 
 6,833,000 
 
 812,000 
 
 23,999,000 
 
 31,338,000 
 
 1856 . . 
 
 . 18.h.^2,000 
 
 9,197,000 
 
 1,006,000 
 
 27,201,000 
 
 36,202,000 
 
 1857 . . 
 
 . 20,505,000 
 
 9,690,000 
 
 1,121,000 
 
 32,639,000 
 
 39,123,000 
 
 1858 . . 
 
 . 21,017,000 
 
 4,249,000 
 
 1,064,000 
 
 25,610,000 
 
 32,276,000 
 
 1860 . . 
 
 . 21,951,000 
 
 9,500,000 
 
 913,000 
 
 28,374,000 
 
 30,373,000 
 
 At the close of the year 1859, there were seventy-two banks in opera- 
 tion in the State of Connecticut; twelve of which were in the city of 
 
 472
 
 Banhing in (he United States. 
 
 Hartford, and eight in New Haven ; the largest capital of any one bank 
 being $1,285,000! 
 
 In Connecticut the banks have been heretofore established by special 
 charters. A general banking law was passed some few years ago, but its 
 workings were not considered beneficial; and at the end of the year 1859, 
 the few banks that had been framed under the general banking law, had 
 been all subject to special charters. There have been few bank failures 
 in this State. The present system and all the banks under it, are subject 
 to the special supervision of the Bank Commissioners and a healthy check 
 is thus placed upon undue expansion. 
 
 The Bank Commissioners in their report for the year 1858, on the 
 condition of the banks of circulation, make the following recommendations 
 and other remarks : — 
 
 1st. A reduction of the circulation of the banks to 50 or 75 per cent, 
 upon die capital actually paid in. 
 
 2d. The requirement of a specific amount of specie, based upon capital, 
 and not upon circulation. 
 
 3d. A reduction of the percentage of discounts, out of the State, to 25 
 per cent, of the capital of the bank. 
 
 4th. To limit the amount of interest to be paid on deposits to 4 per 
 cent. 
 
 Under the present law the specie lines of the banks are very irregular, 
 and the fluctuations are not as carefully observed as they should be ; but 
 fix the amount to a given percentage upon capital, and not only the banks 
 but the public will always know what amount is at all times required. No 
 per cent, of specie is now required by law for deposits, and should a bank 
 abandon the use of its own bills, there is no law requiring them to keep 
 specie at all. 
 
 NEW YORK. 
 
 In the early history of banking in New York, since 1800, politics and 
 finance were so intermingled that the question of granting a bank charter 
 was a matter of direct issue between the two political parties of the day ; 
 but prior to that period, in the establishment of the first bank, this state 
 of partisan excitement did not exist, but in lieu of it, there was a jealousy 
 in regard to the incorporation of moneyed institutions ; and after they were 
 established, great caution was required to avoid the perils and mischief 
 which their opponents had predicted would inevitably ensue. Fortunately, 
 however, the first bank established in New York was managed with such 
 ability and discretion, that it disarmed all opposition, and became an im- 
 portant auxiliary to the government of the United States, by a loan of 
 §400,000 at five per cent., thereby securing in its early career great popu- 
 laritj', as the bank owed no favor to the government, and had no interested 
 motives in loaning the money. The organization of this bank (the Bank 
 of New York) was, however, an association for banking purposes, rather 
 than a regular bank. It commenced business in 1784 (its first application 
 for a charter having been unsuccessful), without a charter, and discounted 
 
 473
 
 Banking in the United States. 
 
 short paper at 6 per cent, per annum, which rate was advanced to 7 per 
 cent, three years afterwards. In 1791 a charter was granted, " the act 
 of incorporation having been drawn by General Alexander Hamilton, 
 which has not been materially altered to this day." Its authorized capi- 
 tal was $1,000,000, but it is now treble that amount. 
 
 In 1799 the Manhattan Company was incorporated, with an unlimited 
 charter, and was regarded as a partisan triumph ; and from this period 
 all projected moneyed institutions in the city of New York were advocated 
 or opposed on political considerations only, and thus finance and politics 
 became blended in the contest, which continued until the question of the 
 construction of the Erie Canal diverted the gladiature of zealous politicians 
 to this new area of strife. In 1801 the whole number of banks in the 
 State was but five, whose authorized capitals were $4,722,000. In 1803 
 the New York State Bank at Albany was chartered, and in 1805 the Mer- 
 chants' Bank in New York, having commenced business, however, two 
 years previous to its being chartered. There were then, in 1805, but 
 seven banks in New York State, the aggregate of whose capitals was only 
 85,430,000 ; but it has now 300 banks, having a capital of $96,000,000. 
 In 1810 the Mechanics' Bank was chartered; in 1811, the Union, and 
 the Farmers and Mechanics' in Albany; in 1812, the Phoenix, the City, 
 and the Bank of America. The projectors of this latter bank originally 
 applied for a capital of $6,000,000, to supply the place of the United 
 States Bank, whose charter had so recently expired, and oflFered for the 
 charter a bonus to the State of $400,000 unconditionally : $100,000 in 
 ten years, and $100,000 in twenty years, if, at the expiration of those 
 terms, there should be no additional banking capital authorized by the 
 Assembly in the city of New York. They further offered to loan the 
 State $1,000,000, at 5 per cent., for the construction of the Erie Canal, 
 and $1,000,000 more at 6 per cent., to be reloaned to farmers and others 
 on landed security. 
 
 The first innovation which was tried commenced in New York with the 
 adoption of the " safety fund" system in 1829. It required from each 
 bank an annual contribution of half per cent, of its capital to a common 
 fund, to be deposited with the State Treasurer as a " bank fund," until it 
 amounted to 3 per cent, of the capital of each bank, and was to be applied 
 to the payment of the debts of any bank which might become insolvent 
 which had contributed to the same; and in case the fund was at any time 
 diminished by payment therefrom, the banks were again required to make 
 their annual contributions, till each had in deposit the 3 per cent, ou its 
 capital stock. For a series of years this system was regarded with favor, 
 but the sudden failure of 10 banks, with capitals amounting to $2,559,000, 
 occasioned a loss of $1,548,560 for redemption of circulation, and 
 $1,010,376 for the payment of the other liabilities of these insolvent 
 banks. 
 
 After nine years' trial of the " safety fund" scheme, it was virtually 
 abandoned, another experiment was substituted in 1838, by the passage 
 of the '* free bank" law. By this system " every individual and associa- 
 tion was authorized to engage in the business of banking; and on deposit- 
 ing with the controller the stocks of the United States, the stocks of any 
 
 474
 
 Banking in the United States. 
 
 State which should be or be made equal to a 5 per cent, stock, or such 
 stocks and bonds, and mortgages to the same amount on improved, pro- 
 ductive, and unincumbered real estate, worth double the amount secured 
 by the mortgage, over and above all buildings thereon, and bearing an 
 interest thereon of 6 per cent, per annum, the controller was required to 
 deliver to such individual or association an equal amount of bank notes 
 for circulation, duly numbered, registered and signed at his office." No 
 specific amount was required from individual bankers before they com- 
 menced operations, nor were the stockholders liable in their individual 
 capacity. 
 
 The following tabular statement exhibits the banking capital of New 
 York during this period of twenty years : 
 
 Tears. Banks. Capital. 
 
 1801 5 $4,720,000 
 
 1805 7 5,430,000 
 
 1811 8 7,522,760 
 
 1815 26 18,946,818 
 
 1816 27 18,766,756 
 
 1820 33 18,988,744 
 
 but we have no means of ascertaining the amount of circulation or specie. 
 The estimates of the whole country for 1815 were 208 banks, $82,260,000 
 capital, S70,000,000 to $110,000,000 circulation, $15,500,000 specie. 
 
 The Present Banking System op New York. — The banks of New 
 York are divided into four classes. I. The Chartered Banks, whose char- 
 ters were granted at various times between the years 1784 and 1829. IT. 
 The Safety Fund Banks, chartered from 1829 to 1838. III. Banking As- 
 sociations, of which there are forty-nine in New York city, IV. Individual 
 Banks, of which there were thirty-four in the State in December, 1858, 
 but none in the city at present. Of those established in the city, all the 
 charters have expired, except five, viz : 1. The Manhattan Co., esta- 
 blished in 1799, charter perpetual. 2. The New York Dry Dock Bank, 
 charter unlimited. 3. The Leather Manufacturers' Bank, charter granted 
 in April, 1832, and will expire in 1863. 4. The Seventh Ward Bank, 
 charter granted in 1831, and will expire in 1863. 5. Bank of the State 
 of New York, charter granted in 1836, and will expire in 1866. Of the 
 old banks of the city whose charters have expired, there are sixteen now 
 doing business under the general law of 1838. Tlaese are : 1. The Bank 
 of New York, established in 1791, and the first bank established in the 
 State. 2. The Merchants' Bank, 1805-1857. 3. The Mechanics' Bank, 
 1810-1855. 4. The Union Bank, 1811-1853. 5. The Bank of America, 
 1812-1853. 6. The city Bank, 1812-1852. 7. The Phoenix Bank, 
 1812-1854. 8. North River Bank, 1821-1842. 9. Tradesmen's Bank, 
 1823-1855. 10. Chemical Bank, 1824-1844. 11. Fulton Bank, 1824- 
 1844. 12. Merchants' Exchange Bank, 1828-1849. 13. The National 
 Bank of which Mr. Albert Gallatin was the President, 1829-1857. 14. 
 The Butchers and Drovers' Bank, 1830-1853. 15. The Greenwich Bank, 
 1830-1855. 16. The Mechanics and Traders' Bank, 1830-1857. _ 
 
 The increased business of the banks of New York city, according to 
 
 475
 
 Banking in the United States. 
 
 their quarterly returns, is shown by the annexed summary, including 
 capital, bank balances, and individual deposits : — 
 
 Date. Capital. Bank balances. Deposits. Loans. Bank balances. Specie. 
 
 Sept., 1851 . . $34,603,000 
 Sept., 1852 . . 36,791,000 
 June, 1853 . . 44,196,000 
 Sept., 1855 . . 48,683,000 
 March, 1857 . . 59,702,000 
 June, 1858 . . 77,041,000 
 Sept., 1859 . . 68,933,000 
 
 $10,777,000 
 22,434,000 
 24,961,000 
 18,525,000 
 22,888,000 
 28,275,000 
 18,379,000 
 
 $36,9.57,000 
 49,608,000 
 59,078,000 
 58,657,000 
 70,760,000 
 74,806,000 
 75,497,000 
 
 $70,516,000 
 94,.355,000 
 102,714,000 
 103,924,000 
 122,790,000 
 127,662,000 
 115,708,000 
 
 $4,178,000 $6,032,000 
 4,228,000 3,702,000 
 6,872,000 12,174,00l> 
 4,919,000 9,747,000 
 5,419,000 10,786,000 
 5,338,000 31,704,000 
 4,714,000 20,559,000 
 
 The ratio of the specie to the deposits and circulation 
 
 was : — 
 
 September, 1859 
 June, 1859 
 
 • 
 
 
 • 
 
 24.56 
 25.58 
 
 June, 1858 
 
 . 
 
 . 
 
 . 
 
 38.72 
 
 Circulation and 
 
 Population of city 
 
 Money to each 
 
 deposits. 
 
 and suburbs. 
 
 inhabitant. 
 
 $69,911,000 
 
 765,777 
 
 $91 30 
 
 72,032,000 
 
 796,000 
 
 90 40 
 
 91,438,000 
 
 837,000 
 
 109 10 
 
 104,448,000 
 
 878,000 
 
 118 SO 
 
 85,125,000 
 
 919,0(10 
 
 92 50 
 
 119,144,000 
 
 965,000 
 
 123 30 
 
 100,000,000 
 
 1,016,000 
 
 98 40 
 
 The more active movements of the banks as to loans (including stocks 
 and mortgages) due from other banks, and specie reserve at the same dates 
 as above, are shown by the annexed summary : — 
 
 New York City Banks— \^b\ to 1860. 
 
 Tear — Ist Jan. 
 
 1854 . 
 
 1855 . 
 
 1856 . 
 
 1857 . 
 
 1858 . 
 
 1859 . 
 
 1860 . 
 
 By referring to the tables here presented, and comparing the bank 
 movement in New York with that in the country at large, it will be seen 
 that the recent expansion, like all others that have occurred since the era 
 of the United States. Bank, originated at New York. It could not, in 
 fact, have originated elsewhere; for the position of the banks in that city, 
 as the centre of the commerce and finances of the Union, gives them a 
 supremacy which, without any effort of their own, effectually controls the 
 movement of all other banks in this country. . The banks of New York 
 city began to enlarge their discounts in December, 1857, just after their 
 prostration by the panic of that year. They continued to move in this 
 direction with rapid strides, until, on the 1st of January, 1859, they were 
 found to be more extended than they were at any time preceding the re- 
 action of 1857, or at any other period, having inflated the currency of 
 this city until it reached the rate of S123 30 to each inhabitant. The 
 banks elsewhere soon found the usual restraints removed, by a favorable 
 condition of the exchanges on New York, and promptly followed the ex- 
 ample of the banks here; and up to 1st January, 1859, had, as already 
 stated, enlarged the currency of the United States to a point 25 per cent, 
 above its mean. 
 
 476
 
 Banking in the United States. 
 
 Liabilities and Resources of the Banks of the State of New York — June^ 
 1856, 1857, 1858, 1859. 
 
 
 Liabilities. 
 
 
 
 
 June 14, 1856. 
 
 Juno 6, 1S57. 
 
 June 19, 1858. 
 
 June 2,5, 1859. 
 
 Capital 
 
 $92,3.34,172 
 
 $10.3,954,777 
 
 $109,.340,541 
 
 $110,605,776 
 
 Circulation . 
 
 30,705,084 
 
 32,395,892 
 
 24,079,193 
 
 26,759,915 
 
 Profits .... 
 
 12,945,901 
 
 13,949,030 
 
 13,563,650 
 
 13,524,418 
 
 Due banks . 
 
 29,730,686 
 
 27,319,817 
 
 34,290,766 
 
 30,175,329 
 
 Duo others . . . . 
 
 1,031,641 
 
 1,010,575 
 
 874,838 
 
 1,418,294 
 
 Due Treasurer State of N. Y 
 
 3,254,421 
 
 3,254,877 
 
 2,716,034 
 
 1,4,39,980 
 
 Due depositors 
 
 96,267,287 
 
 104,350,426 
 
 98,046,875 
 
 99,597,772 
 
 Miscellaneous 
 
 2,184,393 
 $268,453,585 
 
 1,754,886 
 
 1,567,974 
 $284,479,871 
 
 1,643,320 
 
 Total 
 
 $287,990,280 
 
 $285,164,804 
 
 
 Resources. 
 
 
 
 
 June, 1856. 
 
 June, 1857. 
 
 June, 1858. 
 
 June, 1859. 
 
 Loans and discounts 
 
 $174,141,775 
 
 $190,808,832 
 
 $178,853,145 
 
 $185,027,449 
 
 Overdrafts . 
 
 498,978 
 
 507,137 
 
 331,602 
 
 369,455 
 
 Due from banks . 
 
 12,255,098 
 
 11,643,830 
 
 13,569,231 
 
 13,158,254 
 
 Real estate . 
 
 6,724,163 
 
 7,423,015 
 
 7,899,958 
 
 8,481,879 
 
 Specie .... 
 
 18,510,835 
 
 14,370,434 
 
 33,597,211 
 
 22,207,782 
 
 Cash items . 
 
 20,158,-335 
 
 23,737,436 
 
 15,019,241 
 
 17,132,630 
 
 Stocks and promissory notes 
 
 i 23,511,223 
 
 25,747,472 
 
 23.097,661 
 
 26,9,34,786 
 
 Bonds and mortgages . 
 
 8,.381,501 
 
 9,299,794 
 
 8,615,365 
 
 8,104,474 
 
 Bills of banks 
 
 3,087,102 
 
 3,094,293 
 
 1,919,905 
 
 2,264,148 
 
 Loss and expense account 
 
 1,191,994 
 
 1,362,923 
 
 1,576,602 
 
 1,483,947 
 
 Total 
 
 $268,461,004 
 
 $287,994,166 
 
 $284,479,921 
 
 $285,164,804 
 
 Liahilities and Resourc 
 
 ■es of the Neu 
 
 J York City 
 
 5an^s— 1851 to 1858. 
 
 
 Liabilities. 
 
 
 
 
 
 Sept., 1851. 
 
 Sept. 1, 1852. 
 
 June 11, 1853. 
 
 Capital 
 
 
 $34,603,100 
 
 $36,791,750 
 
 $44,196,793 
 
 Profits .... 
 
 
 5,348,666 
 
 5,464,511 
 
 5,674,823 
 
 Circulation . . . ^ 
 
 
 272,880 
 
 ■ 256,834 
 
 996,431 
 
 " registered . 
 
 
 7,103,234 
 
 8,421,830 
 
 8,087,675 
 
 Due Treasurer State of New 
 
 York 
 
 221,840 
 
 187,200 
 
 213,111 
 
 Due depositors 
 
 
 36,957,870 
 
 49,608,800 
 
 59,078,171 
 
 Due banks, &c. 
 
 . 
 
 10,777,040 
 
 22,4.34,214 
 
 24,961,931 
 
 Miscellaneous 
 
 
 241,547 
 
 332,096 
 
 971,374 
 
 Total 
 
 $95,526,177 
 
 $123,497,235 
 
 $144,180,309 
 
 
 Sept. 29, 1855. 
 
 March 14, 1857. 
 
 June 19, 1858. 
 
 Sept. 25, 1858. 
 
 Capital 
 
 . $48,683,750 
 
 $59,703,583 
 
 $67,041,182 
 
 $67,734,755 
 
 Profits .... 
 
 6,037,517 
 
 6,611,258 
 
 8,091,406 
 
 7,275,747 
 
 Circulation . 
 
 " registered . 
 
 177,228 1 
 7,411,128 
 
 ' 8,538,951 
 
 7,080,396 
 
 7,582,598 
 
 Due Treasurer State of N. Y 
 
 527,902 
 
 227,561 
 
 443,685 
 
 402,225 
 
 Due depositors 
 
 . 58,657,430 
 
 70,760,939 
 
 74,373,067 
 
 75,604,637 
 
 Due banks, &c. 
 
 . 18,525,760 
 
 22,888,578 
 
 28,275,873 
 
 27,161,144 
 
 Miscellaneous 
 
 974,160 
 
 490,232 
 
 420,722 
 $185,726,331 
 
 759,694 
 
 Total 
 
 $141,294,875 
 
 $169,221,102 
 
 $186,520,800 
 
 
 47 
 
 7 
 

 
 Banlcing in the United States. 
 
 
 Resources. 
 
 
 
 
 
 Sept., 1851. 
 
 Sept. 1, 1852. 
 
 June 11, 1853. 
 
 Loans .... 
 
 
 $65,426,353 
 
 $88,815,464 
 
 $95,530,656 
 
 Real estate . 
 
 
 2,397,980 
 
 2,702,410 
 
 3,457,544 
 
 Bonds and stocks . 
 
 
 6,090,158 
 
 5,539,815 
 
 7,183,925 
 
 Loss and expense account 
 
 
 392,327 
 
 404,950 
 
 433,459 
 
 Overdrafts . 
 
 
 42,040 
 
 41,210 
 
 63,965 
 
 Specie .... 
 
 
 6,032,463 
 
 8,702,895 
 
 12,174,509 
 
 Cash items . 
 
 
 10,900,135 
 
 11,866,284 
 
 16,383,916 
 
 Bank notes . 
 
 
 1,065,842 
 
 1,195,842 
 
 2,080,214 
 
 Due from banks . 
 
 
 4,178,879 
 
 4,228,210 
 
 6,872,121 
 
 Total 
 
 $95,526,177 
 
 $123,497,235 
 
 $144,180,309 
 
 
 Sept. 29, 1855. 
 
 March 14, 1857. 
 
 June 19, 185S. 
 
 Sept. 25, 1858. 
 
 Loans 
 
 $97,365,163 
 
 $113,813,017 
 
 $118,299,-388 
 
 $122,274,879 
 
 Real estate . 
 
 4,159,030 
 
 5,254,401 
 
 5,815,.368 
 
 5,941,304 
 
 Bonds and stocks . 
 
 6,559,238 
 
 8,977,507 
 
 9,362,613 
 
 11,715,736 
 
 Loss and expense account 
 
 518,676 
 
 335,893 
 
 559,766 
 
 505,036 
 
 Overdrafts . 
 
 66,358 
 
 74,842 
 
 61,734 
 
 49,193 
 
 Specie .... 
 
 9,747,608 
 
 10,786,375 
 
 31,704,814 
 
 28,271,641 
 
 Cash items . . . . 
 
 16,581,856 
 
 22,968,837 
 
 13,689,788 
 
 12,584,100 
 
 Bank notes . 
 
 1,379,568 
 
 1,590,406 
 
 904,804 
 
 1,116,528 
 
 Dae from banks . 
 
 4,919,383 
 
 5,419,824 
 
 5,338,056 
 
 4,045,577 
 
 Total 
 
 $141,294,875 $169,221,102 $185,726,331 $186,520,800 
 
 " It has at all times been the legislative policy of this State, from my 
 earliest recollection, to grant no charters beyond the reach of legislation. 
 With many special charters there is, I believe, but a single one which 
 claims exemption from this provision, and that is the Manhattan Com- 
 pany, chartered in 1799, ostensibly for the purpose of supplying the city 
 of New York with pure and wholesome water, but which, when it came 
 to the practical exercise of its corporate functions, proved to have con- 
 cealed in its stealthy verbiage a perpetual bank charter. 
 
 " The history of this charter doubtless served to arouse legislative 
 watchfulness and suspicion, and charters have since contained the declara- 
 tory provision that ' The legislature may, at any fime, alter, modify or 
 repeal this act.' Under this clause two charters, at least, were promptly 
 repealed, years since — one for being engaged in usurious practices, and 
 another for having issued notes or checks contrary to the provisions of its 
 charter. Yet, notwithstanding this summary treatment, so long as special 
 charters were granted, the legislature was annually besieged to increase 
 the number, and the stock was so eagerly sought for that millions were 
 subscribed where but thousands were to be distributed."* 
 
 Each bank in the city of New York is required by law to publish, " on 
 the morning of every Tuesday, in a newspaper printed in the said city, a 
 statement under the oath of the President or Cashier, showing the aver- 
 age amount of loans and discounts, specie, deposits and circulation, for 
 the next preceding week." The object of this law, which went into eflfect 
 on the 1st of August, 1853 (two months before the organization of the 
 Clearing House), was to check the tendency to a dangerous expansion of 
 bank loans. While it answered the purpose measurably, it proved the 
 
 * Letters from Hon. D. S. Dickinson, July, 1859. 
 478
 
 Banking in the United States. 
 
 inadequacy of legislative action of itself to correct the evil. The law 
 was satisfied with the puhlicatio7i merely of the statement. It neither 
 imposed penalties nor indicated any relation to be preserved between the 
 amount of loans and that of specie. It did not compel banks to liquidate 
 between themselves. A bank might show a creditable average of coin, 
 whilst carrying a discreditable average of debt — enough, if paid, to ex- 
 haust the last dime in its vaults. In reality, nearly all the force and value 
 of the Weekly Statement is due to its incorporation with the records of 
 the Clearing House. These have given it the stamp of truth, which it 
 had not before. There is no longer a possibility of " fixing it up" so as 
 to give a false show of the condition of a bank. It must tell " the truth, 
 the whole truth, and nothing but the truth." 
 
 New York City Bank Averages for Six Tears. 
 
 The bank statement for the week ending July 23d, 1859, completed 
 the sixth year during which the banks of this city have published a 
 weekly statement of the daily average condition of their loans and dis- 
 counts, specie, circulation and deposits. We present a statement of the 
 average 'per day of the several items for each of the six years, with the 
 daily average of the exchanges for those years, and the amount of "net" 
 or undrawn deposits : — 
 
 Average per Day for the Years ending 
 Sunts'! SP«"«- Circtdation. Deposits. Exchanges. ^^^f^^^""' 
 
 July 29, 1854 . . $90,19.5,805 $11,477,186 $9,228,388 $61,534,623 $19,351,328 $42,183,295 
 
 " 28, 1855 . . 90,059,561 14,144,527 7,738,840 72,602,679 17,275,885 55,326,794 
 
 " 26, 1856 . . 100,488,046 13,390,193 7,975,405 84,634,249 21,493,380 63,140,869 
 
 " 25, 1857 . . 111,174,665 11,885,647 8,604,582 92,499,444 27,009,386 65,490,058 
 
 " 24, 1858 . . 107,834,676 25,449,940 7,226,475 86,472,940 16,364,377 70,108,563 
 
 " 23, 1859 . . 126,002,110 26,678,220 7,980,259 107,488,334 20,343,865 87,144,469 
 
 The first weekly statement was made August 6th, 1853. Bank bal- 
 ances were not included in the deposits until June 6th, 1854, at which 
 date the deposits were apparently increased 810,000,000. The Clearing 
 Hou.se was commenced on the 11th of October, 1853, and the average 
 daily exchanges given in the above table, for the year ending July 29th, 
 1854, were for nine months and seventeen days. Considering the circu- 
 lation and net deposits as representing the total liability of the banks, and 
 adding $10,000,000 to the net deposits and circulation for the year ending 
 July 29th, 1854, as the average of bank balances, we present, in the fol- 
 lowing statement, the daily average liability, with the percentage of specie 
 held by the banks, for each year : — 
 
 Average Liability per day for the Years ending 
 
 July 29, 1854 . . . $61,411,683 Specie, 18.69 per cent. 
 
 " 28, 1855 . . . 63,065,634 " 22.43 " 
 
 " 26, 1856 . . . 71,116,274 " 18.82 " 
 
 " 25, 1857 . . . 74,094,640 " 16.04 " 
 
 " 24, 1858 . . . 77,335,038 " 32.91 " 
 
 " 23, 1859 . . . 95,124,728 " 28.04 " 
 
 The following table gives the statements for the weeks in each of the 
 
 479
 
 Banhlng in the United States. 
 
 six years corresponding to that ending July 30th, 1859, with the per- 
 centage of coin to net liability, at each period : — 
 
 July 28, July 26, Ansust 1, July 31, July 30, 
 
 1855. 1856. 1S57. 1S5S. 1859. 
 
 . $99,083,799 $111,346,589 $120,597,050 $119,850,456 $119,347,412 
 
 15,920,976 13,910,848 12,918,014 35,712,107 20,764,564 
 
 7,409,498 8,386,285 8,66^,422 7,408,365 8,214,959 
 
 nt^ ri-rn one "TO QCl non ftQ AQO n<« Q1 IJ*. CT-J TJ ±7A fiOr. 
 
 Loans 
 
 Specie 
 
 Circulation . . . ,_ ,_ , , , ., , , , , 
 
 Net deposits .... 66,070,296 72,381,020 68,682,088 91,145,873 74,474,895 
 
 Per cent, of specie to net de- 
 posits and circulation 21 7-10 17 2-10 16 7-10 36 2-10 25 1-10 
 
 After the above Dates the 
 
 Lowest line of net . \ Liability Loss of Loans Lowest di.scount 
 
 liability was in Amount. decreased. specie. reduced. lino. 
 
 1855, November 17 . . $61,559,319 $11,930,508 $4,618,059 $7,0.53,879 Nov. 17, $92,029,920 
 
 1856, " 10 . . 65,880,108 14,887,197 1,657,111 7,792,139 " 10, 102,508,632 
 
 1857, October 10 . . 50,783,453 26,564,057 1,441,720 18,679,480 " 28, 94,963,130 
 
 1858, " 3 . . 93,742,120 4,812,118 7,178,921 Incr. $3,809,241 Oct. 10,123,599,249 
 
 1859, Largest discount line . . \ Ip^ir'^^'^ie' ^129'96S;925 \ deduced at tbis date $10,621,513 
 " " specie reserve . . January 22^ 29,'472,'o56 " " " 8,707,492 
 
 " liability .... January 15, 103,042,486 " " " 20,352,632 
 
 The economy of time and labor effected by the Clearing House system 
 is stated by the manager, Mr. George D. Lyman, in an appendix to Cleve- 
 land's Banking Laws of New York, as follows : — 
 
 " On the day when the Clearing House began business, about twenty- 
 seven hundred open, active accounts on the ledgers of the associated banks 
 were balanced — the most of them for the first time, and all of them, finally. 
 The business which had rendered necessary this large number of accounts 
 was thenceforth accomplished more quickly, with less annoyance to bank 
 officers, and with greater safety to all concerned. The results may be 
 briefly enumerated as follows : — 
 
 " First. — The condensation for each bank of forty-eight balances into 
 one, and the settlement of that balance without a movement of specie. 
 " Secondly. — The avoidance of numerous accounts, entries and post- 
 
 " Thirdly. — Great saving of time to the porters, and of risk in making 
 exchanges and settlements from bank to bank. 
 
 " Fourthly. — Relief from a vast amount of labor and annoyance to 
 which the great army of cashiers, tellers and book-keepers were subjected 
 under the old system. 
 
 " Fifthly. — The liberation of the associated banks from all injurious 
 dependence on each other. 
 
 " Si.rthly. — The absolute facility afforded by the books of the Clearing 
 House for knowing at all times the management and standing of every 
 bank in the Association." 
 
 480
 
 Banking in tlie United States. 
 
 Aggregate Transactions of the New York Clearing -House for six Years, 
 ending October, 1859 ; to ivhich loe add the Progressive Increase of 
 Taxation and Taxable Property in that City, and the Aggregate Im- 
 ports and Exports of the State. 
 
 1854 
 1855 
 1856 
 1857 
 1858 
 1859 
 
 Exchanges. 
 
 $5,750,455,987 06 
 5,362,912,098 38 
 6,906,213,328 37 
 8,333,226,718 06 
 4,756,664,386 09 
 6,448,005,956 01 
 
 Balances paid. 
 
 $297,411,493 69 
 289,694,137 14 
 334,714,489 33 
 365,313,901 69 
 314,238,910 60 
 363,984,682 56 
 
 Taxation, Taxable pro- 
 city of perty, city of 
 New York. New Torli. 
 
 $4,845,386 
 5,843,822 
 7,075.425 
 8,066,566 
 8,621,096 
 9,860,926 
 
 $37,557,478,473 97 $1,965,357,615 01 
 
 Exchanges for six years — October 1853, to October, 1859 
 Balances paid for six years — " " " 
 
 $462,021,000 
 486,998,000 
 610,740,000 
 520,545,000 
 
 ■ 531,194,000 
 551,923,000 
 
 Aggregate for- 
 eign imports 
 aud exports 
 of the State. 
 
 $317,900,000 
 278,500,000 
 329,200,000 
 371,300,000 
 286,800,000 
 
 Total 
 
 $37,557,478,473 97 
 1,965,357,615 01 
 
 $39,522,836,088 98 
 
 NEW JERSEY. 
 
 The banks of this State have pursued a moderate course, cheeked by 
 New York on dne hand and Philadelphia on the other. There were at the 
 close of 1859, fifty-one banks in the State, with a capital of $7,996,000, 
 or about $156,000 each on an average, while the average of the New York 
 country banks is less than $110,000. 
 
 In 1805 there were 2 banks, whose capital amounted to $1,000,000 
 In 1811 " 3 " • " 794,000 
 
 In 1815 " 11 " « 2,121,000 
 
 In 1820 " 14 " " 2,130,000 
 
 In 1850, a general banking law was passed in New Jersey, which, like 
 those adopted in other States, has subsequently been revised and amended. 
 The new banks established, or at least most of them under the general law, 
 instead of being legitimate banks of discount as well as of issue, are sim- 
 ply mamifactories of paper money, for the benefit of their owners residing 
 in other States. 
 
 Liabilities and Resources of the Banks in New Jersey — 1855 to 1859. 
 
 Liabilities. 
 
 
 Jan. 1S55. 
 
 Oct. 1857. 
 
 Oct. 1&58. 
 
 Jan. 1859. 
 
