THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES tl*' J I /i*^ / ^:^L'W^-AJ T/ZS A.\'r/ (foAKIAN Ml/S£UM eiDl N B U RQ H . THE ONE POUND NOTE. I7 reprieve several times, until after her decease he received a remission of his sentence. In January 1723 a third forgery was detected, although the criminal was never discovered : on this occasion the 20s. notes were those practised upon. Again, in November 1726, another forgery of the same notes took place, on account of which John Currie, a bookbinder, was arrested, and confessed to having committed the crime entirely himself, having attempted to imitate the water- mark of the 20s. notes. Various tools and utensils were found in his house, affording additional proof of guilt, if that were required. In their endeavours to trace the culprit, the bank, by warrant of the Lord Justice-Clerk, searched every engraver's office in Edinburgh, besides the premises of those who had tailliedouce printing presses in and about the city ; but all was in vain, until, on Sabbath evening, the 25th December, the secretary of the bank learned that a bit of paper had been picked up in the workshop of the man Currie, by his servant, on which were printed in characters similar to those on the bank notes, the words, " Bank of Scotland." Only a bit of waste paper, a turn of the graving tool, a simple letter or line displaced, no matter how small the defect may be, it seems impossible for forgers, with all the care and laborious scrutiny they must give to their wretched work, to escape these tell-tale evidences of their crime. In both of those forgeries the art of the engraver had been called in, though apparently to very little purpose, the graving being poorly executed. The notes were again all called in, and new designs prepared, " with special cheques against forgery." The further progress of the bank has little cognate to our subject until the year 1704, when a second issue of i^i notes was resumed, this time under the denomination of i^i2 Scots. Small as the bank's transactions had been hitherto, the issue of these notes was a vast public benefit, the old metallic currency being then quite insufficient for everyday necessities. At the " Union " the Bank of Scot- land took charge of withdrawal of the old coin, when it was called in to be re-coined, and the total of the silv^er so B l8 THE ONE POUND NOTE. received amounted to £411,112. los. pd. sterling, of which only ^^239,036 was Scots coin.* So far as is known, no account was kept of the gold received ; but from old records of the Scottish Mint, Mr Adam Smith supposes the annual quantity coined must have slightly exceeded in value that of the silver. Adding these items, and account- ing for the amount which must have remained in the hands of a suspicious people, the total metallic currency of Scot- land has been variously estimated at from iJ"8oo,ooo to i^ 1, 000,000. The smallness of this amount, at a time when there was onl}- one bank office in a country with one mil- lion inhabitants, when jnetal — one-half silver — had to do nearly the whole work now done by cheques, drafts, bills, and demand orders, and at a time when paper money was almost unknown, is self-evident, and must have seriously retarded the growth of trade. Sir Wm. Forbes mentions, that in looking over the books of Provost Coutts, even so late as 1740 he " saw many notices of the difficulty at that time of effecting money transactions of any considerable extent, in the county towns of Scotland." It is somewhat curious, that in the same year in which the bank first issued its £,\2 Scots notes, it should have stopped payment. So far as can be traced — for our un- known author is singularly reticent as to this " stoppage " — there does not seem to have been much connection between the two events. What effect the small notes had in this crisis, or how many one pound holders " ran " with their neighbours, will probably never be known, until the treasures of the Bank of Scotland's vaults are opened to the light of day ; but certainly, in themselves, the " small notes " had not acquired sufficient importance to be the * From Preface to Anderson's " Diplomata Scotiic" we quote :— Foreign silver money, sterlinj;, . . /,"i32,o8o 17 o Milled .Scottish coin, .... 96,856 13 9 Coins struck by hammer, . . . 142,180 o o English milled coin, .... 40,000 o o ^411,117 10 9 THE ONE POUND NOTE. I9 predisposing cause, unless we consider that they may have been current amongst a lower and more ignorant class, who would be open to alarm. Such a supposition is rather a source of strength to the one pound note, as a prudent bank, knowing this, would always keep more gold on hand to meet possible excitement amongst the lower orders. However, in the present case, it is probable that the ad- vances granted by means of these notes were trifling, and therefore the common English accusation against small notes will scarcely hold. We cannot believe they had acquired sufficient volume to affect the bank's position of themselves, had a reasonable amount of bullion been kept. In accordance with the theory then very prevalent, that land was the basis of all credit, the bank seems to have locked up most of its capital in advances on heritable secu- rities and bonds ; the remainder being chiefly lent upon bills of exchange, leaving too small a sum as cash on hand. It had no deposits, and therefore did not require to maintain a large reserve on that account. Its whole indebtedness to the public thus consisted of the amount of the note issue, together with a few bills of exchange.* The latter could not be pressed for payment until the due date, and may therefore be dismissed from notice, leaving the notes alone to be accounted for. The total sum of these was always said to be very trifling, until the bank began to receive deposits, at 1707 ; yet, trifling as it was compared with figures of modern times, the bank, in their endeavour to use all their money to the best advantage, failed to keep up a proper specie reserve. By a coincidence, the country's resources were severely taxed at that time to meet Govern- ment requirements for the Continental wars. Specie was scarcely to be got, and a rumour getting abroad that it was proposed to increase the nominal value of the coinage, a run began upon the bank, which, in its weak condition, had no resource but to close its doors on i8th December 1704. It was the first reading of the lesson which since then has * Used here in the sense of the modern bank draft. 20 THE ONE POUND NOTE. been so often read in vain. The total absence of such institutions as now furnish banks with " money at call," combined with the distance from London, reduced the assets available as a reserve to the single article of silver bullion ; and when the stock ran low, bankers of last century had a much better excuse than their modern brethren for hesitating before bringing a new supply from London. Then it was no case of stepping leisurely at lO P.M. into a comfortable " Pullman " at the " Waverley," to wake up next morning, 'mid " the roar of London town," at a total cost for the whole expedition of about 2s. per cent. The very language of travel is changed. They " set out ; " we " start ; " they " performed the journey in a week ; " we " do it " in nine hours. The traveller who went to London two hundred years ago was accustomed to prepare his will before setting out, and bid an affectionate farewell to the friends whom he might never see more. The weary jour- ney to and fro in the lumbering mail-coach, with the time spent in searching for the specie in London, usually occu- pied the best part of fifteen days, and cost sometimes on the remittance between £"] and i^8 percent., — somewhat of a contrast to 2s. In a print published by the bank, entitled, " Memorial and Intimation from the Governor and Company of the Bank of Scotland, concerning the present state thereof," dated 28th December 1704, the bank states the causes of the run were, — " The scarcity of money all over the kingdom, which has gradually increased by a tract of export of money for some time past ; and a report that the Privy Council was to cry up the value of species, raised about the beginning of December instant, which, though it was wholly groundless, and without any shadow of reason, yet being industriously spread, and kept up by some persons, occasioned a very great, unexpected, and unaccustomed demand upon the bank, which at last had such effect, that on Monday the 18th of the instant December, the money in the bank was wholly exhausted, and thcrcb)' payments StO[)t." THE ONE POUND NOTE. 21 From contemporary records it would appear that the bulHon then kept by the bank to pay its notes, was almost wholly silve7\ and that of this no great amount was kept, one writer remarking, " that y^ Bank has specie (/>.) silver money for a i or i pairt of y^ value of y^ Notes out ; if y*" demand is greater y" y* specie in Bank, y^ Bank fails,"* which it did in the case under notice. Their 20s. notes, and the £\2 Scots notes, were necessarily payable in silver, as no gold pieces of these amounts existed. The character of the silver had also taken its part in bringing on the crisis. If the currency of England had been bad, that of Scotland was so much worse, that " according to our standard an ounce of bullion is worth 5s. 6d. sterling, and according to that of England only 5s. 2d. Thus a hundred pounds of money is worth about our £\o6. I OS. sterling ; but in respect we put a higher estimate upon all foreign money than our own, most of it, specially the new coin, has found a way to go out of the kingdom."-!- In view of such a state of things, much sympathy should be felt for the early struggles of the old bank ; it lived in troublous times, politically and financially ; it was working out a wholly new experiment, and surrounded as it was by the land bank and land credit delusions of the time, the wonder is that upon the whole it behaved so prudently and well. Silver might be obtained from London at great cost, but it was only safe so long as it remained in the bank's vaults ; once in the hands of the public, there was little chance of it ever coming back, and the whole labour had to be gone over again, with its attendant expense. An examination was made of the bank's books and papers by the Marquis of Tweeddale, and other members of the Privy Council, to consider of " the sufficiency of security to the nation for all the bank notes running, and * MS. Pamphlet by Mr Patrick Campbell of Monzie, upon a Land Bank, 1708. t '"The Crying Down of the Money considered," circular, 1704. 22 THE ONE POUND NOTE. to take such course as in their wisdom they should think iit for the satisfaction of those who might have bank notes in their hands." The examination was held the day following the stoppage, when it was found that the bank's assets exceeded its liabilities by about one-fourth. From the balance-sheet placed before the committee of inspection (of which we give a copy from Mr J. A. Wenley's " Historical Development of Banking in Scotland," 1882), we see the amount of their outstanding debts, ^^"50,847, consisted solely of notes, a fact which shows most strikingly how completely the note issue was looked to as the prime means of carrying on a banking business. The whole statement exhibits banking principles in their crudest form. To meet notes of ;i^ 5 0,000 only ^1600 of silver were held, the great bulk of their remaining assets being quite inconvertible. A modern bank granting advances on heritable and movable bonds to the extent of three-fourths of its liabilities, would be simply courting failure, and we have to thank the old bank for giving the first proof of the danger of such a course, and v/arning to its successors. One good item is the " first coast " of their banking-house, which with " al reparations " costs only £6g^* At the adventurers' meeting held on the 27th of Decem- ber it was agreed that all the company's notes should bear annual rent from the i8th instant to the i8th of April fol- lowing ; power being given to the directors to postpone the resumption of cash payments for two months if necessary. A call of ;:^io,ooo was made upon the partners, and it is a sign of the bank's evident sense' of security that the call was * The bank's first office was on the second flat of Paterson's Land, a tenement down the Parliament Close ; from this they were burnt out in 1700, and removed up the Hijjh Street to the close named after Sir Thomas Hope, Charles I.'s famous King's Advocate. Mr Chambers, in his " Traditions of Edinburgh," gives some interesting particulars of the Auld Bank Close, as it came to be called, and also of the Bank itself, which closed in the bottom of the Close. The whole range of building was cleared away about 1830 to make room for Melbourne Place and George IV. Bridge. THE ONE POUND NOTE. 23 Bank of Scotland. 1704. DehV. Dec. 19th. To Bank Bills charged upon the Treas- urer p. accot. in Ledge, d. fol. 3 . ^146,735 Deduct for so much thereof in the Treasurer's hands at this day . . 95,888 Remainsnettof Bills running through- out Kingdom .... ^{^ 50,847 Ballance due to the Adventurers . . 12,352 ZYt Summa . . . ,^63,199 ^yi BanI? ot Scotland. 1704. Credit. \ Dec. 19. By Cash in the Treasurer's hands, re- mayning in old Merks . . . / 1,600 „ Debts due upon Heritable Bond, per particular a/c, besides interest thereon 21,968 6 8 „ Debts due upon movl. bond p. par- ticulars, besides running interest as 1 above 27,682 8 5K „ Inland Bills due thereby p. particular list besides running interest . . 11,253 16 8 „ The Bank office, for the first coast of their house besides al reparations . 