 Capital . 
 
 . $8,985,950 
 
 $7,292,774 
 
 $7,395,981 
 
 $7,359,122 
 
 Circulation 
 
 2,842,032 
 
 3,758,062 
 
 4,113,864 
 
 4,054,770 
 
 •Deposits . 
 
 2,723,181 
 
 3,767,741 
 
 4,998,266 
 
 4,239,235 
 
 Dividends unpaid . 
 
 
 77,963 
 
 92,142 
 
 88,032 
 
 Due other banks 
 
 443,656 
 
 626,140 
 
 700,061 
 
 770,935 
 
 Surplus . 
 
 901,710 
 
 1,250,373 
 
 1,293,780 
 
 1,332,165 
 
 Miscellaneous . 
 
 
 63,915 
 
 44,678 
 
 48,850 
 
 Total 
 
 $15,896,529 $16,836,968 $18,638,772 $17,893,109 
 481
 
 Banking in the United States. 
 
 
 Resources. 
 
 
 
 
 Jan. 18.V). 
 
 Oct. 1S57. 
 
 Oct. 1S5S. 
 
 Jan. 1859. 
 
 Loans 
 
 $7,746,920 
 
 $12,756,391 
 
 $13,681,904 
 
 $12,449,460 
 
 Specie 
 
 738,595 
 
 855,802 
 
 993,077 
 
 952,231 
 
 Due by other banks 
 
 1,959,952 
 
 1,357,780 
 
 1,769,230 
 
 2,223,936 
 
 Notes and checks . 
 
 
 476,755 
 
 374,664 
 
 578,006 
 
 Real estate 
 
 221^650 
 
 350,518 
 
 404,822 
 
 421,793 
 
 Stocks and mortgages 
 
 138,015 
 
 640,960 
 
 803,343 
 
 785,524 
 
 Miscellaneous . 
 
 5,091,397 
 
 398,762 
 
 611,932 
 
 482,159 
 
 Total . . . $15,896,529 $16,836,968 $18,638,772 $17,893,109 
 
 The following statement shows the practical working of the general 
 banking law : — 
 
 Years. 
 
 1841 
 1849 
 1850 
 1852 
 1854 
 1854 
 1856 
 
 Banks. 
 
 Capital. 
 
 26 
 
 $3,834,816 
 
 25 
 
 3,497,061 
 
 24 
 
 3,565,283 
 
 25 
 
 4,019,900 
 
 24 
 
 4,080,815 
 
 14 Free 
 
 1,066,926 
 
 36 
 
 5,522,060 
 
 PENNSYLVANIA. 
 
 The first bank which was established in this State, was the Bank of 
 North America, which was chartered by Congress on the 31st December, 
 
 1781, with a capital not to exceed ten millions of dollars, and without any 
 limitation of duration. The charter was confirmed by the State in April, 
 
 1782, and it commenced its operations upon a capital, paid in, of $400,- 
 000, and as the country was deficient in notes of circulation, and its credit 
 stood high, it was enabled to extend its issues vastly beyond its capital. 
 The extensive circulation of the notes of the bank, occasioned by the dis- 
 bursements of the government, which was a heavy borrower, emboldened 
 its directors to overstep the bounds of discretion. The channels of circu- 
 lation soon became surcharged, and the public, beginning to doubt the 
 ability of the bank to redeem its notes on presentation, they were returned 
 so rapidly for payment, that it w^s compelled to call upon its debtors for 
 payment also. This reduction of loans occasioned a general pressure for 
 money, bankruptcies, usurious extortions, the disappearance of specie, and 
 the irapo.ssibility of procuring money at the legal rates of interest. Peti- 
 tions were shortly afterwards presented to the Legislature for a repeal of 
 the charter, which was granted on the 13th September, 1785, but the 
 bank continued its business, claiming the right to do so, under the charter 
 granted by Congress; but in March, 1787, the Legi.slature revived its 
 charter, limiting its capital to $'2,000,000, of which only $830,000 were' 
 paid in, and its duration to fourteen years. This bank is now one of the 
 most successful in the city of Philadelphia, having a capital of $1,000,000, 
 and paying annually ten per cent, dividend. 
 
 The system of letters of credit, for use in China, etc., was inaugurated 
 by the Bank of the United States under the presidency of Mr. Nicholas 
 
 482
 
 Banking in the United States. 
 
 In 1805 
 
 
 3 
 
 In 1811 
 
 
 4 
 
 In 1815 
 
 
 42 
 
 In 1820 
 
 
 36 
 
 In 1837 
 
 
 25 
 
 In 1845 
 
 
 51 
 
 In 1850 
 
 
 54 
 
 In 1856 
 
 
 57 
 
 In 1859 
 
 
 88 
 
 Biddle. On a review of the tabular statements of the capitals of the 
 banks in Pennsylvania, there does not appear, with the exception of 1814, 
 when the forty-one banks were chartered, and in 1837-'38, any extraordi- 
 nary augmentation of banking capital. 
 
 Capital. 
 
 In 1801 there were 2 banks $5,000,000 
 
 7,000,000 
 6,153,000 
 15,068,000 
 14,681,000 
 58,000,000 
 16,154,000 
 18,966,000 
 21,281,000 
 25,500,000 
 
 " The banking system of the State was made the subject of much dis- 
 cussion by the Board of Trade during the year previous to that for which 
 we now report, and the interest felt in the reforms which have at length 
 been inaugurated, requires here an expression of satisfaction at the 
 general result. Most important securities for both the city and country 
 circulation of the banks have been devised and put in operation by our 
 associated city banks, and the acknowledgments of this Board are emi- 
 nently due to the authors of these reforms. A clearing house has been 
 established for the city banks, which has been in operation since the first 
 of June, 1858, and which will effectually guard the banks from being 
 drawn into the vortex of any insolvent institution at any future time, 
 while also warning the public in time of the existence of any degree of 
 weakness likely to endanger depositors or note holders. The clearing 
 house system was originally intended merely to facilitate the adjustment 
 of balances between the several banks, and as a measure of economical 
 management simply. It is, in practice, much more than this, and a bank 
 which is in any way unsound, or likely to endanger its creditors, is almost 
 immediately detected by its inability to pay its balances, and by its dis- 
 credit at the clearing house. The public are warned in time, therefore ; 
 no bank is weakened by yielding to advances likely to compromise itself, 
 and the public generally are as well protected as it is possible for any of 
 the creditors of the bank to be. No case of such general weakening of 
 the public confidence in all the banks of the city, because of the known 
 insolvency of one, can again occur, as has twice most disastrously hap- 
 pened here, while the clearing house system is in vigorous operation."* 
 
 All of the banks now (1860) in operation in this State exist by virtue 
 of special charters; but at its recent session the Legislature enacted the 
 following law, which we give in full : — 
 
 * Annual Report of the Philadelphia Board of Trade, 1859. 
 483
 
 Banhimj in the United States. 
 
 FREE BANKING LAW OF PENNSYLVANIA. 
 
 Approved March 31, 1860. 
 
 An Act to establish a system of Free Banking in Pennsylvania, and to secure 
 the Public against loss from Insolvent Banks. 
 
 Section 1. Be it enacted hy the Senate and House of Representatives 
 of the Commonicealih of Pennsylvania in General Assemhly met, and it is 
 hereby enacted by the authority of the same, That any partnership or asso- 
 ciation of persons, not less than five, in pursuance of this act may establish 
 banks of discount, deposit and circulation, subject to the terms, conditions, 
 contingencies, restrictions and liabilities hereinafter prescribed; but the 
 capital of no bank, established under the provisions of this act, shall ex- 
 ceed one million of dollars, or be less than fifty thousand dollars. 
 
 Section 2. That whenever any such partnership or association of citi- 
 zens desire to establish a bank, or increase its capital, they shall make a 
 certificate, to be hereinafter described, under their hands and seals, and 
 shall cause a notice of the same to be advertised, for at least six months, 
 in at least three newspapers, one published at the seat of government of 
 the State, and the other two in the city or county where such bank is to 
 be located, one of which shall be in the German language, if such paper 
 is published ; which certificate, after due notice of the same shall be pub- 
 lished as aforesaid, shall be submitted to, and examined by, the attorney 
 general of the commonwealth, and by him certified to be properly drawn 
 and signed, and that the notice of the same has been duly and correctly 
 advertised according to law, and that the certificate and the published no- 
 tice are in conformity with the constitution and the laws of this common- 
 wealth ; for which service the attorney general shall be entitled to a fee 
 of five dollars. 
 
 Section 3. That the certificate approved by the attorney general shall 
 specify — 
 
 I. The name of such persons, partnership or association, and the names 
 and residences of each member of any partnership or association. 
 
 II. The place of business, designating the city, town or village, and 
 the county where the contemplated bank is to be located, and which loca- 
 tion shall not be changed, without the consent of the auditor general, after 
 six months' public notice. 
 
 III. The amount of capital stock of such association, the number of 
 shares into which the same shall be divided, together with any contem- 
 plated increase of capital stock. 
 
 IV. The names and places of residence of the shareholders, and the 
 number of shares held by each of them respectively. 
 
 V. That when the certificate is so certified by the attorney general 
 as aforesaid, the same shall be recorded in the ofiice for the recording of 
 deeds in the city or county where the bank is to be located, in a suitable 
 book to be kept for that purpose, and a copy of said certificate, duly certi- 
 fied by the recorder, shall be filed in the ofiice of the auditor general ; and 
 the auditor general, upon the receipt of such certified copy, shall enter 
 thereon, and upon tlic original certificate to be retained by such partner- 
 
 484
 
 Banking in the United States. 
 
 ship or banking association, the day and date of the filing of the same, 
 and shall, moreover, cause a true copy of such certificate to be recorded, 
 at length, in a suitable book to be kept in his ofiice for that purpose, for 
 which he shall receive the sum of five dollars ; and the governor shall, 
 upon the certified copy of the aforesaid certificate being produced before 
 him, cause letters patent, under the great seal of the commonwealth, to 
 be issued to the said bank or corporation. 
 
 Section 4. That every association authorized to carry on the business 
 of banking, under this act, shall be held and adjudged to be a body cor- 
 porate, with succession, for the term of twenty years from the date of 
 letters patent, and thereafter only so long as is necessary to close the 
 affairs of such bank, and by its corporate name shall be competent to con- 
 tract, prosecute and defend actions of every description, as fully as natural 
 persons ; >and process against such bank may be served upon its president 
 or cashier, or by leaving a copy thereof at their usual place of business, 
 during the usual hours of business ; they shall have power to make and 
 adopt a corporate seal, and to change and renew the same at pleasure ; 
 and shall, during the term of twenty years from the date aforesaid, if the 
 said bank shall so long comply with the provisions of this act, have power 
 to loan money, buy, sell and discount bills of exchange, notes, and all 
 other written evidences of debt, except such as it shall be prohibited by 
 this act from buying, selling or discounting, receive deposits, buy and sell 
 gold and silver coin and bullion, collect and pay over money, and transact 
 every such other business as shall appertain to the business of banking, 
 subject, however, to the provisions of this act ; may acquire and hold and 
 convey such real estate as may be necessary to the proper transaction of 
 business, and no more ; but may, however, acquire title to any real estate 
 pledged to secure any debt previously contracted, or purchased on an 
 execution or order of sale to satisfy any judgment or decree in its favor, 
 or which shall have been conveyed to it in payment of any previous debt, 
 but shall hold any real estate so held no longer than is necessary to secure 
 the payment of said debt, interest and costs, for the collection and secur- 
 ing of the debt for which it was acquired : Provided hoioever, That if at 
 any time before selling the same, the last preceding owner, his, her or 
 their heirs, shall tender to said bank a sum sufficient to secure the pay- 
 ment of such debt, with interest, costs, taxes and other necessary charges 
 for the collection or securing of said debt, for which said real estate was 
 acquired, then the bank shall release to such owner, his, her or their 
 heirs, all right, title and interest therein : Frovidcrl further, That said 
 last preceding owner or owners, their heirs or attorneys, shall have the 
 right of redemption of said real estate for the term of twelve months 
 after sale, upon paying debt, interest and costs. 
 
 Section 5. That it shall be the duty of the auditor general to report, 
 annually, to the Legislature, within three days from the commencement 
 of the session, a summary of the state and condition of every incorporated 
 bank or banking institution, and every private bank from which reports 
 have been received for the preceding year, at the several dates to which 
 such reports refer, with an abstract of the whole amount of banking 
 capital returned by them, of the whole amount of their debts and liabili- 
 
 485
 
 Banking in the United States. 
 
 ties, specifying, particularly, the amount of circulating notes outstanding, 
 and the total amount of means and resources, specifying the amount of 
 specie held by them at the time of the several returns, and such other 
 information in relation to said banks and associations as, in his judgment, 
 may be useful ; the said report shall also contain a statement of the 
 amount of expenses of his office, on account of banks, during the year, 
 and the amount, if any, for which the treasury shall be in advance ; such 
 number of copies of said report, for the use of the Legislature, as it may 
 direct, and two hundred and fifty copies for the use of his department, 
 shall be printed, by the public printer, in readiness for distribution within 
 twenty days from the commencement of the legislative session. 
 
 Section 6. That any increase of capital, alteration or addition, shall be 
 advertised as is provided for by the second section of this act, for six 
 months, and then submitted to the stockholders at a general meeting called 
 for that purpose, and by them approved ; and further, any such increase 
 of capital, alteration or addition, shall also be approved by the auditor 
 general ; and if approved by the same, shall be attested and recorded, and 
 published, as is provided in the original formation of said bank. 
 
 Section 7. That the auditor general of this commonwealth shall cause 
 to be engraved and printed, in the best manner to guard against counter- 
 feiting, such quantity of circulating notes, in blank, of difierent denomina- 
 tions, not less than five dollars, each of which are authorized to be issued 
 by the banks of this commonwealth incorporated under this act, as he 
 may deem necessary, from time to time, to carry into efi'ect the provisions 
 of this act J said notes shall be countersigned by the auditor general, or 
 by a clerk appointed by him for such purpose, numbered and registered 
 in his office, in manner as directed by him in a book kept for the pur- 
 pose; and all notes issued by him shall be uniform, and they shall have 
 stamped on them, secured by the deposit of public stock. 
 
 Section 8. That the plates, dies and materials to be procured by the 
 auditor general, for the printing and making of such bills or notes for 
 circulation, shall remain in his custody and under his direction, and the 
 expenses necessarily incurred in executing the provisions of this act, shall 
 be audited by the auditor general, and paid out of the treasury on his 
 written order ; and for the purpose of reimbursing the same, the auditor 
 general is hereby authorized and required to charge against, and receive 
 from, each bank or banking association applying for such notes for circu- 
 lation, such rate per centum thereon as will repay the expense necessarily 
 incurred, as before directed. 
 
 Section 9. That the auditor general, with the approval of the governor, 
 shall devise a seal, with a suitable inscription, for this branch of his duties, 
 independent of the seal of office now used by said officer as auditor general, 
 a description of which, with a certificate of approval by the governor, shall 
 be filed in the office of the secretary of the commonwealth, with an impres- 
 sion thereof, which shall thereupon become his seal of office, as set forth 
 in this act, and the same may be renewed when necessary ; every certifi- 
 cate, assignment and conveyance, executed by the said auditor general in 
 pursuance of any authority conferred on him by this act, and sealed with 
 the aforesaid seal, shall be received in evidence, and may be recorded in 
 
 486
 
 Banhlng in the United States. 
 
 the proper recording offices, in the same manner and with like effect as a 
 deed regularly acknowledged or proved before any officer authorized to 
 take proof or acknowledgments of deeds ; and all copies of papers in the 
 office of said auditor general, that have any relation to any of the banks, 
 or banking associations of this State, certified by him, and authenticated 
 by the said seal, shall in all cases be in evidence equally and in like man- 
 ner as the original. 
 
 Section 10. That banks established under this act, upon legally as- 
 Signing to and depositing with the auditor general the bonds or evidences 
 of debt of this commonwealth or of the United States, shall be entitled to 
 receive an amount of such circulating notes in blank, of the denominations 
 such as they may require, numbered, registered, countersigned, and stamped 
 as is herein provided for, the bonds and stocks to be taken at five per cent, 
 less than their market value : Provided, That the same is not above par, 
 and that the amount to be invested under the provisions of this act, shall 
 not exceed the amount of capital now employed in corporate banking in 
 this State more than fifteen millions of dollars, until otherwise provided. 
 
 Section 11. That the auditor general may, at his discretion, exchange 
 such bonds or evidences of debt, or of any of them, on receiving other ap- 
 proved bonds or evidences of debt of this commonwealth or of the United 
 States, of equal amount ; and when any sum of the principal of the bonds 
 or evidences of debt which have been transferred to the auditor general, 
 shall be paid to him, he shall notify the bank or banking association which 
 transferred the same, of such payment, and shall pay the same to such 
 bank or banking association, on receiving other approved bonds or evi- 
 dences of debt of this commonwealth or of the United States, of an equal 
 amount, or on returning an equal amount of the bills or notes delivered by 
 him to such association for circulation, which bills, when delivered, shall 
 be cancelled ; and all bonds or evidences of debt received by the auditor 
 general, under the provisions of this section, shall be subject to all the 
 regulations and restrictions prescribed by the different sections of this act. 
 
 Section 12. That the bank or banking association transferring bonds 
 or evidences of debt to the auditor general may receive the interest that 
 accrues thereon, unless default shall be made in paying the bills or notes 
 to be countersigned as aforesaid, or unless the bonds or evidences of debt 
 so pledged shall become insufficient security for the payment of such bills 
 or notes; and the auditor general, together with the State treasurer and 
 secretary of the commonwealth, shall, on the first Mondays of March and 
 September, in each year, make an average of the value of the State and 
 United States stocks, pledged for the redemption of notes issued to the 
 several banks and banking institutions incorporated under the provisions 
 of this act, which average shall be made on the value of the stocks afore- 
 said, during the last preceding six months; which average value shall be 
 the declared value for the six months succeeding; and if the declared value 
 of the stocks aforesaid shall exceed the value of the same at the previous 
 average, then, and in that case, the auditor general is authorized to issue 
 to each bank or banking institution, incorporated under the provisions of 
 this act, an additional amount of notes or bills ; but in no case shall the 
 whole amount of the notes or bills issued to any bank or banking institu- 
 2 G 487
 
 Banlcing in the United States. 
 
 tion exceed the amount of five per centum less than the declared value ; 
 but if the stocks deposited as aforesaid shall become depreciated in value, 
 so that the averages of the six months shall be below the value of the se- 
 curities at the last declared value, then the auditor general shall thereupon 
 immediatel}' notify the President or Cashier of any bank or banking insti- 
 tution, to place in his hands, veithin fifteen days, such additional amount 
 of securities of the description named in this act, or to return to his ofl&ce 
 such an amount of the circulation of the bank as will preserve the value 
 of the securities deposited, and secure, in full, the notes or bills issued aS 
 aforesaid ; and if such bank or banking institution shall refuse or neglect 
 to comply with the requirements made by the auditor general, then, and 
 in that case, he shall, without delay, proceed to wind up the afi'airs of such 
 bank or banking institution, in the manner prescribed by the several pro- 
 visions of this act. 
 
 Section 13. That the affairs of every bank shall be managed by not 
 less than five nor more than eleven directors, and they shall choose one of 
 their number as president of the bank ; every director shall be a citizen of 
 this commonwealth ; each director shall own, in his own name and right, 
 at least one per centum of the capital stock of the bank, up to two hundred 
 thousand dollars, and the half of one per centum on its capital stock over 
 two hundred thousand dollars ; each director shall take an oath that he 
 will, so far as the duty devolves on him, diligently and honestly administer 
 the aflfairs of the bank, and not knowingly violate or willingly permit to 
 be violated, any of the provisions of this act, and that he is the bona fide 
 owner, in his own right, of the stock standing in his name on the books 
 of the bank, and that the same is not hypothecated, or in any way pledged 
 as security for any loan obtained or debt owing ; which oath, subscribed 
 by himself and certified by the officer before whom it was taken, shall be 
 filed and carefully preserved in the ofl&ce of the recorder of deeds in the 
 county in which the bank is located ; but no person shall be president, 
 cashier or director, or either, of more than one bank at the same time. 
 
 Section 14. That the directors of any bank first elected shall hold 
 their places until the first Monday in November next thereafter, and until 
 their successors shall be elected and qualified; all subsequent elections 
 shall be held annually, upon the first Monday in November, and the di- 
 rectors so elected shall hold their places for one year* and until their 
 successors are elected and qualified ; but any director removing from the 
 State, or ceasing to be the owner of the requisite amount of stock, shall 
 thereby vacate his place ; any vacancy in the board shall be filled by ap- 
 pointment by the remaining directors; the director so appointed shall 
 hold his place until the next annual election ; and if, from any cause, an 
 election of directors should not be made at the time appointed, the bank 
 shall not, for that cause, be dissolved, but an election may be held on any 
 subsequent day, thirty days' notice thereof having been given in a news- 
 paper printed in the county where the bank is located. 
 
 Section 15. That in all elections for directors, and in deciding all 
 (luestions at meetings of the stockholders, each share shall entitle the 
 bolder thereof to one vote; stockholders may vote by proxy, duly author- 
 ized in writing, if dated within thirty days ; but no officer, clerk, teller or 
 
 488
 
 Banhing in the United States. 
 
 book-keeper of the bank shall act as proxy, and no stockholder, whose 
 liability to the bank is past due and unpaid, shall be allowed to vote. 
 
 Section 16. That no bank shall be permitted to commence or carry on 
 the business of banking under this act, unless at least twenty per centum 
 of the capital stock of each bank shall be paid in gold and silver coin, or 
 bullion, and shall be in the actual possession and bona fide the property 
 of the bank at the time of its commencement of its banking business, and 
 at the place designated for carrying on such business. 
 
 Section 17. That the capital stock of each bank shall be divided into 
 shares of fifty dollars each, and shall be assignable on the books of the 
 bank, in such manner as the by-laws shall prescribe ; but no shareholder 
 shall have power to sell or transfer any shares held in his own right, so 
 long as he shall be liable, either as principal debtor, surety or otherwise, 
 to the bank for any debt, without the consent of a majority of the directors; 
 nor shall such shareholder, when liable to the bank for any debt that is 
 overdue and unpaid, be entitled to receive any dividend, interest or profit 
 on such shares, as long as such liabilities shall continue, but all such 
 dividends, interests or profits shall be retained by the bank and applied to 
 the discharge of such liabilities. 
 
 Section 18. That if any shareholder, or his assignee, shall fail to pay 
 any instalment' on his stock, when the same shall be required to be paid, 
 the bank may sell such stock at public auction, having given three weeks' 
 previous notice thereof in two newspapers, if two are published in the 
 county where the bank is located, to the highest and best bidder for the 
 same, and the excess, if any, after paying the expenses of the sale, shall 
 be refunded to the delinquent stockholder. 
 
 Section 19. That if any bank, authorized by the provisions of tbis act, 
 shall refuse to pay its notes of circulation, or any of them, in gold or 
 silver coin of the lawful currency of the United States, on which payment 
 shall be lawfully demanded at its banking house, or customary place of 
 doing' banking business, during usual banking hours, the holders of such 
 protested notes may cause the same to be protested for non-payment by 
 a notary public, under his official seal, in the usual manner; and the 
 auditor general, on receiving and filing in his office such protest, shall 
 forthwith give notice, in writing, to the maker of such note or notes, to 
 pay the same ; and if they omit to pay the same with interest, costs and 
 protest, for twenty days after such notice, the auditor general shall there- 
 upon declare such bank to have committed an act of insolvency. 
 
 Section 20. That the auditor general, upon receiving reliable informa- 
 tion that any bank has committed an act of insolvency, shall forthwith 
 appoint a committee of three judicious and discreet citizens of this com- 
 monwealth, who shall receive five dollars per day each, and their travelling 
 and necessary expenses, all of which to be paid by said bank, who shall 
 make immediate inquiry into the truth of such information, and report 
 thereon to the auditor general of the commonwealth; and if the said 
 committee, or a majority of them, shall report that such bank has sus- 
 pended payment of its notes in gold and silver, he shall forthwith appoint 
 a suitable receiver, who shall take immediate possession of the books, 
 records, money, choses in action, and property of such bank, of every 
 
 489
 
 Banking in the United States. 
 
 description, including the securities deposited with the said auditor gene- 
 ral, and hold the same for the joint use of the creditors of the failing 
 bank. The compensation of such receiver shall be five dollars per day 
 each, and travelling and necessary expenses, to be paid by said bank, 
 whose assets he is appointed to take possession of. 
 
 Section 21. That the receiver appointed as provided in this act, shall 
 be required to give bond in such sum and with such sureties as the auditor 
 general and the governor shall deem sufficient, and under the direction of 
 said auditor general, shall proceed to settle up the affiiirs of such bank, 
 and shall convert into money all its assets of every kind whatsoever, with 
 the least possible delay ; the money so made shall be applied — 
 
 I. To pay all the liabilities on account of the notes of circulation, to 
 pay the same on demand, and set aside a sum sufl&cient to meet all the 
 said notes outstanding. 
 
 II. Then to pay all the deposits of the bank. 
 
 III. To the payment and discharge of all the remaining liabilities of 
 such bank. 
 
 IV. And the residue shall be divided among the stockholders of .the 
 failing bank, in proportion to the stock by them respectively held. 
 
 Section 22, That it shall be the duty of the cashier of every bank to 
 publish monthly, in two newspapers, if two are published, and if two are 
 not published, then in one paper of said county wherein the same may be 
 situate, if there be one published in said county, the entire amount of the 
 assets of the bank as herein provided for, and every class of items therein, 
 under separate heads, setting forth the amount of the capital stock actually 
 paid in, the entire amount of indebtedness and liabilities of said bank, the 
 amount of circulation, the amount of deposits, the amount of gold and 
 silver in the vaults of the bank at the time of making the exhibit, the 
 amount of bills, bonds, notes and other evidences of debt, the value of the 
 real and personal property of the bank. 
 
 Section 23. That the directors of each bank shall semi-annually, on 
 the first Monday in May and November, declare a dividend of so much of 
 the net profits of the bank as they shall judge expedient, and pay the same 
 to the stockholders, on demand, at any time after the expiration of ten days 
 therefrom ; but such dividend shall in no case exceed the amount of the 
 net profits actually acquired, so that the capital stock of the bank shall 
 never be thereby impaired ; and if the directors of the bank shall make 
 any dividends which shall impair the capital stock of the bank, the direct- 
 ors consenting thereto shall be jointly and severally liable in any action 
 of debt, scire facias, or bill in equity, in their individual capacities, to 
 such corporation, for the amount of the stock so divided ; and each di- 
 rector present or otherwise when such dividend shall be made, shall be 
 adjudged to bo consenting thereto, unless he forthwith enter his protest 
 on the minutes of the board, and give public notice to the stockholders of 
 the declaring of such dividend. 
 
 Section 24. That said banks shall pay into the treasury of the State, 
 in the manner now directed by law for the payment of a tax on dividends, 
 as follows : On all dividends which do not exceed six per centum per an- 
 num, eight per centum ; on dividends exceeding six per centum, and not 
 
 490
 
 Banking in the United States. 
 
 exceeding seven per centum, a tax of nine per centum ; on dividends ex- 
 ceeding seven per centum, and not eight per centum per annum, a tax of 
 ten per centum ; on dividends exceeding eight per centum per annum, and 
 not exceeding nine per centum, a tax of twelve per centum ; on dividends 
 exceeding nine per centum, and not exceeding ten per centum, a tax of 
 thirteen per centum ; on dividends exceeding ten per centum, and not 
 exceeding eleven per centum, a tax of fifteen per centum ; on dividends 
 exceeding eleven per centum, and not exceeding twelve per centum, a tax 
 of seventeen per centum ; on dividends exceeding twelve per centum, and 
 not exceeding fifteen, a tax of twenty per centum j on dividends exceeding 
 fifteen per centum, and not exceeding twenty per centum, a tax of twenty- 
 five per centum ; and on all dividends exceeding twenty-five per centum, 
 a tax of thirty per centum. 
 
 Section 25. That on each dividend day the cashier shall make a full, 
 clear and accurate statement or exhibit of the condition of the bank, as it 
 shall be on that day, after declaring the dividend, which shall be verified 
 by the oath of the president and cashier, setting forth — 
 
 I. The amount of the capital stock actually paid in, and then remaining 
 as the actual capital stock of the bank. 
 
 II. The amount of the bills and notes of the bank then in circulation, 
 specifying the amount of each denomination. 
 
 III. The greatest amount of notes in circulation at any time since the 
 making of the last previous statement, specifying the time when the same 
 occurred. 
 
 IV. The balances and debts of every kind due to banks of this State, 
 and the amount due to banks not of this State. 
 
 jg. V. The amount due to depositors. 
 
 VI. The total amount of debts and liabilities of every description, and 
 the greatest amount since the last previous statement, specifying the time 
 when the same occurred. 
 
 VII. The total amount of dividends declared on the day of making the 
 statement. 
 
 VIII. The amount of gold and silver coin and bullion belonging to such 
 bank, and in possession at the time of making the statement, designating 
 the amount of each. 
 
 IX. The amount on hand of bills, bonds, notes and other evidences of 
 debts discounted or purchased by the bank, specifying, particularly, the 
 amount of suspended debt, the amount considered bad, the amount con- 
 sidered doubtful, and the amount in suit or judgment. 
 
 X. The value of the real and personal property held for the convenience 
 of the bank, specifying the amount of each. 
 
 XI. The amount of real estate taken for debts due the bank. 
 
 XII. The amount of the undivided profits of the bank. 
 
 XIII. The total amount of the liabilities to the bank by the directors 
 thereof collectively, specifying the gross amount of such liabilities as 
 principal debtors, and the gross amount as endorsers or sureties. 
 
 XIV. The total amount of liabilities to the bank by the stockholders 
 thereof collectively, specifying the gross amount of such liabilities as 
 principal debtors, and the gross amount as endorsers or sureties ; which 
 
 491
 
 Banking in the United States. 
 
 statement shall be forthwith transmitted to the auditor general of the 
 commonwealth, and a copy thereof immediately published three times in 
 two newspapers of the county in which said bank is located ; Provided, 
 The same are published, one of which papers shall be in the German 
 language if published within the county, else in two English papers. 
 
 Section 26. That if any bank, against which the auditor general shall 
 have instituted proceedings on account of any supposed act of insolvency 
 as prescribed in this act, shall deny having committed such act of insolv- 
 ency, such bank may apply to any court of competent jurisdiction for a 
 writ of injunction to said auditor general, to suspend all further proceed- 
 ings against such bank as an insolvent bank, and such court, after citing 
 said auditor general to appear and show cause why such writ should not 
 be granted, and after the finding of a jury that such bank has, at all times, 
 continued and still continues to redeem, in gold and silver coin, its notes 
 of circulation, shall make an order, enjoining the auditor general from all 
 further proceedings against such bank on account of the supposed act of 
 insolvency on which such proceedings were instituted, and thereupon all 
 the property and assets of such bank shall be restored to its directors. 
 
 Section 27. That if the auditor general in any case fail to proceed in 
 the manner prescribed in the foregoing sections of this act, in providing 
 for the payment of the outstanding notes of circulation, and other liabili- 
 ties of the failing bank, and in closing the affairs of any bank that shall 
 have committed an act of insolvency, the holders of any of its notes of 
 circulation, or other creditors of such bank may, in case payment of such 
 notes of circulation or other claim has been refused, when lawfully de- 
 manded, and remain unpaid, apply to any court of competent jurisdiction 
 for its writ commanding the auditor general so to proceed ; and it shall be 
 the duty of the said court, after citing such bank to appear and show 
 cause why such writ should not issue, and upon the finding of a jury that 
 such act of insolvency has been committed, to issue their writ command- 
 ing said auditor general forthwith to proceed in the manner pointed out 
 in the preceding sections of this act, to provide for the payment of out- 
 standing notes of such bank, close up its affairs and make application of 
 its assets. 
 