694 8 10^ Summa . . . ^^63,199 8>^ 1 24 THE ONE POUND NOTE. not made payable until Whitsunday, or a month after the date fixed for repaying the notes. From this date on to 1726 little can be gathered from contemporary history bearing directly upon the bank, except that the entire note issue received a slight stimulus in 1707, the year when deposits were first accepted. Probably the hope of attracting a portion of the money due to Scotland in respect of the Treaty of Union, concluded in that year, induced the bank to take this step, with a view to increasing its profits by having a larger fund to work upon. Their profit would necessarily be larger, since no interest was allowed on the deposits. This, as it turned out, was a short-sighted policy, for the largest beneficiary in the Union payments (which amounted to ^^398,08 5. los.) was the African and India Company of Scotland, the bank's early rival. If, as may be supposed from such a patriotic institution as the Bank of Scotland, they objected to the terms of the Treaty of Union,* this would account at once for its known unpopularity with the Hanoverian party in 171 5, and also for the malignity with which it was attacked some years later by the Whigs of the Equivalent Company, who, after the failure of their negotiations for a union of capitals with the old bank in 17 19, must have suspected its endeavours to get control, in some way, of the very fund in their hands, which afterwards formed the capital of the Royal Bank of Scotland. Mere rivalry scarcely accounts for the violent opposition of the old bank to the establish- ment of the new, which has more the appearance of chagrin at a lost opportunity, combined with the disappointment of * The Jacobiteyawf^z was stron<;ly denied by the bank, who resented the suggestion as an insult ; and any dislike the bank might have against the Union would be from that event having been pressed on by the African Company, in the hope of recovering some of its lost capital. William Paterson was strongly in favour of the Union ; and, strange to say, he had no great opinion of the bank, having written about it in 1695, that it "maybe a great prejudice (to the African Company), but is never like to do any matter of good to us nor to those who have it." THE ONE POUND NOTE. 2$ defeat in a past attempt, than fear of future competition ; though no doubt the latter feeling was strongly aroused after the Royal Bank was fairly launched. Several attempts, based on current notions, were made to share in banking profits, though only two of them came before Parliament. The first of these was that of the famous Dr Hugh Chamberlain, who — styled Chamberland — unsuccessfully petitioned the Scots Parliament to erect a land bank in 1700. The other was that of John Law. In an overture to the Scots Parliament, dated in 1705, he proposes the foundation of a land bank, in which notes would be payable in land instead of in bullion ! and " that forty Commissioners, appointed by Parliament, should coin notes to be received in payment when offered." The scheme gave rise to considerable excitement and discussion in the House, but was finally rejected, with the remark that an " i^sue of paper or bills, without an obligation to pay coin, was not consistent with the welfare of Scotland." Speaking of the old bank, Law says, " Its Notes went for four or five times the value of Cash in Bank, and that so much as the amount of their Notes exceeded the amount of Cash in Bank, was a clear addition to the money of that nation." Besides, it was " more national or general than either the Bank of England or that of Amsterdam, because its Ah^tes pass in most payments tJirougliout the ivhole country, whereas the Bank of Amsterdam serves only for that one city, and that of England is of little use but in London." " Many of the Notes were so low as Twenty Shillings." It is observable here that Law accounts for the bank's popu- larity and soundness solely by the circulation of its notes, — a characteristic piece of reasoning from the Mississippi schemer. Another project was mooted by Mr John Campbell of Monzie, though we are not aware of its having become public. In an elaborate pamphlet, dated 1708, he works out a project for a land bank, or a " Land Mint," as he calls it, in which there is .so much good reasoning and sound sense on some points, that it is difficult to see how 26 THE ONE POUND NOTE. he could have gone so far astray on others. In addition to the notes proposed to be issued against land, he argued for an issue of i^ 1,000,000 in notes, against which the same amount of gold would be kept for change. Freedom of inspection and audit by members of Parliament were amongst the sensible parts of his programme, and no dividend to be made account of but out of profits. Ad- mitting that his project might seem an encroachment on the monopoly granted to the Bank of Scotland, Mr Campbell tries to prove that there would be no encroach- ment at all, as the two banks would be essentially different. " Y*^ Banknotes are a credite upon silver pledged, y*^ Notes of Y^ Land Bank are a credite upon land pledged ; y® bank pays in silver, y'^ land mint pays in land. Y*^ bank has specie {i.e.) Silver money for a | or i pairt of y'^ value of y® Notes out ; if y^ demande is greater y" y*^ specie in bank, the bank fails. Y® land mint has specie (i.e.) land equal to the Notes out, and a million more to make good a year's deficiency, so y* to all appearance y'^ Land Mint will not fail." Mr Campbell apparently could get none to help him, and contented himself with placing his document amongst the archives of the Advocates' Library, where it remains a memorial of his prudence in action and his folly in theory. The bank was again compelled to stop payment by a " run " for gold, caused by the Rebellion of 171 5 ; when the deposits and ;^30,ooo Government money which was lodged in the Castle for safety, had a marked effect in shortening the time during which the drain was endured. In the first stoppage, when notes only had to be met, and the amount of these not large, three weeks elapsed before the bank was affected. In the second, they had to close their doors in eleven days,* and remain so for nearly four months ; their notes again being called in, in May, June, and July follow- ing, to be paid by a new issue, with interest from the date of stoppage. It has been stated that the directors privately * Arnot's " History of Edinburgh," 1788. THE ONE POUND NOTE, 2/ encouraged the run, lest the money might fall into the hands of the enemy. The French proverb, " qui s' excuse s'accuse," is strongly suggested by a perusal of the Bank of Scotland's defence at this period ; they seem to have been conscious that they were scarcely meeting public requirements as they ought, but were in a short-sighted way looking more to payment of a high dividend on a small capital. Three separate proposals for extension were made to them, between 17 19 and 1727, all of which were plainly refused. The first was on behalf of the Equivalent Company, and was handed to the bank in December 17 19, without any name attached, by one describing himself as " A Gentleman of Distinction, a well-wisher of his country and of the Bank of Scotland." It was suggested to join the ;^2 50,000 of Equivalent Com- pany's debenture bills to the bank's subscription of i^ 100,000, making a total capital of ^^3 50,000. Of the profits the Equivalent Company were to get five-sevenths and the old bank two-sevenths. But as the whole of the debentures were paid up, while only a tenth of the bank's capital was so, it was hoped that the latter would see its way to repay the Equivalent Company i^22 5,000, or nine-tenths of the total amount, with other arrangements as to interest. Something might have been made of the scheme, crude and unworkable as it must have appeared to the bank authorities, but, unfortunately sheltering themselves behind the actuarial absurdities of the proposal, the bank declined the opportunity of running out ";!^225,ooo in bank notes" on such terms, and accordingly returned a civil answer in writing to the " Gentleman of Distinction," who by this time was quite well known. On receiving the bank's depu- tation, the " Gentleman " was so angry at the refusal of his offer, that his interruptions completely prevented the " answer in writing " being handed to him. So far as it dealt with details of the scheme, the directors' reply was able and acute on all points ; but it did not touch the broad question of the bank's position with the country. It is possible, of course, that the Equivalent Company would 28 THE ONE POUND NOTE. not have agreed to terms had they been proposed, but the defect in the old bank's apology is, that they exhibited no desire whatever to meet the company in any way, — a slight which was duly remembered when 1727 came round. The second proposal came in 1720 from a less credit- able source. " The Edinburgh Society for insuring Houses against loss from Fire " was not, as the reader might inno- cently suppose, a society for insuring Jiouses against fire, that business having fallen through in the first months of its existence. Being disappointed in their hopes of gain, the society got into bad humour, and, after sundry secret meetings, resolved to make a run on the bank, with the hope of compelling it to shut its doors, when they could set up in its place. A sum of ^^8400 of the bank's notes was expended in this foolish design, the treasurers of the Equivalent Company aiding it by withdrawing all their money in gold, and lodging it in the Castle. It is needless to say that the contemptible trick ended in complete fail- ure ; notwithstanding this, the society had the audacity, a short time afterwards, to make proposals for amalgamation, — proposals which the Bank of Scotland rejected with more politeness than they deserved. Still another " braw wooer " turned up, in the end of 1721, all the way from London town, in the person of Mr James Armour, a writer in Edin- burgh, representing the " Royal Exchange Company at London." Upon first consideration of his desires, the bank declined to open negotiations, whereupon Mr Armour, in 1722, published a pamphlet containing an elaborate account of his proposals, addressed to Lord Leven, the bank's governor, and printed with capitals, German text, and Italics sprinkled amongst the Roman characters with a taste peculiarly his own. " The sum of the proposal is this : The Royal Exchange Assurance Company was to send down to the bank ^20,000 sterling (in specie), for which the said company were to be entitled to one-half of the whole free profits in the bank, after setting aside ^2500 sterling to the bank's proportion." Other proposals were made as to exchange, but these are suspected to have been THE ONE POUND NOTE. 29 inserted only with the view of diverting " the reader from too narrowly examining his main project." In all its disputes with English companies, the bank had an unhappy way of invariably styling them " For- eigners," and asking, with patriotic indignation, if it were for the nation's advantage that they should borrow money from a foreign country, which they could easily get in their own ? but perhaps this was only the Scottish return for the manner in which Englishmen spoke of Scotland. It was objected by Mr Armour that the bank could not strengthen its position by calling up more capital from its proprietors, as these would pay their calls, not in specie, but in the bank's own notes ; to which it was retorted, that the bank's position would be strengthened even by such a payment, inasmuch as its liabilities would be lessened by the amount of the notes paid. The point of receiving ;{J"20,000 in gold was evaded, by insinuating that it would not be so paid ultimately, but would be settled by bills of exchange, or the bank's own notes. Thus this disconsolate lover was compelled to retire like his predecessors, much grieved that his efforts to induce " Jenny to birl her bawbee" had been in vain. Details of these various proposals have been given at some length, as the same features appear prominently in each : first, the desire to share in the banking profits ; and, second, to increase these profits by a corresponding increase of credit to the public, granted by means of a larger issue of notes ; the latter, according to the narrow notions of the time, being the most profitable and extensive way of giving accommodation. The amount of notes issued bore an immensely larger proportion to the entire floating paper obligation than it now does, cheques being only used to draw the notes direct from the bank, and not being handed in payment of accounts, as in later times ; so that all accounts, large or small, were settled b)' bank notes. While stating these facts, it would be unfair not to admit that the bank had some reasons for declining to increase the scope of its business, for the most indignant outcry against its position undoubtedly came from those who 30 THE ONE rOUND NOTE. would onl}- have accepted greater facilities to further their own private views in stock-jobbing. The South Sea Bubble was a thing of the past, but the speculative spirit was by- no means at rest. Where the bank failed to discover the signs of the times, was in not sufficiently appreciating the difference between the selfish demands of speculators, and the deeply felt need of the honest trading community. Mr Macleod. in his " Theory and Practice of Banking," quotes their own words, " For the quota of credit in a Bank- ing Company must be proportioned to the stock of specie in the nation, learned and understood by long experience," as a proof of the soundness of some of their theories. In the same pamphlet from which he quotes occur the following sentences, giving the opinions of the blind prophets of 1727: — "It is impracticable to support and carry on tiuo Banking Companies in one country. No nation did ever attempt it. England, where banking is as well known as in any part of the world, did never try it." " No set of Scotsmen, who had the nation's welfare at heart, would ever attempt to disquiet the bank. A proposal for a new bank would never obtain favour in a Scots Parliament." The bank's monopoly lapsed in the year 17 16. Indeed the bank did not ask for a renewal, deeming the proba- bility of another bank being originated an impossibility. Fortunately the monopoly was not renewed. We say /or/ujiaU/j', apart from any questions of economic principles as to restriction, for their entire policy at this time stands out in marked contrast to the energetic, clear-headed way in which the bank was conducted after 1730. During this early period of its history it seems to have lacked a more vigorous management, which could have enlarged the scope of its business, augmented its capital, and generally enabled it to afford these increased facilities for banking which were so much required. Trusting, apparently, to the current belief that more than one bank was not safe, they do not seem to have thought of a rival, and, from the want of an inventive genius in their councils, plodded on in the old tracks, "if two banks were authorised in England, there THK ONE POUND NOTE. 3 1 would be a constant hustling and interference betwixt them, till one, or probably both, came to ruin." History proves very distinctly the incorrectness of their opinion. This limited style of banking clearly could not be tolerated much longer, and at last " came the deluge." Much as that " ill-faured Union " has been reviled, its indirect effects upon Scotland have been marvellous, and not the least of those was produced by the " Equivalent Fund," out of which came to be created the Royal Bank of Scotland. With its establishment in 1727 a new era began. Credit was no longer to run with feeble stream in former narrow channels. Competition, with its good and evil attendants, had begun. New methods of banking were invented. In short, when the first flame of jealousy was burnt out, the two banks settled down to their work, about 1 73 1, in a manner as distinct from that of 1707 as the steam-engine is from the mail-coach. What all this had to do with one pound notes we shall presently see ; but, for a few pages it will be well to look back at the first years of the new bank, and the warfare that ensued, — a warfare all the more interesting to modern readers, since the weapons of destruction were largely one pound notes. 32 THE ONE POUND NOTE. Cbapter ll.— 1727-1750. The Contest between the Banks. Shylock — "Thou call'dst me dog, before thou hadst a cause — I'll have my bond, I will not hear thee speak — I'll have my bond, and therefore speak no more." — Merchant of Venice. THE Royal Bank of Scotland obtained its charter on 31st May 1727; but while in chancery, and before the sign manual of King George I. . had been adhibited, his majesty died suddenly at Hanover on nth June of same year. Some delay took place ere George H. gave the necessary authority, on receiving which, the charter was presented to the Deputy-Keeper of the Great Seal in Scotland on 6th or 7th of July ; and regardless of the last effort of the old bank, who lodged a caveat against putting on the seal, the charter was returned to the Royal Bank completed on the following day. To get it passed had been no easy task, and required all the efforts of its supporters by fair means and foul, — an equal amount of the latter being carried on by both parties. The old bank learned that the promoters had placed a draft scheme before the Bank of England directors for their approval and patronage ; banking operations being limited to Scotland, the directors cautiously answered that for the present nothing in it appeared to them prejudicial to the Bank of England. After a vain attempt to obtain a copy of this charter, the old bank lodged a caveat against its passing ; and after consultation with their " Doers " in London, determined to petition the king, which they did in no gentle terms. Seeing that all their efforts would pro- bably be fruitless, they protected themselves by calling up i^ 1 0,000 of their capital, and waited in angry impatience the further operations of the new bank. THE ONE POUND NOTE. 33 The Equivalent proprietors on their side had not been idle. Villainous rumours about the Bank of Scotland were set afloat. They were accused of disaffection to the Govern- ment, a serious matter to the jealous House of Hanover ; of sending a gentleman to London with ^^5000 for pur- poses of bribery ; of having too small a capital ; that the '' Directors were far too narrow in extending their loans " and requiring security; of not lending on pledge, nor dealing in exchange, foreign bills, or lending money to its own partners ; its transfer fees were too high. In short, every- thing was wrong, and it was impossible that anything could be right. The Bank of Scotland were shrewd enough to point out, that the Royal Bank having a capital consisting solely of national debt, would have no fund to bank with ; but on the publication of the charter it was found that due provision had been made for this, the capital consisting of ;^iii,347. 19s. iOi\d. sterling of Government stock, with 20 per cent, additional as a banking fund, the proceeds of calls on the proprietors. During the time spent in preparing for the start, a sum of j^20,ooo was paid to Scotland by Government, to be laid out at interest for improving the fisheries and manufactures. Hearing of this sum, the Bank of Scotland determined to apply for one half of it, hoping that the Royal would be content with the other half ; but reckoning without their host, they soon found they were in an evil case. The chairman and a majority of the Trustees and Commissioners of the Board of Manufactures were all Equivalent proprie- tors, and after a scandalous display of jobbery, the whole sum was deposited with the new bank, when it opened in a close off the High Street ; affording proof that public men in 1700 were as prone as the "carpet-baggers" of 1865 to " convartin' public trusts to vejy private uses." Not content with this injustice, the chairman of the Trustees ordered his underlings to refuse all Bank of Scotland notes offered in payment of " rates or taxes," and to demand gold or Royal Bank notes. With this year the Bank of Scotland " Defence " ceases, C 34 THE ONE POUND NOTE. and the concluding words are interesting historically : — " I shall therefore sum up all in one comprehensive Truth— that those of the Royal Bank have exerted the utmost of their Power and Strength, and racked their Wit and Politicks, to bear all hardships on the Bank, to discredit the Company and encumber the circulation of its Notes, with no other view but to occasion a Run upon the Bank ; oblige the Directors to make demands on their debtors ; create national dis- asters, and (as they hope) to raise clamour against the Bank — the Royal Bank in the meantime hording up all the specie they can be masters of, without affording any relief to the country under the present great scarcity of money ; while the Bank of Scotland stands passive, or rather on the defensive, only, trusting to the affection of the countr}-, and for support from the favour of all who have been accommo- dated by the bank, and found the conveniency and advan- tage of the circulation of the Company's Credit and Notes in the Nation." The first notes of the new bank were issued, dated 8th December 1727, apparently in exchange for as much of the Bank of Scotland's paper as could be got for the money. With remarkable promptitude the Bank of Scotland at once endeavoured to make a similar collection of its rival's notes. The modern exchange clerk might naturally sup- pose that his occupation then began, as indeed it did in one sense ; but nothing was further from the old bank's notions of banking propriety, than that its notes should be returned to it in thousands by a rival institution, and peace- ably paid for, as is done in our enlightened times. In those days it was regarded as an offensive innovation, which was not to be tolerated ; and accordingly the old lad)' of Bank Street began in the most vigorous manner to stop the offence by destroying the offender. Unfortunately for the accomplishment of this amiable design, the Ro)-al Bank proved to be more than a match for its elder rival. It was the favourite bank with the Government, as well as a con- siderable portion of the lulinburgh people ; and, above all, it had the entire support of the Glasgow merchants, who THE ONE POUND NOTE. 35 hoped to extend their credit by its aid. In adtlition to these, the Royal Bank had other two distinct advanta<;es : it was possessed of a nmch larger capital than the Bank of Scotland, and could therefore endure a heavier blow ; and, being a new bank, it had very few notes in the hands of the public, and was therefore less open to the particular mode of attack. The financial position of the Bank of Scotland was almost exactly the opposite ; its capital was small, and being an old bank, would probably be " out " in advances, while its note issue had attained to a considerable amount, having been in fair repute for over twelve years, and now forming a recognised portion of the currency. Thus, with- out any extra effort^ the Royal Bank, in ordinary course of business, became possessed of a number of Bank of Scot- land notes ; and then came the defect in their exchange system. Instead of presenting these at once, and getting them paid daily in small quantities, they carefully hoarded them up until they reached such an amount as would give the old bank considerable trouble to pay : trouble was what was intended, the more the better : they were then sud- denly presented, with a demand for gold. This went on for about three months, the Bank of Scotland vainly tr\'ing to scrape together Royal Bank notes wherewith to do like- wise in its turn. The end of the squabble was, that the new bank reduced the old to such extremities, that it was compelled to refuse payment of a packet of about iJ^QOO of notes to a patron of the Royal Bank, Mr Andrew Cochrane, the Lord Provost of Glasgow. Thus within four months of its first appearance the new bank forced its rival to stop pay- ment on the 27th of March. The whole story of the legal proceedings which ensued is very well told in the print of the appeal, which was brought before the House of Lords in May 1729, by the Royal Bank and Andrew Cochrane as appellants against interlocutors of the Court of Session, versus the Bank of Scotland, respondents. * Althoui^h it may not have been required, extra effort does seem to have been made by the Royal to buy up the Hank of Scotland notes. 2,6 THE ONE POUND NOTE. The appellants' case opens by referring to the Bank of Scotland's perpetual power of banking, and twenty-one years' monopoly. It then says : — " And to give their Notes or Bills the greater credit, and enable them to recover money due to them, they are empowered to sue and may be sued summarily, — and therefore the said Act [1696] declares. That Sjunmar Execution by Horning shdW proceed upon Bills or Tickets drawn upon or granted by, or to, and in favours of the said Bank, and protests thereon in same Manner as is appointed to pass upon Protests of Foreign Bills, by the 20th Act of Pari. 1681, and that no suspension pass of any charge for sums lent by the said Bank, or to the same, but only upon Discharge or Consignation of the sum charged for." At this point the appellants can no longer restrain themselves, they swell forth like the frog in the fable : — " But as the Rules laid down by the Respondents were too narrow, and that it would be of great Service to the Country if Credit were made more extensive, — His Majesty was graciously pleased ... to incorporate the Appellants by the name of The Royal Bank of Scotland, with Power of Banking upon a Fund much more extensive, and ntore certain than TJiat of the Respondents." How the respondents must have quailed before these sentences. They are then accused of having made a call upon their proprietors, with sundry other offences, which had the effect of "occasioning such an Interruption to Credit that they" were obliged to stop payment of their notes ; but by an " Advertisement, promised to pay 5 per cent. Interest till their Notes would be paid." " The Possessors of these Notes finding by this Stop that what had in Commerce been formerly equal to Specie, was become meer Paper, applycd to the Respondents for Payment of their Notes, and upon Refusal, protested against them for Non-pay- ment." Mr Cochrane, on being refused payment of the packet before mentioned, went to the Royal Bank, who, at once, as they said, " in order to prevent an entire Stagnation of Credit, advanced the same to him." Thereupon Coch- rane, grounding upon the Bank Act of 1696, presented a THE ONE POUND NOTE. 37 petition for letters of horning against the Bank of Scotland ; but the Lord Ordinary, believing that the whole course of action was intended purposely to distress the old bank, instead of at once granting the letters, ordered the petition to be seen and answered by defenders, and afterwards delayed it a few days for the decision of six of the judges. They, in turn, postponed it for nearly three months, and finally refused to pass it on 25th June 1728. Seeing that summar execution was denied them, the pursuers endeavoured to secure themselves by inhibition and arrestment ; and accordingly,having brought two actions, one in name of Thomas Peters and Michael Wallace, and the other in their own name, for payment of iJ" 10,2 5 5 of notes, payable to David Spence or bearer, the appellants, upon depending suits, offered to the Lords bills of inhibi- tion and arrestment. Contrary to usage, these were not at once granted, but were referred to all the judges, i ith July 1728, who, as in the former action by Cochrane, "refused to pass the same." An appeal to the whole Court was decided in a similar way on 26th July, neither horning, inhibition, nor arrestment being competent against the Bank of Scotland upon their notes, the diligence being done in enmlatiofieni. Meantime the Bank of Scotland had not been idle. Knowing that further actions would certainly be brought against them, and that letters of horning were " frequently passed of course," they petitioned the Court of Session to withdraw from the i^lerks of Court the power of writing upon any such papers until they, the Bank of Scotland, had seen them. This the Lords also granted, and, contrary to all precedent, ordered such bills to be delayed twenty-four hours, in order that the bank might have the opportunity of answering the same. Immediately after this the principal sum sued for was paid over, being received by the Royal Bank under protest, that their acceptance of pay- ment did not affect their right to demand damages and costs of their proceedings. On the 19th February 1729, the Royal Bank, now furious beyond discretion, again resumed the attack, re- 38 THE ONE POUND NOTE. questing the judges to withdraw their previous