 Section 28. That if any bank shall neglect or refuse to comply with 
 any order of the auditor general, made in accordance with the provisions 
 of this act, requiring such bank to reduce its circulation, or to provide a 
 larger amount of specie or other means, or to pay in its stock, or to do or 
 cease to do any other matter or thing which said auditor general may deem 
 necessary for the security of the noteholders and other creditors, then the 
 auditor general may apply to any judge of competent jurisdiction, by 
 petition, in which the auditor general shall be made the petitioner, and 
 the bank implicated defendant, setting forth the substance of such order 
 or orders, and such neglect or refusal on the part of the bank, its officers 
 or agents, and the auditor general having made affidavit of such neglect or 
 refusal, then it shall be the duty of such judge to allow an injunction, 
 and to enjoin such bank, its officers, agents and all others in its employ 
 or connected therewith, from doing, or suffering, or permitting to be done, 
 any business whatever as a bank, from intermeddling witli, or in any 
 
 4'J2
 
 Banking in the United States. 
 
 manner disposing of the books, papers, money, choses in action, assets or 
 property of the bank, until the further order of the judge to whom appli- 
 cation had been made as aforesaid ; a petition, reciting the proceedings 
 had, shall be filed in the court where proceedings have been had, as soon 
 as the injunction is allowed. 
 
 Section 29. That upon the allowance of any such injunction, the 
 property, credits, securities, liens and assets of every description, of such 
 bank, shall forthwith vest in the auditor general, who shall appoint a re- 
 ceiver or receivers, to take possession of the same, as is provided heretofore 
 by this act; a certificate of. the appointment of such receiver, from the 
 auditor general of this commonwealth, shall be sufficient authority to him 
 to take possession of the books, property and rights of every description 
 of such bank, and shall be full authority to the sheriff of the county where 
 the bank is located, to give such receiver full possession of such books, 
 property and rights, with the aid of the county, if required, and said bank 
 and receiver shall be governed by the provisions of this act. 
 
 Section 30. That no bank shall take as security, for any loan or dis- 
 count, a lien on any part of its capital stock, but the same security, both 
 in kind and amount, shall be required of shareholders as of persons not 
 shareholders, and no bank shall be the holder or purchaser of any portion 
 of its capital, or of the capital stock of any other incorporated bank, 
 unless such purchase shall be necessary to prevent loss upon a debt pre- 
 viously contracted in good faith, on security, which at the time was deemed 
 adequate to insure the payment of such debt, independent of any lien upon 
 such stock, or in case of forfeitures of stock for the non-payment of in- 
 stalments due thereon, as provided in this act ; and stock so purchased 
 shall in no case be held by the bank so purchasing for a longer period of 
 time than six months, if the same can be sold for what the stock cost the 
 said bank, or at par ; nor shall any bank, either directly or indirectly, pledge, 
 hypothecate or exchange any of its notes of circulation, for the purpose of 
 securing money to be paid in on its capital stock, nor pledge or hypothe- 
 cate, directly or indirectly, any such notes to be used in its ordinary 
 business operations. 
 
 Section 31. That each bank shall at all times have on hand, in gold 
 or silver coin, or its equivalent, in its vaults, an amount equal to twenty 
 per centum of all its circulating notes of every description whatsoever, 
 and whenever the amount of its outstanding circulating notes shall exceed 
 the above named proportion, no more of its notes shall be paid out or oth- 
 erwise put in circulation by such bank, nor shall such bank increase its 
 liabilities by making any new loans or discounts, nor make any dividends 
 of its profits, until the required proportion between its outstanding circu- 
 lating notes, and gold and silver coin, or its equivalent, shall be restored. 
 
 Section 32. That no bank shall, during the time it shall continue its 
 operations, withdraw, or permit to be withdrawn, either in form of divi- 
 dends, loans to stockholders, or in any other manner, any portion of its 
 capital stock ; and if losses shall at any time have been sustained by the 
 bank equal to, or exceeding its undivided profits then on hand, no divi- 
 dends shall be made, and no dividends shall ever be made by a bank while 
 it shall continue its banking operations, to an amount greater than its net 
 
 493
 
 Banking in the United States. 
 
 profits then on hand, deducting therefrom its losses and bad and suspended 
 debt? ; and all debts due to a bank on which interest is paid, due and un- 
 paid for a period of six months, unless the same shall be well secured or 
 shall be in process of collection, shall be considered bad and suspended 
 debts within the meaning of this section. 
 
 Section 33. That no bank shall at any time issue or have in circula- 
 tion any note, draft, bill of exchange, acceptance, certificate of deposit, or 
 other evidence of debt, which from its character or appearance, shall be 
 circulated or intended to circulate as money, other than such notes of cir- 
 culation as are by this act described, and which such bank is by this act 
 authorized to issue for the purpose of being circulated as money. 
 
 Section 34. That each bank shall receive at par, at the ofiice or bank- 
 ing house of such bank, in payment of dues payable at such bank, for 
 notes of hand, bills of exchange, or other evidences of debt, discounted or 
 purchased by, or belonging to such bank, the notes of circulation issued 
 by any other solvent bank incorporated under the provisions of this act. 
 
 Section 35. That every bank may take, reserve, receive and charge on 
 any loan or discount made, or upon any note or bill of exchange or other 
 evidence of debt, at the rate of six per centum per annum on the amount 
 of any such note, bill of exchange, or other evidence of debt so discounted, 
 and no more : Provided 1iov;ever, That interest may be reserved or taken 
 in advance at the time of making the loan or discount, according to the 
 usual rules of banking, and the knowingly taking, reserving or charging 
 on any debt or demand discounted or purchased by any bank, a rate of 
 interest greater than that allowed by this section, shall be held and ad- 
 judged a forfeiture of such debt or demand; but the purchase or discount 
 of a bona fide bill of exchange or note, payable at another place than the 
 place of such purchase or discount, and the taking or reserving of interest 
 thereon at the rate aforesaid, from the time of such purchase or discount 
 until the maturitj of such bill or note, shall not be held usurious, although 
 exchange on the place where it is made payable is at the time of such pur- 
 chase or discount worth a premium ; nor shall the discount or purchase of 
 a bona fide bill or note payable at a place between which and the place of 
 discount or purchase exchange is in favor of the place of discount or pur- 
 chase, and the taking in addition to the rate of interest aforesaid, the rate 
 of exchange between such places, be deemed usurious : Provided, That no 
 loan to or discount in favor of any director, in which more than six per 
 centum shall be taken, reserved or charged, shall be forfeited, but the 
 same shall be valid against such party : Ami provided further, That no 
 director shall be allowed to purchase any note or obligation which has 
 been rejected by the board of directors, except upon the same terms pre- 
 scribed by the bank. 
 
 Section 36. That all transfers of notes, bonds, bills of exchange, and 
 other evidences of debt owing to any bank, or of deposits to its credit ; all 
 assignments of mortgages or otiier securities on real estate, or of judg- 
 ments or decrees in its favor; all deposits of money, bullion or other 
 valuable thing, for its use, or for the use of any of its stockholders or 
 creditors ; all payments of money to either, made after the commission of 
 an act of insolvency, or in contemplation thereof, with a view to prevent 
 
 494
 
 BanTcing in the United States. 
 
 the application of its assets in the manner prescribed by this act, or with 
 a view to the preference of one creditor to another, except in payment of 
 its circulating notes, shall be held utterly null and void. 
 
 Section 37. That if the directors of any bank shall knowingly violate, 
 or knowingly permit any of the officers, agents or servants of such bank 
 to violate any of the provisions of this act, all the rights, privileges and 
 franchises of such bank shall thereby be forfeited; such violation shall, 
 however, be determined and adjudged by a court of competent jurisdic- 
 tion, agreeably to the laws of this State, and the practice of such court, 
 before the corporation shall be declared dissolved ; and in case of such 
 violation, every director who participated in, or assented to the same, 
 shall be held liable, in his personal and individual capacity, for all damages 
 which the bank, its shareholders, or any other persons, body politic or 
 corporate, shall have sustained in consequence of such violation. 
 
 Section 38. That every president, director, cashier, teller, clerk or 
 agent of any bank who shall embezzle, abstract or wilfully misapply any 
 of the moneys, funds or credits of such bank, or shall, without authority 
 from the directors, issue or put in circulation any of the notes of such 
 bank, or shall, without such authority, issue or put forth any certificate of 
 deposit, draw any order or bill of exchange, make any acceptance, sign 
 any note, bond, draft, bill of exchange, mortgage or other instrument of 
 writing, or shall make any false entry on any book, report or statement of 
 the bank, with an intent, in either case, to injure or defraud such bank, 
 or to injure or defraud any other company, body corporate or politic, or 
 any individual person, or to deceive any officer or agent appointed to in- 
 spect the affairs of any bank, shall be deemed guilty of a misdemeanor, 
 and upon conviction thereof, shall be confined in the penitentiary, at hard 
 labor, not less than one, nor more than ten years. 
 
 Section 39. That the several banks and banking associations of this 
 commonwealth, incorporated for the purposes of banking under special 
 charters, are hereby authorized, by a vote of the stockholders of said in- 
 stitutions, to call in and cancel their circulating notes, and to carry on the 
 business of banking under the provisions of this act ; and that any asso- 
 ciation of citizens who have declared their intention to make application 
 to the present Legislature for an act of incorporation to organize a bank 
 of issue, and have caused such advertisement to be made of the same as 
 is required by law, may, with their associates, establish a bank, under the 
 provisions of this act, at any time after its passage : Provided, The attor- 
 ney general is satisfied, and does certify that such advertisement has been 
 made in conformity with the constitution and present laws of this com- 
 monwealth. 
 
 Section 40. That the notes issued by any bank incorporated under 
 this act shall at all times be receivable in payment of all State taxes, and 
 other State dues. 
 
 Section 41. That the general assembly may alter or repeal this act at 
 pleasure ; but no act altering or repealing this act shall impose any injus- 
 tice or wrong upon the stockholders of any bank. 
 
 The following statement shows the condition of the Banks of Philadel- 
 phia at various times since January, 1858 : — 
 
 495
 
 Banking in the United States. 
 
 Jan. 11, 
 
 1858 
 
 Feb. 8, 
 
 i( 
 
 March 8, 
 
 « 
 
 April 5, 
 May 3, 
 Dec. 6, 
 
 (1 
 1858 
 
 Jan. 3, 
 
 1859 
 
 Feb. 7, 
 
 (( 
 
 March 21, 
 
 (( 
 
 April 25, 
 May 30, 
 June 27, 
 
 n 
 
 July 18, 
 Aug. 15, 
 Sept. 5, 
 Oct. 3, 
 
 « 
 (1 
 
 (( 
 
 Nov. 28, 
 
 u 
 
 Dec. 5, 
 
 It 
 
 Jan. 3, 
 
 1860 
 
 Feb. 6, 
 
 (( 
 
 March 3, 
 
 (1 
 
 March 10, 
 
 (C 
 
 Loans. 
 
 $21,302,374 
 
 20,359,226 
 
 20,471,166 
 
 21,657,152 
 22,243,824 
 26,195,509 
 26,451,057 
 26,472,569 
 26,856,891 
 27,817,918 
 26,406,458 
 25,406,842 
 25,200,073 
 24,497,730 
 24,640,746 
 25,479,419 
 25,077,432 
 24,963,565 
 25,386,387 
 25,493,975 
 25.742,447 
 25,832,077 
 
 Specie. 
 $3,770,701 
 4,668,085 
 5,147,815 
 9,937,597 
 7,027,712 
 6,439,795 
 6,063,356 
 5,979,439 
 6,136,539 
 6,689,591 
 5,521.759 
 5,066,847 
 4,824,864 
 4,996,541 
 5,435,090 
 5,321,153 
 4,512,324 
 4,564,453 
 4,450,261 
 4,669,929 
 4,816,052 
 4,873,419 
 
 Circulation. 
 
 $1,011,033 
 1,293,046 
 1,916,352 
 2,647,219 
 2,029,617 
 2,724,111 
 2,741,754 
 2,786,453 
 2,923,551 
 3,179,236 
 2,975,736 
 2,729,953 
 2,873,947 
 2,736,309 
 2,702,837 
 2,742,440 
 2,679,562 
 2,648,226 
 2,856,801 
 2,656,310 
 2,697,108 
 2,783,345 
 
 Deposits. 
 $11,455,263 
 11,004,519 
 12,253,282 
 13,422,313 
 15,389,718 
 16,683,561 
 17,049,005 
 17,007,167 
 16,899,816 
 17,804,212 
 16,454,349 
 16,114,269 
 15,011,670 
 14,249,758 
 14,901,572 
 15,550,755 
 14,846,676 
 14,852,018 
 14,982,918 
 15,405,341 
 15,192,971 
 15,205,432 
 
 DELAWARE. 
 
 In the State of Delaware there was one bank in 1801, with a capital of 
 $110,000— Bank of Delaware. 
 
 Tears. 
 
 
 
 Banlcs. 
 
 Capital. 
 
 1815 5 
 
 $996,990 
 
 1820 
 
 
 
 6 
 
 974,900 
 
 1837 
 
 
 
 8 
 
 818,020 
 
 1849 
 
 
 
 2 
 
 210,000 
 
 1850 
 
 
 
 4, with 3 branches 
 
 940,000 
 
 1854 
 
 
 
 6, with 3 branches 
 
 680,000 
 
 1856 
 
 _i-; 1- J 
 
 •.- il- 
 
 • Oi. 
 
 8, with 3 branches 
 
 1,690,000 
 ■u.i; xi- 
 
 Banking is done in this State on a specie basis, and we believe that the 
 only failures which have ever occurred in it were the Bank of Milford, in 
 1854, and the Laurel Bank. 
 
 Year. No. banks. Capital. Specie. Circulation. 
 
 1859 
 
 12 
 
 $1,740,000 
 
 $250,000 
 
 $600,000 
 
 There are no published returns of banking in this State. Hence the 
 community is not informed as to the condition of one or more of them at 
 any time. 
 
 Liabilities and Resources of the Banks of Delaioare — January 1, 1860. 
 
 lilAlilLilT 
 
 Capital 
 
 IJKS. 
 
 . $1,638,000 
 
 Loans .... 
 
 $3,174,000 
 
 Circulation . 
 
 594,000 
 
 Specie .... 
 
 216,000 
 
 Deposits 
 
 828,000 
 
 Real estate and miscel- 
 
 
 Profits on hand 
 
 412,000 
 
 laneous 
 
 82,000 
 
 Total 
 
 $3,472,000 
 
 Total 
 
 496 
 
 $3,472,000
 
 Banking in the United States. 
 
 MARYLAND. 
 
 The first bank established in this State was the Bank of Maryland, 
 which was incorporated in 1790, with a capital of $300,000, Next in 
 the order of succession was the Bank of Baltimore, incorporated in 1795, 
 with a capital of $1,200,000, of which $1,122,900 were paid in. In 
 1803, the Farmers' Bank of Maryland, with two branches, was chartered, 
 with a capital of $1,000,000, of which $752,745 were paid in. 
 
 Names of baaks. 
 The Uuion Bank of Baltimore . 
 The Bank of Hagerstown 
 The Commercial and Farmers' 
 The Farmers' and Merchants' . 
 The Franklin Bank, Baltimore 
 The Marine Bank, Baltimore . 
 The Elkton Bank, Maryland . 
 The Cumberland Bank, Alleghany 
 The Farmers' Bank, Cumberland and Worcester 
 The City Bank of Baltimore .... 
 
 The annexed tabular statement, derived from the treasurer's reports and 
 estimates, will exhibit the amount of banking capital in the State for the 
 last fifty years, and presents a striking contrast to the banking mania of 
 other Atlantic cities. 
 
 When chartered. 
 
 Capital. 
 
 1804 
 
 $3,000,000 
 
 1806 
 
 250,000 
 
 1810 
 
 1,000,000 
 
 1810 
 
 500,000 
 
 1810 
 
 600,000 
 
 1810 
 
 600,000 
 
 1810 
 
 300,000 
 
 1812 
 
 200,000 
 
 1812 
 
 200,000 
 
 1813 
 
 150,000 
 
 Years. 
 
 No. banks. 
 
 Capital. 
 
 Years. 
 
 No. banks. 
 
 Capital. 
 
 1792 
 
 1 
 
 $500,000 
 
 1836 
 
 21 
 
 $8,203,000 
 
 1801 
 
 2 
 
 1,600,000 
 
 1837 
 
 23 
 
 10,438,000 
 
 1805 
 
 4 
 
 5,800,000 
 
 1840 
 
 23 
 
 10,526,000 
 
 1811 
 
 6 
 
 4,895,000 
 
 1845 
 
 22 
 
 8,858,000 
 
 1815 
 
 17 
 
 7,882,000 
 
 1850 
 
 23 
 
 8,704,000 
 
 1820 
 
 14 
 
 6,708,000 
 
 1856 
 
 30 
 
 11,180,000 
 
 1830 
 
 13 
 
 6,250,000 
 
 1860 
 
 33 
 
 12,524,000 
 
 Some of the banks specified in the preceding schedule, failed in 1834, 
 such as the Bank of Maryland, Farmers Bank of Maryland, Elkton Bank, 
 Havre de Grace Bank, Susquehanna Bridge and Banking Company, and 
 various others ; but the loss of their capitals was supplied by the enlarge- 
 ment of others, and is scarcely perceptible in the above returns. As an 
 illustration of the vicissitudes of some of these banks, we select at random 
 the history of the Franklin Bank, of Baltimore, chartered in 1810, with 
 a capital of $600,000, for five years, and of which $415,000 only were 
 paid in. In 1815 the charter was extended twenty years, and in 1821 
 ten years more, but a tax for the benefit of the school fund was imposed, 
 of twenty cents on every hundred dollars of its stock. In 1834 the char- 
 ter was extended from 1845 to 1857, and in 1835 the bank was author- 
 ized to double its stock, making its capital $1,200,000 ; but in 1840 it 
 was discovered that its cashier had committed large frauds on the bank, 
 and it was compelled to stop payment in 1841. After an examination of 
 its affairs, the Legislature authorized a reduction of its capital to $301,595, 
 and in 1853 it was increased again to $500,000. The adoption of the 
 
 497
 
 Banking in the United States. 
 
 new Constitution in 1851 imposed upon stockholders in new banks, or in 
 those whose charters might be removed, personal liability for the debts or 
 liabilities of such banks, to the extent of the stock held by them respect- 
 ively. In 1852 the circulation of notes under five dollars was prohibited 
 by law, under similar penalties to those in various other States, and we 
 believe has had an influence in creating a larger circulation of coin. 
 
 The banks of Maryland all suspended specie payments in 1814 and 1837, 
 in common with all the others in the Middle, Western, and Southern 
 States ; and it would be superfluous to recapitulate the circumstances at- 
 tending these events, as they have already been described in the preced- 
 ing pages. 
 
 LiaMUties and Resources of the Banhs of Maryland — January 1, 1860. 
 
 Liabilities. Resoukces. 
 Capital . . . $12,560,000 Loans . . . $22,416,000 
 Circulation . . . 3,218,000 Specie . . . 3,294,000 
 Deposits . . . 9,486,000 Real eastate and Mis- 
 Profits on hand . . 932,000 cellaneous . . 486,000 
 
 Total . . $26,196,000 Total . . $26,196,000 
 
 DISTRICT OF COLUMBIA. 
 
 The first bank established at Washington was in 1792, with a capital of 
 ),000; in 1802, there were two banks, $1,500,000; in 1805, three 
 banks, S2,000,000; in 1811, four banks, $2,341,395; in 1815, ten banks, 
 84,078,295; in 1820, thirteen banks, S5,525,319 capitals. 
 
 Tears. Banks. Capital. 
 
 1830 9 $3,879,574 
 
 1837 7 2,204,445 
 
 1842 6 1,786,920 
 
 1844 6 1,649,280 
 
 VIRGINIA. 
 
 The first*notice of any bank in Virginia was in 1805, being that men- 
 tioned in Mr. Gallatin's report, capital $1,500,000. This was the Bank 
 of Virginia, chartered in 1804, and which expired in April, 1857 ; its 
 capital has been enlarged to 82,050,000. There was, it is true, a branch 
 of the first bank of the United States in Norfolk ; but the paper of this 
 bank rarely found its way into the interior of the country, where the cur- 
 rency was purely metallic. " The desk of every agriculturist in Virginia 
 had some gold or silver to spare, if he was a prudent, industrious man ; 
 or he had something like money to spare in the hands of his merchant, 
 who, in the days of which I am speaking, acted as a banker to his prosper- 
 ing customers. The currency being specie, was widely scattered through 
 the land, and in diversified hands, so that its concentration at any par- 
 
 498
 
 Banking in the United States, 
 
 ticular point was impossible ; and consequently its removal from the 
 country could not happen to any great extent." The same writer pro- 
 ceeds : " No people had more cause to rejoice than the people of Virginia; 
 but alas ! the banks came and all things became changed. Like the Upas 
 tree they have withered and destroyed the healthful condition of the 
 country, and inflicted on the people political and pecuniary disease of the 
 most deadly character." 
 
 Such was the tone of public sentiment in the Southern States, origi- 
 nating with the establishment of the first United States Bank, and che- 
 rished by Virginia until the expiration of its charter in 1811, when, through 
 fear that its sovereignty would not be represented at the funeral orgies, 
 the Assembly, in January, 1811, passed a special resolve — " to instruct 
 their senators and request their representatives to vote against the renewal 
 of the charter of the United States Bank" — a puny little institution, on 
 its last legs, with an embargo behind it, and a war before its last expiring 
 moments. But in one brief year the mystery was explained : Virginia 
 xoanted a hank ofheroion, and in February, 1812, we perceive that the 
 Farmers' Bank of Virginia, with a capital of $2,000,000, and with a right 
 to issue $6,000,000 of circulation, was chartered, and with the Bank of 
 Virginia, (in which the State was interested $300,000,) and the enlarge- 
 ment of capital to the old, and the creation of new banks, it certainly was 
 very politic that the State should wish to avoid either the rivalry or the 
 surveillance of a national institution. Three other banks followed in 
 quick succession, with capitals amounting to four millions more, and there 
 was no further outcry against paper money or banks, because the '' Old 
 Dominion" had adopted them. The charters of the two first banks pro- 
 hibited the issue of notes under $5, which they adhered to, until it was 
 found convenient to issue $7, $8 and $9 notes to supply the use of coin ; 
 and thus the intent of the law was frustrated. Our tabular statement 
 furnishes the readiest mode of showing the banking operations of the 
 State from 1820 to 1856 : 
 
 
 
 
 Capital. 
 
 Loans. 
 
 Circulation. 
 
 In 1820, 4 banks . 
 
 $5,212,192 
 
 
 ... 
 
 In 1830, 4 « 
 
 
 
 5,751,100 
 
 $7,699,000 
 
 $3,858,000 
 
 In 1837, 5 " 
 
 
 
 6,731,200 
 
 18,021,000 
 
 9,107,000 
 
 In 1840, 6 " 
 
 
 
 10,283,633 
 
 15,596,000 
 
 6,707,000 
 
 In 1842, 6 " 
 
 
 • 
 
 10,363,362 
 
 16,170,000 
 
 7,740,000 
 
 In 1848, 6 " 
 
 
 
 9,684,970 
 
 17,302,000 
 
 8,997,000 
 
 In 1850, 6 " 
 
 
 
 9,731,370 
 
 18,163,000 
 
 8,944,000 
 
 In 1854, 16 " 
 
 
 
 12,796,436 
 
 24 913,000 
 
 14,298,000 
 
 In 1856, 60 banks and brancli( 
 
 }S . 13,734,800 
 
 25,000,000 
 
 13,000,000 
 
 In 1859, 69 
 
 It 
 
 
 17,040,000 
 
 26,000,000 
 
 10,400,000 
 
 With the exception of 1837, there does not appear to be any extra- 
 vagant banking ; but in January of that year, the proportion of loans to 
 capital was larger than that of any other State in the Union — being fifty 
 per cent, above the average rate of all the banks, and its circulation in 
 excess by a larger ratio, 214 to 91 average proportion of circulation to 
 capital. 
 
 In 1851, the general banking law was passed, and several banks* have 
 been chartered, securing their circulation by a pledge of public stocks. 
 
 499
 
 Banking in the United States. 
 
 The Bank of Virginia and the Farmers' Bank charters expired in 1858, 
 and were renewed upon their old basis, "as the experiment of inde- 
 pendent banking' has not so triumphantly vindicated the sound wisdom 
 of the principle, as to induce the public to sacrifice a system which has 
 operated in the main equally to the advantage of the State and the com- 
 munity. There is certainly nothing in the financial condition of the State 
 to warrant any hazardous experiments with its monetary relations." 
 
 NORTH CAEOLINA. 
 
 The first bank chartered in North Carolina was the Bank of Cape Fear, 
 at "Wilmington, in 1804, to continue till 1820. Capital $250,000. This 
 charter was extended in 1814 till 1835 and its capital increased. In 1833 
 its charter again extended till 1855, and capital increased to $800,000. 
 In 1836 its charter extended till 1860, and capital increased to $1,500,000. 
 In 1854 its charter extended till 1880, and capital increased to $2,000,000. 
 
 The Bank of Newbern was established in 1804 to continue till 1820. 
 Capital $200,000. Extended in 1814 till 1835; capital increased to 
 $775,000. This charter was never renewed, but expired in 1835. 
 
 State Bank of North Carolina chartered in 1810 to continue till 1880. 
 Capital $1,600,000. 
 
 Bank of the State of North Carolina chartered in 1833 till 1860. 
 Capital $1,500,000. 
 
 Merchants' 13ank of Newbern chartered in 1834 till 1855. Capital 
 $300,000. Charter extended in 1850 till 1880. 
 
 Commercial Bank of Wilmington established in 1847. Capital $300,000. 
 Increased in 1850 to $350,000. 
 
 Bank of Fayetteville established 1849. 
 
 Bank of Washington established in 1850 till January, 1877. Capital 
 $400,000. 
 
 Bank of Wadesboro' established in 1850 till 1880. Capital $200,000. 
 Capital increased in 1852 to $400,000. 
 
 Bank of Charlotte established in 1852 till 1880. Capital $300,000. 
 
 Farmers' Bank, Elizabeth, established 1852 till 1880. Capital $500,000. 
 
 Bank of Yanceyville established 1852 till 1880. Capital $200,000. 
 
 Bank of Clarendon established 185 1 till 1880. Capital $400,000. 
 
 Bank of Wilmington established 1854 till 1880. Capital $800,000. 
 
 Bank of North Carolina established 1858-'59 till 1890. Capital 
 $2,500,000. Capital all subscribed and went into operation Nov. 1st, 
 1859. By the charter the stockholders arc entitled to eight directors, and 
 the State to two, of which number, by the terms of the charter, the 
 Treasurer of the State was one. 
 
 Bank of Lexington established in 1858 till 1885. Capital $300,000. 
 
 Bank of Commerce (Newbern) established in 1858 till 1890. Capital 
 $600,000. 
 
 500
 
 Banhing in the United States. 
 The following is a summary of the banks in this State : — 
 Condition of the Banks in North Carolina in 1858. 
 
 
 
 
 Due 
 
 Due 
 
 
 Depo- 
 sits. 
 
 Banks. 
 
 Capital. 
 
 Surplus. 
 
 foreign 
 
 N. C. Circulation. 
 
 
 
 
 banks. 
 
 banks. 
 
 
 Bank of Cape Fear . 
 
 $1,591,900 
 
 $356,320 , 
 
 $5,192 
 
 8920 
 
 $1,612,641 
 
 $299,474 
 
 Bank of the State . 
 
 1,500,000 
 
 525,039 
 
 75,945 
 
 17,430 
 
 1,078,158 
 
 545,393 
 
 Merchants' Bank, Newbern 
 
 225,000 
 
 46,656 
 
 
 2,917 
 
 93,998 
 
 79,391 
 
 Bank of Fayetteville 
 
 380,000 
 
 55,000 
 
 
 4,708 
 
 184,138 
 
 60,918 
 
 Commercial Bank, Wilmingtoi 
 
 3.50,000 
 
 72,663 
 
 8,442 
 
 4,003 
 
 105,0.33 
 
 67,697 
 
 Bank of Washington 
 
 325,000 
 
 32,633 
 
 
 4,856 
 
 357,870 
 
 31,032 
 
 Farmers' Bank of N. Carolina 
 
 297,900 
 
 14,267 
 
 381 
 
 106 
 
 170,385 
 
 29,543 
 
 Bank of Wadesborough . 
 
 325,000 
 
 85,610 
 
 8,295 
 
 
 518,574 
 
 30,186 
 
 Bank of Charlotte . 
 
 300,000 
 
 65,978 
 
 19 
 
 1,839 
 
 331,000 
 
 43,564 
 
 Bank of Yauceyville 
 
 200,000 
 
 19,549 
 
 1,084 
 
 1,0.50 
 
 332,137 
 
 53,193 
 
 Bank of Clarendon . 
 
 400,000 
 
 29,691 
 
 
 4,475 
 
 310,660 
 
 61,675 
 
 Bank of Wilmington 
 
 630,400 
 $6,525,200 
 
 54,400 
 
 "86 
 
 641 
 
 349,706 
 
 62,896 
 
 Total 
 
 $1,057,806 
 
 $99,444 
 
 $42,945 
 
 $5,444,300 
 
 $1,364,964 
 
 Banks. 
 
 Notes dis- 
 counted. 
 
 Foreign ex- 
 change. 
 
 Dae by 
 N. C. 
 banks. 
 
 Specie. 
 
 Eeal 
 estate. 
 
 State 
 
 bonds 
 
 &c. 
 
 Bank of Cape Fear . 
 
 $2,341,289 
 
 $957,321 
 
 $95,268 
 
 $472,597 
 
 $71,000 
 
 $25,000 
 
 Bank of the State 
 
 1,998,247 
 
 980,031 
 
 74,842 
 
 282,652 
 
 47,058 
 
 36,000 
 
 Jlerchants' Bank, Newbern 
 
 237,793 
 
 126,399 
 
 36,101 
 
 40,361 
 
 7,563 
 
 
 Bank of Fayetteville 
 
 602,978 
 
 19,307 
 
 16,613 
 
 41,763 
 
 15,000 
 
 
 Commercial Bank, Wilmingtoi 
 
 I 329,113 
 
 172,984 
 
 21,572 
 
 73,230 
 
 9,000 
 
 
 Bank of Washington 
 
 480,133 
 
 1.89,853 
 
 10,414 
 
 42,817 
 
 33,681 
 
 39",627 
 
 Farmers' Bank of N. Carolina 
 
 280,983 
 
 117,748 
 
 15,293 
 
 24,928 
 
 7,805 
 
 13,444 
 
 Bank of Wadesborough . 
 
 543,368 
 
 334,421 
 
 13,536 
 
 55,025 
 
 5,771 
 
 20,000 
 
 Bank of Charlotte . 
 
 258,279 
 
 304,268 
 
 87,003 
 
 73,026 
 
 
 850 
 
 Bank of Yancey ville 
 
 283,193 
 
 241,030 
 
 5,522 
 
 73,881 
 
 3,385 
 
 
 Bank of Clarendon . 
 
 511,584 
 
 245,195 
 
 14,424 
 
 52,6S6 
 
 
 
 Bank of Wilmington 
 
 455,287 
 
 514,478 
 
 12,682 
 
 66,613 
 
 16",434 
 
 29',754 
 
 Total 
 
 8,322,247 $4,153,035 $403,270 $1,299,579 $215,697 $164,675 
 
 In one of the late reports of the Bank of the State of North Carolina 
 we find the following remark : '* By successful management, this bank 
 has obtained a position and influence which scarcely any State institution 
 ever possessed, and certainly none in North Carolina. After passing unin- 
 jured through the crisis of 1837, under the able guidance of its first 
 president, Mr. Cameron, it rapidly acquired confidence and strength, and 
 now stands pre-eminent among the State institutions of our land." 
 
 SOUTH CAROLINA. 
 