interlocutors, and find that the defenders (the Bank of Scotland) had no other rights than those common to the " Pursuers, and all others His Majesty's subjects." JVo notice ivas taken of this petition, while one put in on 25th February was superseded and delayed till the following June. But there was no rest for the unjust judges of the Court of Session ; they might style the petition "disrespectful, indecent, and injurious," as they did, but the Royal Bank was determined on having its " pound of flesh." The appeal to the House of Lords was accordingly prepared, insisting that as the Bank Act of 1696 gave the right of summary execution to the bank, so it also gave it to others against the bank ; to which it was objected by the Bank of Scotland, that notes issued by them as a company were not referred to in the Act, but only bills for money borrowed as private individuals. The Royal replied, " this seems a Distinction without a Differ- ence," and in clear vigorous language proceeded to take the old bank's arguments to pieces, concluding thus : " As the Interlocutors appealed against are not only against the express words of an Act of Parliament, but establish a Privilege in favour of the Respondents different from all other subjects, the Appellants hope that the said Inter- locutors shall be reversed, and such other Relief given, as to your Lordships shall seem meet." One of the four names adhibited to the document is that of Duncan Forbes, pro- babtly the famous Forbes of Culloden whose statue now adorns the Parliament House in Edinburgh. The writ for the Bank of Scotland makes the most of a bad case, at the very outset adroitly exhibiting its rival as the Upstart Institution. In its opening paragraphs the bank tries to show that its notes or tickets could not come under the Summar Diligence Act of 1681, which only applied to bills of exchange, "but not to cash ox promissory notes paj'ablc upon demand ; " while there is no provision in the bank's Act of 1696 on this point, because to give a charge of horning upon cash notes " would have entirely defeated the institution of a bank," — how, it does not THE ONE POUND NOTE. 39 explain, but endeavours to cover its weakness under pro- testations of the manner in which " the Company ever since their Erection have executed their trust, with the greatest candor and caution to the universal satisfaction of this country, and with the strictest Fidehty and Affection to the present happy Establishment to which they owed their Existence." Complaint is then made of the Royal Bank (spoken of as ^' some of the Creditors on the Scots Equivalent") " having got a sum of Money into their hands, — became possessed of several of the Respondents' notes, and there- with made for some time a continual demand upon the Respondents, which, with the scarcity of Money in the country, brought them under the necessity to stop payment for a little time." The Bank of Scotland re-opened its office on 27th June 1728, two days after the Court of Session decision in its favour, but there is reason to believe that cash payments were not resumed until 14th November of the same year, when the full sums, with interest at five per cent., were paid to the parties. The clause in the Summar Diligence Act of 168 1, requiring protest to be recorded within six months of due date of bill, is taken advantage of, it being maintained that the bank notes, sub judice, were due several years before they were protested and registered ; further, that letters of horning could only be obtained by the person specially named in the bill, or in its endorsement, so that in this case David Spence, the bank's own officer, was the only one who could properly pursue ; but apart from these grounds it was insisted that it was neither known nor intended to make bank notes subject to immediate execution. Whatever hopes the Bank of Scotland had of success were soon doomed to grievous disappointment. The case came before the House of Lords on 1st May 1729, who gave the following decision on the 9th : — " It is ordered and adjudged, that the several interlocutory sentences complained of be and are hereby reversed,' and it is hereby further ordered, that the Appel- lants be at liberty to apply to the said Lords of Session to 40 THE ONE POUND NOTE. cause their costs and expenses in the proceedings above mentioned to be taxed according to the course of their Court."* There is now Httle doubt that the House of Lords were right, and that the Court of Session were wrong in their view of the case. It may possibly be doing injustice to the old Jacobite Lords of Session, to insinuate that they would naturally have a leaning to the old bank, and wish to repress the new Whig Company on political grounds, as well as on account of the obvious malice which prompted its action ; but the Royal on their side could urge, that had it not been for the antipathy of the old bank at the very outset, the bad feeling which led to the actions would never have arisen. On the merits of the case, it was fortunate that " Bank Notes " were placed thus early on a clearly defined legal footing as to the steps to be taken for their recovery. At the risk of being tedious, the account of these proceedings has been given at considerable length, since no subsequent action has ever been raised of so much importance in connection with one pound notes. We shall have more to say further on as to this right of summary diligence on bank notes. As before mentioned, the Bank of Scotland resumed payment towards the end of 1728, and do not appear to have suffered much from the Royal Bank's attacks, until after the decision of the House of Lords, in May of the following year, when the old tactics were resumed ; without, however, any more serious result than that of making the directors of the old bank consult as to the surest way of outwitting their opponents by staving off the evil day. Strange as it may seem to us, payment of specie on demand was the supposed objectionable point in their note issue, as it was even down to the present century, when the writer of a series of letters in the Coiiraiit declaimed strongly against the absurdity of supposing that notes should be paid in gold ! Except the feeble resort to paying in six- * Reports of Cases Decided in House of Lords, upon appeal from Scotland, from 1726 to 1757. THE ONE rOUND NOTE. 4I pences, the only remedy the directors could think upon was the famous " Option Clause ; " and accordingly, " to avoid such distresses in future, the Bank of Scotland, on the 19th November 1730, began to issue ^5 Notes, payable to bearer on demand, or ;^5. 2s. 6d. six months after being presented for payment, in the option of the bank. On 1 2th December 1732, they began to issue £i Notes with a similar clause. The other banking companies in Scotland found it con- venient to follow the example, and Bank Notes were universally framed with these Option Clauses. They were issued for most trifling sums, and were currently accepted in payment, insomuch that Notes of Five Shillings Sterling were perfectly common ; and Silver was in a manner banished out of the country." * As a temporary remedy this measure was successful, and it is understood that the bank did not require again to avail itself of the option clause, although it was inserted in the notes for many years afterwards. The lapse of years helped to exhaust the virulence of the two banks, their peace being effectually made about 1749 or 1750, when Messrs Livingston, Mowat, Bremner, and Dingwall, who had begun the first Scottish country bank, in Aberdeen, under the name of the Banking Company of Aberdeen, excited the jealous monopolists of Edinburgh by doing a good business in note issuing, which soon displaced those of the southern banks. Unfortunately no proper care was taken to keep sufficient reserves ; and as the Edinburgh banks were at this time beginning their own system of note exchanges, they had good reason to demand of the Aberdeen bank that they should redeem their superfluous paper. In their attack they were only too successful ; drained by un- expected demands for gold, and dragged into an expensive lawsuit, the Aberdeen bank succumbed in 1753. The lawsuit referred to arose in connection with a demand for summary diligence by a holder of Livingston & Co.'s notes ; this was refused by the Court of Session on the ground that * Arnot's " History of Edinburgh," 1788. 42 THE ONE POUND NOTE. these notes were not of the nature of bills, and therefore did not come under any statutes for summary diligence. While partly printed and partly written, they were neither holograph nor legally attested, and besides were not signed by all the partners. The decision therefore was, that according to the law of Scotland they were quite valueless, and should neither have been issued to the public, nor accepted by them, one eminent judge remarking that they were " no better securities than a nick-stick." This procedure of the two banks received a vigorous check a few years afterwards from the Glasgow merchants. These gentlemen had invited the banks to open branches in their city, only to have their overtures declined, until in 1749, the Bank of Scotland, dreaming of the possibility of destroying its rival's splendid western connection, and in- creasing its own business, founded a bank there under the name of the " Ship Bank," of Dunlop, Houston, & Co., known at the time as the " Old Bank." Next year the Royal, thinking only of retaliation, replied by setting up its old friend. Provost Andrew Cochrane, with John Murdoch,* under the style of the " Glasgow Arms Bank," then called the " New Bank." Led away by mutual dislike, they little * " The partners whose names appeared in the firm were Provost Andrew Cochran, and his brother-in-law, John Murdoch. The former was an extensive merchant in this city [Glasgow] upwards of half a century — Cochran Street is named after him. Mr Murdoch, like Mr Cochran, was elected Provost three several times ; his town mansion was what is now the Buck's Head Hotel, the oldest edifice extant in Argyle Street, and giving a good idea, altered though it be. of the style of residence of the tobacco lords who ruled Glasgow in the days of these old banks" ("Banking in Glasgow during the Olden Time," p. 11). The tobacco lords referred to by Dr Buchanan aided greatly in making Glasgow what it now is, and by their extensive corporations and com- panies had afforded fair banking facilities to the west for many years prior to the establishment of regular banks in that quarter. Indeed, had these wealthy mercantile corporations not existed, the want of banks would have been felt much earlier ; so that although the first Glasgow bank only dates from 1749, banking facilities were afforded there for fifty years prior to that date, which were almost unknown in Edinburgh. THE ONE POUND NOTE. 43 dreamed of the result, for the dragon's teeth were sown, and in due time the armed men sprang up. Finding, when too late, that their so-called agents were only " fighting for their own hand," the Edinburgh banks endeavoured to stop their business, and withdrew their credits. Their threats and measures were alike unavailing, and at last, about 1758, the strength of the common enemy brought the two old rivals to a second truce, — a reconciliation said to be as uncharitable as the first, and one which brought them little credit, since, according to the Glasgow banks' assertion, it was induced less by mutual regard, than by enmity to their new competitors. Thus far the tale has been told as by all writers on the subject, and it may, no doubt, be partly true ; but it is an entirely ex parte statement, met by the direct denial of the bank's agent, Mr Trotter, whose employment by the banks might be rather traced to an honest endeavour on their part to carry out the system of exchanges which they had arranged for themselves in 1752, and thereby lessen the excessive amount of bank paper which was put out by their neigh- bours. If they themselves took up their notes regularly, there could be clearly no proper reason for other bankers not doing the same ; the latter, however, objected to such an application of the homely proverb, " What is sauce for the goose, is sauce for the gander," and, as will be seen, resisted it to the utmost. On their first issuing notes, Murdoch & Co. made a pre- tence of keeping a factor in Edinburgh to retire them on demand, but he was soon withdrawn when they found how troublesome he was according to their way of thinking ; and when this became known to the Edinburgh banks, an agreement was made, as in the Aberdeen case, to send an agent through to Glasgow to harass the new bankers. This gentleman, Mr Archibald Trotter, had been a partner in the firm of Coutts & Co. (then Coutts, Son, & Trotter), and is described by Sir William Forbes as " not possessing liberality of thinking and acting in business," nor " were his person and manner at all calculated to command respect ; " besides, " he was subject to a species of religious melan- 44 THE ONE POUND NOTE. choly." His employment in Glasgow might afford him ample food for reflection, but would scarcely be a proper cure for religious melancholy. His first duty consisted in calling upon and informing the Glasgow banks of his inten- tions, and inviting them to take up their notes, — a piece of politeness which was quite thrown away upon Messrs Mur- doch & Co. Beginning his operations, he collected notes of the Glasgow banks (making regular journeys to the west, and eventually living there for some years), and presented them, asking payment in gold or Edinburgh notes. A man of Mr Trotter's ability was, however, no match for the Glasgow bankers ; the experience of the Bank of Scotland and the Aberdeen bankers had not been lost to them, and distress sharpened their wits. Accordingly, we find that during thirty-four laborious days the unfortunate Trotter had only obtained payment of ^^2893 of his notes. On presenting his bundle day by day, Murdoch & Co., with profound deliberation, proceeded to dole out the money in sixpences, regardless of protests or threats of legal pro- cedure. Mr Trotter's own words are too entertaining to be passed over : — " When their Notes (Murdoch & Co.) were presented at the office for payment, a Bag of Sixpences was with great Deliberation produced and laid upon the table ; the Teller then proceeded with ridiculous Slowness to open up the Bag and Count the Money. He would first Tell over a pound sterling, in single Sixpences ranked upon the Table, and then affecting to be uncertain about the Reckon- ing, he would gather this small money, and count it over again from One hand to the Other, sonietijues letting fall a Sixpence for a Pretence to begin anew and count it over again ; on other occasions he would make Time by ridicul- ous discourses upon the odd size or shape of Pai'ticular Six- pences, SOUND another upon the Table, to try if it was sufficient coin. And sometimes he \\ould quit his occupation altogether upon Pretence of some sudden Errand or Call out of the Room. Very often they employed one Coggill, by his ordinary occupation a Porter, to act the Teller, and he lost time and blundered with great alacrity — being instructed to THE ONE POUND NOTE. 45 do his worst." On i6th October 1758 Mr Trotter presented £600 of Murdoch & Co.'s notes, offering to receive in ex- change Edinburgh notes or gold as they pleased ; but it cost him and a clerk no less than nine days' attendance to receive £47$ of this sum. From 7th November to 4th December he received average payments of ^36 per day, at end of which time he had ^^^2821 Glasgow notes on hand, which Murdoch & Co.'s cashier obligingly offered to pay, iJ'iOOO in Edinburgh notes, ^821 in silver, as usual, and /^lOOO by bill on London, payable at thirty days' date! Melancholy Mr Trotter's flesh and blood could endure this treatment no longer ; and, accordingly, we find him in Mur- doch's telling-room on the 23d January 1 759, solemnly accom- panied by a notary and two witnesses. Utterly abandoned, the shameless Coggill was again set to work " in the usual manner of payment" in sixpences. Some noteholders were not so well treated as Mr Trotter, being called " scoundrels" by the tellers, and otherwise abused. Sometimes a beating was threatened, and one man was said to have got both a beating and payment in sixpences. The instant the clock struck five all troublesome parties were " thrust out of doors by the shoulders,"— a mode of satisfaction of which there is little doubt Mr Trotter had experience. An action was raised, before Lord Woodhall, concluding for payment of ^^3447, the amount of notes in Mr Trotter's possession, with interest from the date of demand, and £600 damages. From the "information" prepared for Mr Trotter's case, in 1760, Murdoch & Co. seem to have had a large circulation, — Mr Trotter asserting that he could have taken up from ^80,000 to iJ^ 1 00,000 of their notes at any time in Glasgow ; and in another place he says, they cannot deny having " issued notes to the extent of above two hundred thousand pounds," although their capital was only about iJ^iO,ooo or iJ^i 5,000. The character of their business as merchant bankers, gives an opportunity for the pursuer stating the dangers and distress to trade of bankers engaging in mercantile speculations. The form of the notes was again discussed at great length, as in the Aberdeen case, special 46 THE ONE POUND NOTE. reference being made to the option clause, which had been inserted during the controversy. With shocking disregard to their comfort, he calls them " a Bubble and a public Nuisance," and demands that they should remain open for payment of their notes from seven in the morning to nine at night ! The defenders plead that Mr Trotter had acted in mala fide, being the agent of the two Edinburgh banks, and paid by them to live in Glasgow for the express purpose of dis- tressing them, and causing a stoppage to their business, as had been done with the bank in Aberdeen. In spite of Mr Trotter's repeated denials that there was any intention to distress, the case was not decided, but was made avizan- dum of again and again, being suspended on every pretext by Murdoch & Co., until June 1760, when Mr Trotter presented a petition, complaining that the defendants were trifling with justice. The Lords remitted the case back to the Lord Ordinary, " to adjust the facts — and especially the fact of Mr Trotter's being a mere hand for the banks, and his intention to distress, which several of the judges thought obvious. Lord Kames observed that Mr Trotter should not have taken the notes. Lord Affleck thought the case of Mr Trotter like that of a man's buying up another's debts /;/ iiialitia. The Lord President and Lord Coalston dreaded paper credit, and thought banks dangerous. A great variety of proceedings again took place before the Lord Ordinary, who again ordered pleadings to the whole Court."* Again and again Mr Trotter returned to the attack, and as often did Messrs Murdoch & Co. draw the Court away from the point by cleverly arranged side issues. Thus the matter meandered on through the mazes of Court of Session practice for other two long years, until in April 1763, the Glasgow bankers, having thoroughly worried Mr Trotter, and discomfited his employers, settled the matter out of Court by paying ;^6oo by way of damages. The scandalous delays in this case must have been chiefly caused by the hazy notions then prevalent as to note * Scotsman, 5th April 1826. THE ONE POUND NOTE. 47 issues and bank notes. Lawyers are notoriously creatures of precedent, and the judges of the Court of Session were only magnified lawyers. Seeing no precedent for a system of note exchanges, and being doubtless imbued with ridicu- lous contemporary theories, they were too willing to lend an ear to Murdoch & Co.'s frivolous objections. Had they given effect to what was afterwards embodied in the Act of 1765, that all notes should be payable on demand, on pain of summary diligence, they would have given a more com- prehensive meaning to the phrase " bank notes," and the records of the country would not have been marred by such a miscarriage of justice. If the Glasgow banks, or rather that of Murdoch & Co. (for the Ship Bank soon honourably fulfilled all its engage- ments), had kept a supply of gold proportionate to their issue, they would have had nothing to fear from exchanges of notes ; but issuing, as they did, notes far beyond their capital or means of payment, they had no resources where- with to purchase gold when the notes were presented, and had they been compelled originally to keep gold for so much of their notes, the latter would have been greatly restricted. To do them credit, therefore, the two Edinburgh banks, notwithstanding many shortcomings, seem at this time to have been sincerely searching, in much uncertainty, after better things, and were really trying to place the banking system of Scotland on a more reliable basis, it being their own interest to do so, inasmuch as they were wholly looked to for assistance in those times of panic, caused in great measure by the facilities given for speculation in an over-issue of unsecured notes. The whole case must have been specially annoying to the Bank of Scotland, who by their own Act of Parliament had been held liable to summary diligence for payment of their oiun notes. Apparently the only practical result of the whole affair, taken in connection with the decision in the Aberdeen case, was to cause the Edinburgh banks to refuse to receive any notes in payment except their own. The provincial bank notes having by this time acquired a considerable currency 48 THE ONE POUND NOTE. in the capital, towards which the greater portion of them seems to have gravitated, the effect of the banks' decision " was a loss to the people of Edinburgh, who, when they became possessed of notes of private bankers, in which indeed most of their wages were paid, were obliged either to keep them dead some time on hand, or pay i^d. every 20s. for changing them" at the brokers (Scots Magazine, 1727). We may here give copies of the notes issued by these two first banks of Glasgow, the first, taken from a charming little reprint, " Banking in Glasgow during the Olden Time," is that of Messrs Dunlop, Houston, & Co., the " Glasgow Ship Bank." It bore a vignette of a ship in full sail, but was very plain in its appearance. It is followed by two of Messrs Murdoch & Co., both copied from the Appendix to the print of Mr Trotter's Case, prepared for the Court of Session. The first exhibits the form in use prior to Mr Trotter's de- mand, while the second was arranged to defeat his attempts, by means of the option clause, which is here inserted. To meet the requirements of Scots law, as interpreted possibly by the case of the Aberdeen Banking Company, it became customary to insert in these private note issues the name of the writer of the parts not printed, and also to lodge a bond with some city official with full powers and particulars as to their issue. But it was one of Mr Trotter's pleas against Murdoch & Co., that they had neither lodged a new bond, nor altered the style of the old one, when they adopted the option clause, which was a glaring violation of the terms of their bond. With this case the discreditable behaviour of the banks to each other seems to have ended. The whole proceed- ings, and the novelty of the expedients resorted to, afford a glimpse of the commercial courtesy of the time ; besides showing very plainly, that though our official fathers did not at once recognise the maxim that " competition is the life of trade," yet that, towards the middle of the century, a beginning had been made by the two old banks in the establishment of a sound and prudent principle to control the issue of bank notes. THE ONE POUND NOTE. 49 M O M I t^ r 01 O o o CO Q. o -J z Q z _j O O ;^ o CO «n 1 o QJ) ^3 >- Z < o o o h- 03 ID o I cc LU Q Z < X UJ _J < 9- o o z rK> ^ ? o c nr ^ m 'J ^^ ^ z ^ X ? M u Q <» o £ m ^ o ^ 5 o^ ^ ri ■ z -V o H ..^ *-J CO cr» 3 O .;: T OJ ■V 5 X UJ < Q. o _J z Q O O ^ ^ so THE ONE POUND NOTE. O O CD o < I o O O d < ^ — o •- c I-' O o CO LLl o z: LU < > o o I O o Q DC 3 I O * I *' 1 ** 1 ' ' I ** ! *^ ! * ! "I * rT-i T ii T « T .. T »T..T.. (?) < I O CQ CO LU < •P c^ «> o o a M ^ ei ^ 5 i LU Z < DC I O o O DC n Q ^ < V ■.y./oji ]]0.i >^ o o < o o _.o o -V z Q o ■i— o 5 o o o LU r3 o >-* 2 ^ I Q O a O ro C ^ ^ ti ^ ^ lU .0 © <^ 5 ^ ^ ^ cr Q z o rTi (3 ^ < ?j rJ g ^ O p Zl co' Q ^ o o o o >? ^ :i < _J -V ^

-.~ ec r; rj < o O 6 e d LU CC I o r-i < ~ -V h r^i O »J 2 ■5s cc o ►i o o -M 6 t < CO z I o cc o _J < 'J d CO 'J 1 c3 5 e^ > z < CL o 1- < O I 'J "cT 'J -"■J ■W O f- rj ■1— •"J 'J ii o to r- '^ ij^ o ^rr^- •J -V o • Q r; i 6 1 to ^ 6 ^ ^J r- -•^ -»-» ^ C3 :) ■»-» m < 2-^2; £ S2i 1) i» I- 11-5 S o— ■ t = " - rt 3 71 g_= be o c c lull's 5 i_<~ o tl ^ ° g 8 «■ E Ji-u u I rt O — VO 00 t^ — O "^ O '^O N 00 I^ "- 1^ CT> r^CO "-> — 00 00 O^ ro »o •- o CO 00 M C^^O r^ — Tj- M M CO " m>o o on r^ ro ro C^vO ro\0 N 00 ■- t^ pTcT'J-CNrororOM'oo '^M Tf^^C^O^^CoO C7^C^^OOo'oo">-C^•^ro vO MvOvO ■^►"VO Tj-u-i"^i-cOO Tj- uico O— r^r^mON'^r^mi^O M vo t^N ON ONr^ONN y^yO (s r^oo Lo-^rj-r) 0\i-i nn r^ir^r^iy-)"" O O "^'-" LOO tT-^-^N OOn'-OO •- roN OnJ^M rOr^O "^t^O CTi S? vriroi-oOvO "^n N N r^Ovo N moo OvO vO r^co t)- ■* m i^ r>.vO N OO 0;>3 O^MCO 0^ lOO 1^ r^ riO On O -i" — O 00 lO^ ^ j^ «, »« ro roOO LO On Tj- w-i Tj- ■- vc r^'-D CO CnOO r^ONr^^^M M O On"^M rOM ^ •^' a\0 Tfu-irJ-rJ-OOO VO — —OOOvOOOOn t^oo W) ri M tT LT) O 1^00 rn o\ t^ n" cf^ »- " ro ro Tj- lA) S? 0000"->000000000000000»-^r^O"^ONOO VO ^O CO M tn ONvO CO CO CO 00 00 CO CO -^^O sOOOO'-'j'^OMI^OO N M Tt- M VO O CnOO COCOCOOOCOCO^O u-iu-it^'\0 l-»00 ON O "" N ro 'S- "TO t->.00 0\0>'lOf*1'*trjOOOOO 00 00 00 00 00 •a" THE ONE POUND NOTE. IO7 As showing the rapidity with which provincial bank paper found its way to the capital, it is mentioned that in the first eighteen months of the Dundee bank's existence ;^55,000 of the bank's notes were paid by their Edinburgh agent, Mr Fyffe, a sum which so distressed the bank to pay that in 1765 they refused to continue the retirements, apparently in the hope that they might still remain in circulation. The Act of the same year stopped this dream, as the notes were simply sent through to Dundee and presented there, and seeing that nothing was to be gained the bank again resumed its Edinburgh retirements in 1766. For many years thereafter a sum of notes, gradually increasing to three or four times the amount of the whole circulation, was yearly paid in Edinburgh alone. The year 1778 was one of great scarcity of money, London bills standing at a high premium in consequence of dull trade and numerous bankruptcies. The distress had indeed begun in the previous year, a slight run having been made on Sir William Forbes, James Hunter, & Co.'s bank, owing to a loss they made with Mr Fall of Dunbar. The one pound note holders seem to have been the most panic-stricken, as the circulation of these notes fell nearly ^6000, though the decrease was more than made up by the rise in large notes, caused no doubt by the wants of the mercantile classes, who felt severely the need of advances to carry them on. 1779 was little better for the Dundee bank, pressing wants compelling them to bring down specie from London by land, a very expensive means of transit. Hitherto the banks had used the Berwick smacks, insuring the cargo during the winter months only, and taking the risk from April to October in each year ; but the dangers of privateer- ing now compelled them to abandon this comparatively cheap and speedy transit, and resort to the slow heavy waggon, at a cost of about i per cent, for silver, with i per cent, to the London agent for collecting it. Adding to this ^ per cent, over both metals for carriage, the total cost was ;^l. 8s. per cent, on a mixed remittance of silver and gold. I08 THE ONE POUND NOTE. Gold alone usually cost from 4 to f per cent, for carriage ; but in times of scarcity, or under an adverse exchange, a commission had also to be paid for its collection, the bullion points in the exchanges of all countries being then necessarily much wider apart than now, when telegrams and cheap railways minimise time and outlay. An important factor in the circulation of the country came into existence on ist January 1782, when Sir William Forbes, James