 The first bank established in this State was the Bank of South Carolina, 
 chartered in 1792, with a capital of $1,000,000. In the appendix to Mr. 
 Woodbury's report of the banks in 1837, he states the South Carolina 
 banks as follows : — 
 
 Years. 
 
 Banks. 
 
 Capital. 
 
 Years. 
 
 Banks. 
 
 Capital. 
 
 1792 
 1801 
 1805 
 
 1 
 2 
 2 
 
 $675,000 
 3,000,000 
 3,000,000 
 
 1811 
 1815 
 1820 
 
 4 
 5 
 5 
 
 $3,475,000 
 3,730,900 
 4,475,000 
 
 The progress of banking in South Carolina is shown by the annexed 
 summary for that State : — 
 
 501
 
 Banking in the United States. 
 
 Years. 
 
 Banks. 
 
 Capital. 
 
 Circulation. 
 
 Deposits. 
 
 Specie. 
 
 Loans. 
 
 1836 . 
 
 10 
 
 $7,936,318 
 
 $7,488,727 
 
 $4,021,210 
 
 $2,500,427 
 
 $16,316,319 
 
 1837 . 
 
 12 
 
 8,636,118 
 
 7,223,616 
 
 6,048,477 
 
 1,664,786 
 
 18,899,838 
 
 1842 . 
 
 11 
 
 11,472,922 
 
 2,932,154 
 
 1,743,000 
 
 1,355,178 
 
 13,890,033 
 
 1846 . 
 
 11 
 
 11,036,260 
 
 3,911,360 
 
 2,-353,168 
 
 1,723,561 
 
 14,181,722 
 
 1850 . 
 
 14 
 
 13,139,571 
 
 8,741,765 
 
 3,322,1.32 
 
 1,711,902 
 
 20,601,137 
 
 1855 . 
 
 19 
 
 16,603,253 
 
 6,739,623 
 
 2,871,095 
 
 1,283,284 
 
 23,149,098 
 
 1858 . 
 
 20 
 
 14,888,000 
 
 6,912,000 
 
 3,279,000 
 
 2,036,000 
 
 18,100,000 
 
 1859 . 
 
 20 
 
 14,888,000 
 
 6,600,000 
 
 3,800,000 
 
 2,000,000 
 
 16,800,000 
 
 Liabilities and Resources of the BanJcs of South Carolina — Jan. 1, 1860. 
 Liabilities. Resources. 
 
 Capital 
 Circulation 
 Deposits . 
 Profits on liand . 
 
 Total 
 
 814,962,000 
 
 10,971,000 
 
 7,187,000 
 
 1,884,000 
 
 $35,004,000 
 
 Loans 
 Specie 
 
 Real estate and mis- 
 cellaneous 
 
 Total 
 
 $32,062,000 
 2,255,000 
 
 687,000 
 
 $35,004,000 
 
 The items of discounts, deposits, specie and circulation of the several 
 banks, Feb. 18G0, were as follows : — 
 
 Banks. 
 Camden . 
 Charleston 
 Chester . 
 Commercial 
 Exchange 
 
 Farmers' and Exchange 
 Georgetown 
 Hamburg 
 Merchants' 
 Newberry 
 People's . 
 Planters' 
 
 Planters' and Mechanics 
 South Carolina 
 S. W. Kailroad 
 Bank of State 
 Branches, Columbia 
 " Camden . 
 State 
 Union 
 
 Total 
 
 Discounts. 
 
 $112,371 
 
 2,195,959 
 169,284 
 700,680 
 390,655 
 218,651 
 179,146 
 209,114 
 184,632 
 176,806 
 915,706 
 51,653 
 786,086 
 824,985 
 578,873 
 
 2,237,089 
 773,768 
 196,793 
 554,267 
 780,112 
 
 Deposits. 
 
 $41,576 
 
 843,586 
 
 92,164 
 
 265,308 
 
 141,423 
 
 131,781 
 
 89,046 
 
 95,195 
 
 34,602 
 
 64,711 
 
 234,071 
 
 60,291 
 
 282,733 
 
 328,549 
 
 344,382 
 
 919,807 
 
 325,047 
 
 14,140 
 
 409,611 
 
 288,034 
 
 Circulation. 
 
 $213,055 
 975,880 
 830,680 
 445,845 
 
 1,128,122 
 
 1,069,825 
 344,290 
 
 1,158,705 
 533,274 
 732,680 
 808,045 
 570,300 
 341,180 
 99,016 
 289,700 
 
 1,892,780 
 
 628,535 
 441,775 
 
 Specie. 
 $22,308 
 557,897 
 
 94,770 
 
 84,843 
 
 48,183 
 208,839 
 
 50,211 
 119,635 
 
 50,821 
 
 69,796 
 206,967 
 
 54,397 
 217,006 
 113,542 
 
 87,226 
 265,226 
 
 14,703 
 
 2,171 
 
 159,403 
 
 135,315 
 
 $12,736,630 $5,001,054 $12,603,687 $2,560,260 
 
 GEORGIA. 
 
 In Georgia, the first bank which appears in Mr. "Woodbury's report, 
 is, in 1811, one bank, capital $210,000; in 1815, two banks, capital 
 $023,580; in 1816, three banks, capital $1,502,000; in 1820, four banks, 
 with an aggregate capital of $3,401,510; and the following table shows 
 that Georgia has had her full share of banking business, notwithstanding 
 her frequent complaints of dependence upon Charleston for facilities, and 
 her own want of bank capital. There were, in the State, in 
 
 502
 
 Banhlny in the United States. 
 
 Voars. 
 
 Banks. 
 
 Capital. 
 
 Circulation. 
 
 Deposit-s. 
 
 Specie. 
 
 Loans. 
 
 1830 . 
 
 9 
 
 $4,203,029 
 
 $2,719,356 
 
 $1,382,6.34 
 
 $1,305,141 
 
 $6,252,474 
 
 1837 . 
 
 . 32 
 
 11,438,828 
 
 8,058,739 
 
 2,943,6.32 
 
 2,860,326 
 
 10,692,215 
 
 1840 . 
 
 . 39 
 
 15,008.694 
 
 5,518,822 
 
 1,985,413 
 
 1,300,694 
 
 13,783,221 
 
 1843 . 
 
 . 24 
 
 10,250,702 
 
 1,972,215 
 
 1,056,842 
 
 1,206,971 
 
 5,451,751 
 
 1846 . 
 
 . 22 
 
 8,970,789 
 
 2,471,264 
 
 1,318,266 
 
 1,104,235 
 
 5,549,232 
 
 1849 . 
 
 . 18 
 
 12,595,010 
 
 4,118,419 
 
 1,697,099 
 
 1,547,626 
 
 6,953,166 
 
 1853 . 
 
 . 18 
 
 12,957,000 
 
 9,518,777 
 
 2,523,227 
 
 1,576,813 
 
 13,567,469 
 
 1855 . 
 
 . 21 
 
 13,413,100 
 
 6.098,869 
 
 2,0.34,455 
 
 1,451,880 
 
 11,648,559 
 
 1859 . 
 
 . 32 
 
 10,430,000 
 
 0,000,000 
 
 3,400,000 
 
 1,500,000 
 
 18,000,000 
 
 Liabilities and Resources of the Banhs in Georgia — January 1, 18G0. 
 
 Liabilities. 
 
 Capital . . . $12,479,000 
 
 Circulation . . 7,164,000 
 
 Deposits . . . 5,746,000 
 
 Resources. 
 Loans . . . $21,037,000 
 Specie . . . 3,726,000 
 
 Real estate and mis- 
 
 Profits on hand 
 Total 
 
 4,166,000 
 $29,555,000 
 
 cellaneous 
 Total 
 
 4,792,000 
 $29,555,000 
 
 FLOHIDA. 
 
 Florida was admitted into the Union in 1845. Under its territorial 
 government, it had, in 1838, five banks, with an aggregate amount of 
 capital of ^2,113,302, $774,040 circulation, $145,842 specie, $493,623 
 deposits, and $2,652,614 loans. These were located at Pensacola, Talla- 
 hassee, Appalachicola, and Magnolia, but they are all broken and worth- 
 less. A law was passed in 1849 authorizing a bank at Tallahassee, but 
 we believe that it was not organized. 
 
 Florida passed a law, some years^ since, to authorize the establishing of 
 " free banks." Under that law one company was organized ; but the 
 authorities of the State, finding that the " free bank" was intended to 
 operate in New York rather than in Florida, refused to give it the final 
 sanction which the law required. In consequence of this decision, some 
 very pretty engravings became useless. 
 
 An agent of the Treasury Department who, some time since, visited 
 Florida, found at Tallahassee certain agencies established by banks of a 
 neighboring State, which agencies circulated their paper money. He 
 did not visit Appalachicola, but he was informed that there were in that 
 town some manufacturing or other companies that issued 'change notes or 
 " shinplasters," of as low a denomination as twenty-five cents. At Pen- 
 sacola, where there were neither bank agencies nor " shinplaster" manu- 
 facturers, the currency consisted exclusively of gold and silver. 
 
 There have been two banks recently chartered in Florida: 1. The Bank 
 of Fernandina, at Fernandina, a short distance south of the Georgia State 
 line, on the Atlantic, capital $100,000 ; 2. The State Bank of Florida, at 
 Tallahassee, capital $130,000 ; but they have been in operation too short 
 a time to furnish any tabular returns of their operations. 
 2 H 503
 
 BanhinQ in the United States. 
 
 LOUISIANA. 
 
 Wc gladly turn away from a melancholy review of past disasters, and 
 enter upon a scene of still larger operations in Louisiana. The State was 
 admitted into the Union in 1812, but there was a bank in the territory in 
 1805, of 8500,000, which, in 1815, was increased to $1,432,300, distributed 
 among three banks, and in 1820 four banks, with $2,597,420. There 
 are no reliable returns of the banks between 1820 and 1830, but as the 
 increase of their number in the United States was but twenty-two, and of 
 their capital only eight millions, we take Mr. Gallatin's report of four 
 banks in 1830, as the actual number in Louisiana at that period, as " in 
 all the Western and Southwestern States there were, in 1830, only eigh- 
 teen banks, with capitals amounting to 69,402,268. By the first of Janu- 
 ary, 1837, the number of banks in these States was increased to 161, 
 including branches, with paid up capitals of the amount of $88,699,974," 
 of which Louisiana had 16 banks, with 31 branches, and $36,769,455 
 capital, $7,909,788 circulation, §11,487,431 deposits, $3,108,416 specie, 
 and loans $59,108,741, which was the highest point of the operations of 
 the banks. Kiles' Register of March, 1836, gives the following statement 
 of bank capital in Louisiana, at that date : — 
 
 In 1811 . . . 8754,000 In 1834 . . . 823,364,000 
 
 In 1815 . . . 1.432,000 In 1835 . . . 27,172,000 
 
 In 1820 . . . 2,597,000 In 1836 . . . 56,000,000 
 
 In 1830 . . . 5,665,000 
 
 Of which about thirty-two millions were paid in, and the circulation of 
 six millions — less than the specie in the banks to redeem it. The ofiBcial 
 reports, however, exhibit a more correct view of the matter, and from it 
 we copy the following table : — 
 
 Years. Banks. Branches. Capital. Circulation. Specie. Loans. 
 
 1837 . . 16 31 . $36,769,455 $7,909,788 $3,108,416 $59,108,741 
 
 1840 . 16 31 41,711,214 6,443,783 3,163,243 48,64R,799 
 
 1843 . . 6 22 20,929,.340 1,087,377 4,451,023 20,420,948 
 
 1846 . . 6 22 17,528,910 4,206,788 6,636,394 21,582,744 
 
 Comparative Condition of the Bnnlcsof Nexo Orleans for ten years, on the 
 last Saturday of August for each year. 
 
 Years. 
 
 Specie. 
 
 Circulation. 
 
 Deposits. 
 
 Loans and 
 discounts. 
 
 Exchange. 
 
 1849 
 
 $6,907,387 
 
 $4,556,660 
 
 86,077,840 
 
 $13,746,489 
 
 $1,291,137 
 
 1850 
 
 4,801,050 
 
 4,607,508 
 
 6,515,542 
 
 15,072,890 
 
 1,495,807 
 
 1851 
 
 4,894,409 
 
 3,950,854 
 
 6,792,140 
 
 15,742,096 
 
 1,272,540 
 
 1852 
 
 6,332,840 
 
 6,770,886 
 
 8,220,003 
 
 14,96.3,917 
 
 1,163,607 
 
 1853 
 
 7,280,059 
 
 6,456,360 
 
 8,052,822 
 
 16,737,698 
 
 1,088,458 
 
 1864 
 
 7,595,376 
 
 6,289,014 
 
 10,100,817 
 
 18,285,110 
 
 1,923,207 
 
 1855 
 
 6,328,341 
 
 5,940,239 
 
 9,152,874 
 
 19,349,270 
 
 1,570,677 
 
 1856 
 
 0,001,698 
 
 7,442,550 
 
 10,643,795 
 
 23,512,273 
 
 2,082,029 
 
 1857 
 
 6,560,052 
 
 8,325, .324 
 
 9,706,003 
 
 24,294,933 
 
 2,265,624 
 
 1858 
 
 11,173,021 
 
 6,731,599 
 
 13,343,938 
 
 21,405,648 
 
 4,081,875
 
 Banking in the United States. 
 
 Statement of the New Orleans Banks — 18G0. 
 
 Total 
 
 
 Cash Assets. 
 
 
 
 
 Loaus. 
 
 Specie. 
 
 
 March 3. 
 
 Feb. 2.3. 
 
 March 3. 
 
 Feb. 2j. 
 
 Citizens' Bank 
 
 $5,498,337 
 
 $5,512,065 
 
 $3,811,421 
 
 $3,712,561 
 
 Canal Bank 
 
 1,882,721 
 
 1,780,111 
 
 . 1,048,850 
 
 1,041,732 
 
 Louisiana 
 
 3,617,481 
 
 3,437,592 
 
 1,658,964 
 
 1,704,164 
 
 Louisiana State 
 
 5,523,162 
 
 5, .330, 978 
 
 3,599,690 
 
 3,561,043 
 
 Mechanics' and Traders' 
 
 1,589,252 
 
 1,550,994 
 
 395,481 
 
 423,669 
 
 Bank of New Orleans 
 
 1,823,991 
 
 1,646,497 
 
 461,510 
 
 655,241 
 
 Southern Bank 
 
 228,457 
 
 222,456 
 
 329,152 
 
 202,607 
 
 Union Bank . 
 
 1,712,000 
 
 1,770,471 
 
 535,175 
 
 546,929 
 
 Merchants' 
 
 671,177 
 
 758,375 
 
 330,439 
 
 320,194 
 
 Crescent City . 
 
 1,227,435 
 
 1,239,343 
 
 237,080 
 
 228,012 
 
 Bank of America . 
 
 1,171,597 
 
 1,146,405 
 
 544,241 
 
 492,322 
 
 Total . 
 
 ' $24,946,210 
 
 $24,395,287 
 
 $12,952,008 
 Increase . 
 
 $12,945,074 
 
 
 Increase . 
 
 . $550,923 
 
 . . $6,829 
 
 
 Cash Liabilities. 
 
 
 
 
 Circulation. 
 
 Deposits. 
 
 
 
 
 
 
 March 3. 
 
 Feb. 25. 
 
 March 3. 
 
 Feb. 25. 
 
 Citizens' Bank 
 
 $5,321,885 
 
 $5,196,790 
 
 $4,664,931 
 
 $4,582,396 
 
 Canal Bank 
 
 1,613,560 
 
 1,600,865 
 
 1,073,880 
 
 1,066,195 
 
 Louisiana 
 
 898,439 
 
 862,064 
 
 3,965,180 
 
 3,866,323 
 
 Louisiana State 
 
 3,004,740 
 
 2,928,195 
 
 5,744,261 
 
 5,356,082 
 
 Mechanics' and Traders' 
 
 424,795 
 
 422,810 
 
 975,392 
 
 958,204 
 
 Bank of New Orleans 
 
 670,650 
 
 670,750 
 
 1,208,842 
 
 1,257,294 
 
 Southern Bank 
 
 291,560 
 
 291,905 
 
 428,940 
 
 415,376 
 
 Union Bank 
 
 629,435 
 
 089,075 
 
 1,130,829 
 
 1,271,999 
 
 Merchants' Bank . 
 
 460,785 
 
 461,845 
 
 600,841 
 
 626,649 
 
 Crescent City . 
 
 285,585 
 
 279,575 
 
 429,860 
 
 429,401 
 
 Bank of America 
 
 248,965 
 
 246,545 
 
 1,183,752 
 
 1,120,894 
 
 $13,850,399 $13,600,419 $21,400,708 $20,850,813 
 
 Increase . . $249,980 
 Exchange. 
 
 Increase . . $555,895 
 Due distant banks. 
 
 
 March 3. 
 
 Feb. 25. 
 
 March 3. 
 
 Feb. 25. 
 
 Citizens' Bank 
 
 $2,882,828 
 
 $2,776,959 
 
 $244,439 
 
 $353,962 
 
 Canal Bank 
 
 1,469,155 
 
 1,533,052 
 
 139,825 
 
 218,492 
 
 Louisiana 
 
 725,876 
 
 679,245 
 
 156,678 
 
 275,931 
 
 Louisiana State 
 
 830,138 
 
 703,790 
 
 384,981 
 
 233,904 
 
 Mechanics' and Traders' 
 
 327,749 
 
 298,014 
 
 15,768 
 
 74,765 
 
 Bank of New Orleans 
 
 440,545 
 
 460,.300 
 
 124,605 
 
 160,284 
 
 Southern Bank 
 
 992,632 
 
 1,112,137 
 
 
 
 Union Bank . 
 
 151,834 
 
 277,156 
 
 121,019 
 
 231,537 
 
 Merchants' Bank . 
 
 127,107 
 
 105,952 
 
 79,096 
 
 72,209 
 
 Crescent City . 
 
 71,965 
 
 62,290 
 
 10,909 
 
 6,042 
 
 Bank of America . 
 
 1,224 
 
 13,834 
 
 15,156 
 
 8,181 
 
 Total . 
 
 $8,027,053 
 Decrease . 
 
 $8,083,929 
 . $56,876 
 
 $1,292,470 
 Decrease . 
 
 $1,035,257 
 
 
 . $342,781 
 
 In 185G, there were nine banks, whose caputals amounted to 815,702,600. 
 As New Orleans is the grand entrepot of the products of the whole South- 
 western country, large banking facilities arc requisite to expedite the cotton, 
 
 505
 
 Banldmj in the United States. 
 
 sugar and tobacco shipped annually from this great commercial mart, and 
 to supply the demands of the planters during each successive season. 
 
 Louisiana adopted a free banking law in the year 1853 ; one section of 
 which provides that " Every bank or banker is required to have on hand 
 at all times, in specie, an amount equal to one-third of all their liabilities 
 (independently of circulating notes), and two-thirds in specie funds, bills 
 of exchange, or paper maturing within ninety days." For the circulating 
 notes the banks are compelled to deposit bonds of the United States, or of 
 the State of Louisiana, or of the city of New Orleans. 
 
 ALABAMA. 
 
 Alabama was admitted into the Union in 1819, and in the following 
 year there were three banks, whose capitals amounted to $469,11*2; in 
 1830, one bank, with $495,503 capital, and we give the tabular statements 
 of four years, to exhibit its bunk history during the memorable epoch of 
 1836-42. 
 
 Years. Capital. Circulation. Specie. Deposits. Discounts. 
 
 1836 . . 86,.')58,000 8(5,172,000 $1 ,.562,000 83,152,000 §15,020,000 
 
 1840 
 
 1841 
 
 1842 
 
 1859 
 
 14,379,000 7,211,000 1,589,000 2,827,000 24,183,000 
 
 14,346,000 1,728,000 685,000 980,000 23,065,000 
 
 3,067,700 19,000 28,000 629,000 2,948,000 
 
 In 1843, the banking capital was reduced to $1,500,000, the Bank of 
 Mobile being the only institution until 1851. The State owned two-fifths 
 of the stock, $600,000, for which it issued its bonds, and the bank paid 
 the interest thereon. Since then, the Southern Bank of Alabama, capital 
 $500,000, Bank of Montgomery, $100,000, the Northern Bank of Ala- 
 bama, $200,000, the Eastern Bank, the Bank of Alabama, with a capital 
 of $500,000, and others, have been organized. In 1850 a free banking 
 law was passed, but there has been no advantage taken of its privileges, 
 by establishing any such institution in the State. " The Bank of the 
 State" has been winding up its affairs ever since the expiration of its 
 charter, and it has furnished another illustration of the principle that 
 there should be no interwoven interests of State and bank, or of politics 
 and finance ; they may be correlative but not conjoint. The executive 
 messages have fully argued this point, and there is no occasion for further 
 comment. 
 
 MISSISSIPPI. 
 
 In 1830-'31 the Planters' Bank of Mississippi was chartered, with a 
 capital of $3,000,000, of which two-thirds were reserved for the State, 
 and one-third allotted to individuals. In July, 1831, the State issued 
 $500,000 six per cent, bonds, and in March, 1832, $1,500,000 more, for 
 her proportion of the stock. These bonds were sold at thirteen and one- 
 fourth per cent, advance, and yielded to the State a premium of $250,000. 
 
 500
 
 Banhing in (he United States. 
 
 This was deposited in the bank, as a sinking fund, to be increased by 
 the dividends on the State's stock in the bank, from which fund the 
 interest on the two millions of bonds was to be regularly paid. The bank 
 paid ten per cent, dividends up to September, 1839, when the State stock 
 was transferred to the Natchez Railroad Company. The sinking Sund 
 was then $800,000 beyond the amount required to pay the interest on the 
 State bonds. In ISoU to 1839, a large proportion of this fund was lost, 
 and the remnants left were only $60,000, to which about an ef|ual sum 
 has since been added by the commissioners, by collections from the assets 
 of the Planters' Bank. In 1835, the banking capital of the State amounted 
 to $12,000,000, and such was the prosperous condition of the State, that 
 it was proposed to add ten millions more to the amount; and in the ses- 
 sion of 18o5-'36, about seventeen millions of dollars in banks and rail- 
 roads were chartered. In 1837 there were eighteen banks in Mississippi, 
 the aggregate capitals of which were $12,872,815, having a circulation of 
 $5,073,425, and loans $24,351,414. But the end was not yet. In 1838, 
 " The Mississippi Union Bank" was chartered, with a capital of $15,500,- 
 000, to be " raised by means of a loan, to be obtained by the directors of 
 the institution." 
 
 All the banks in the State finally failed, and in 1859 only one, of 
 small capital, was left. Even this is represented to be without a legal 
 charter. The following table exhibits the condition of the banks of Missis- 
 sippi, their number, amount of capital, circulation, specie and loans, for 
 the years 1830, 1837, 1840, 1842, 1850, 1859:— 
 
 Years. 
 1830 
 1837 
 1840 
 1842 
 1856 . . 1 240,165 234,880 
 
 ARKANSAS. 
 
 We have little to say of Arkansas, where there are no remaining banks 
 to claim our attention. There were foimerly two banks in Arkansas, the 
 Real Estate Bank and the Bank of the jState of Arkansas. They are 
 both in the hands of trustees for liquidation, and are indebted to the State 
 about $1,500,000, and interest to an equal amount for State bonds loaned 
 to them, and still unpaid. This State was admitted into the Union in 
 December, 1817, and it had then one bank, with a capital of $100,000. 
 In 1820 this capital was increased to $900,000, and in 1830 it had but 
 one bank, capital $950,600. 
 
 In Arkansas there are no banks of issue. Private bankers operating on 
 their own capital and their own credit, but issuing no notes for circula- 
 tion, are found amply competent to perform all the banking functions that 
 the business of the people legitimately require. Since the business has 
 been left to men personally responsible in the whole extent of their en- 
 gagements, the rates of exchange on New York and other commercial 
 
 507 
 
 Janks, 
 
 Capital. 
 
 Circulation. 
 
 Specie. 
 
 Loans. 
 
 1 
 18 
 18 
 17 
 
 $950,600 
 
 12,872,815 
 
 30,379,403 
 
 9,261,200 
 
 $540,190 
 
 5,073,425 
 
 15,071,639 
 
 2,374,189 
 
 $77,665 
 
 1,369,467 
 
 867,977 
 
 11,223 
 
 $1^27,435 
 24,351,414 
 48,333,728 
 13,349,481
 
 Banhing in the United States. 
 
 places have been much more regular than they ever were when the cor- 
 porate banks were in their mo?t flourishing condition. 
 
 By an act of the 8th of February last, entitled "An act to prevent the 
 people from being defrauded with bank paper," severe penalties are im- 
 pose^J on all who shall, after the 4th of July of the present year, pass or 
 put in circulation, in Arkansas, any bank note of a less denomination than 
 ten dollars. After the 4th of July, 1860, the prohibition embraces all 
 notes of a less denomination than twenty dollars. 
 
 TEXAS. 
 
 This State was admitted into the Union in 1845, and although she has 
 cost the country a vast amount of money, in prolonged debates in Con- 
 gress, in the wasted hours of the excited masses of the people, in cities, 
 towns, and villages, and the exhaustion of all the intense expletives that 
 suppositive patriotism could invent, yet beyond those straws, after the 
 payment of the hard money of the contract, we believe that the govern- 
 ment have made a good bargain, and that her territory may be our favored 
 pathway to the Pacific. Professor Tucker, twenty-five years ago, said, 
 '* The banking mania has prevailed in the Southwestern States beyond 
 any other in the Union, not excepting New England, but in consequence 
 of which, with the most j^^o/itable agriculture in the United States, the 
 bank circulation has been the most depreciated, and they are still suffering 
 the evils of a disordered currency." 
 
 In 'iiexas, the Agricultural and Commercial Bank at Galveston, which 
 did business for some ten or twelve years under a territorial charter, ex- 
 pired last year of pure inanition ; and there is now no bank of issue in 
 that State.* 
 
 KENTUCKY. 
 
 This State was admitted into the Union in June, 1702, and the first 
 bank was established in 1802, with a capital of $150,000, in Lexington, 
 under the covert name of an insurance compani/, which was authorized to 
 issue notes, payable to bearer. In 1804 a regular bank was incorporated, 
 under the name of "The Bank of Kentucky," with a capital of 81,000,000. 
 This bank suspended payment in 1814, but resumed it in 1815; in 1817 
 forty new banks were incorporated with capitals amounting to $10,000,000, 
 and had permission to redeem their notes with the bills of Kentucky banks, 
 instead of specie. In 1818 the State was inundated with the paper of 
 these banks ; large loans were made, speculation was rife, and most of the 
 bubbles which were set afloat collapsed within one brief year. The pres- 
 sure became universal, and for " relief" the Legislature chartered a new 
 bank, "The Commonwealth," with a capital of three millions, pledging 
 the public faith fur the redemption of its circulation ; and as security held 
 
 * U. S. Treasury Report. 
 508
 
 Banhing in the United Slates. 
 
 certain lands, south of Tennessee River, as a guaranty. If a creditor 
 refused to receive this paper in payment, the debtor was authorized to 
 " replevy the debt for the space of two years." The paper of the new 
 bank fell fifty per cent., and creditors had the choice of the payment of 
 one-half the amount of their claims, or a delay of two years in the settle- 
 ment, with all the hazard of ultimate bankruptcy, and a total loss. The 
 conflict of the two parties, known as the '' relief" and " anti-relief," or 
 the " old court" and " new court," was the fiercest which ever agitated 
 the State, but after five years struggle, the " old court" party triumphed, 
 the replevin act was repealed, and the paper of the Commonwealth Bank 
 was suppressed, and ultimately destroyed by successive acts of the Legis- 
 lature. In 1833 the dominant party determined to supply the place and 
 currency of the two branches of the United States Bank, at Lexington 
 and Louisville, by the establishment of State banks; and in 1834 the 
 Bank of Kentucky, with a capital of five millions, the Northern Bank of 
 Kentucky, with three millions, and the Bank of Louisville, with five mil- 
 lions of dollars, were chartered, and are now in existence ; but whose 
 aggregate capitals are only $7,030,000, instead of the thirteen millions 
 granted. In 1837 all these banks suspended payments in specie, but 
 resumed again in 1839, and the Legislature chartered the Southern Bank 
 of Kentucky. Shortly afterward, however, the banks suspended a second 
 time, and the universal prostration of trade, the repudiation of their bonds, 
 by some of the States, and the universal derangement of the currency 
 South and West, prevented the stock of the new bank from being taken 
 up. The trading community was in a desperate condition, yet they stag- 
 gered on under their oppressive load of debts ; but by the liberal accom- 
 modations and indulgencies of the banks, they were partially relieved, until 
 1843, when the pressure gradually diminished, and shortly afterward it 
 ceased altogether. In 1842 the three banks resumed specie payments, 
 and from a circulation of $2,800,000 in 1842, gradually extended their 
 issues until 1850, when they amounted to $6,683,000. The Southern 
 Bank of Kentucky had its charter amended, and in 1852 went into opera- 
 tion with a capital of $1,300,000. Since then charters have been granted 
 to the Farmers' Bank, with $2,300,000 capital; the Commercial Bank, with 
 $400,000 ; the Kentucky Trust Company, with an miUmited capital ; and 
 the Newport Safety Fund Bank, with $300,000 capital. Both of these 
 latter institutions failed in 1854, and their notes were selling at fifty per 
 cent, discount ; and the small notes of the latter bank at 90 per cent. 
 With the exception of the charters of these two last banks, the legislation 
 of Kentucky has been of a fixed character, and her circulation has ever 
 been esteemed in the Western States as of the highest character! There 
 were, at the close of 1859, thirty-seven banks and branches in the State, 
 the aggregate of whose capitals is $12,660,000, and circulation about 
 $13,000,000. In the session of 1854 it was proposed to charter six new 
 banks, with capitals amounting to $6,100,000 ; but the governor having 
 vetoed one of the bills of incorporation, the bills all failed to pass, and 
 there for the present the matter rests. In January, 1860, an increase of 
 the capita] of the Southern Bank was authorized, vetoed by Governor 
 Magoffin, and the bill was afterward passed over the veto. 
 
 509
 
 Banking in the United States. 
 
 Condensed Statement of the KentucJcy Banhsfrom January, 1851, to 
 January, 1860. 
 
 
 
 
 Capital. 
 
 Circulation. 
 
 Cash 
 means. 
 
 Notes dis- 
 counted. 
 
 Bills of 
 exchange. 
 
 1851 
 
 
 §7,030,000 
 
 87,050,437 
 
 $2,475,153 
 
 84,852 
 
 ,969 
 
 86,860,6.36 
 
 1S52 
 
 
 
 8,108,825 
 
 8,501,121 
 
 3,418,0.35 
 
 5,110 
 
 ,726 
 
 9,422,267 
 
 1853 
 
 
 
 11,076,436 
 
 11,702,767 
 
 4,391,241 
 
 5,268,383 
 
 11,956,756 
 
 1854 
 
 
 
 10,022,250 
 
 ];!,573,5]0 
 
 4,594,369 
 
 4,812 
 
 ,574 
 
 13,688,592 
 
 1855 
 
 
 
 10,343, OSS 
 
 8,628,946 
 
 4,149,541 
 
 4,421 
 
 ,264 
 
 12,455,171 
 
 1856 
 
 
 
 10,404,822 
 
 12,634,533 
 
 4,610,016 
 
 5,348,396 
 
 15,638,209 
 
 1857 
 
 
 
 10,433,400 
 
 13,485,585 
 
 5,983,117 
 
 6,751 
 
 ,016 
 
 16,9.35,341 
 
 1858 
 
 
 
 10,074,070 
 
 8,884,225 
 
 5,648,100 
 
 5,295,0.39 
 
 12,.329.435 
 
 1859 
 
 
 
 12,14], 725 
 
 14,345,696 
 
 7,517,.395 
 
 6,717 
 
 ,926 
 
 16,956,796 
 
 1860 
 
 
 
 12,000,670 
 
 13,520,207 
 
 6,741,912 
 
 6,317 
 
 ,994 
 
 18,030,282 
 
 
 
 Notes and 
 
 Due from 
 
 Due to 
 
 
 . 
 