Hunter, & Co. issued their first notes. Had all the bankers of Scotland imitated the example of this wealthy house and established a sound business before issuing their notes, the roll of failures would not have reached its present length ; but adopting an issue of notes as the quickest way of getting business by granting advances, without having regard to the safest way, the majority of banking houses had sprung up into huge connections with the rapidity of Jonah's gourd, to wither away with equal speed when touched by the heat of adversity. Devoid of any firmer support than the circula- tion of their notes, these firms appear to have regarded capital and reserves not so much as bulwarks of safety in time of need, as unproductive consumers of profit in time of success. Sir William Forbes and his partners were induced to take this step by the restrictions, and possibly the jealousy, of the Royal Bank, who had begun to look upon private bankers not only as rivals, but as an unsafe element in the banking system of Scotland. In this view they were undoubtedly perfectly correct, for most of the private bankers depended entirely upon the two banks in times of trouble. Unfortunately, in the case under notice, the Royal Bank cannot have been fully aware of the resources of this oldest of the private banks, for, in pursuance of their decision, they intimated to Sir William Forbes that any deposits he might in future have with them would have to be at a much lower rate of interest, otherwise his account would be closed on ist July (a Sunday), — thinking, as Sir William says, that he would have no resource but to comply THE ONE POUND NOTE. IO9 with their desires. " This measure, which we could not but regard as ungenerous on their part, led us to consider in what manner we might contrive to render ourselves inde- pendent of them altogether ; " and after consultation on the matter, " we formed the bold resolution of issuing a few notes ourselves of the nature of bank-notes by way of experiment, for which wc thought our credit and character in the world sufficiently established." It was resolved that no agent should be employed to push the notes, as was the custom of other bankers ; but if any customer intimated a preference for notes of the joint-stock banks, he was to be at once accommodated with what he desired. Due notice was given of the intention to the Bank of Scotland and the Royal Bank, with intimation that the notes would be taken up once every week, or oftcner, if desired. In regular course the banks replied, stating that they would receive the notes in payment, but would expect that exchanges would be made every day, which was at once agreed to. After all this prudent forethought in the origin of the scheme, it is amusing to read that, falling into the error of the Royal Bank, they had dated their notes on Sunday, ist July 1 78 1, a circumstance that caused the good folks of Edinburgh to be " much tumbled up and down in their minds " over the matter. The old notes were called in and burnt, and a new plate engraved, dated ist March 1782, the new notes being handed out to the cashier on the 5th of the same month. At first only guinea and five-pound notes were issued, the first amount printed of the smaller note being about ;^55,ooo, while between 1782 and 1789 i^5 19,330 were printed, a quantity indicating the extensive circulation and wear the notes received before they found their way back to the bank. Twenty-shilling notes were not put into circulation until ist June 1798, when ;^45,ooo were printed. The annexed table exhibits the bank's circulation for some years after the first issue in 1782, distinguishing between notes of £^ and upwards and one pound or one euinea notes. no THE ONE POUND NOTE. Statistics ot Circulation Of Sir W. Forbes, James Hunter, & Co., from 1782 to 1827. Dates Total Circulation. Guinea Notes. 1782, Jan. I " ,, 14 ,, 28 Feb. 7 Apr. 27 May 28 June 28 July 31 Nov. 20 Dec. 31 I783,june23 ,, Dec. 10 1784, June... 1785" 1786 1787 1788 1789 1790 1793 1795 1797. Jan. I Mar. I Apr. 15 >. 17 Aug. 8 Oct. 27 1799 1800 1801 1803 1805 1807 1809 1810 1811 1812 1813 1815 1816 1817 1818 1820 1822 1823 1824 1825 1826 1827 9,900 15,100 26,800 37,900 48,300 60, 500 58,900 63,300 84,600 82,750 81,270 89,060 110.770 99,400 96,100 94,100 100,700 90,500 101,200 94, 100 99,800 115,200 84,300 63,900 48,500 47,200 93,000 108,100 136,400 142,600 192,300 169,700 207,265 225,444 220,700 251,400 210,525 244,440 170,028 142,000 172,351 153,920 208,000 211,312 182,785 210,000 209, 1 50 189,257 214,056 161,430 Not shewn 8,175 Not shewn 23,400 32,700 34,300 55,800 44,300 51,600 51,270 55,360 68,970 6 1 , 200 57,900 58,700 52,800 60,700 62,900 57,700 58,400 63,900 51,100 41,300 31,800 29,800 51,300 63,300 ^43,880 Not shewn 38,400 38,955 37,464 29,505 52,815 47,670 Not shewn ,39,123 Not shewn 19,656 14,427 13,860 14,155 11,697 11,949 9,450 20s. Notes. None 36,620 Not shewn 52,800 57,020 71,515 72,650 57,730 58,720 Not shewn 44,980 Not shewn 85,086 85,556 89,985 74,160 80,250 85,202 69,856 Per- Total of centage Small Notes. ofSmall Notes. Not known 8,175 53 Not known 23,400 48 32,700 54 34,300 58 55,800 86 44,300 52 51,600 62 51,270 63 55,360 62 68,970 62 61,200 61 57,900 60 58,700 62 52,800 52 60,700 67 62,900 62 57,700 61 58,400 58 63,900 55 5 1 , 1 00 60 41,300 64 31,800 65 29,800 63 51,300 55 63,300 58 80,500 58 67,270 47 75,460 38 91,200 53 95,975 4b 108,979 48 102,155 46 110,545 43 106,390 50 107,210 43 84,103 48 80, 500 56 84,100 48 77,300 50 104,720 50 104,742 49 99,983 54 103,845 49 88,315 42 91,947 48 97,151 45 79,306 49 THE ONE POUND NOTE. Ill Remarks on Table. " Tlie amount of our notes has not only far exceeded our utmost expectation, but has been the one cause of the great increase which has taken place in the original and funda- mental branches of our business, — the deposit of money with us at interest and the negotiation of bills of exchange between Edinburgh and London, both of which branches have been enlarged to a most astonishing degree ; while, on the other hand, those branches of our business have been the means of facilitating and extending the circulation of our notes, so that they have mutually acted and reacted on each other." — " Memoirs of a Banking House," Sir W. Forbes. 1784. — Increased circulation to meet wants in monetary crisis of 1783-84. 1788. — In this year there was a "run " of poorer classes with small notes, which was more than counterbalanced by increased circulation of large notes to meet necessities ofcoiiiiitcrcial nun : in the following year, from the continued depression, small notes were largely used. 1797. — The effects of the tremendous "run" of this year are here shewn in an exaggerated scale, as Sir W. F., from prudential motives, paid all his own notes presented through the exchange, but did not keep up his circulation by issuing any, until he saw what course events were likely to take. To inoecisc the/n/fr currency was almost impossible for some days, as it was coin that was wanted. 1810-1815. — Want of bullion and commercial speculation increase the circulation greatly at the beginning of this period; as the distress passes on, the circulation rapidly decreases. The fall in large notes is very marked. The guinea notes with their odd shilling are found useful as change, but begin to disappear from 181 1. 1782-1827. — 46 years' average of small notes, 54 per cent. 1865-1874 inclusive. — 10 years' average of small notes for the .Scottish banks, 64.5 percent. As the end of the century drew near an extraordinary outburst of crime occurred throughout the country, and a few of these relating to bank robberies and small note forgeries may be mentioned. On January 26, 1774, an advertisement appeared in the Edinburgh papers regarding an extensive forgery of Bank of Scotland guinea notes : — " The engraved part is well executed, so that at iirst sight it is difficult to distinguish the forged from the real note. The forged note wants the watermark on the paper which is in that of all the real notes, but an imitation of it is attempted with an instru- ment, which is discovered by looking at the back of the note." Next day the British Linen Company issued a similar advertisement regarding its one pound notes, dated 6th September 1770 : — "The forged notes are done on common paper. The figure of the woman and ship is ill executed and appears faint, and the strokes of the letters in the copperplate print are less full and broad than in the real notes." The imitation of the watermark had nearly cut the paper by the pressure required to bring it out. In both cases i^ioo reward was offered by the banks, but without apparent effect. A similar attempt had been made 112 THE ONE POUND NOTE, on the British Linen Company in November 1772, in which one John MacAffee was found guilty. From the facsimile notes of the period, reproduced elsewhere, the reader may judge that a very elementary knowledge of engraving would suffice to impose upon the public. During the night between the i6th and 17th of February 1788, the Dundee Banking Company's office was broken into and robbed of ^^423, of which nothing was recovered. A singular fatality attended this robbery. Two men were tried, convicted, and hanged at Edinburgh, asserting their innocence to the last. In the same year other two men were arrested, of whom one was sentenced to be hanged but was afterwards pardoned. In 1790 suspicion fell upon a fifth man, who had been convicted of forging a bill. He was shipped to Botany Bay, but was hanged on the way for mutiny. Yet a sixth individual in 1790, on being condemned to death for robbery, endea- voured to get a respite by asserting his knowledge of the bank robbery ; his story was disbelieved, but, with the rope round his neck, he repeatedly declared that the three men previously sentenced, two of whom had been executed, were perfectly guiltless of the whole affair. In 1791, on 29th October, £1600 in guinea and one pound notes were stolen off a cart in Glasgow. The owners, Messrs Andrew, George, & Andrew Thomson, bankers there, advertised a reward of iJ"200, which they paid to a lad in the following month, who had found the box, and its con- tents untouched, in a dunghill in the Saltmarket which he had been clearing out. In the same month 500 guinea notes of the Paisley Union Bank were removed from a mail coach running between Carlisle and Glasgow. On 14th October 1797 Milesius Roderick M'Cuillin was condemned to be hanged for uttering forged notes in Scotland, a sen- tence which was carried out on the 21st of that month. By the Stamp Act, 1791, one pound and guinea notes were for the first time threatened with taxation ; but upon the rumour becoming known amongst the Scottish members of Parliament, it met with such decided opposition that the proposal was abandoned for a time. THE ONE POUND NOTE. II3 Cbapter ix.— 1793-1820. The French Revolution and War Crises— Cash Payments Stopped — Depreciation of the Note. " When all around was danger, strife, and fear, While the earth shook, and darkened was the sky, And wide destruction stunn'd the listening ear Appall'd the heart and stupefied the eye." — Scott, The Vision of Don Roderick. DURING the nine years' peace— from 1783 to 1792 — the country made rapid strides, the two large banks advancing with the times in financial prosperity if not in popularity, Bank of Scotland stock fetching a little over i^300 per cent., and Royal Bank new stock steady at ^240. To increase the prosperity many of the banks opened branches in different parts ; amongst others the Dundee bank, on 24th March 1791, minutes a resolution, " that as the circulation of the bank has considerably diminished, and probably owing to the number of branches from other banks which have been opened in this and the neighbouring towns, it is expedient for this company to establish branches in other towns." They accordingly did so in Brechin, Arbroath, Forfar, and Kirkcaldy, carrying on a good business for some years, until heavy losses, caused by absconding agents, led the bank to close them all, — a line of action which might have been avoided by the timely appointment of a good inspector. Scarcely had the country time to think upon its renewed prosperity, when the long pent-up volcano of the French Revolution burst out upon the world. The cataclysm of blood, plunder, and war which ensued, the derangement of 114 THE ONE POUND NOTE. commerce, and the inundation of France with millions of assignats, — all combined to produce European disturbance, from which England and Scotland were not free. In the midst of the confusion and excitement which immediately arose, the militia were called out to resist the dreaded invasion of the Revolutionists, an act which at once " checked mercantile credit all over the kingdom." The revolutionary party in Britain did their utmost to increase the alarm, with the view of overthrowing the Government. A serious demand for money set in upon all the bankers (twenty-two of whom failed in England alone), and rose to an extent that caused the stoppage of the old firm of Murdoch & Co., the Glasgow Arms Bank, whose business had greatly declined since Mr Trotter's days. Immediately thereafter James Dunlop, one of the wealthiest men in Glasgow, and the house of Bertram, Gardner, & Co., in Edinburgh, also stopped ; " and to complete the confusion, the four banks in Newcastle, which were known to be opulent, were forced to shut up." Sir William Forbes has left a note of the effects of the run on his house, shewing that while only 60 interest receipts were granted between 23d to 30th April 1793, the number paid was 60S. The sum paid of interest receipts from December 1792 to 23d May 1793 was ^^263,724 ; and the sum on current account as much more. The circulation of his notes* affords a little glimpse into the character of the run, the one pound note holders being the principal actors. As the British navy cleared the seas of the French marine and restored com- merce in some measure, trade gradually became better than it had ever been during a foreign war ; but the alarm of the invasion of Ireland, and the scarcity of gold from the war drain, brought about a most violent run upon all the banks in 1797, though fortunately of shorter duration than that of 1793. The lower orders and agricultural population were the most easily excited, and the Edinburgh bankers were beginning, according to Sir William Forbes, to dread a * See Table, page no. THE ONE POUND NOTE. II5 "still severer demand, when, early in the morning of Wednesday the first of March, an express arrived from London to the directors of the Bank of Scotland from Thomas Coutts & Co., informing them that the demand for gold at the Bank of England had risen to such an alarming height, that the directors had thought it proper to state the circumstances to the Chancellor of the Exchequer, who immediately procured an order of the Privy Council to be issued, prohibiting that bank from making any more issues of specie for their notes." It is chiefly the panic in Scot- land that specially relates to the subject ; but as it arose in England, it will be well to consider both cause and effect in that country. From 1794 to 1797 war expenses had drained the Bank of England of gold, a matter which caused the country much distress, as the bank did not make up the deficiency by a smaller note issue, but left that duty entirely in the hands of feeble private bankers^ who, being unprovided with specie, were at once compelled to stop payment, when confidence broke down and a demand arose. Nearly a hundred country banks were bankrupt in England during 1797. The bank had tried to keep back the Atlantic with a mop of five pound notes, issued for the first time, its previous issues having been for larger denominations. It is no exaggeration to say, that had the Bank of England at this time issued one pound notes, as it afterwards did in the panic of 1825, the storm would have been prevented. It was purely a scarcity of a suitably small circulating Diedimn in which the public could have confidence, and not a commercial crisis in any sense. In the Restriction Act, passed to confirm the action of the Privy Council, it was provided that ^^2 5,000 in cash might be advanced to the Bank of Scotland and Royal Bank. On the news reaching Edinburgh, an interesting proof was seen of the estimate in which Sir William Forbes was held by his fellows in the banking profession. Walking into his place of business at ten o'clock, wrapt in gloomy enough reflections, he found it filled with a jostling crowd clamouring for gold. To the celebrated house in the Il6 THE ONE POUND NOTE. Parliament Close the cashier and deputy-governor of the Royal Bank and the treasurer of the Bank of Scotland resorted for consultation with the famous banker. Mr Hog, the manager of the British Linen Company, was sent for, and seems to have come at once. Sir William, with characteristic sense of the respect due to the old bank, then adjourned with his friends to the Bank of Scotland, where it was agreed that there was no other course open but to follow the example of the " Bank of England, and suspend all further payments in specie." A public meeting was held, at which the decision was unanimously confirmed ; expresses were sent out in hot haste to the provincial towns, and circulars were scattered through Edinburgh with the intelligence. The direst uproar at once broke out, and every bank in the town, for the remainder of the week, was crammed with " fishwomen, carmen, street porters, and butchers' men, all bawling out at once for change and jostling each other in their endeavours who should get nearest to the table." Specie was in existence, but no one would part with it, and as Saturday drew on, the want of small change exhibited itself in various distressing ways. The banks were besought to issue smaller notes than for one pound, but the Act of 1765 standing in the way, recourse was had to tallies, tokens, and sometimes even to tearing a twenty- shilling note into quarters, for which the banks afterwards freely paid the proportional sum. In England an issue of one pound and two pound notes for the first time by the Bank of England greatly lessened the inconvenience, while a large quantity of Spanish 4s. 6d. dollars were marked at the Mint and circulated along with quarter guineas and some other small coins. In a short time an Act was passed through Parliament, 37 Geo. III., c. 32, suspending the Act of 1765, and authorising specially the three old banks, and generally other bankers who had been accustomed to circulate notes on or before 2d March 1797, to issue " notes, bills, or tickets in the nature of bank notes, payable to the bearer on demand, for any sum whatever under the sum of 20s. sterling;" while such of the banks as had already issued ^ >V w 1 go I / THE onf: pound note. 117 notes in contravention of the Act of 1765 were indemnified for having done so. The duration of this Act was subsequently extended, by Act 37 Geo. III., c. 61, to 5th July 1799, during which time many banks availed them- selves of the liberty it gave, the Dundee bank alone issuing over i^ 1 2,700 of 5s, notes, representing 50,800 notes, — an amount that would imply that the benefit was largely taken advantage of for a time, though from the nature of the panic, which was purely one of scare excited by the necessary action of the Bank of England, the need for notes smaller than one pound soon passed away, as the specie holders, bowing to the inevitable, produced their hoards in exchange for goods or bank notes. Opposite is given a facsimile of a British Linen Bank note for 5s. issued in 1797. Sir William Forbes remarks that he did not issue 5s. notes as the other banks did, " being convinced that there was no real scarcity of specie in the country, and that it would make its appearance when the panic should wear off, as actually proved to be the case." His own note issues were restricted for a time, none being issued for several weeks ; but as large numbers were paid, the circulation fell from ^115,200 in January 1797 to ;!^47,200 in the following April, the amounts of one pound and one guinea notes at the same times being respectively ^^63,900 and £2g,d)00. In munber the large notes were about 8000 and 3000 at the two periods, so that the area of panic must have been principally confined to one pound note holders of the " fishwomen and butcher men " type described in his memoirs. The position of the Scottish Banks was now a most anomalous one, and illustrates strikingly the effects of public confidence during a national emergency. The Act of 1765 had given the remedy of summary diligence to all holders of notes who could not get payment on demand. Such payment implied settlement in specie, as no notes were legal tender in Scotland ; and now, in 1797, there was not a bank in Scotland who would give specie for their notes. Yet there is no record of any Scottish holder Il8 THE ONE POUND NOTE. attempting to exercise his right. Sir William Forbes mentions that only one case arose in England, when an individual of the name of Grigby endeavoured to take the law out of Messrs Oakes Son, of Bury St Edmunds, in 1801, for which he was severely reprimanded by Baron Hotham, before whom he brought his petition. Throughout the twenty-two years of the Restriction Act, such was the trust placed in the banks by the Scots people, that a paper currency based merely upon such specie as could be collected in the ordinary course of busi- ness from the amount circulating in the hands of the pub- lic, passed from hand to hand for nearly a quarter of a century without openly losing in value to an extent that would have entailed payment of a premium for their exchange ;* while the notes of the Bank of England, which alone of all the note issues of the three kingdoms were legally protected, maintained their value for three years only, and gradually fell to i8s. 46. per £i note in 18 10, i6s. 3d. in 181 1, and at last to 14s. 2d. in 1813, gold stand- ing at the price of ;^5. los. per ounce, or £i. 12s. i-^d. above the usual mint price. It is true that this serious fall occurred in the years when Britain was engaged in her last desperate struggle with Napoleon, when the Bank of Eng- land was almost compelled to produce enormous sums to satisfy Government demands ; for no mere speculation of commerce could possibly cause the prodigious increase in its note issue, which in 1784 stood at . ^6,000,000 1790 1797 1809 and in 18 14 10,909,694 8,601,964 1 9,64 1 ,640 28,291,832 The comparative quietness in Scotland may therefore be greatly accounted for by its distance from the centre of the world's finance, which at that time appeared to be almost in the throes of dissolution. The protection afforded to the Bank of England was * But see pages \2\ et seq. as to effects of depreciation on Scots paper generally. THE ONE POUND NOTE. II9 one of the causes which led to this depreciation of its notes, though of course the war was the primary cause. Having no dread of payment hanging over them, the bank directors issued this huge quantity of notes with the certain effect of lowering the exchanges, and adding to the drain of bullion for military purposes an equally disastrous drain for commercial necessities. Thousands, almost millions, of these notes circulated on the Continent during the war ; and it was the sight of them in Russia passing from hand to hand like gold, that drew from Napoleon the striking words, " I trembled for the fate of our enterprise." An utterance all the more remarkable, coming as it did soon after the defeat of Austerlitz, when his blatant bulletin to his soldiers proclaimed, that tJiey had scattered to the zvinds the last army " on which the com- mercial spirit of a despicable nation had placed its expiring hope." In many instances notes were actually sold for 15s. per ^i note, or a gold sovereign exchanged for ci £\ note and four or five shillings in silver, the premium being brought about solely by the large inconvertible note issue, which had become so depreciated that the exchanges fell far below the gold points, and would have caused a serious stoppage in trade had the Berlin decrees not accomplished that already. For years after the bank was quite able to resume payment, the House of Commons stubbornly maintained that there should be no difference between paper and gold. Lord Liverpool, amongst others, asserting to Lord Lauder- dale that notes were not depreciated, but that possibly gold had risen in price ! The Government, which lavished millions after millions upon the imbecile powers of the Continent, could scarcely be expected to appreciate the difference between a paper promise to pay a ^i and a piece of gold for the same amount ; and through their inability to distinguish between the cause and the effect, they delayed the resumption of cash payments until many years after the bank declared they were able to meet their notes. Up to 181 5 this policy may have been reasonable, I20 THE ONE POUND NOTE. as the pressure of 1810 and 18 14 would in all probability have compelled the bank to stop a second time, if it had begun to pay gold prior to those dates. But even this is questionable, for had the bank once begun cash payments, the prodigious note issue would not have been ventured upon, and the subsequent depreciation would have been avoided. But having eased their conscience by declaring their ability, the bank had no objections to fall in with the views of the Government, which were so highly profitable to them that they were enabled to pay dividends of 10 per cent, from 1807 to 1822, a rate which had not been reached since 1708, and \\hich since 1822 we are not aware of having once been paid. Similar results to those exhibited by the Bank of England were shewn by the banks in Dublin. Taking ad- vantage of the public indulgence, Irish bankers issued their notes to an extent which, so early as 1804, reduced their value 2s. 2d. per £1, and thus brought the exchange on London of that year from ^^105. los. of Dublin money per i^ioo London, as it had been in 1797, to ^118 Dublin for i^ioo London money. As with the English exchanges, the cost of conveying the bullion did not account for the difference. Between Ireland and London such carriage would amount to about £2 or £2h per cent. ; and as the par of exchange was ;^io8. 6s. 8d. Irish to £100 English money, there is a clear loss of 7^ per cent., which can only be accounted for by the depreciation of the Irish bank note. While this was the case in Dublin, the par of exchange w^as scarcely affected in Belfast, ^^'here the notes were seldom or never taken to any excess, and, having therefore a small circulation, did not affect the exchanges as in Dublin. Thus in England where the bank w^as compelled to over- issue, and in Ireland where no such compulsion existed, the results of an inconvertible over-issue were the same. In Scotland the principal banks, acting so far as can be seen with commendable prudence, restricted their issues to the lowest commercial wants of the time, yet without impeding the national growth of commerce. The Bank of Scotland and THE ONE POUND NOTE, 121 British Linen Company, instead of an increase towards 1 817, as in England, have a considerable decrease ; while the Royal Bank, which was very low in 1816, maintained its issues in after years at nearly the same as at 18 10. In 1804, from a desire to restrict advances on discounts slightly and thereby check the note issues, the banks began charging from ten to twenty days additional discount on bills payable in certain towns by way of exchange. The most notable of these, from their English connection, were Berwick and Newcastle, bills on these towns being charged twenty days and 2s. 6d. per cent, extra. By this careful pilotage the Scottish banks were able to come out of the years of restriction with good credit and fair resources, having been carried through the ordeal by the confidence placed in their prudent management. In view of the quietness and success of their procedure in these years, it has often been asserted that Scotch bank notes did not become depreciated, a statement which ought to be received with some reserve; for, with the market value of gold in London at £4, £4. 