 Suspended 
 
 
 
 bills. 
 
 banks. 
 
 banks. 
 
 Deposiip. 
 
 debt. 
 
 1851 
 
 
 811,713,606 
 
 82,313,527 
 
 81,187,073 
 
 81,711,929 
 
 8222,192 
 
 1852 
 
 
 
 14,532,994 
 
 2,. 348, 180 
 
 2,1.33,042 
 
 1,830,824 
 
 21.3,495 
 
 1853 
 
 
 
 17,222,0.39 
 
 4,569,077 
 
 3,183,272 
 
 2,422 
 
 ,046 
 
 217,201 
 
 1854 
 
 
 
 20,728,192 
 
 3,961,758 
 
 2,800,759 
 
 2,748 
 
 ,362 
 
 180,297 
 
 1855 
 
 
 
 16,826,436 
 
 3,317,090 
 
 2,577,633 
 
 2,196,624 
 
 34.3,981 
 
 1856 
 
 
 
 20,950,772 
 
 2,541,778 
 
 2,555,832 
 
 2,522 
 
 ,692 
 
 347,955 
 
 1857 
 
 
 
 22,686,504 
 
 4,087,048 
 
 2,949,484 
 
 3,406 
 
 ,706 
 
 312,307 
 
 1858 
 
 
 
 17,642,845 
 
 3,507,623 
 
 3,195,154 
 
 2,324,857 
 
 487,186 
 
 1859 
 
 
 
 23,674,686 
 
 4,896,168 
 
 4,. 332. 922 
 
 4,301,867 
 
 315,076 
 
 1860 
 
 
 
 24,348,276 
 
 3,631,938 
 
 3,237,929 
 
 4,524,180 
 
 332,943 
 
 Consolidated Statement of the KentucJcy Banks 
 
 — January 1, 
 
 1860. 
 
 Ba 
 
 iks. 
 
 Capital. 
 
 Circulation. 
 
 Casli 
 means. 
 
 p .,, Notes dis- 
 *^'''"- counted. 
 
 Bills of 
 exchange. 
 
 Bank of Kontucky 
 
 . $3,700,000 
 
 82.673,353 
 
 $1,674,1.31 $857,842 $1,977,562 
 
 $4,873,982 
 
 Kortheri 
 
 Bank 
 
 
 2,2.30,000 
 
 2,232,928 
 
 1,424,868 
 
 8.50,899 
 
 1,545,921 
 
 3,103,241 
 
 Bank of Louij-ville 
 
 
 1,930,000 
 
 i,8r,i,so8 
 
 700,478 
 
 462,378 
 
 637,309 
 
 2,783,728 
 
 Southern 
 
 Bank 
 
 
 1,.')90,000 
 
 2,1.35,263 
 
 808,161 
 
 660,1.53 
 
 435,113 
 
 2,121,079 
 
 Farmers 
 
 Bank 
 
 
 1,700,000 
 
 2,235,003 
 
 918,448 
 
 812,492 
 
 875.4,56 
 
 2,790,267 
 
 Commercial Bank 
 
 
 1,094,62.5 
 
 1,645,228 
 
 777,212 
 
 556,193 
 
 288,104 
 
 1,9.56,214 
 
 Bank of 
 
 Ashland 
 
 
 311,890 
 
 467,495 
 
 308,246 
 
 196.153 
 
 314,038 
 
 292,743 
 
 People's 
 
 Bank 
 tal . 
 
 
 174,155 
 
 279,129 
 
 130,468 
 
 101,737 
 
 244,491 
 
 109,028 
 
 To 
 
 
 §12,660,670 
 
 $13,.520,207 
 
 $6,741,912 $4,497,847 $6,317,994 
 
 $18,030,282 
 
 Banks. 
 
 Real estate 
 bonds, &c 
 
 , Due from 
 banks. 
 
 ba^nVs*: I'^P-"- 
 
 Suspended Surplus 
 debt. fund. 
 
 Bank of 
 
 Kentucky 
 
 6286,963 
 
 $1,204,852 
 
 $1,324,667 $1 
 
 770,114 
 
 $118,296 
 
 $549,203 
 
 Northerr 
 
 Bank 
 
 
 116,685 
 
 967,402 
 
 957,682 1,152,.53S 
 
 95,475 
 
 630,!^22 
 
 Bank of 
 
 Louisville 
 
 
 149.182 
 
 599,081 
 
 608,509 
 
 306,113 
 
 6,241 
 
 79,879 
 
 Southern 
 
 Bank 
 
 
 35,475 
 
 459,198 
 
 149,083 
 
 285,807 
 
 56,063 
 
 409,289 
 
 Farmers 
 
 Bank 
 
 
 78,800 
 
 166,237 
 
 67,214 
 
 581,073 
 
 25,076 
 
 183,476 
 
 Commercial Uank 
 
 
 63,612 
 
 66,365 
 
 112,012 
 
 242,889 
 
 24.078 
 
 69,897 
 
 Bank of Ashland 
 
 
 39,600 
 
 43,214 
 
 19,065 
 
 154,350 
 
 4,295 
 
 33,087 
 
 People's 
 
 Bank 
 
 
 
 1,200 
 
 25,589 
 
 2:^ 
 
 31,296 
 
 3,419 
 
 29,356 
 
 Total 
 
 $771,517 $3,531,938 $3,237,920 $4,524,180 $332,943 .$1,885,009 
 
 Note. — The term "cash means" includes coin. Eastern exchange, and notes of other banks. 
 The Farmers' Bank and Southern Bank do not report Eastern exchange as a part of their "cash 
 means." 
 
 In the deposits of the Bank of Kentucky the State deposit ($785,815 63) is included. 
 
 Banks. 
 
 Circulation to 
 
 Circulation to Circulation 
 
 to $100 
 
 Surplus fund 
 
 $100 of stock. 
 
 §100 of coin. 
 
 of 
 
 cash means. 
 
 to capital. 
 
 Bank of Kentucky 
 
 $72 
 
 $312 
 
 
 $150 
 
 
 15 per cent 
 
 Northern Bank 
 
 99 
 
 202 
 
 
 157 
 
 
 23 1-2 
 
 Bank of Louisville 
 
 96 
 
 400 
 
 
 200 
 
 
 4 1-7 
 
 Southern Bank 
 
 142 
 
 323 
 
 
 264 
 
 
 27 1-3 
 
 Farmers' Bank 
 
 131 
 
 273 
 
 
 243 
 
 
 10 4-5 " 
 
 Commercial Bank . 
 
 150 
 
 296 
 
 
 212 
 
 
 2-5 
 
 Bank of Ashland . 
 
 141 
 
 231 
 
 
 150 
 
 
 10 1-2 
 
 People's Bank 
 
 160 
 
 273 
 
 510 
 
 
 214 
 
 
 17
 
 Banking in (he United States. 
 
 TENNESSEE. 
 
 At the close of the year 1859, there were in Tennessee fifty banks in 
 operation, including branches of the three leading banks, viz. : Bank of 
 Tennessee, Planters' Bank of Tennessee, and the Union Bank of Ten- 
 nessee. Their aggregate condition was then as follows : — 
 
 Dec. 1S59. ^ Dec. 1SJ9. 
 
 Capital . . . $8,361,000 Loans . . . . * $15,197,000 
 
 Circulation . . . 3,286,000 Specie . . . 2,857,000 
 
 Deposits . . . 5,183,000 Real estate and miscel- 
 
 1,712,000 laueous . . . 488,000 
 
 Total . . 618,542,000 Total . . $18,542,000 
 
 Before 1807 the currency of Tennessee consisted of coin purchased by 
 the sale of produce at New Orleans, the coin coming from South America, 
 Mexico and the West Indies. In 1807 the Legislature chartered the 
 Bank of Nashville, capital $200,000, afterwards increased to $400,000. 
 After one or two suspen.sions, it wound up with much loss. 
 
 In 1811 the Bank of Tennessee was chartered, capital $400,000, with 
 branches at Murfreesborough, Knosville, Kingston, Carthage, Gallatin, 
 Shelbyville, Franklin, Columbia and Winchester, with an aggregate 
 capital of about two millions, an enormous sum for that day and for such 
 villages. What number of these paper issuers went into operation does 
 not appear, nor what became of them, but doubtless they were wretched 
 concerns. In 1819 the Farmers and Merchants' Bank was chartered, 
 capital $400,000. It was a relief bank, and became insolvent in a year. 
 Redemption laws became necessary to rescue property of the debtor out of 
 the hands of the creditor. 
 
 In 1820 came the Bank of Tennessee, capital $1,000,000, based upoc 
 $250,000 State stocks and proceeds of Hiwassee lands. 
 
 In 1833 the Union Bank was chartered, capital stock not to exceed 
 three millions. The State took $500,000 of the stock j authorized it in 
 certain contingencies to take more than the lawful interest allowed to 
 others; declared that it should not refuse the payment of its notes or 
 dues to depositors, and if it did, that it should pay ten per cent, till paid ; 
 that the notes might be made payable at either of its branches, or at any 
 " respectable" bank in the Union, whether the same be in Maine, Arkan- 
 sas or Georgia ; that its notes and bills issued should in no case exceed 
 one hundred per cent, above the amount of capital stock paid in ; and by 
 declaring what the tax should be, tied up the taxing power from 1832 to 
 January, 1863, a period of thirty years. 
 
 In 1833, the Legislature chartered the Planters' Bank, to expire in 
 1863, capital $2,000,000. Its charter, in most material respects, similar 
 to that of the Union Bank, authorizing the issuance of four millions of 
 notes on two millions of capital stock. 
 
 In 1833, the Legislature chartered the Farmers and Merchants' Bank, 
 capital stock $600,000, charter perpetual ; in all other respects substan- 
 
 511
 
 Banlcing in the United States. 
 
 tially similar to the Union and Planters' Bank charters. This authorized 
 an issuance of $1,200,000 notes, or 8000,000 of corporate stock. 
 
 In 1844, the Bank of East Tennessee was chartered, capital $800,000 ; 
 stock maybe increased $200,000, with capacity thus to issue two millions 
 of notes on one million of stock paid. 
 
 .In 1848, the Lawrenceburg Bank was chartered, capital stock $100,000, 
 with powers and restrictions like the Planters' Bank. Individual liability 
 restricted to amount of stock. $200,000 notes may be issued on $100,000 
 of stock, and individual liability to $100,000. 
 
 In 1852, the Citizens' Bank of Memphis was chartered, to expire in 
 1881 ; capital stock $200,000, may be increased to $500,000. Individual 
 liability for all the debts of the corporation — the charter subject to repeal. 
 Charter similar to Planters' Bank in other respects. 
 
 In 1853, the Bank of West Tennessee was chartered, to expire in 1881 ; 
 capital stock $1,500,000, with right to issue three millions of notes on one 
 million and a half of stock. 
 
 In 1854, the Bank of Ocoee was chartered, capital stock $950,000, with 
 four branches, $100,000 each. It expires in 1884. Leading provisions 
 similar to Union and Planters' Bank charters. $2,050,000 notes on 
 81,325,000 stock. 
 
 In 1854, Bank of Chattanooga chartered, capital stock 8500,000, with 
 right to issue one million of notes. In other respects similar to Union 
 Bank charter. It expires in 1884. 
 
 In 1854, Mechanics' Bank of Memphis was chartered, with capital 
 stock of 8100,000, with right to issue $200,000 of notes. Stockholders 
 individually liable for all debts of the corporation. It expires in 1884. 
 Leading features similar to the Union and Planters' Banks. 
 
 In 1854, Agricultural Bank of Brownsville was chartered, capital stock 
 $100,000, with right to issue 8200,000 notes. It expires in 1884. Lead- 
 ing features like Union and Planters' Banks. 
 
 In 1854, the Bank of Shelbyville was chartered, capital stock $500,000, 
 with right to issue one million of notes. The right to repeal the charter 
 reserved. Its leading features are similar to Union and Planters' Bank 
 charters. 
 
 In 1850, the Bank of America was chartered, capital stock $1,000,000, 
 with right to issue two millions of notes. It expires in 1885. The Legis- 
 lature thought, probably, they were declaring the stockholders liable, but 
 there seems to be some doubt about it from the language used. Other 
 leading features similar to the Union Bank. 
 
 The statute books have been run over in much hurry, and there are, 
 therefore, very probably, errors in the statements, but it is believed to be 
 in the main correct, and it exhibits a list of, say sixteen millions of 
 authorized bank capital, with a right to issue, say thirty-two millions of 
 notes, one half of which rested on no corporate stock whatever. 
 
 512
 
 Banking in the United States. 
 
 MISSOURI. 
 
 Missouri was admitted into the Union in 1821. There was one bank 
 in existence prior to this date, but the first we find in the regular reports 
 is the State 13ank of Missouri, at St. Louis, with two branches in 1837, 
 and a capital of $533,000, which was afterwards increased to 81,200,000. 
 This bank proved very profitable to the State, and was continued until 
 March, 1857, when was passed " An act to regulate banks and banking 
 institutions, and to create the ofiice of bank commissioner." Under this 
 general law the following banks were authorized : — 
 
 Autliorized capital. 
 
 Exchange Bank of St. Louis, witli two branches . . $1,000,000 
 
 Bank of St. Louis, with two branches . . . ■ . 1,000,000 
 
 Merchants' Bank of St. Louis, with three branches . . 2,000,000 
 
 City Bank of St. Louis, with four branches . . . 2,000,000 
 
 Mechanics' Bank of St. Louis, with three branches . . 1,500,000 
 
 Southern Bank of St. Louis, with two branches . • 1,000,000 
 
 Farmers' Bank of Missouri, with two branches . . . 1,000,000 
 
 Western Bank of Missouri, with two branches . . . 1,000,000 
 
 Also the Bank of the State of Missouri with branches. 
 
 Liabilities and Resources of the Banks of the State of Missouri, 
 January 1, 1860. 
 
 Liabilities. 
 
 Capital owned by State 
 
 . 
 
 
 
 
 
 $1,000,000 
 
 Capital owned by individuals . 
 
 
 
 
 
 . 8,082,951 
 
 Amount due depositors 
 
 
 
 
 
 . 3,348,337 
 
 Unpaid dividends 
 
 
 
 
 
 8,839 
 
 Interest and exchange 
 
 
 
 
 
 796,478 
 
 Due to other banks . 
 
 
 
 
 
 1,200,010 
 
 Circulation outstanding 
 
 
 
 
 
 7,884,885 
 
 Due to parent bank on account 
 
 
 
 
 
 315,333 
 
 Contingent and surplus fund 
 
 
 
 
 , 
 
 289,768 
 
 Due to parent bank for capital . . ... 
 
 
 3,795,796 
 
 Total 
 
 $26,695,397 
 
 Eesodkces. 
 
 Capital stock in branches $3,641,901 
 
 Notes discounted 
 
 
 
 
 
 
 4,993,245 
 
 Exchange matured . 
 
 
 
 
 
 
 430,399 
 
 Bills of exchange 
 
 
 
 
 
 
 9,759,025 
 
 Suspended debt 
 
 
 
 
 
 
 278,526 
 
 Due from banks 
 
 
 
 
 
 
 1,090,506 
 
 Expense account 
 
 
 
 
 
 
 209,603 
 
 Notes of other banks 
 
 
 
 
 
 
 1,046,015 
 
 Coin on hand . 
 
 
 
 
 
 
 4,160,912 
 
 Due from branch banks 
 
 
 
 
 
 
 133,086 
 
 Real estate 
 
 
 
 
 
 
 256,509 
 
 Invested in State bonds 
 
 
 
 
 
 
 695,670 
 
 Total 
 
 $26,695,397 
 
 513
 
 Banl-i)i;/ in the United States. 
 
 The banks of the State have as much specie as all the Illinois, Wis- 
 consin, and Indiana Free Banks together. 
 
 The Bank of the State of Missouri has a capital of 81,000,000, and 
 branches at Fayette, Arrow Rock, Cape Girardeau, Palmyra, Springfield, 
 Louisiana, Chillicothe, St. Joseph, and Canton. 
 
 The Farmers' Bank of 3Iissouri has a capital of $1,000,000, and 
 branches at Paris and Liberty. 
 
 The Western Bank of Missouri has a capital of $260,210, with a 
 branch at Glasgow. 
 
 The Union liank of Missouri has a capital of $378,390, and branches 
 at Richmond, Kansas City, Warrensburgh, and La Grange. 
 
 'I'he Mechanics' Bank has a capital of $782,355, and branches at 
 Warsaw, Weston, and Kansas City. 
 
 The Southern Bank of St. Louis has a capital of $916,755, and 
 branches at St. Charles, Independence, and Savannah. 
 
 The Merchants' Bank of St. Louis has a capital of $1,493,000, and 
 branches at Brunswick, Osceola, and St. Genevieve. 
 
 The Exchange Bank of St. Louis has a capital of $732,178, and 
 branches at Glasgow and Columbia ; and the Bank of St. Louis a capital 
 of $461,520, with branches at Boonville and Kirkville. 
 
 We give a tabular statement of its operations, during a series of years, 
 from 1837 to 1850 :— 
 
 18.37 
 1840 
 1843 
 1846 
 1849 
 1850 
 1860 
 
 Banks and 
 branches. 
 
 2 
 
 2 
 
 3 
 
 5 
 
 5 
 
 5 
 
 Capital. Circulation. Deposits. 
 
 $533,538 
 1,116,123 
 1,200,688 
 1,200,582 
 1,208,167 
 1,208,751 
 
 $28,000 
 
 410,740 
 
 731,080 
 
 2,195,840 
 
 2,569,950 
 
 2,594,790 
 
 $119,855 
 1,174,532 
 1,116,672 
 1,296,428 
 1,735,409 
 1.377,288 
 
 Specie. 
 
 $466,715 
 562,902 
 1,260,294 
 1,453,614 
 2,427,685 
 1,902,986 
 
 Loans. 
 
 $1,109,050 
 2,077,841 
 951,949 
 2,958,495 
 3,152,028 
 3,265,275 
 
 40 9,082,900 7,884,000 3,348,000 4,160,000 14,100,000 
 
 OHIO. 
 
 The first bank chartered in Ohio was in 1803, called the Miami Ex- 
 porting Company, with a capital of $200,000. It was not a regular bank, 
 but " its main purpose was to facilitate trade, then suffering under great 
 depression." 
 
 The Bank of Marietta was chartered in 1808, and subsequently the 
 Bank of Chillicothe, the former with $500,000, the latter with $100,000 
 capital. Other institutions were soon after incorporated, aud the follow- 
 ing statement shows the progress of banking in the State : — 
 
 Years. 
 
 Banks. 
 
 Capital. 
 
 Years. 
 
 Banks. 
 
 Capital. 
 
 1805 
 
 1 
 
 $200,000 
 
 1838 
 
 33 
 
 89,247,296 
 
 1811 
 
 4 
 
 895,000 
 
 1840 
 
 37 
 
 10,507,521 
 
 1815 
 
 12 
 
 1,484,719 
 
 1845 
 
 8 
 
 2,171,807 
 
 1816 
 
 21 
 
 2,061,027 
 
 1850 
 
 56 
 
 7,129,227 
 
 1820 
 
 20 
 
 l,7'.t7,4(J3 
 
 ]85() 
 
 GO 
 
 6,995,250 
 
 1835 
 
 24 
 
 5,Slt>,(>i)2 
 
 1859 
 
 53 
 
 5,413,000 
 
 511
 
 Banhing in the United States. 
 
 Of the banks chartered in this State, eighteen have been closed under 
 various circumstances of disaster or want of success, and their bills are 
 sold at fifty to seventy-five per cent, discount, and about thirty-six of 
 them have failed, and their bills are reported as worthless. Two branches 
 of the second Bank of the United States wece established in Cincinnati 
 and Chillicothe in 1817, and the State imposed a tax of $50,000 on each 
 branch in 1819 ; but after a long controversy in the courts, it was decided 
 at Washington that the tax was illegal, and the State submitted to the 
 decree. In 1845 a new system of banking was introduced into the State, 
 known as the " safety fund system," and under the same act, an " inde- 
 pendent bank system." The former was based upon the New York sys- 
 tem, but it was more perfect; it created a State bank, subdivided into 
 about forty branches, under the supervision of a Board of Control, who 
 furnish all the notes required for circulation ; and to this board each 
 branch is required to contribute ten per cent, of the amount required for 
 circulation, either in stocks of the State or of the United States, or the 
 amount in money; to be applied by the board, in case of need, to the 
 redemption of the notes of circulation of any one of the branches which 
 may fail. The independent banks are twelve in number, having a capital 
 of 8650,000. These banks are required to deposit with the State Trea- 
 surer certificates of stocks, either of the State of Ohio or of the United 
 States, for the entire amount of their circulation, which cannot exceed 
 three times the amount of their capital. These banks are annually exam- 
 ined by a commissioner appointed by the auditor, and quarterly returns 
 of their condition must be furnished to him, and are published with those 
 of the State Bank branches. The banks are all required to have thirty 
 per cent, of the amount of their circulation always on hand, in gold or 
 silver coin, or its equivalent in value, one-half at least being in gold or 
 silver; " but deposits in any bank or banker's hands of established credit 
 in the cities of New York, Boston, Philadelphia, or Baltimore, subject to 
 drafts at sight, and payable in specie, shall be deemed equivalent to gold 
 and silver." Of the banks chartered prior to 18-15, the Ohio Life Insur- 
 ance and Trust Company, chartered in 1834, was the last, and failed in 
 1857. In 1851, the Legislature passed an act authorizing " free bank- 
 ing," and under its provisions thirteen banks were established, the aggre- 
 gate of whose capitals was 8738,050, and a circulation was created of 
 S769,397. At one period this was nearly one million of dollars larger ; 
 but in consequence of some of the bank plates having been stolen, an 
 alarm was raised, and the notes of these banks were suddenly presented 
 for redemption. A few months after the passage of the free bank law, 
 the new Constitution of Ohio was submitted to the people and was adopted. 
 By its provisions the General Assembly were no longer authorized to 
 grant banking powers to associations. 
 
 515
 
 Banking in the United States. 
 
 Banks of the State of Ohio — February, 1860. 
 
 
 Resources. 
 
 
 
 
 Indpppnilput 
 
 Free 
 
 Branelips of 
 
 Total of all 
 
 
 liauks. 
 
 bauks. 
 
 State Bank. 
 
 Banks. 
 
 Specie 
 
 • 6120.957 
 
 $131,416 
 
 $1,576,267 
 
 81,828,641 
 
 Eastern deposits 
 
 172,700 
 
 335,164 
 
 990,870 
 
 1,498,796 
 
 Kotes of other banks 
 
 157,231 
 
 350,764 
 
 390,342 
 
 898,337 
 
 Due from other banks 
 
 ^9,966 
 
 285,268 
 
 793,735 
 
 1,168,970 
 
 Loans 
 
 1,428,092 
 
 1,414,402 
 
 8,257,368 
 
 11, 100,4' 13 
 
 State bonds 
 
 600,214 
 
 758,529 
 
 
 1,358,743 
 
 Safety fund 
 
 
 
 794,809 
 
 794,809 
 
 Real estate 
 
 75,415 
 
 29,107 
 
 611,391 
 
 718,914 
 
 Cash items 
 
 9,632 
 
 62,638 
 
 85,108 
 
 157,379 
 
 Other resources 
 
 72,453 
 
 37,098 
 
 855,176 
 814,355,066 
 
 901,722 
 
 Total . 
 
 82,727,320 
 
 $3,404,389 
 
 820,486,775 
 
 
 Liabilities. 
 
 
 
 Capital stock . 
 
 8550,000 
 
 8820,945 
 
 84,035,750 
 
 85,406,695 
 
 Keserved fund 
 
 ... 
 
 
 570,110 
 
 570,110 
 
 Safety fund 
 
 548,934 
 
 365,100 
 
 
 914,034 
 
 Circulation 
 
 538,820 
 
 652,867 
 
 6,792,202 
 
 7,983,889 
 
 Due banks and bankers . 
 
 87,629 
 
 504,315 
 
 198,627 
 
 790,569 
 
 Individual dei)osits 
 
 853,319 
 
 952,056 
 
 2,211,668 
 
 4,017,044 
 
 Dividends unpaid . 
 
 182 
 
 325 
 
 2,254 
 
 2,761 
 
 Contingent fund 
 
 87,849 
 
 40,407 
 
 265,708 
 
 393,966 
 
 Discounts and interest, &c 
 
 30,850 
 
 62,694 
 
 150,006 
 
 243,610 
 
 Bills payable . 
 
 
 5,000 
 
 48,167 
 
 53,167 
 
 State tax (set off on profits 
 
 ) i"oi7 
 
 ... 
 
 18,293 
 
 19,310 
 
 Other liabilities 
 
 28,720 
 
 678 
 
 62,216 
 
 91,615 
 
 Total . 
 
 §2,727,320 
 
 83,404,389 
 
 614,355,065 
 
 $20,486,775 
 
 
 INDIANA. 
 
 
 
 This State was admitted into the Union in 18 16, and in 1820 it had 
 two banks, whose capitals amounted to 6202,857. In 1834, the State 
 Bank of Indiana was incorporated, with a capital of $1,600,000, and with 
 ten branches, subsequently increased to thirteen in number. By the 
 original charter, $160,000 was assigned to each branch, but they were 
 subsequently authorized to increase the amount to 6250,000 each. The 
 branches were mutually liable for the debts of each other, but divided 
 their own profits ; each share was subject to a tax of twelve and one-half 
 cents for educational purposes, in lieu of all other taxes; but in case of 
 an ad valorem system of taxation in the State, then the stock was liable 
 the same as other capital, not exceeding, however, one per cent, altogether. 
 No note under y? ye dollars was allowed to be issued, and the Legislature 
 reserved the right to restrict it to ten dollars within ten years. The capi- 
 tal of any branch might be increased by and with the assent and concur- 
 rence of the Legislature and the directors of the State Bank. The 
 directors of the parent bank were to have charge of the plates and bank 
 paper of the branches, and were empowered to deliver to them an amount 
 
 516
 
 Banlcing in the United States. 
 
 of such paper not exceeding twice the amount of the stock subscribed for. 
 One-half of the stock was subscribed for and owned by the State, for 
 which they authorized bonds to be issued to the amount of $1,300,000, at 
 five per cent., to realize the funds to pay for their half of the stock ; the 
 remaining half was to be subscribed for, and owned by individuals and 
 corporations. The debts of each branch were limited to double the amount 
 of capital paid in, exclusive of deposits. In January, 1836, an amend- 
 ment was passed by the Legislature, and the discounts were allowed to be 
 extended to twice and a half of the amount of the capital paid in. la 
 1841, the branches were authorized to issue notes of a less denomination 
 than five dollars, not exceeding one million of dollars, on the payment of 
 one per cent, for the privilege; and of its circulation, about $3,800,000, 
 nearly one-sixth part was in small notes. After the resumption of specie 
 payments in 1838, out of the 959 banks then in existence in the United 
 States, 343 wholly suspended, and G'2 partially so ; of which latter num- 
 ber were those of the State Bank of Indiana, and which did not again 
 resume the payment of specie until October, 1841, when the branches 
 held §1,127,000 in specie, to meet a circulation of $2,900,000, and de- 
 posits amounting to $317,000 only. The charter of the State Bank of 
 Indiana expired January 1, 1857, after having been twenty years in 
 operation. A new institution, under the name of the Bank of the State 
 of Indiana, was chartered in the preceding year. The latter assumed the 
 business of the old one, and has now twenty branches established, with a 
 combined capital of $3,050,000. 
 
 This State adopted a general banking law in the year 1852, under 
 which over one hundred banks have been established. At the close of 
 1859, only seventeen of these were in active operation. The whole num- 
 ber of banks at that time, with their capital, etc., was as follows : — 
 
 
 No. Capital. Circulation. 
 
 Specie. 
 
 Free banks 
 
 Branches of State Bank 
 
 17 $1,344,000 $1,190,000 
 20 3,050,000 2,300,000 
 
 $150,000 
 1,069,000 
 
 Liabilities and Resources of the Banks of Indiana — Jidij 1. 
 
 , 1859. 
 
 Liabilities. 
 Capital 
 Circulation . 
 Deposits 
 Profits on hand. . 
 
 Resources. 
 
 $3,617,000 Loans .... 
 
 3,946,000 Specie 
 
 1,824,000 Real estate and miscel- 
 
 244,000 laueous . . ' . 
 
 $7,641,000 
 1,794,000 
 
 196,000 
 
 Total 
 
 $9,631,000 Total 
 
 ILLINOIS. 
 
 $9,631,000 
 
 Bank legislation in Illinois has been quite as extraordinary as in any 
 other State in the Union. This State was admitted into the Union in 
 December, 1818, but the first bank was established while it was under 
 territorial government, in 1813, at Shawneetown, the whole territory then 
 containing but 1500 inhabitants. In 1816 it was regularly incorporated, 
 and, aided by the government deposits, it acquired extensive credit, pay- 
 
 517
 
 Banhing in the United States. 
 
 ing specie for its bills until August, 1821, after the Kentucky banks had 
 suspended ; it was at length compelled to stop, and remained dormant 
 until February, 1835, when the Legislature renewed its charter until 1st 
 Januar}', 1857. In the following month its capital, originally $300,000, 
 was increased to $1,400,000, and subscribed for by the State; and their 
 bonds, payable in 1861, were issued to provide the funds for this increase 
 of capital. 
 
 The Constitution, in 1818, prohibited the establishment of any new 
 banks except a State Bank and its branches; aud in March, 1819, "the 
 State Bank of Illinois" was incorporated, with a capital of 84,000,000, 
 for twenty-five years, one-half to be subscribed for by individuals, and the 
 balance by the State, whenever the Legislature thought proper. This 
 charter was repealed in 1821, as no effort was made to carry it into opera- 
 tion, and another bank was chartered in lieu of it, with a capital of 
 8500,000, for ten years, to be owned by the State and managed by the 
 Legislature. The capital consisted of its office fiu-niture and hank-note 
 plates only ; and $300,000 were directed to be issued and loaned on notes 
 for one year, with mortgages as securities, and not exceeding $1,000 to 
 each individual. These notes were receivable for taxes aud all debts due 
 to the State or the bank. It had hardly commenced operations before its 
 bills fell to seventy-five per cent. ; shortly after to fifty per cent., and 
 finally to twenty-five per cent., when they ceased to circulate at all. The 
 members of the Legislature received their pay in the depreciated currency 
 at the market value, and on one occasion received $9 per day for their 
 services, which the State was compelled to redeem at par ; and a loan of 
 $100,000 received in these notes at par was paid out at fifty cents on the 
 dollar. 
 
 In February, 1835, a new bank was incorporated, with a capital of 
 $1,500,000, with the liberty to increase it to $2,500,000— the State 
 taking $100,000 of the stock ; but in March increased the capital 
 $2,000,000 ; the whole of which the State subscribed for. The bank 
 was allowed ^/?y days for the redemption of its bills, and was required to 
 redeem the $100,000 loan referred to. The career of this bank was 
 brief; it was shortly compelled to suspend payment, and in 1842 it went 
 into liquidation. After the suspension of specie payments in 1837, the 
 State was without any banks until 1851, when a general banking law was 
 passed. The bonds of all States paying six per cent, interest, United 
 States stocks and Illinois bonds at eighty per cent, were received by the 
 auditor in exchange for the notes of circulation, and the bank commenced 
 operations. The amount of bank-notes is limited to the amount of the 
 bonds in the hands of the auditor ; but the denominations are optional, so 
 that the loliole circulation may be in one dollar notes if the parties choose 
 to require them ; but in case of failure to redeem them, they are subject 
 to twelve and one-half per cent, damages per annum, ten days having 
 elapsed after specie is demanded, and the corporate privilege becomes for- 
 feited. The stockholders are individually liable for all the debts and 
 liabilities of the bank, and provision is made for the collection of the 
 same, if occasion should require. 
 
 518
 
 Banking in the United States. 
 
 Liabilities and Resources of the Banks of 
 
 Illinois. 
 
 
 Liabilities. 
 
 
 
 Jan 1858. 
 
 Jan. 1, 1860. 
 
 Capital . 
 Circulation . 
 Deposits 
 Profits on hand 
 
 . $4,679,300 
 
 5,238,900 
 
 658,000 
 
 6,400 
 
 $4,000,000 
 
 2,846,000 
 
 1,294,000 
 
 212,000 
 
 Total 
 
 . $10,582,600 
 Resodeces. 
 
 $8,352,000 
 
 Loans . 
 Specie . 
 Keal estate and 
 
 . $7,300,000 
 
 333,000 
 
 miscellaneous . 2,949,600 
 
 $7,994,000 
 
 269,000 
 
 89,000 
 
 Total 
 
 . $10,582,600 
 
 $8,352,000 
 
 MICHIGAN. 
 
 Michigan was admitted into the Union of the States in January, 1837; 
 and in 1838 there were eleven banks, with an aggregate capital of 
 $1,400,000. During that year many more were created, as the following 
 statement will show : — 
 
 Date. 
 February, 1838 
 January, 1841 
 January, 1843 
 December, 1843 
 December, 1844 
 December, 1845 
 December, 1840 
 January, 1848 
 January, 1849 
 January, 1850 
 January, 1854 
 January, 1856 
 
 The only banks which are now in existence in the State are the Michi- 
 gan Insurance Company, the Peninsular Bank, and Farmers and Mechan- 
 ics' Bank, all of Detroit. " Free bank laws" were adopted by this State 
 in 1849, and personal liability is also imposed upon the stockholders, but 
 the law was inoperative. At the close of 1859 the bank capital of Michi- 
 gan was only 6750,000, circulation $147,000, deposits $680,000, loans 
 11,400,000, specie S50,000. 
 
 LiahiUties and Resources of the Banks of Michigan — January 1, 1860. 
 
 Liabilities. Resources, 
 
 Capital .... $745,000 Loans .... $1,487,000 
 
 Circulation . . . 147,000 Specie .... 42,000 
 
 Deposits . . . 681,000 Real estate and miscel- 
 
 Profits on band . . 81,000 laneous . . . 125,000 
 
 Banks and branches. 
 
 Capital. 
 
 43 
 
 $2,397,715 
 
 4 
 
 1,000,000 
 
 2 
 
 428,700 
 
 5 
 
 719,100 
 
 3 
 
 202,650 
 
 6 
 
 815,697 
 
 2 
 
 176,167 
 
 1 
 
 139,450 
 
 1 
 
 147,650 
 
 5 
 
 392,530 
 
 6 
 
 1,084,718 
 
 5 
 
 1,100,000 
 
 Total 
 21 
 
 $1,654,000 
 
 Total 
 
 519 
 
 . $1,654,000
 
 Banking in the United States. 
 
 A general banking law was adopted in Michigan, February, 1857. Only 
 one bank has, however, been chartered under this law. As collateral 
 security for bank bills, the State treasurer is authorized to receive from 
 banks the bonds of the United States, and of the States of Michigan, 
 New York, the New England States, Pennsylvania, Indiana, Illinois, Ohio 
 or Kentucky, at the rate of ninety-five dollars on the hundred of the 
 market value in New York city. No bank to be chartered with less than 
 fifty thousand dollars capital, three-fourths of which may be invested in 
 State bond for deposit with the treasurer. (See Bankers' Magazine, N. 
 Y., October, 18.58, for the whole act.) Of the depressed condition of 
 the banking system of the State, Senator Chandler said in the United 
 States Senate, in March, 1860 : " In Michigan we have scarcely any bank- 
 ing capital. I think we have, in the State of Michigan, scarcely half a 
 million dollars of banking capital. What is the consequence ? That gold 
 comes in to fill the vacuum ? No, sir ; but the poorest class of currency 
 that will come in and circulate is the kind with which we are flooded. 
 Our brokers send off to Indiana, Illinois, and Wisconsin, and other States 
 where the currency is depreciated two or three per cent., and purchase it 
 with drafts on New York, and put it in circulation; and that is four-fifths 
 of the circulation of the State of Michigan at this time." 
 
 WISCONSIN. 
 
 The Western States are cursed with an inconvertible currency — one of 
 their greatest misfortunes. Illinois and Wisconsin have nearly two hun- 
 dred banks or currency mills where promises to pay on demand, prepared 
 in the most pleasing and highest style of the engraver's art, with flaming 
 tints, as safeguards against counterfeiting ; and the farmer, in exchanging 
 his wheat for one of these promises to pay, gets something that is con- 
 vertible into gold (at present) at a discount of two per cent, (if in small 
 amounts). If he has a few thousands, and sends these pretty promises 
 to the location of the bank of issue, thereby hoping to save the two per 
 cent, discount, he is " very respectfully" informed that the promise to pay 
 on demand does not mean exactly what he always supposed the word de- 
 mand to mean. In other words, the banks of Illinois and AVisconsin make 
 no pretensions to redeem their issues in coin on demand. Both these 
 States have an inconvertible currency issue to the amount of twelve mil- 
 lions of dollars and upwards. It is true these notes are secured by the 
 pledge of State or United States stocks, at a safe margin, and the notes 
 are, beyond question, eventually good for their nominal value, unless a 
 sudden depreciation in these securities should take place, which is hardly 
 probable. This system of banking is truly the perfection of the credit 
 system. It is a fine thing for the banker, but it is not a fine thing for the 
 farmer or the merchant. 
 
 Wisconsin was admitted into the Union in 1848. The first bank was 
 established in Milwaukie, in 1851, with a capital of S225,000. In 1852 
 the free banking law was adopted, similar to those in other States, receiv- 
 ing all State stocks paying six per cent., and first mortgage railroad bonds, 
 
 520
 
 Banhlnrj in the United States. 
 
 on roads of their own State, at eighty per cent, of their par value, but 
 not exceeding one-half of the cost of the road on which they are a lien, 
 nor for more than one-half the amount of the circulating notes delivered. 
 A tax of one and one-half per cent, was imposed, and the personal liability 
 of the stockholders, to the amount of their stock. 
 
 Date. 
 
 Banks. 
 
 Capital. 
 
 Circulation. 
 
 January, 1854 
 
 10 
 
 $554,000 
 
 $519,814 
 
 July, 1854 . 
 
 19 
 
 1,250,000 
 
 786,218 
 
 January, 1855 
 
 22 
 
 1,400,000 
 
 940,000 
 
 January, 1856 . 
 
 32 
 
 1,983,000 
 
 1,153,534 
 
 July, 1856 . 
 
 38 
 
 2,635,000 
 
 1,443,215 
 
 There is a bank controller by law, who has the supervision of the banks, 
 receives the securities, and issues the notes therefor. Bills under 85, of 
 foreign banks, are prohibited from circulation. 
 
 According to Governor Randall's message, the whole number of banking 
 associations doing business in Wisconsin, on the first Monday of January, 
 1860, was 114, with, a capital of 88,595,000— a decrease of 6285,000 
 during the year. The whole amount of countersigned notes issued and 
 delivered to the banks, and outstanding on the first day of January, 1860, 
 was 84,609,432. These notes are secured by the deposit of specie and 
 public stocks as follows : — 
 
 California St 
 
 ate stocks, 7 per cent. 
 
 
 
 
 
 $78,000 
 
 Georgia 
 
 5 
 
 " 
 
 
 
 
 
 41,000 
 
 Georgia 
 
 7 
 
 (1 
 
 
 
 
 
 20,000 
 
 Illinois 
 
 6 
 
 (I 
 
 
 
 
 
 555,020 
 
 Iowa 
 
 7 
 
 (( 
 
 
 
 
 
 10,000 
 
 Indiana 
 
 " 5 
 
 (( 
 
 
 
 
 
 60,000 
 
 Kentucky 
 
 « 6 
 
 (( 
 
 
 
 
 
 11,000 
 
 Louisiana 
 
 " 5 
 
 (1 
 
 
 
 
 
 10,000 
 
 Missouri 
 
 " 6 
 
 (( 
 
 
 
 
 
 2,049,000 
 
 Michigan 
 
 " 6 
 
 (1 
 
 
 
 
 
 188,000 
 
 N. Carolina 
 
 6 
 
 (( 
 
 
 
 
 
 403,500 
 
 Ohio 
 
 6 
 
 (f 
 
 
 
 
 
 228,000 
 
 Tennessee 
 
 6 
 
 (t 
 
 
 
 
 
 750,000 
 
 Virginia 
 
 " 5 
 
 11 
 
 
 
 
 
 57,600 
 
 Virginia 
 
 6 
 
 (1 
 
 
 
 
 
 183,000 
 
 Wisconsin 
 
 6 
 
 11 
 
 
 
 
 
 100,000 
 
 Minnesota 
 
 " 8 
 
 11 
 
 
 
 
 
 20,000 
 
 Racine and Missouri Railroad Company's bonds, 8 per cent. 
 
 
 27,000 
 
 Milwaukie and Missouri Railroad Company's bonds, 8 per cent. 
 
 50,000 
 
 
 Total 
 
 
 $4,974,120 
 
 Specie of org 
 
 anized banks 
 
 '..'.'.'.. $26,244 
 
 I 
 
 Specie of banks winding up 
 
 . . . 132,201 
 
 
 
 
 
 
 
 
 
 158,445 
 
 Total securities on deposit 
 521 
 
 $5,132,565
 
 Banking in the United Stales. 
 
 Liabilities and Resources of the Banks of ^yisconsin — January 1, 1860 
 
 Liabilities. Resoukces. 
 
 Capital . . . $7,995,000 
 
 Circulation . 
 Deposits 
 Profits on hand 
 
 Total 
 
 2,964,000 
 
 4,627,000 
 
 536,000 
 
 $16,122,000 
 
 Loans .... 
 
 Specie 
 Real estate and miscel- 
 laneous . 
 
 Total 
 
 $15,008,000 
 719,000 
 
 305,000 
 
 $16,122,000 
 
 Abstract of the Assets, Lia 
 lotca, from the ojficia 
 
 IOWA. 
 
 Lilities, and Condition of the State Bank of 
 I Returns for Monday^ March 7, 1859. 
 
 
 Capital 
 paid ill. 
 
 Due 
 
 depositors. 
 
 Circulation. 
 
 Due to 
 banks. 
 
 Dubuque Brancii . 
 
 $3(t,000 
 
 $61,018 54 
 
 $12,900 
 
 
 Davenport Branch . > 
 
 25,300 • 
 
 51,9(>3 30 
 
 17,919 
 
 $ 314 21 
 
 Des Moines Branch 
 
 25,000 
 
 25.331 35 
 
 • 22,450 
 
 4,130 91 
 
 Iowa City Branch • 
 
 25,000 
 
 26,498 45 
 
 23,248 
 
 404 00 
 
 Keokuk Branch 
 
 26,250 
 
 20,496 32 
 
 23,371 
 
 670 51 
 
 Mount Pleasant Branch 
 
 25,000 
 
 20,126 62 
 
 15,450 
 
 156 65 
 
 Muscatine Branch . 
 
 34,000 
 
 35,514 45 
 
 23,923 
 
 283 70 
 
 Oskaloosa Branch . 
 
 25,000 
 
 21,531 12 
 
 21,949 
 
 
 Total . 
 
 $215,550 
 
 $202,420 15 
 
 $161,210 
 
 $5,959 98 
 
 
 Specie ia 
 
 Due from 
 
 oaiis. 
 
 Safety 
 
 
 bauks. 
 
 banks. 
 
 
 fund. 
 
 Dubuque Branch . 
 
 . $27,469 12 
 
 $48,810 40 
 
 $22,855 03 
 
 $3,750 00 
 
 Davenport Branch . 
 
 35,243 12 
 
 15,109 87 
 
 37,152 20 
 
 6,000 00 
 
 Des Moines Branch 
 
 27,047 65 
 
 10,095 27 
 
 37,159 14 
 
 4,066 65 
 
 Iowa City Branch . 
 
 29,085 65 
 
 24,118 62 
 
 17,061 15 
 
 3,875 00 
 
 Keokuk Branch 
 
 20,070 82 
 
 21,364 44 
 
 25,991 62 
 
 4,880 00 
 
 Mount Pleasant Branch 
 
 18,256 34 
 
 12,603 56 
 
 22,255 50 
 
 5,932 50 
 
 Muscatine Branch . 
 
 15,432 00 
 
 38,922 29 
 
 28,789 90 
 
 8,743 75 
 
 Oskaloosa Branch . 
 
 16,458 37 
 
 12,414 25 
 
 29,061 51 
 
 8,990 00 
 
 Total . . . $189,063 07 $183,438 70 $220,276 11 $46,237 90 
 
 The State Bank of Iowa in December, 1859, had twelve branches, viz : 
 Muscatine, Dubuque, Keokuk, Mount Pleasant, Davenport, Oskaloosa, 
 Iowa City, Des Moines, Lyons City, Burlington, Washington and Fort 
 Madison. The condition of the banks on the 17th December, was as 
 follows : — 
 
 Safety fund 
 Specie . 
 Discounts 
 
 $84,181 91 
 244,135 40 
 682,473 59 
 
 Capital . 
 
 Circulation 
 
 Deposits 
 
 $421,920 00 
 481,204 00 
 464,443 79 
 
 A free banking law was adopted in Iowa, March 2'2d, 1S5R, which au- 
 thorizes the issue of bank notes based upon a deposit of bonds issued by 
 the United States, " or any stocks on which full interest is annually paid, 
 or the stocks of the State of Iowa," to be rated at ten per cent, below the 
 average market price at New York. The stock of each bank to be at least 
 
 522
 
 Banking in the United States. 
 
 S50,000. The new branches having been but a few months in business, 
 would hardly give a correct idea of their character or management, with- 
 out the comparison with the published statement for the month previous, 
 which shows for November the following diiferences, without including the 
 Fort Madison branch, which commenced business in October : — 
 
 Oct. 1859. Nov. 1S.5!). 
 
 Loans $608,582 $662,174 
 
 Circulation 352,647 450,304 
 
 Deposits 485,853 451,078 
 
 Specie 218,356 222,499 
 
 MINNESOTA. 
 
 Liabilities and Resources of the Banks of Minnesota — January 1, 1860. 
 
 Liabilities. Resources. 
 
 Capital .... $50,000 Loans .... $62,000 
 
 Circulation . . . 14,000 Specie .... 15,000 
 
 Deposits .... 13,000 Real estate and miscella- 
 
 Profits on hand . . 3,000 neous .... 3,000 
 
 Total . . . $80,000 Total . . . $80,000 
 
 A general banking law was adopted in Minnesota in July, 1858. The 
 authority to receive railroad bonds, guaranteed by the State, as collateral 
 for bank issues, has thus far been a disadvantage. Only a few banks were 
 established in 1859, and it is understood that they have all ceased busi- 
 ness. Thus it always will be, for banks established solely on State credit, 
 without an adequate specie basis. 
 
 CALIFORNIA. 
 
 In California there are no banks of issue. The people of that State 
 have steadily resisted all attempts to introduce paper money among them. 
 
 523
 
 MONEY: 
 
 A LECTURE 
 
 DELIVERED BEFORE THE NEW YORK 
 
 §e0grapjital M)i Statistical ^u\t% 
 
 THURSDAY, FEBRUARY, 1857. 
 
 BY HENEY C. CAEEY. 
 
 REPRINTED FROM THE MERCHANTS' MAGAZINE FOR APRIL, 1857.
 
 MONEY. 
 
 1. The single commoclity that is of uuiversal request is money. Go 
 where we may, we meet persons seeking commodities required for the 
 satisfaction of their wants, yet widely differing in their demands. One 
 needs food ; a second, clothing ; a third, books, newspapers, horses, or 
 ships. Many desire food, yet while one would have fish, another rejects 
 the fish and seeks for meat. Offer clothing to him who sought for ships, 
 and he would prove to have been supplied. Place before the seeker after 
 silks, the finest lot of cattle, and he will not purchase. The woman of 
 fashion rejects the pantaloons ; while the porter regards her slipper as 
 wholly worthless. Of all these people, nevertheless, there would not be 
 found even a single one unwilling to give labor, attention, skill, houses, 
 bonds, lands, horses, or whatever else might be within his reach, in ex- 
 change for money — provided, only, that the quantity offered were deemed 
 sufficient. 
 
 So has it been in every age, and so is it everywhere. Laplander and 
 Patagonian, almost the antipodes of each other, are alike in their thirst after 
 the precious metals. Midianite merchants paid for Joseph with so many 
 pieces of silver. The gold of Macedon bought the services of Demosthenes ; 
 and it was thirty pieces or silver that paid for the treason of Judas. African 
 gold enabled Hannibal to cross the Alps; as that of Spanish America has 
 enabled France to subjugate so large a portion of Northern Africa. Sov- 
 ereigns in the East heap up gold as provision against future accidents ; 
 and finance ministers in the West, rejoice when their accounts enable 
 them to exhibit a full supply of the precious metals. When it is other- 
 wise the highest dignitaries are seen paying obsequious court to the 
 Rothschild and the Baring, controllers of the supply of money. So, too, 
 when railroads are to be made, or steamers to be built. Farmers and 
 contractors, landowners, and stockholders, then go, cap in hand, to the 
 Croesuses of Paris and London, anxious to obtain a hearing, and desiring 
 to propitiate the man of power by making whatsoever sacrifice may seem 
 to be required. 
 
 2. Were a hundred ships to arrive in your port to-morrow, a single 
 one of which was freighted with gold, she alone would find a place in the 
 editorial columns of your journals — leaving wholly out of view the re- 
 maining ninety-nine, freighted with silks and teas, cloth and sugar. The 
 news, too, would find a similar place in almost all the journals of the 
 
 527
 
 Money. 
 
 Union, and for tlio reason, that all their readers, the "bears" excepted, 
 so much rejoice when money comes in, and so much regret when it goes 
 out. Of all the materials of which the earth is composed, there are none 
 BO universally acceptable as gold and silver — none in whose movements 
 so large a portion of every community feels an interest. 
 
 Why is this the case ? Because of their having distinctive qualities 
 that bring them into direct connection with the distinctive qualities of 
 man — facilitating the growth of association, and promoting the develop- 
 ment of individuality. They are the indispensable instruments of society, 
 or commerce. 
 
 That they are so, would seem to be admitted by those journalists when 
 giving to their movements so much publicity ; and yet, on turning to an- 
 other column, you would probably find it there asserted, that all this anx- 
 iety in regard to money was evidence of ignorance — the condition of man 
 being improved by parting with gold that he can neither eat, drink, nor 
 wear, in exchange for sugar that he can eat, and cloth that he can wear. 
 Such may be the case, says one reader, but, for my part, I prefer to see 
 money come in, because when it does so, I can borrow at six per cent.; 
 whereas, when it is going out, I have to pay ten, twelve, or twenty. This 
 is doubtless true, says another, but I prefer to see money arrive — being 
 then able to sell my hats and shoes, and to pay the people who make 
 them. It may be evidence of ignorance, says a third, but I always rejoice 
 when money flows inwards, for then I can always sell my labor; whereas, 
 when it flows outwards, I am unemployed, and my wife and children suf- 
 fer for want of food and clothing. Men's natural instincts look, thus, in 
 one direction, while mock science points in another. The first should be 
 right, because they are given of God. The last 7nay be wrong — being one 
 among the weak inventions of man. Which is right, we may now inquire. 
 
 3. The power of man over matter is limited to efiecting changes of 
 place and of form. For the one he needs wagons, horses, ships, and rail- 
 roads ; for the other, spades, plows, mills, furnaces, and steam-engines. 
 Among men, changes of ownership are to be efi"ected, and for that purpose 
 they need some general medium of circulation. 
 
 The machinery of exchange in use is, therefore of three kinds — that 
 required for producing changes of place, that applied to eff"ecting changes 
 of form, and that used for eff'ecting changes of ownership ; and were we 
 now to examine the course of proceeding with regard to them, we should 
 find it to be the same in all — thus obtaining proof of the universality of 
 the natural laws to whose government man is subject. For the present, 
 however, we must limit ourselves to an examination of the phenomena of 
 the machinery of circulation. 
 
 In the early periods of society, man has little to exchange, and there 
 are few exchanges — those which are made being by direct barter — skins 
 being given for knives, clothing, meat, or fish. With the progress of popu- 
 lation and wealth, however, all communities have endeavored to facilitate 
 the transfer of property, by the adoption of some common standard with 
 which to compare the value of the commodities to be exchanged — cattle 
 having thus been used among the early Greeks — while slaves and cattle, 
 or "living money," as it was then denominated, were commonly in use 
 
 528
 
 3Ion€y. 
 
 among the Anglo-Saxons — wampum among our aborigines — codfish 
 among the people of New England — and tobacco among those of Vir- 
 ginia. With further progress, we find them adopting successively iron, 
 copper, and bronze, preparatory to obtaining silver and gold, to be used 
 as the machinery for efiecting exchanges from hand to hand. 
 
 For such a purpose, the recommendations of those metals are very great. 
 Being scantily diffused throughout the earth, and requiring, therefore, 
 much labor for their collection, they represent a large amount of value — 
 •while being themselves of little bulk, and therefore capable of being 
 readily and securely stored, or transported from place to place. Not be- 
 ing liable to rust or damage, they may be preserved uninjured for any 
 length of time, and their quantity is, therefore, much less liable to varia- 
 tion than is that of wheat or corn, the supply of which is so largely de- 
 pendent upon the contingencies of the weather. Capable of the most 
 minute subdivision, they can be used for the performance of the smallest 
 as well as the largest exchanges ; and we all know well how large an 
 amount of commerce is efi"ected by means of coins of one and of three 
 cents that would have to remain unaffected; were there none in use of less 
 value than those of five, six, and ten cents. 
 
 To facilitate their use, the various communities of the world are accus- 
 tomed to have them cut into small pieces and weighed, after which they 
 are so stamped as to enable every one to discern at once how much gold 
 or silver is offered in exchange for the commodity he has to sell; but the 
 value of the piece is in only a very slight degree due to this process of 
 coinage.* In the early periods of society, all the metals passed in lumps, 
 requiring of course, to be weighed ; and such is now the case with much 
 of the gold that passes between America and Europe. Gold dust has also 
 to be weighed, and allowance has to be made for the impurities with 
 which the gold itself is connected; but with this exception, it is of almost 
 precisely the same value with gold passed from the mint and stamped with 
 an eagle, a head of Victoria, or of Nicholas. 
 
 4. A proper supply of those metals having been obtained, and this 
 having been divided, weighed, and marked, the farmer, the miller, the 
 clothier, and all other members of society, are now enabled to effect ex- 
 changes, even to the exent of purchasing for a single cent their share of 
 the labors of thousands, and tens of thousands, of men employed in making 
 railroads, engines, and cars, and transporting upon them annually hun- 
 dreds of millions of letters; or, for another cent, their share of the labor 
 of the hundreds, if not thousands, of men who have contributed to the 
 production of a penny newspaper. The mass of small coin is thus a saving 
 fund for labor, because it facilitates association and combination — giving 
 utility to billions of millions of minutes that would be wasted, did not a 
 demand exist for them at the moment the power to labor had been pro- 
 duced. Labor being the first price given for everything we value, and 
 
 * The heap of paper in the mill becomes slightly more valuable when it is 
 counted off and tied up in reams, and the heap of cloth is in like manner 
 increased in value when it is measured and tied up in pieces, for the reason that 
 both can be more readily exchanged. Precisely similar to this is the increase 
 of value resulting from the process of coinage. 
 
 529
 
 Money. 
 
 being the commodity that all can offer in exchange, the progress of com- 
 munities in wealth and influence is in the direct ratio of the presence or 
 absexice of an instant demand for the forces, physical and mental, of each 
 and every man in the community — resulting from the existence of a power 
 on the part of each and every other man, to offer something valuable in 
 exchange for it. It is the only commodity that perishes at the instant of 
 production, and that, if not then put to use, is lost forever. 
 
 AA''e are all momently producing labor-power, and daily taking in the 
 fuel by whose consumption it is produced; and that fuel is wasted unless 
 its product be on the instant usefully employed. The most delicate fruits 
 or flowers may be kept for hours or days; but the force resulting from 
 the consumption of food cannot be kept, even for a second. That the in- 
 stant power of profitable consumption may be coincident with the instant 
 production of this universal commodity, there must be incessant combina- 
 tion, followed by incessant division and subdivision, and that in turn fol- 
 lowed by an incessant recomposition. This is seen in the case above 
 referred to, where miners, furnace-men, machine-makers, rag-gatherers, 
 carters, bleachers, paper-makers, railroad and canal men, type-makers, 
 compositors, pressmen, authors, editors, publishers, newsboys, and hosts of 
 others, combine their efforts for the production in market of a heap of 
 newspapers that has, at the instant of production, to be divided off into 
 portions suited to the wants of hundreds of thousands of consumers. Each 
 of these latter pays a single cent — then perhaps subdividing it among 
 half a dozen others, so that the cost is perhaps no more than "a cent per 
 week ; and yet each obtains his share of the labors of all of the persons by 
 whom it had been produced. 
 
 Of all the phenomena of society, this processof division, subdivision, com- 
 position, and recomposition is the most remarkable ; and yet — being a 
 thing of such common occurrence — it scarcely attracts the slightest no- 
 tice. AVere the newspjfper above referred to, partitioned off into squares, 
 each representing its portion of the labor of one of the persons who had 
 contributed to the work, it would be found to be resolved into six, eight, 
 or perhaps even ten thousand pieces, of various sizes, small and great — 
 the former representing the men who had mined and smelted the ores of 
 which the types and presses had been composed, and the latter the men 
 and boys by whom the distribution has been made. Numerous as are 
 these little scraps of human effort, they are nevertheless, all combined in 
 every sheet, and every member of the community may — for the trivial 
 sum of fifty cents per annum — enjoy the advantage of the information 
 therein contained; and as fully as he could do, had it been collected for 
 himself alone. 
 
 Improvements in the mode of transportation are advantageous to man, 
 but the service they render, when compared with their cost is very small. 
 A ship worth forty or fifty thousand dollars cannot effect exchanges be- 
 tween men at opposite sides of the Atlantic to an extent exceeding five 
 or six thousand tons per annum ; whereas, a furnace of similar cost will 
 effect the transmutation of thirty thousand tons' weight of coal, ore, lime- 
 stone, food, and clothing, into iron. Compared with either of these, how- 
 ever, the commerce effected by the help of fifty thousand dollars' worth 
 
 530
 
 Money. 
 
 of little white pieces representing labor to the extent of three or five cents 
 — labor which by their help is gathered up into a heap, and then divided 
 and subdivided day after day throughout the year — and it will be found 
 that the service rendered to society, in economizing force, by each dollar's 
 worth of money, is greater than is rendered by hundreds, if not thousands, 
 employed in manufactures, or tens of thousands in ships or railroads ; and 
 yet there are able writers who tell us that money is so much " dead capi- 
 tal" — being "an important portion of the capital of a country that pro- 
 duces nothing for the country." 
 
 "Money, as money," says aneminent economist, "satisfies no want, an- 
 swers no purpose. * * The difference between a country with money, 
 and a country altogether without it, would," as he thinks, " be only one of 
 convenience, like grinding by water instead of by hand." A ship, as a 
 ship — a road, as a road — a cotton-mill, as a cotton-mill — in like manner, 
 however, "satisfies no want, answers no purpose." They can be neither 
 eaten, drunk, nor worn. All, however, are instruments for facilitating the 
 work of association, and the growth of man in wealth and power is in the 
 direct ratio of the facility of combination with his follow-men. To what 
 extent they do so, when compared with money, we may now inquire. To 
 that end, let us suppose that by some sudden convulsion of nature all the 
 ships of the world were at once annihilated, and remark the effect pro- 
 duced. The ship-owners would loose heavily ; the sailors and the porters 
 would have less employment ; and the price of wheat would temporarily 
 fall; while that of cloth would, for the moment rise. At the close of a 
 single year, by far the larger portion of the operations of society would 
 be found moving precisely as they had done before — commerce at home 
 having taken the place of that abroad. Cotton and tropical fruits would 
 be less easily obtained in Northern climes, and ice might be more scarce 
 in Southern ones ; but, in regard to the chief excjianges of a society like 
 our own, there would be no suspension, even for a single instant. So far, 
 indeed, would it be to the contrary, that in many countries commerce 
 would be far more active than it had been before — the loss of ships pro- 
 ducing a demand for the opening of mines, for the construction of furnaces 
 and engines, and for the building of mills, that would make a market for 
 labor, mental and physical, such as had never before been known. 
 
 Let us next suppose that the ships had been spared, and that all the 
 gold and silver, coined and not coined, mined and not mined, were anni- 
 hilated, and study the effect that would be produced. The reader of 
 newspapers — finding himself unable to pay for them in beef or butter, 
 cloth or iron — would be compelled to dispense with his usual supply of 
 intelligence, and the journal would be no longer printed. Omnibuses 
 would cease to run for want of sixpences ; and places of amusement would 
 be closed, for want of shillings. Commerce among men would be at an 
 end, except so far as it might be found possible to effect direct exchanges, 
 food being given for labor, or wool for cloth. Such exchanges could, 
 however, be few in number, and men, women, and children would perish 
 by millions, because of inability to obtain food and clothing in exchange 
 for service. Cities whose population now counts by hundreds of thou- 
 sands would, before the close of a single year, exhibit hundreds of blocks 
 
 531
 
 Money. 
 
 of unoccupied buildings, and the grass would grow in their streets. A 
 substitute might, it is true, be found — men returning to the usages of 
 those primitive times when wheat or iron, tobacco or copper, constituted 
 the medium of exchange ; but under such circumstances, society, as at 
 present constituted, could have no existence. A pound of iron would be 
 required to pay for a Tribune or a Herald, and hundreds of tons of any 
 of the commodities above referred to, would be needed for the purchase 
 of the weekly emission of either. Tons of them would be needed to pay 
 for the food consumed in a single eating-house, or the amusement fur- 
 nished in a single theatre; and how the wheat, the iron, the corn, or the 
 copper could be fairly divided among the people who had contributed to 
 the production of the journal, the food, or the amusement, would be a 
 problem entirely incapable of solution. 
 
 The precious metals are to the social body what atmospheric air is to 
 the physical one. Both supply the machinery of circulation, and the re- 
 solution of the physical body into its elements when deprived of the one 
 is not more certain than is that of the social body when deprived of the 
 other. In both these bodies the amount of force is dependent upon the 
 rapidity of circulation. That it may be rapid, there must be a full supply 
 of the machinery by means of which it is to be effected ; and yet there 
 are distinguished writers who mourn over the cost of maintaining the cur- 
 rency, as if it were altogether lost, while expiating on the advantages of 
 canals and railroads — not perceiving, apparently, that the money that can 
 be carried in a bag, and that scarcely loses in weight with a service of 
 half a dozen years, effects more exchanges than could be effected by a 
 fleet of ships, many of which would be rotting on the shores on which 
 they had been stranded, at the close of such a period of service, while the 
 remainder would already have lost half of their original value.* 
 
 Of all the labor-saving machinery in use, there is none that so much 
 economizes human power, and so much facilitates combination, as that 
 known by the name of money. Wealth, or the power of man to com- 
 mand the services of nature grows with every increase in the facility of 
 combination — this latter growing with the growth of the ability to com- 
 mand the aid of the precious metals. Wealth, then, should increase most 
 rapidly where that ability is most complete. 
 
 5. The power of a commodity to command money in exchange is 
 called its prick. Prices fluctuate with changes of time and place — wheat 
 being sometimes low, and at others high — and cotton commanding in one 
 country thrice the quantity of silver that would be given for it in another. 
 In one place, much money is required to be given for a little cloth ; 
 whereas, in another, much cloth may be obtained for little money. What 
 are the cauises of all these differences, and what the circumstances which 
 tend to affeot prices generally, we may now inquire. 
 
 * A three-cent piece, changinc,' liands ten times in a clay, effects exchanges in 
 a year to the extent of §100 ; or, if we take both sides of the excliaiiges, to that 
 of 8-00. Two thousand such i)ieces — costing $(J0 — engaged in circuhiting bread 
 at lionie, are capable of maintaining a greater amount of commerce than can be 
 maintained by a ship that has cost $30,000, engaged in ejecting exchanges 
 between the producers of cloth in Manchester and tea in China. 
 
 532
 
 Money. 
 
 A thousand tons of rags at the Rocky Mountains would not exchange 
 for a piece of silver of the smallest conceivable size ; whereas, a quire of 
 paper would command a piece so large that it would weigh an ounce, 
 Passing thence eastward, and arriving in the plains of Kansas, their rela- 
 tive values, measured in silver, would be found so much to have changed, 
 that the price of the rags would pay for many reams of the paper. Com- 
 ing to St. Louis, a further change would be experienced — rags having 
 again risen and paper having again fallen. Such, too, would prove to be 
 the case at every stage of the progress eastward — the raw material steadily 
 gaining, and the finished commodity losing, in price, until, at length, in 
 the heart of Massachusetts, three pounds of rags would be found to com- 
 mand more silver than would be needed for the purchase of a pound of 
 paper. The changes of relation thus observed are exhibited in the fol- 
 lowing diagram : — 
 
 Paper. 
 
 Massachusetts. 
 
 Rags. 
 
 The price of raw materials tends to rise as we approach those places iu 
 which wealth most exists — those in which man is most enabled to associate 
 with his fellow-man, for obtaining power to direct the forces of nature to 
 his service. The prices of finished commodities move in a direction ex- 
 actly opposite — tending always to decline as those of raw materials advance. 
 Both tend thus to approximate — the highest prices of the one being always 
 found in connection with the lowest of the other ; and in the strength of 
 the movement in that direction will be found the most conclusive evidence 
 of advancing civilization and growing commerce. 
 
 That all the facts are in entire accordance with this view, will be obvi- 
 ous to those who remark that cotton is low in price at the plantation, and 
 high in Manchester or Lowell ; whereas, cloth is cheaper in Lowell than 
 it is in Alabama or Louisiana. Corn, in Illinois, is frequently so cheap 
 that a bushel is given in exchange for the silver required to pay for a yard 
 of the coarsest cotton cloth ; whereas, at Manchester, it is so dear that it 
 pays for a dozen yards. The English farmer profits doubly — obtaining 
 much cloth for his corn, while increasing the quantity of corn by help of 
 the manure that is furnished by his competitor of the West. The latter 
 loses doubly — giving much corn for little cloth, and adding thereto the 
 manure yielded by the consumption of his corn, to the loss of which is 
 due the unceasing diminution of the powers of his land. 
 
 Looking backward in time, we obtaia results precisely similar to those 
 
 533
 
 Monei/. 
 
 obtained in passing from countries in which associated men are found, and 
 in which, consequently, wealth abounds, to those in which they are widely 
 scattered, and in which they are, therefore, weak and poor. At the close 
 of the fifteenth century, eight ecclesiastics, attending the funeral of Anne 
 of Brittany, were royally entertained at a cost of 3.13 francs, of money of 
 our time ; while the silk used on that occasion is charged at 25 francs. 
 The same quantity of silk could now be pui'chased for less than a franc 
 and a half — a sum that would be entirely insufficient to pay for a single 
 dinner. The owner of four quires of paper could then obtain for it more 
 money than was required for the purchase of a hog, and less than two 
 reams were needed for that of a bull. In P^ngland, hogs, sheep, and corn 
 were cheap, and were exported, while cloth was dear, and was therefore 
 imported. Coming down to a more recent period, the early portion of 
 the last century, we find that corn and wool were cheap, while cloth and 
 iron were dear ; whereas, at the close of the centur}', the former were 
 becoming dearer from day to day, while the latter were as regularly be- 
 coming cheaper. 
 
 6. Raw material tends, with the progress of men in wealth and civiliza- 
 tion, to rise in price. What, however, is raw material ? In answer to 
 this question, we may say, that all the products of the earth are, in their 
 turn, finished commodity and raw material. Coal and ore are the finished 
 commodity of the miner, and yet they are only the raw material of which 
 pig-iron is made. The latter is the finished commodity of the smelter, 
 and yet it is but the raw material of the puddler, and of him who rolls 
 the bar. The bar, again, is the raw material of sheet-iron — that, in turn, 
 becoming the raw material of the nail and the spike. These, in time, 
 become the raw material of the house, in the diminished cost of which 
 are found concentrated all the changes that have been observed in the 
 various stages of passage from the rude ore — lying useless in the earth — 
 to the nail and the spike, the hammer and the saw, required for the com- 
 pletion of a' modern dwelling. 
 
 In the early and barbarous ages of society, land and labor are very low 
 in price, and the richest deposits of coal and ore are worthless. Houses 
 being then obtained with exceeding diflliculty, men are forced to depend 
 for shelter against wind and rain upon holes and caves they find existing 
 in the earth. In time, they are enabled to combine their efforts ; and 
 with every step in the course of progress, land and labor acquire power 
 to command money in exchange, while the house loses it. As the ser- 
 vices of fuel are more readily commanded, pig-iron is more easily obtained. 
 Both, in turn, facilitate the making of bars and sheets, nails and spikes, 
 and all of these facilitate the creation of boats, ships, and houses ; but 
 each and every of these improvements tends to increase the prices of the 
 original raw materials — land and labor. At no period in the history of 
 the world has the general price of these latter been so high as in the 
 present one ; at none would the same quantity of money have purchased 
 so staunch a boat, so fleet a ship, or so comfortable a house. 
 
 The more finished a commodity, the greater is the tendency to a fall of 
 price — all the economics of the earlier processes being accumulated to- 
 gether in the later ones. Houses, thus, profit by all improvements in the 
 
 534
 
 Money, 
 
 making of bricks, in the quarrying of stone, in the conversion of lumber, 
 and in the working of the metals. So, too, is it with articles of clothing 
 — every improvement in the various processes of spinning, weaving, and 
 dyeing, and in the conversion of clothing into garments, being found 
 gathered together in the coat — the more numerous those improvements, 
 the lower being its price, and the higher that of the land and labor to 
 which the wool is due. 
 
 With every stage of progress in that direction, there is an increasing 
 tendency towards an equality in the prices of the more and the less fin- 
 ished commodities — and towards an approximation in the character of the 
 books, clothing, furniture, and dwellings of the various portions of society; 
 with constant increase in power to maintain commerce between those 
 countries which do, and those which do not, yield the metals which con- 
 stitute the raw material of money. 
 
 For proof of this, we may look to any of the advancing communities of 
 the world. In the days when the French peasant would have been re- 
 quired to give an ox for a ream and a half of paper, wine was much higher 
 than it is at present — peaches were entirely unattainable — the finer vege- 
 tables now in use were utterly unknown — a piece of refined sugar, or a cup 
 of tea or coffee, were luxuries fit for kings alone — and an ell of Dutch 
 linen exchanged for the equivalent of 60 francs — $11 25. Now — the 
 price of meat having wonderfully increased — the farm laborer is better 
 paid ; and the consequences are seen in the fact, that with the price of an 
 ox the farmer can purchase better wine than then was drunk by kings — 
 that he can obtain not only paper, but books and newspapers — that he 
 can eat apricots and peaches — that sugar, tea, and coffee have become 
 necessaries of life — and that he can have a supply of linen which would, 
 in earlier times, have almost sufficed for the entire household of a noble- 
 man. Such are the results of an increase in the facility of association 
 and combination among men ; and if we now desire to find the instrument 
 to which they are most indebted for the power to combine their efforts, we 
 must look for it in that to which we have given the name of money. Such 
 being the case, it becomes important that we ascertain what are the cir- 
 cumstances under which the power to command the use of that instrument 
 increases, and what are those under which it declines. 
 
 7. To acquire dominion over the various natural forces provided for his 
 use, is both the pleasure and the duty of man ; and the greater the amount 
 acquired, the higher becomes his labor, and the greater is the tendency to 
 increase of power. With each addition thereto, he finds less resistance 
 to his further efforts ; and hence it is, that each successive discovery 
 proves to be but the precursor of newer and greater ones. Franklin's 
 lightning-rod was but the preparation for the telegraph-wires that connect 
 our cities ; and they, in turn, are but the precursors of those destined 
 soon to enable us to read, at the breakfast-table, an account of the occur- 
 rences of the previous day in Europe, Asia, and Australia. Each succes- 
 sive year thus augments the power of man, and with every new discovery 
 utility is given to forces that now are being wasted. The more they are 
 utilized — the more nature is made to labor in man's service — the less is 
 the quantity of human effort required for the reprodxiction of the com- 
 2K 535
 
 Money. 
 
 modities needed for his comfort, convenience, or enjoyment — the less is 
 the value of all previous accumulations — and the greater is the tendency 
 towards giving to the labor of the present, power over the capital created 
 by the labors of the past. 
 
 Utility is the measure of man's power over nature. The greater it is, 
 the larger is the demand for the commodity or thing utilized, and the 
 greater the attractive force exerted upon it, wherever found. Look where 
 we may, we see that every raw material yielded by the earth tends towards 
 those places at which it has the highest utility, and that there it is the 
 value of the finished article is least.* Wheat tends towards the grist- 
 mill, and there it is that flour is cheapest. Cotton and wool tend towards 
 the mills at which they are to be spun and woven, and there it is that the 
 smallest quantity of money will purchase a yard of cloth. On the other 
 hand, it is where cotton has the least utility — on the plantation — that 
 cloth has the highest value. Therefore it is, that we see communities so 
 universally prospering when the spindle and the loom are brought to the 
 neighborhood of the plough and the harrow, to utilize their products. 
 
 Precisely similar to this are the facts observed in regard to the precious 
 metals, everywhere on the earth's surface seen to be tending towards those 
 places at which they have the highest utility — those at which men most 
 combine their efforts for utilizing the raw products of the earth — those in 
 which land most rapidly acquires a money value, or price — those, there- 
 fore, in which the value of those metals, as compared with land, most 
 rapidly diminishes — and those in which the charge for the use of money 
 is lowest. They tend to leave those places in which their utility is small, 
 and in which combination of action least exists — those, therefore, in which 
 the price of land is low, and the rate of interest high. In the first, there 
 is a daily tendency towards increase in the freedom of man ; whereas, in 
 the last, the tendency is in the opposite direction — towards the subju- 
 gation of man to the control of those who live by the expenditure of taxes, 
 rent, and interest. Desiring evidence of this, we have but to look around 
 us at the present moment, and see how oppressively rent and interest ope- 
 rate upon the poorer portions of society — how numerous are the applica- 
 tions for the smallest office — and, above all, how great has been the increase 
 of pauperism in the past three years, in which our exports of specie have 
 been so large. 
 
 'Looking to Mexico or Peru, to California or Siberia, we see but little 
 of that combination of action required for giving utility to their metallic 
 products — little value in land — and interest higher than in any other or- 
 ganized communities in the world. Following those products, we see them 
 passing gradually through the West, towards the cities of the Atlantic, or 
 through Ilussia to St. Petersburg — every step of their progress being to- 
 wards those States or countries in which they have the greatest utility — 
 those in which combination of action most exists, and in which, therefore, 
 man is daily acquiring power over the various forces of nature, and com- 
 
 * Value is the measure of the obstacle interposed by nature to the gratification 
 of the wishes of man. 
 
 536
 
 Money. 
 
 pelHng her more and more to aid him in his efforts for the attainment of 
 further power. 
 
 8. For more than a century, Great Britain constituted the reservoir 
 into which was discharged the major part of the gold and silver produced 
 throughout the world. There it was, that the artisan and the farmer were 
 most nearly brought together — the power of association most existed — 
 the ultimate raw materials of commodities, land and labor, were most 
 utilized, and the consumption in the arts, of gold and silver, was the great- 
 est.* Now the state of things is widely different. From year to year, 
 the land of the United Kingdom has become more consolidated — the little 
 proprietor having been superseded by the great middleman farmer, and 
 the mere day-laborer ; and the result is seen in the fact, that Great Brit- 
 ain has passed from being a place at which commodities are produced, to 
 be given in exchange for the produce of other lands — to being a mere 
 place of exchange for the people of those lands. With each successive 
 year, there is a decline in the proportion borne to the whole population 
 by the producing classes, and an increase in that borne by the non-pro- 
 ducing ones, with corresponding diminution in the power to retain the 
 products of the mines of Peru and Mexico. 
 
 The gold of California does not, as we know, to any material extent, re- 
 main among ourselves. Touching our Atlantic coast, only to be transferred 
 to steamers that bear it off to Great Britain, it there meets the product of 
 the Australian mines — the two combined amounting to more than a hun- 
 dred millions of dollars a year. Both come there, however, merely in 
 transit — being destined, ultimately, to the payment of the people of Con- 
 tinental Europe, who have supplied raw products that have been converted 
 and exported, or finished ones that have been consumed. Much of it goes 
 necessarily to France, whose exports have grown, in the short period of 
 twenty years, from 500,000,000 francs, to 1,400,000,000, and have steadily 
 maintained their commercial character. Manufactures are there the hand- 
 maids of agriculture; whereas in the United Kingdom, they are, with 
 each successive year, becoming more and more the substitutes for it. To 
 a small quantity of cotton, silk, and other raw products of distant lands, 
 France adds a large amount of the produce of her farms — thus entitling 
 herself not only to receive, but to retain for her own uses and purposes, 
 nearly all the commodities that come to her from abroad. Her position 
 is that of the rich and enlightened farmer, who sells his products in their 
 highest form — thus qualifying himself for applying to the support of his 
 family, the education of his children, and the improvement of his land, 
 the whole of the commodities received in exchange. That of Britain is the 
 position of the trader, who passes through his hands a large amount of 
 property, of which he is entitled to retain the amount of his commission, 
 and nothing more. The one has immense, and wonderfully growing com- 
 merce, while the other performs a vast amount of trade. 
 
 9. The precious metals are steadily flowing to the north and east of 
 Europe, and among the largest of their recipients we find Northern Ger- 
 
 * Thirty years since, the annual consumption of the precious metals in Great 
 Britain was estimated at £2,500,000, or $12,000,000. 
 
 537
 
 Money. 
 
 many, now so rapidly advancing in wealth, power, and civilization. Den- 
 mark and Sweden, Austria and Belgium, following in the lead of France, 
 in the maintenance of the policy of Colbert, are moving in the same di- 
 rection; and the consequences are seen in a growing habit of association, 
 attended with daily augmentation in the amount of production, and in the 
 facility of accumulation, as exhibited in the building of mills, the opening 
 of mines, the construction of roads, and the constantly augmenting power 
 to command the services of the precious metals. 
 
 The causes of these phenomena are readily explained. Raw materials 
 of every kind tend towards those places at which employments are most 
 diversified, because there it is that the products of the farm command the 
 largest quantity of money. Gold and silver follow in the train of raw 
 materials ; and for the reason, that where the farmer and the artisan are 
 most enabled to combine, finished commodities are always ch-eapest. When 
 Germany exported corn and wool, they were cheap, and she was required 
 to export gold to aid in paying for the cloth and paper she imported; be- 
 cause they were very dear. Now she imports both wool and rags ; her 
 farmers obtain high prices for their products, and are enriched ; and the 
 gold comes to her, because cloth and paper are so cheap that she sends 
 them to the most distant quarters of the world. So is it with France, 
 Belgium, Sweden, and Denmark — all of which are large importers of raw 
 materials, and of gold. In all those countries, raw materials rise in price ; 
 and the greater the tendency to rise, the more rapidly nuist the current of 
 the precious metals set in that direction. The country that desires to in- 
 crease its supplies of gold, and thus lower the price of money, is, therefore, 
 required to pursue that course of policy tending most to raise the prices 
 of raw material, and lower those of manufactures. This, however, is di- 
 rectly the opposite of the policy advocated by the British school, which 
 seeks, in the cheapening of all the raw material of manufactures, the means 
 of advancing civilization. 
 
 10. The reverse of what is above described is found in Ireland, Turkey, 
 and Portugal, so long the close allies of England — and so uniformly fol- 
 lowing in the course of policy now advocated by her economists. From 
 each and all of them, there has been an unceasing drain of money — 
 the disappearance of the precious metals having been followed by decline 
 in the productiveness of agriculture — in the prices of commodities, in the 
 value of land, and in the power of man. 
 
 France in the decade prior to the Eden treaty in 1786, was advancing 
 in both manufactures and commerce with great rapidity, as is shown con- 
 clusively in M. de Tocqueville's recent work.* Raw materials and the pre- 
 
 * " Sinjultaneous with, these changes in the minds of governed and governors, 
 public prosperity began to develop with unexampled strides. This is shown by- 
 all sorts of evidence. Population increased rapidly ; wealth more rapidly still. 
 The American war did not check the movement — it completed the embarrass- 
 ment of the State, but did not impede private enterprise ; individuals grew more 
 industrious, more inventive, richer than ever. 
 
 "An official of the time states that in 1774 'industrial progress had been so 
 rapid that the amount of taxable articles had largely increased.' On comparing 
 the various contracts made between the State and the companies to which the 
 
 538
 
 Money. 
 
 cious metals flowing in, and manufactured goods flowing out, the result 
 was seen in a daily increasing tendency towards the division of land, the 
 improvement of agriculture, and the increase of human freedom. From 
 the date of that treaty, however, all was changed. Manufactures flowed 
 in, and gold flowed out, with daily decline in the power of association, in 
 the wages of labor, and in the value of land. Universal distress producing 
 a demand for change of policy, its eff"ect was seen in the calling together 
 of the States-General, whose appearance on the stage for the first time in 
 a hundred and eighty years, was so soon to be followed by a revolution, 
 that sent to the guillotine the most of those by whom that treaty had 
 been made. 
 
 Looking to Spain, we see her poverty to have steadily increased from 
 the hour, when, by expelling her manufacturing population, she rendered 
 herself dependent upon the workshops of other countries. Mistress of 
 Mexico and Peru, she acted merely as the conduit through which their 
 wealth passed to the advancing countries of the world, as is now the case 
 with Great Britain and the United States. 
 
 Turning next to Mexico, we see her to have been declining steadily in 
 power from the day on which she obtained her independence ; and for the 
 reason, that from that date her manufactures began to disappear. From 
 year to year she becomes more and more dependent upon the trader, and 
 more and more compelled to export her commodities in their rudest state ; 
 as a necessary consequence of which, her power to retain the produce of 
 her mines is constantly diminishing. 
 
 11. The facts thus far presented, may now be embodied in the follow- 
 ing propositions : — 
 
 Raw materials tend towards those countries in which employments are 
 most diversified — in which the power of association most exists — and in 
 which land and labor tend most to rise in price. 
 
 The precious metals tend towards the same countries ; and for the rea- 
 son, that there it is that finished commodities are least in price. 
 
 The greater the attractive force exerted upon those raw materials and 
 this gold, the more does agriculture tend to become a science — the larger 
 are the returns to agricultural labor — the more steady and regular becomes 
 the motion of society — the more rapid is the development of the powers 
 of the land, and of the men by whom it is occupied — the larger is the 
 commerce — and the greater the progress towards happiness, wealth, and 
 power. 
 
 Raw materials tend/rom those countries in which employments are least 
 
 taxes were farmed out, at different periods during the reign of Louis XVI., one 
 perceives that the yield was increasing with astonishing rapidity. The lease of 
 1786 yielded fourteen millions more than that of 1780. Necker, in his report of 
 1781, estimated that 'the produce of taxes on articles of consumption increased 
 at the rate of two millions a year. 
 
 "Arthur Young states that in 1788 the commerce of Bordeaux was greater than 
 that of Liverpool, and adds that ' of late years maritime trade has made more 
 progress in France than in England ; the whole trade of France has douhled in 
 the last twenty years.' " — De Tocqueville, The Old Regime and the Revolution, 
 p. 210. 
 
 539
 
 Money. 
 
 diversified — those in which the power of combination least exists — and 
 those consequently, in which land and labor are least in price. 
 
 The precious metals, too, tend to leave those countries, because there it 
 is that finished commodities are dearest. 
 
 The greater the expulsive force that is thus exhibited, the slower is the 
 circulation of society, and the smaller is the amount of commerce — the 
 more rapid is the exhaustion of the soil — the lower is the condition of 
 agriculture — the less is the return to the labors of the field — the lower 
 are the prices of the products of the farm — the less is the regularity of the 
 motion of society — the greater is the power of the trader — and the stronger 
 is the tendency towards pauperism and crime among the people, and to- 
 wards weakness in the government. 
 
 The portions of the world /ram which the precious metals flow, in which 
 agriculture declines, and men become less free, are those which follow in 
 the lead of England — preferring the supremacy of trade to the extension 
 of commerce — Ireland, Turkey, Portugal, India, Carolina, and other ex- 
 clusively agricultural countries. 
 
 The portions toicards which they flow are those which follow in the lead 
 of France — preferring the extension of commerce to the enlargement of 
 the trader's power. Germany and Denmark, Sweden and New England, 
 are in this position. In all of these agriculture becomes more and more 
 a science, as employments become diversified — the returns to agricultural 
 labor increasing as the prices of raw materials tend to rise. 
 
 In all the countries to which they flow, the prices of raw materials and 
 those of finished commodities tend to approximate — the farmer giving a 
 steadily diminishing quantity of wool and corn in return for a constant 
 quantity of cloth and iron. 
 
 In those from which they flow, those prices become from year to year 
 more widely separated — the farmer and the planter giving a steadily in- 
 creasing quantity of wool and corn for a diminishing quantity of iron, or 
 of cloth. 
 
 Such are the facts presented by the history of the outer world, of both 
 the present and the past. How far they are in accordance with our own 
 experience we may now inquire. 
 
 12. The mining communities of the world having raw products to sell, 
 and needing to purchase finished commodities, the gold and silver they 
 produce flow naturally to those countries that have such commodities to 
 sell ; and not towards those which have only raw materials to oftcr in ex- 
 change. India has cotton to sell ; Ireland and Turkey have grain : Brazil 
 has sugar and coflFee ; while Alabama has only cotton ; for which reason 
 it is that money is always scarce in those countries, and the rate of interest 
 high. Looking homeward, we find that whenever our policy has tended 
 towards the production of combination of action between the farmer and 
 the artisan, we have been importers of the precious metals, and that then 
 land and labor have risen in price. The contrary efl'cct has invariably been 
 produced, whenever our policy has tended to the diminution of association, 
 and the production of a necessity for looking abroad for making all our 
 exchanges of food and wool for cloth and iron — limited, however, for the 
 period immediately following the change, by the existence of a credit that 
 
 540
 
 Money. 
 
 has enabled us to run in debt to Europe, and thus for a time to arrest the 
 export of the precious metals. What was the precise course of the trade 
 in those metals during the thirty years preceding the discovery of the 
 California gold deposits, is shown by the following figures : — 
 
 Excess exports. Excess imports. 
 
 1821—1825 .... $12,500,000 
 
 1826—1829 
 
 1830—1834 
 1835—1838 
 1839—1842 
 1843—1847 
 1848—1850 
 
 $4,000,000 
 20,000,000 
 34,000,000 
 
 39,000.000 
 
 9,000,000 
 14,000,000 
 
 In the closing years of the free trade system of 1817, the average 
 excess of specie export was about $2,500,000 a year. To this adding a 
 similar amount, only, for the annual consumption, we obtain an absolute 
 diminution of five-and-twenty millions, while the population had increased 
 about ten per cent. Under such circumstances, it is no matter of surprise 
 that those years are conspicuous among the most calamitous ones in our 
 history: At Pittsburg, flour then sold at SI 25 per barrel ; wheat, through- 
 out Ohio, would command but 20 cents a bushel ; while a ton of bar iron 
 required little short of eighty barrels of flour to pay for it. Such was the 
 state of affairs that produced the tariff" of 1824 — a very imperfect mea- 
 sure of protection, but one that, imperfect as it was, changed the course of 
 the current, and caused a net import, in the four years that followed, of 
 64,000,000 of the precious metals. In 1828, there was enacted the first 
 tariff" tending directly to the promotion of association throughout the 
 country ; and its eff"ects exhibit themselves in an excess import of the pre- 
 cious metals — averaging $4,000,000 a year — notwithstanding the discharge, 
 in that period, of the whole of the national debt that had been held in 
 Europe, amounting to many millions. Putting together the discharge of debt 
 and the import of coin, the balance of trade in that period must have been 
 in our favor to the extent of nearly $50,000,000 ; or an average of about 
 $10,000,000 a year. As a consequence, prosperity existed to an extent 
 never before known — the power to purchase foreign commodities growing 
 with such rapidity as to render it necessary greatly to enlarge the free list ; 
 and then it was that coff'ee, tea, and many other raw commodities, were 
 emancipated from the payment of any impost. Thus did efficient protec- 
 tion lead to a freedom of commerce, abroad and at home, such as had never 
 before existed. 
 
 The first few years of the compromise tariff" of 1833 profited largely by 
 the prosperity caused by the act of 1828, and the reductions under it were 
 then so small that its operation was but slightly felt. In those years, too, 
 there was contracted a considerable foreign debt — stopping the export of 
 specie, and producing an excess import averaging more than $8,000,000 a 
 year. Prosperity seemed to exist, but it was of the same description that 
 has marked the last few years, during which the value of all property has 
 depended entirely upon the power to contract debts abroad — thus placing 
 the nation more completely under the control of its distant creditors. 
 
 5il
 
 Money, 
 
 In the succeeding years, the compromise became more fully operative.* 
 Furnaces and factories ■were closed, with constantly increasing necessity 
 for looking abroad for the performance of all exchanges, and correspond- 
 ing necessity for remitting money to pay the balance due on the purchases 
 of previous years. Nevertheless, the annual specie export averaged little 
 more than S2, 000,000 ; but if to this be added a consumption of only 
 83,000,000 a year, we have a reduction of §20,000,000; the consequences 
 of which were seen in almost total suspension of commerce. The whole 
 country was in a state of ruin. Laborers were everywhere out of em- 
 ployment, and being still consumers, while producing nothing, the power 
 of accumulation ceased almost to exist. Debtors being everywhere at the 
 mercy of creditors, sales of real estate were chiefly accomplished by help 
 of sheriffs, whose employments were then more productive than they had 
 been from the date of the constitution. 
 
 The change in the value of labor, consequent upon the stoppage of the 
 circulation that followed this trivial export of the precious metals, cannot 
 be placed at less than $500,000,000 a year. Wages were low, even where 
 employment could be obtained ; but a large portion of the labor-power of 
 the country was totally wasted, and the demand for mental power dimi- 
 nished even more rapidly than that for physical exertion. In the prices of 
 land, houses, machinery of all kinds, and other similar property, the re- 
 duction counted by thousands of millions of dollars; and yet, the difference 
 between the two periods ending in 1833 and 1842, in regard to the mone- 
 tary movement, was only that between an excess import of $5,000,000, 
 and an excess export of $2,500,000, or a total of 67,500,000 a year. No 
 one who studies these facts, can fail to be struck with the wonderful power 
 over the fortunes and conditions of men exerted by the metals provided 
 by the Creator for furthering the work of association among mankind. 
 With the small excess of import in the first period, there was a steady 
 tendency towards equality of condition among the poor and the rich, the 
 debtor and the creditor ; whereas, with the slight excess of export in the 
 second one, there was a daily increasing tendency towards inequality — the 
 poor laborer and the debtor, passing steadily more under the control of 
 the rich employer, and the wealthy creditor. Of all the machinery fur- 
 nished for the use of man, there is none so equalizing in its tendency as 
 that known by the name of money; and yet economists would have the 
 world believe that the agreeable feeling which everywhere attends a know- 
 ledge that it is flowing in, is evidence of ignorance — any reference to 
 the question of the favorable or unfavorable balance of trade being 
 beneath the dignity of men who feel that they are following in the foot- 
 steps of Hume and Smith. It would, however, be as difficult to find a 
 single prosperous country that is not, from year to year, making itself a 
 letter customer to the gold-producing courdries, as it would be to find one 
 that is not becoming a better customer to those which produce silk, or 
 
 * One-tenth of tlie excess over 20 per cent, was reduced in December, 1833, 
 another tenth in 1835, a third in 1837, and a fourth in 1839 ; the remaining ex- 
 cess of duties being then equally divided into two parts, to be reduced in 1841 
 and 1842. 
 
 542
 
 Money. 
 
 cotton. To an improving customer, there must be in its favor a steadily 
 increasing balance of trade, to be settled by payment in the commodity 
 for whose production the country is fitted, whether that be cloth, or to- 
 bacco, silver or gold. 
 
 The condition of the nation at the date of the passage of the act of 1842, 
 was humiliating in the extreme. The treasury — unable to obtain at home 
 the means required for administering the government, even on the most 
 economical scale — had failed in all its efforts to negotiate a loan at six per 
 cent., even in the same foreign markets in which it had but recently paid 
 off, at par, a debt bearing an interest of only three per cent. Many of 
 the States, and some even of the oldest of them, had been forced to sus- 
 pend the payment of interest on their debts. The banks, to a great extent, 
 were in a state of suspension, and those which professed to redeem their 
 notes, found their business greatly restricted by the increasing demand 
 for coin to go abroad. The use of either gold or silver as currency had 
 almost altogether ceased. The Federal government, but recently so rich, 
 was driven to the use of inconvertible paper money, in all its transactions 
 with the people. Of the merchants, a large portion had become bankrupt. 
 Factories and furnaces being closed, hundreds of thousands of persons were 
 totally unemployed. Commerce had scarcely an existence — those who 
 could not sell their own labor, being unable to purchase of others. Never- 
 theless, deep as was the abyss into which the nation had been plunged, so 
 magical was the effect of the adoption of a system that had turned the 
 balance of trade in its favor, that scarcely had the act of August, 1842, 
 become a law, when the government found that it could have all its wants 
 supplied at home. Mills, factories, and furnaces, long closed, were again 
 opened; labor came again into demand; and, before the close of its third 
 year, prosperity almost universally reigned. States recommenced the pay- 
 ment of interest on their debts. Railroads and canals again paid dividends. 
 Real estate had doubled in value, and mortgages had been everywhere 
 lightened ; and yet the total net import of specie in the first four of the 
 years, was but $17,000,000, or $4,250,000 per annum ! In the last year 
 occurred the Irish famine, creating a great demand for food ; the conse- 
 quence of which was, an import of no less than $22,000,000 of gold — 
 making a total import, in five years, of $39,000,000. Deducting from 
 this but $4,000,000 per annum for consumption, it leaves an annual in- 
 crease, for the purposes of circulation, of less than $5,000,000 ; and yet 
 the difference in the prices of labor and land in '1847, as compared with 
 1842, would be lowly estimated, if placed at only $2,000,000,000. 
 
 With 1847, however, there came another change of policy — the nation 
 being again called upon to try the system under which it had been pros- 
 trated in 1840-'42. The doctrines of Hume and Smith, in reference to 
 the balance of trade, were again adopted as those by which a government 
 was to be directed in its movements. Protection being then repudiated, 
 the consequences were speedily seen in the fact, that within three years, 
 factories and furnaces were again closed, labor was seeking demand, and 
 gold was flowing out even more rapidly than it had come in under the 
 tariff of 1842. The excess export of those three years amounted to 
 $14,000,000; and if to this be added $15,000,000 for consumption, it 
 
 543
 
 Money. 
 
 follows that the reduction was equal to the total increase under the previ- 
 ous system. Circulation was everywhere beinfj; suspended, and a crisis 
 was close at hand, when, fortunately for the advocates of the existing sys- 
 tem, the gold deposits of California were brought to light. 
 
 In the year 1850-'51, the quantity received from that source was more 
 than 840,000,000, of which nearly 620,000,000 were retained at home. 
 The consequence was speedily seen in a reduction of the rate of interest, 
 and a re-establishment of commerce. In the following year, 637,000,000 
 were exported, leaving, perhaps, 68,000,000 or 610,000,000, which, added 
 to that retained in 1851, made an addition to the currency of probably 
 630,000,000 — producing universal life and motion. In 1852-'53, there 
 was still a slight increase, but in the two years following, the export was 
 697,000,000 ; and if to this we add a domestic consumption that probably 
 was but little short of $20,000,000, we obtain a total amount withdrawn 
 exceeding the receipt from all the world. Looking now to the Union east 
 of the Rocky Mountains, it may well be doubted if the effective addition to 
 the stock of the precious metals remaining in the form of coin much exceeds 
 a single dollar per head of the population.* It may amount to 630,000,000 
 or $35,000,000 ; and small as is that sum, it would have produced a great 
 effect in promoting rapidity of circulation, had it not been that, simulta- 
 neously therewith, the indebtedness to foreign countries had so much in- 
 creased, as to require, for the payment of interest alone, an annual remit- 
 tance equal to the whole export of food to all the world — producing doubt 
 and general distrust — causing an extensive hoarding of money, and palsying 
 the movements of commerce. As a consequence of this it is, that the coun- 
 try now presents the most extraordinary spectacle in the world — that of a 
 community owning one of the great sources of supply for money, in which 
 the price paid for its use is generally thrice, and, in many parts of the 
 country, six or eight times as great as in those countries of Europe which 
 find their gold mines in their furnaces, their rolling-mill*, and their cotton 
 and woollen factories. 
 
 * In the last Treasury Report (1856) tlie addition to the stock of the precious 
 metals in the last few years is estimated at more than $l(l(>,0(Hl,000, and possihly 
 even $15(»,ltOO,000. Small allowance is there, however, made for a consumption in 
 the arts, that must, in the last five years, have absorbed at least fifty of those mil- 
 lions. None is made for the fact that $20,000,000 are always kept in the Treasury 
 vaults, and, while there, are as useless as would be a similar weight of pebble- 
 stones. Much advantage is claimed to have resulted from increasing the difli- 
 culty of transferring the property in money, by compelling individuals to carry 
 gold in their pockets, when, if the law permitted, they would prefer to carry 
 bank-notes. No allowance is made for a land system that compels millions of 
 dollars in gold to be transported from one part of the country to another, at great 
 cost and risk, when drafts would be used, were it not that it is the object of the 
 Federal government, as far as possible, to destroy the utility of the precious 
 metals, by promoting their transportation, and thus j^reventing their circulation. 
 From the day when free trade was inaugurated as the policy of the dominant 
 party of the country, there has been almost an unceasing war against credit ; 
 and the result is seen in the fact that it reqiiires $200,000,000 of gold and silver 
 to carry on a smaller amount of commerce than would, under a sound system, 
 be transacted by help of less than $100,000,000, and with a steadiness and regu- 
 larity that now are quite iinkuown. 
 
 544
 
 Money. 
 
 Our policy has, with slight exceptions, looked steadily towards keeping 
 down the prices of the rude products of the earth, and thus facilitating 
 their export; and the precious metals always follow in their train. The 
 result is seen in the general exhaustion of the soil — in the fact that agri- 
 culture makes but little progress — in the diminished yield of the land, and 
 in the steady decline of the price of tobacco, flour, cotton and other rude 
 products of the earth. Taking the averages of the several decades since 
 1810, the export prices of flour have been as follows : — 
 
 For that ending in 1820 
 " " 1830 
 
 « " 1840 
 
 " " 1850 
 
 The 3 years ending 1853 
 
 For 1853 . 
 
 $10 37 
 6 20 
 6 78 
 5 27 
 4 67 
 4 24 
 
 — this last being probably the lowest price at which it has been sold since 
 the arrival of Hendrick Hudson in your harbor. The prices above given, 
 I pray you to recollect, are those furnished in the recent Treasury Reports. 
 Precisely similar to this have been the facts transpiring in relation to cot- 
 ton and tobacco ; of the former of which, the planter was giving, in 1852, 
 little short of five pounds for the same quantity of gold and silver that 
 seven-and-thirty years before he obtained for one. 
 
 The power to command the services of the precious metals grows with 
 the growth of the power of association and combination. The policy of 
 the Union is hostile to association, and hence it is that our products fall 
 in price, while all the metals remain so dear. That is the course towards 
 barbarism. You will probably be disposed to say, that prices are now very 
 high, and that if such prices are to insure prosperity, it is certainly within 
 our reach. Such would be the case, were it not for the causes to which 
 they are due — great deficiency in the quantity produced. Twenty years 
 since, we had similar prices, and for the same reason — all the energies of 
 the country having then been given, as is now the case, to the creation of 
 food and cotton-producing machinery, and not to the production of either 
 food or cotton. Those high prices were, however, only the precursors of 
 the ruinously low ones of 1841 and '42. 
 
 The quantity of food now produced is far less, per head, than it was four 
 years since ; while the average crop of cotton, for the last four years, has 
 been less than that of 1851-'52. Desiring to know the cause, you need 
 only to look to the facts, that the rural population of your own State is 
 gradually diminishing; and that the young Ohio has now become the great 
 emigrating State of the Union. The men who are now being driven from 
 farms in the East, to found colonies in the West, are consumers, and not 
 producers ; but the day approaches, when the efi'ects of their labor will 
 become visible in such a reduction of prices as has never before been known. 
 Any one who, in 1835, had predicted the universal ruin of farms, that fol- 
 lowed three years later, would have been listened to with an incredulity 
 equal to that which you, probably, hear one say that the occurrences of 
 1841-42 are yet to be repeated. In the last ten years, we have added 
 to our numbers almost as many millions ; and yet we have scarcely more 
 persons engaged in the four chief branches of manufacturing than we 
 
 545
 
 Money. 
 
 had in 1847-48. Nearly the whole increase has been driven to the crea- 
 tion of farms and plantations, that will yet overwhelm the market with 
 food and cotton. The whole policy of the country is adverse to the agri- 
 cultural interest, for it tends toward cheapening raw products, and thus 
 promoting the exports of the precious metals. 
 
 13. '' In every kingdom into which money begins to flow in greater 
 abundance than formerly, everything," says Mr. Hume, in his well-known 
 Essay on Money, " takes a new face : labor and industry gain life ; the 
 merchant becomes more enterprising, the manufacturer more diligent and 
 skilful ; and even the farmer follows his plough with more alacrity and 
 attention." 
 
 That this is so, is well known to all. Why should it be so ? Because 
 the circulation of society then increases, and all power — whether in the 
 physical or social world — results from motion. When money is flowing 
 in, every man is enabled to find a purchaser for his labor, and to become 
 a purchaser of that of others. Therefore it is, that commerce so steadily 
 increases in those countries in which the Californian and Australian pro- 
 ducts now so rapidly accumulate — France, Germany, and Northern and 
 Eastern Europe generally. When, on the contrary, money flows out, the 
 circulation diminishes, and labor is everywhere wasted. That labor-power 
 is capital, the result of the consumption of other capital in the form of 
 food; and all the difference between an advancing and a declining state 
 of society, is found in the fact, that in the one, there is a constant increase 
 in the rapidity with which the demand for muscular or mental power fol- 
 lows its production, while in the other, there is a daily diminution therein. 
 The more instantly the demand follows the supply, the more is the force 
 economized, and the larger is the power of accuuaulation. The longer the 
 interval between production and consumption, the greater is the waste of 
 force, and the less is the power of accumulation. 
 
 Of all the machinery in use among men, there is none that exercises 
 upon their actions so great an influence as that which gathers up and 
 divides and subdivides, and then gathers up again, to be on the instant 
 divided and subdivided again, the minutes and quarter-hours of a commu- 
 nity. It is the machinery of association, and the indispensable machinery 
 of progress; and therefore it is, that we see in all new or poor communi- 
 ties so constant an efibrt to obtain something to be used in place of it; as 
 is shown in various countries in which an irredeemable paper constitutes 
 the only medium of exchange. Throughout the ^tV^est, a currency of some 
 description is felt to be among the prime necessities of life. So well is 
 this want understood, that many Eastern banks supply notes expressly for 
 Western circulation, and the people there pass them from hand to hand, 
 because any money is better than none, and good they cannot get, for the 
 reason that metallic money always flows from the place where the charge 
 for its use is high, to that at which it is low. The rate of interest in the 
 West is now enormous, but every day witnesses the export of gold to the 
 East, where it is somewhat less; and yet even your high interest — rang- 
 ing, as it has done for years, between ten and thirty per cent, per annum 
 — cannot prevent it from going to Franco and Germany, where it com- 
 mands but five or six per cent. Money thus obeys the same law as water 
 
 54(j
 
 Money. 
 
 — seeking always the lowest level. The latter falls upon the bills, but from 
 the moment of its fall it never stops until it reaches the ocean j nor does 
 the gold of California, or the silver of Mexico, stop until it reaches that 
 point at -which money most abounds, and at which, for that reason, the 
 price paid for its use is least. 
 
 Of all the commodities in use by man, the precious metals are those 
 that render the largest amount of service in proportion to their cost — and 
 those whose movements furnish the most perfect test of the soundness or 
 unsoundness of its commercial system. They go from those countries 
 whose people are engaged in exhausting the soil, to those in which they 
 renovate and improve it. They go from those at which the price of raw 
 products, and the land itself, is low — from those at which money is scarce 
 and interest is high. The country that desires to attract the precious 
 metals, and to lower the charge for the use of money, has, then, only to 
 adopt the measures required for raising the price of land and labor. In 
 all countries, the value of land grows with that development of the human 
 faculties which results from diversity in the modes of employment, and 
 from the growth of the power of combination. That power grows in 
 France, and in all the countries of Northern Europe ; and for the reason, 
 as has been shown, that all those countries have adopted the course of 
 policy recommended by Colbert, and carried out by France. It declines 
 in Great Britain, in Ireland, in Portugal, in Turkey, in the Eastern and 
 Western Indies, and in all countries that follow the teachings of the Brit- 
 ish school. It has grown among ourselves in every period of protection ; 
 and then money has flowed in, and land and labor have risen in value. It 
 has diminished in every period in which trade has obtained the mastery 
 over commerce. Land and labor have always declined in value as soon 
 as our people had eaten, drunk, and worn foreign merchandise to the ex- 
 tent of hundreds of millions of dollars, for which they had not paid ; and 
 had thus destroyed their credit with other communities of the world. 
 
 14. We are told, however, by the same writer — Mr. Hume — and in that 
 he is followed by the modern economists — that the only effect of an in- 
 crease of the supply of gold and silver is that of " heightening the price 
 of commodities, and obliging every one to pay more of those little yellow 
 or white pieces for everything he purchases." Were such really the case, 
 it would be little short of a miracle that we should see money always, 
 century after century, passing in the same direction — to the countries that 
 are rich from those that are poor ; so poor, too, that they cannot afford to 
 keep as much of it as is absolutely necessary for their own exchanges. 
 The gold of Siberia leaves a land in which so little circulates that labor 
 and its products are at the lowest prices, to find its way to St. Petersburg, 
 where it will purchase less labor and less of either wheat or hemp than it 
 would do at home ; and that of Carolina and Virginia goes steadily and 
 regularly, year after year, to the countries to which the people of those 
 States send their cotton and their wheat, because of the higher prices at 
 which they sell. The silver of Mexico, and its cochineal, travel together 
 to the same market ; and the gold of Australia passes to Britain by the 
 ship which carries the wool yielded by its flocks. 
 
 Every addition to the stock of money, as we are assured by the inge- 
 
 547
 
 Money. 
 
 nious men of modern days engaged in compiling treasury tables and 
 finance reports, renders a country a good place to sell in, but a bad one 
 in which to purchase. To what countries, however, is it that men have 
 most resorted when they desired to purchase ? Have they not, until re- 
 cently, gone, almost exclusively, to Britain ? It has been so, assuredly ; 
 and for the reason, that there it has been that finished commodities were 
 cheaply furnished. Where have they gone to sell ? Has it not been to 
 Britain ? It certainly has been so ; and for the reason, that there it was 
 that gold, cotton, wheat, and all other of the rude products of the earth, 
 were dear. Where do they now most tend to go when they desire to 
 purchase cloths or silks ? Is it not to France and Germany ? So it cer- 
 tainly is; and for the reason, that there it is that raw materials are high- 
 est, and finished ones are cheapest. Gold follows in the train of raw ma- 
 terials generally — these last being found, invariably, travelling to those places 
 at which the rude products of the earth command the highest price, while 
 cloth, iron, and manufactures of iron and other metals, may be purchased 
 at the lowest ; and the greater the flow in that direction, the greater is 
 the tendency to further enhancing the prices of the former, and reducing 
 those of the latter. From this it would seem^that increase in the supply 
 and circulation of money, so far from having the eflfect of causing men 
 to give two pieces for an article that could before have been had for one, 
 has, on the contrary, that of enabling them to obtain for one piece the 
 commodity that he/ore had cost them two ; and that such is the fact, can 
 readily be shown. 
 
 It is within the knowledge of all, that manufactures have greatly fallen 
 in price — the quantity of cotton cloth that can now be obtained for a sin- 
 gle dollar being as great as would formerly have cost five — and that the 
 reduction has taken itlace in the very countries into which the gold of the 
 world has steadily Jioioed, and into which it is now Jloivhu/ — whence it 
 would appear quite certain that finished commodities tend to fall as money 
 flows in, while land and labor — the ultimate raw materials of all — tend to 
 rise in price. The gold of California and Australia now goes to Germany, 
 France, Belgium, and Great Britain, where money abounds and interest 
 is low, because there manufactured commodities are cheap and money is 
 valuable, ivhen measured by them. It does not go to Spain, Italy, Portu- 
 gal, or Turkey, because there manufactured goods are dear, and land and 
 labor are cheap. It does not stop in Mississippi, Ai-kansas, or Texas, be- 
 cause there, too, manufactures are dear, and land and labor arc cheap ; 
 but there it will stop at some future period, when it shall have been ascer- 
 tained that the plough and the harrow should always have for their near 
 neighbors the spindle and the loom. 
 
 The higher products of a skilful agriculture — fruits, garden vegetables, 
 and flowers — tend steadily to decline in price in all those countries into 
 which money is flowing ; and for the reason, that agricultural improve- 
 ment always accompanies manufactures, and manufactures always attract 
 the precious metals. Every one familiar with the operations of the West, 
 knows that while corn and pork are there always cheap, cabbages, peas, 
 beans, and all green crops, are invariably scarce and dear; and so continue, 
 until, as around Cincinnati and Pittsburg, population and wealth have 
 
 548
 
 Money. 
 
 given a stimulus to tlie work of cultivation. In England, the increase of 
 green crops of all kinds lias been immense, attended with the decline in 
 price ; and in France, a recent writer* informs us that, notwithstanding 
 the increase in the quantity of money, the price of wine is scarcely more 
 than a fourth of what it was three centuries since. By another we are 
 told, that " every man in France, of forty years of age, must have re- 
 marked the sensible diminution of the price of garden produce, fruits of 
 all kinds, flowers, etc. ; and that most of the oleaginous grains and plants 
 used in manufactures have fallen in like manner; while beets, carrots, 
 beans, etc., have become so common that they are now fed to animals in 
 the stable."t 
 
 Food thus becomes more abundant in those countries into which gold 
 is steadily flowing, and it becomes less so in those from which the gold 
 flows, as is seen in Carolina, which has steadily exhausted her land — in 
 Turkey — in Portugal — and in India. In all those countries, land and la- 
 bor are low in price. Give them manufactures — thus enabling their peo- 
 ple to combine their efi'orts — and they will obtain and retain gold ; and 
 then they will make roads, and the supplies of food will steadily increase 
 as cloth and iron become cheaper ; and land and labor will then rise in 
 price. 
 
 15. Of what use, however, it may be asked, are further supplies of gold 
 and silver when a country has obtained the full allowance required for the 
 most perfect circulation of its products, and of the services of the persons 
 of whom the society is composed ? Is it not possible that the commodity 
 may become superabundant ? It is not ; and for the reason, that the uses 
 of those metals are so numerous and great. Silver is better than iron for 
 a great variety of purposes. The melting-pot of the goldsmith, or the 
 subjection to the hammer of the gold-beater, is the ultimate destination 
 of the whole of the vast products of Siberia, California, and Australia ; 
 and the greater the power to use them in the arts, the more rapid must 
 be the progress of civilization. That power grows with increase in the 
 facility of combination, and the latter grows with the increased facility of 
 obtaining this essential machinery of association. The miner of gold is 
 thus always making a market for his commodity, and the more of it that 
 he supplies, the greater is the tendency towards decline in the price of the 
 cloth, the watches, the steam-engines, and the books that he seeks to pur- 
 chase. In proof that such is the case, it is needed only that — looking 
 back for half a century — we remark the vast increase in the demand for 
 plate, and the growing substitution of gold for the silver that so recently 
 was used. Forty years since, gold watches were the exception. Now, a 
 silver watch is rarely seen. Thirty years since, a gold pencil-case was 
 quite a rarity. Now, such cases are made almost by millions. A quar- 
 ter of a century since, a gilt-edged book was an unusual article of luxury. 
 Now, gold is required almost by tons for gilding the edges of books. So 
 is it everywhere — gold and silver coming daily into use, because of the 
 increased facility with which they may be obtained ; while all the com- 
 
 * M. Moreau de .Jonnes. 
 t De Fonteuay, Du Revenu Foncier. 
 549
 
 Money. 
 
 modities required for the miner's purposes have steadily declined in price. 
 That " all discord" is " harmony not understood," we are assured ; and 
 the more we study the laws of nature, the more conclusive become the 
 proofs that such is certainly the case. 
 
 16. The use of bank-notes tends, however, as we are assured, to pro- 
 mote the expulsion of gold. AVere it to do so, it would be in oppo.sition 
 to the great general law in virtue of which all commodities tend to, and 
 rxot from, the places at which they have the highest utility. A bank is a 
 machine for utilizing money, by enabling A, B, and G to obtain the use 
 of it at the time when D, E, and F, its owners, do not need its services. 
 The direct effect of the establishment of such institutions in the cities of 
 Europe has always been to cause money to flow towards those cities ; and 
 for the reason, that there its utility stood at the highest point. Even then, 
 however, there were difficulties attendant upon the change of property in 
 the money deposited with the bank — the owner being required to go to 
 the banking-house, and write it off to other parties. To obviate this diffi- 
 culty, and thus increase the utility of money, its owners were at length 
 authorized to draw checks, by means of which they were enabled to trans- 
 fer their property without stirring from their houses. 
 
 The difficulty still, however, existed, that — private individuals not being 
 generally known — such checks could, in general, effect but a single trans- 
 fer, and thus the recipient of money found himself obliged to go through 
 the operation of taking possession of that which had been transferred to 
 him, after which he had, in his turn, to draw a check when he himself de- 
 sired to effect another change of property. To obviate this, circulating 
 notes were invented, and by their help the ownership of money is now 
 transferred with such rapidity that a single hundred dollars passes from 
 hand to hand fifty times a day — effecting exchanges, perhaps, to the ex- 
 tent of many thousand dollars, and without the parties being at any time 
 required to devote a single instant to the work of counting the coin. This 
 was a great invention, and by its aid, the utility of money was so much 
 increased that a single thousand pieces could be made to do more work 
 than without it could be done by hundreds of thousands. 
 
 This, of course, as we are told, supersedes gold and silver, and causes 
 them to be exported. So we are certainly assured by those economists 
 who regard man as an animal that must be fed and will procreate ; and that 
 can be made to work only under the pressure of a strong necessity. Were 
 they, however, to look, for once, at the real Man — the being made in the 
 image of his Creator, and capable of almost infinite elevation — they would 
 perhaps, arrive at a conclusion widely different. The desires of that man 
 are infinite, and the more they are gratified, the more rapidly do they in- 
 crease in number. The miserable Hottentot dispenses with a road of any 
 kind, but the enlightened and intelligent people of other countries are seen 
 passing in succession from the ordinary village road to the turnpike, and 
 thence to the railroad; and the Letter the exist inr/ communications, the 
 (jreater is the tliirst for further imj)rovement. The better the schools and 
 houses, the greater is the desire for superior teachers and further additions 
 to the comforts of the dwelling. The more perfect the circulation of 
 society, the larger is the reward of labor, and the greater is the power to 
 
 550
 
 Money. 
 
 purchase gold and silver, to be used for the various purposes for which they 
 are so admirably fitted, and the greater is the tendency to have them flow 
 to the places at which the circulation is established. Money promotes the 
 circulation of society. The check and the bank-note stimulate that circu- 
 lation — giving thereby value to labor and land ; and wherever these checks 
 and notes are most in use, there should the inward current of the precious 
 metals be most fully and firmly established. 
 
 That such is, the case, is proved by the facts, that, for a century past, 
 the precious metals have tended most to Britain, where such notes were 
 most in use. Their use increases rapidly in France, with constant increase 
 in the inward flow of gold. So, too, does it in Germany, towards which 
 the auriferous current now sets so steadily that notes which are the repre- 
 sentatives of money are rapidly taking the place of those irredeemable pieces 
 of paper by which the use of coin has so long been superseded. 
 
 Whence flows all this gold ? From the countries in which employments 
 are not diversified ; from those in which there is little power of association 
 and combination ; from those in which, therefoi-e, credit has no existence ; 
 from those, finally, which do not use that machinery which so much in- 
 creases the utility of the precious metals, and which we are accustomed to 
 designate by the term hank note. The precious metals go /rom California 
 — from Mexico — from Peru — from Brazil — from Turkey — and from, 
 Portugal — the lands in which property in money is transferred only by 
 means of actual delivery of the coin itself — to those in which it is trans- 
 ferred by means of a check or note. It goes from the plains of Kansas, 
 where notes are not in use, to New York and New England, where they 
 are — from Siberia to St. Petersburg — from the banks of African rivers to 
 London and Liverpool — and /ro??! the "diggings" of Australia to the 
 towns and cities of German}', where wool is dear and cloth is cheap. 
 
 17. All the facts exhibited throughout the world tend to prove that 
 every commodity seeks that place at which it has the highest utility ; and 
 all those connected with the movement of the precious metals prove that 
 they constitute no exception to the rule. Bank-notes increase the utility 
 of those metals, and should, therefore, attract, and not repel, them. Nev- 
 ertheless, the two nations of the world which claim best to understand the 
 principles of commerce, are now engaged in a crusade against those notes ; 
 and in the vain hope of thereby rendering their several countries more 
 attractive of the produce of the mines of Peru, and Mexico, Australia and 
 California. In this case, England follows in our lead — Sir Robert Peel's 
 restrictions being later in date, by several years, than the declaration of 
 war against circulating notes fulminated by our government. 
 
 It is a pure absurdity ; and its adoption here is due to the feet that our 
 system of policy tends to that expulsion of the precious metals which always 
 must result from the long-continued export of the raw products of the earth. 
 The administration that adopted what is called free trade, was the same that 
 commenced the system of compeJUng the community to use gold instead of 
 notes ; and the result was found in the disappearance from circulation of 
 coin of any description whatsoever. From that time to the present, the 
 motto of the generally dominant party of the Union has been — " War to 
 the death against bank-notes ;" and, with a view to promote their expul- 
 2 L 551
 
 Money. 
 
 sion, laws have been passed in various States forbidding their use except 
 when of too large size to enter freely into the transactions of the communitj-. 
 As must, however, inevitably be the case the tendency to the loss of the 
 precious metals has always been in the direct ratio of the diminution in 
 their utility thus produced. At one time only, in almost twenty years, has 
 there been an excess import of those metals, and that was under the tariff 
 of 1842. Then, money became abundant and cheap, because the policy 
 of the country looked to the promotion of association and the extension 
 of commerce. Now, it is scarce and dear, because that policy limits the 
 power of association, and established the supremacy of trade. 
 
 18. Of all the machinery in use among men, there is none whose yield 
 is so great in proportion to its cost as that employed in effecting exchanges 
 from hand to hand — none whose movements inward or outward are so 
 strong an evidence of increase or decrease of the productive power of the 
 community — none, therefore, that affords the statesman so excellent a ba- 
 rometer by means of which to judge of the working of his measures. It 
 is nevertheless, of all others, the one whose movements are, by economists 
 generally, regarded as least worthy of consideration. By many of them 
 we are even tuught that the only effect of an increase in the supply of a 
 commodity whose possession is so anxiously sought by all mankind, is 
 that instead of having the labor of counting out one, two, or three hun- 
 dred pieces, we should be forced to count three, six, or nine hundred; and 
 that, therefore, there is economy in being forced to perform the work of 
 exchange with the smallest quantity of the machinery by aid of which, 
 alone, it can be performed. All the teachings on this subject are in direct 
 opposition to those of the common sense of mankind ; and, as is usually 
 the case, that to which all men are prompted by a sense of their own in- 
 terests, is far more nearly right than that which is taught by philosophers 
 who look inward to their own minds for the laws which govern man and 
 matter — refusing to study the movements of the people by whom they are 
 surrounded. 
 
 The uniustructcd savage finds in the waterspout and the earthquake the 
 most conclusive proof of the wonderful power of nature. The man of sci- 
 ence finds it in the magnificent, but unseen, machinery by means of which 
 the waters of the ocean arc daily raised, to descend again in refreshing 
 dews and summer showers. He finds it, too, in that insensible perspira- 
 tion which carries off so nearly the whole amount of food absorbed by men 
 and animals. Again ; he sees it in the workings of the little animals, 
 invisible to the naked eye, to whom we are indebted for the creation of 
 islands, elaborated out of earth that has been carried from the mountains 
 to the sea, and there deposited. Studying these facts, he is led to the 
 conclusion, that it is in the minute and almost insensible operation of the 
 physical laws he is to find the highest proof of the power of nature, and 
 the largest amount of force. So, too, is it in the social world. To the 
 uniustructcd savage, the ship presents most forcibly the idea of commerce. 
 The mere trader finds it in the transport of cargoes of cotton, wheat, or 
 lumber; and in the making of bills of exchange for tens of thousands of 
 dollars, or of pounds. The student of social science, on the contrary, 
 sees it in the exercise of a power of association and combination resulting 
 
 552
 
 Money. 
 
 from development of the various human faculties, and enabling each and 
 every member of society to exchange his days, hours, and minutes for 
 commodities and things to whose production have been applied the days, 
 hours, and minutes of the various persons with whom he is associated. 
 For that commerce, pence, sixpences, and shillings are required; and in 
 them he finds willing slaves, whose operations bear to those of the ship, 
 the same relation that is elsewhere borne by the little coral insect to the 
 elephant. 
 
 It is by means of combination of effort that man advances in civiliza- 
 tion. Association brings into activity all the various powers, mental and 
 physical, of the beings of which society is composed, and individuality 
 grows with the growth of the power of combination. That power it is 
 which enables the many who are poor and weak, to triumph over the few 
 who are rich and strong; and therefore it is that men become more free 
 with every advance in wealth and population. To enable them to asso- 
 ciate, they need an instrument by help of which the process of composi- 
 tion, decomposition, and recomposition of the various forces may readily 
 be effected ; so that while all unite to produce the effect desired, eacli may 
 have his share of the benefits thence resulting. That instrument was fur- 
 nished in those metals which stand almost alone in the fact, that, as Mi- 
 nerva sprang fully armed from the head of Jove, they, wherever found, 
 come forth ready — requiring no elaboration, no alteration, to fit them for 
 the great work for which they were intended, that of enabling men to 
 combine their efforts for filling worthily the post at the head of creation 
 for which they were designed. Of all the instruments at the command 
 of man, there are none that tend in so large a degree to promote individu- 
 ality on the one hand, and association on the other, as do gold and silver 
 — properly, therefore, denominated the Precious Metals. 
 
 553
 
 THE AVORIvS 
 
 OP 
 
 HENRY C. CAREY. 
 
 PRINCIPLES OF SOCIAL SCIENCE. In 3 vols. 8vo. Price $7 50. 
 
 CONTENTS.— Volume I. Ol" Scioncp and its Methods— Of Man, the Subjeet of Social Science— Of 
 Increase in the Numbers of Mankind — Of the Occupation of the Eartli (Two Chapters) — Of Value 
 — Of Wealth — Of the Formation of Society — Of Appropriation — Of Changes of Matter in Place 
 (Five Chapters) — Of Mechanical and Clieniical Changes in the Forms of Matter (Fire Chapters). 
 VoLCME II. Of Vital Changes in the Form of Matter (Ten Chapters) — Of the Instrument of Asso- 
 ciation (Eight Chapters). Volume III. Of Production and Consumption — Of Accumulation — Of 
 Circulation — Of Distribution (Three Chapters) — Of Concentration and Centralization — Of Com- 
 petition — Of Population — Of Food and Population — Of Colonization — Of the Malthusian. Theory 
 — Of Commerce (Four Chapters) — Of the Socictary Organization — Of Social Science. 
 
 THE PAST, THE PRESENT, AND THE FUTURE. In one vol. 8vo., 
 price $2 ; 12mo., price $1. 
 
 "Decidedly a book to bo read by all who take an interest in the progress of social science." — 
 London Spectator. 
 
 "The field surveyed by Mr. Carey in the Past and Present is a broad one — broader than that of 
 any book of our time, for it discusses every interest of man." — Avierican Whig Review. 
 
 " It is, as our readers see, the theory of progress, redeemed from the wildness of philosophical 
 speculation, economically established, and brought home to us by the facts." — Didionnaire de 
 VEconomie Politique. 
 
 THE SLAVE TRADE ; Domestic and Foreign ; Why it Exists, and how 
 it may be Extinguished. In one vol. 12mo. Trice $1. 
 
 CONTENTS.— The Wide Extent of Slavery— Of Slavery in the Briti.sh Colonies- Of Slavery in the 
 United States — Of Emancipation in the British Colonies — How Man passes from Poverty and 
 Slavery toward Wealth and Freedom — How Wealth tends to Increase — How Labor acquires 
 Value and Man beciinios Free — IIow Man passes from Wealth and Freedom toward Poverty and 
 Slavery — How Slavery Grew, and How it is now Maintained in the West Indie.s — How Slavery 
 Grew, and is Maintained in the United States — How Slavery Grows in Portugal and Turkey — 
 How Slavery Grows in India — IIow Slavery Grows in Ireland and Scotland — How Slavery Grows 
 in England — How can Slavery be Extinguished ? — How Freedom Grows in Northern Germany — 
 How 5'reedom Grows in liussia — How Freedom Grows in Denmark — How Freedom Grows in 
 Spain and Belgium — Of the Duty of the People of the United States — Of the Duty of the People 
 of England. 
 
 From a Letter of the Hon. Richard W. Tno.MPso.v, of Indiana, totheFuhUsher, dated Junel6, ISJS. 
 
 "I have rarely read a work that so completely exhausts the subject it discusses. And besides 
 being thorough and complete as an argument, all its positions arc supported by an imposing and 
 most instructive array of facts. *»♦**#* 
 
 "Mr. Carey, with the sagacity of a profound philosopher, has seen all this, and has, most 
 patriotically, employed his acknowledged ability and great learning, in an effort to enlighten tho 
 public mind upon the subject. He has met it fairly and fully, and if tliis work of his could be 
 placed in the hands of every intelligent voter in the United States, its immediate effect would be 
 seen in the restoration of quiet and concord amongst those who should never have forgotten that 
 they were brethren, and in the entire withdrawal of the exciting subject of slavery from our na- 
 tional politics." 
 
 " He explores the philosophy of slavery, ' Why it exists, and how it may be extinguished,' just 
 as one would preach for the cause and cure of cholera, of the explosion of steam-boilers, or any 
 othc'r event deju^udent upon fixed and iuflexible laws." — Rochester Democrat. 
 
 THE HARMONY OF INTERESTS : Agricultural, Manufacturing, and 
 
 Commercial. In oue vol. 8vo., papci-, price .50, cents; cloth, price i^^l. 
 
 "We can safely recommend his remarkable work to all who wish to investigate tho causes of the 
 progress or decline of industrial communities." — Blackioood's Magazine. 
 
 Any of the above books will be sent by mail, free of postage, at the publication price. 
 
 HENRY CAREY BAIRD, 
 40G Wuluiit Sti-eet, Pliilatlelpliia.
 
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