5s., or £4. los. per ounce, it is difficult to see how — though they may not have become so glaringly depreciated as Bank of England notes — they should not have become depreciated relatively, from the increased prices of commodities and the scarcity of gold. The affairs of the two countries were so intimately bound up with each other, that it seems rather absurd to suppose that while a one pound note of the Bank of England, the source from whence gold came, sold for 15s. in gold, a Scotch note could buy 20s. worth of the same metal. A few points may therefore be indicated for measuring the extent of the depreciation. First, That gold was scarcely ever asked for Scots bank notes before the restriction, and consequently was not so much missed after it had begun as in England, where a metallic currency was more prized. Second, The Scots banks found another method of main- taining the credit of their paper, by reverting to the practice of 1770, and settling their exchanges of notes by bills on 122 THE ONE POUND NOTE. London drawn at ten days date, — a rate from twenty-five to thirty-five days below the natural rate of the commercial exchanges. This was clearly a heavy loss to any particular bank, but as on the whole the amounts given and received by each would be tolerably equal, the loss and gain of such payments partially neutralised each other, though the whole method would be a most powerful deterrent to an over- issue. It was probably this course which led them, about 1804, to charge additional days of discount by way of exchange on certain Scots bills, as has been noticed before, so that the burden might be put finally upon the public who obtained notes for these bills, and thus increased the circulation which the banks had to pay off when it came back through the exchanges. It was not until 1820 or 1825 that the natural rate fell to twenty days on London, while the ten days rate has only been reached during the past twenty years, when railways so greatly reduced the cost of carriage and thus contracted the bullion points. That even this astute move of the banks failed to prevent a certain depreciation, but only partially neutralised it by giving a correspondingly higher value to another class of their paper, there appears to be some proof, for Sir Henry Parnell — at one time member of Parliament for Dundee — in his " Observations on Paper Money, Banking, &c.," 1826, points out, that " This practice of drawing on London by the banks, for the purpose of paying to each other twice a w^eek the balances of the exchanges of their notes, has kept the value of bank paper in Scotland from ever becoming of less value than the current money of London. Whilst that consisted wholly of paper, the Scotch paper fell in value ivith it ; and now that it consists of paper convertible into gold, the Scots paper is of equal value with gold, because every banker can obtain gold for the bills he receives in exchanging the notes of another banker, if he chooses to require it. It is in this way that the paper money of Scotland maintains the nature of gold, although no gold exists in the circulation." This obligation under which the banks had come compelled THE ONE POUND NOTE. 123 them to look carefully to their operations, since any unnecessary issue of notes entailed a loss of fully 9s. per cent, at settlement of the note balances. The par of exchange between Edinburgh and London being from forty to forty-five days, equal to lis. or 12s. per hundred (bullion point being reached at i^ioo. 15s.), there was a difference in the exchange favourable to Scotland, so far as the note settlements were concerned, of 8s. 66. or 9s. per cent, over the exchange required for ordinary conunercial business, — a sum which would materially aid in raising the price of Scots bank notes above that of London paper, and bring it so much nearer the rate for gold. This salutary practice is still maintained by the banks in Scotland, the rate for note or clearing settlements having been reduced to four days, as that for the commercial exchange has been lowered to ten. Third, While gold was seldom asked for in exchange for notes, there is reason to believe that cash payments were not stopped so entirely in Scotland as they were at the Bank of England. All the Scots banks kept stocks of gold, and it is probable that, notwithstanding the theory that the notes of Scotland turned out the gold, there was more gold in the country than was generally supposed, for the prudent measures of the banks in their exchanges and issues could not fail to attract some of the gold which was displaced by the excessive issues of England. That gold could be got when asked for is certain, for Mr H. Monteith — a Glasgow manufacturer and member of Parliament, when examined as to this period by the Committee of 1826 — observes, that being in England two or three times a year, he invariably got either gold or Bank of England notes from the Glasgow banks to pay his way. When asked, " Do you think there being no run on the banks was in part attributable to the Scots having lost their habits of metallic currency, and therefore setting no superior value on gold," he replied, " I do not think that w^as the sole cause. Knowing the Scotch character as I do, I think that the want of gold currency would not induce a Scotsman to take a bank note he had no confidence in." Thus the 124 THE ONE POUND NOTE. demand for gold, though legal, was met because it was so small. The difference between the two currencies seems to have lain in the fact that the Bank of England were compelled to produce funds to carry on the war, by means of its world- wide note issues, — funds which, from their very nature and volume (hundreds of millions being issued below par), must have had a deteriorating effect upon the medium of exchange, whereby they were transferred from the public to the Govern- ment, and from the Government to its creditors.* * So much was this the case, that, so late as 1819, the exchange on Paris was down to 23'45 — i.e., is. 4/^d. per £, or ^6. i6s. 8d. per cent. — below the current par of 2^'i7)4, and £6. los. below the low bullion point (bullion points being 25"io and 25'25), a fact only ex- plainable by the stoppage of gold payments and forced note issue of England ; for whenever cash payments were begun, the rate rose in 1820 to 25"6o, or 34s. 2d. per cent, above par, and ;^8. los. lod. beyond the actual exchange of January 18 19. Assuming, thei'efore, that ordinary conimerce would have made the exchange of 18 19 nearly as much in favour of England as that of 1820, if the former had not been affected by other causes, the difference between the extremes, ^8. los. lod., when reduced by 34s. 2d., leaves ^6. i6s. 8d. to repre- sent the depreciation of cotemporary British legal tender, bank notes, as compared with gold. This is easily proved from the average premium on gold for 1819 being ;/^4. 9s. per cent., or ^95. us. of gold to ^100 bank notes ; the difference between £6. i6s. 8d. and ^4. 9s. being explained by the above example exchange, 23'45, being the lowest point touched in 18 19, while the £^. 9s. is the average premium for that year, there being great fluctuation towards its close from the legislation as to resumption of cash payments. To prove, therefore, that Scottish notes were not depreciated, it would be necessary to shew that the Scottish exchange was above that of London, and on a par with those of the Continent, which no one will be hardy enough to affirm, — the London exchange with Scotland, all through the restriction period, remaining practically the same, except so far as the ten days drafts, before referred to, gave an increased value to Scottish paper in the London market. THE ONE POUND NOTE. 12$ Chapter x.— 1800-1826. Joint Stock versus Private Banking— Banking Record. " Weighed in the balances, and found wanting." THE opening of the nineteenth century in Scotland was followed by the establishment of numbers of joint-stock companies, a sure indication that, not- withstanding the heavy war expenditure, the capital of the country was increasing more quickly than was required for every-day business, and could thus be diverted to other channels of usefulness. The varied mechanical improve- ments which had been perfected during the previous thirty years, had placed Britain at the head of the manufacturing countries of the world. It is true there was at the precise time under notice severe depression, following upon the obstruction of the war ; but as one opening was closed, the indefatigable capitalists of the country soon found other regions wherein to prosecute their commerce. To meet the requirements of the new departure, let us see what position the banking houses of the period were in, as to power and enterprise. The system of private banking, with the few well-known exceptions, had been gradually losing power over the com- mercial population. In proportion as they saw their end approaching, they seem to have endeavoured to increase their influence with the old banks by obtaining a voice in their direction. Again and again their influence was pointed out to the banks, and several efforts were made to throw them off by limiting their credits and deposits, but without success. 126 THE ONE POUND NOTE. Notwithstanding all that has been said and written against them, these gentlemen appear to have managed the old banks with integrity. Their action during the restriction crisis was so cautious as to excite adverse criticism, but Scotland seems to have been none the worse for their caution and professional skill ; and that they had due sense of obligation to meet current requirements, is shewn by the increase of capital of the two senior banks from i^i, 000,000 to ;^ 1, 500,000 sterling. The defective part in the arrange- ment was the manner of granting accommodation to the public. Instead of coming direct to the old banks, it was rather the rule to approach a private banker, who in turn obtained his support from one of the joint-stock banks, making his profit out of the difference between what he paid to his bank and what he got from his customers. Dissatisfaction arose, and as profits were cut more closely in commercial circles, such a waste of one profit in their banking transactions was resented by business men, and especially so by the rising Whig party, who believed the banks to be wholly abandoned to the Tory cause. The idea of new banking seems first to have arisen in the provinces, from the presence of branches of the Edinburgh banks suggesting the possibility of new ventures being equally profitable. The result was any- thing but satisfactory. In 1802 the Fife Banking Company began with a capital of ^^30,000, to wind up in 1826 with a call of ^^2500 per share on its proprietors. In the same year were started the Renfrewshire Banking Company, a considerable affair, having five or six branches, which failed in 1842, paying only from 7s. 6d. to 9s. 2d. per £ ; the Cupar Bank, which retired from banking in 181 1 ; and the miserable Falkirk Union Bank, sequestrated in 18 16, pa\-ing 9s. 6d. per £. Some of the notes of these banks come in to the banks to this day. With the exception of the Fifeshire Bank, which had fort\- shareholders, all these were purely private banks with sounding names, none of them having over ten partners. The Bank of Scotland and the Royal Bank, no doubt THE ONE POUND NOTE. 12/ remembering the troubles of 1772, refused to receive nevv^ country bank notes, a step in marked contrast to their treatment of Sir William Forbes & Co., whom they had at once received upon equal terms with themselves. These new companies, however, bore a close resemblance to Douglas, Heron, & Co., and would fain have forced their notes upon the country. The result proved the soundness of judgment of the old banks, whether it was dictated by their private bank directors or otherwise. The sure precursor of the crisis of 1810-15, a new rush of banking houses came into existence about these years. In 1809 and 18 10 appeared the Dundee Union Bank, the Glasgow Banking Company, the Glasgow Commercial Bank, and the East Lothian Bank. The last named had a capital of i^8o,000, and did a large business in Haddington- shire until 1822, when it suddenly stopped, owing to the villainous conduct of its manager, William Borthwick, who disappeared with nearly ^^30,000 of the company's notes, most of which had been put into circulation. The bank received some aid from Sir William Forbes, who retired their notes, amounting to upwards of ^^50,000. Suspecting some of the directors of seeing through his intended mischief, Mr Borthwick prepared a scheme for placing some of these gentlemen into large puncheons, with suitable breathing-room, and thereafter having them quietly shipped from Dundee to be landed out of the way at Dantzig, and confined in the heart of Prussia for a time. At first it was supposed that the scoundrel had betaken himself to America, and an Edinburgh merchant crossed the Atlantic in the endeavour to trace him, but it was afterwards believed he had taken refuge in Norway. The creditors of the bank were paid in full. In 1 8 10 was laid the foundation of the most important Scottish bank since the date of the British Linen Company, certainly the most important joint-stock 2inliniited bank Scotland had hitherto seen. In that year the Commercial Bank of Scotland began business, with the large nominal capital of i^3,ooo,ooo, having ;!^45o,ooo paid up. It at once 128 THE ONE POUND NOTE. CO $^ ^ M ^ o I- o O H 05 X=3W- ^ff) ^ X o DC D CQ Z Q UJ © T^ o o o o IS I ^ (^ n o VrS 6 Cj S ^ THE ONE POUND NOTE. I29 entered upon an energetic establishment of branches, a work hitherto pecuHarly that of the Bank of Scotland and British Linen Company, but which, from the inevitable relapse attending all sudden expansions, had somewhat fallen into the background with both banks. Giving due credit to the British Linen Company as the real founder of a successful branch system, it was left to the Commercial Bank to give the greatest impulse it had yet received. The British Linen Company steadily increased the number of its branches, but it would appear that the Bank of Scotland closed several between 18 10 and 1826. While these two banks had contented themselves with sixteen and twenty-seven branches respectively up to 1826, the new establishment, strong in its splendid capital, large proprietory, and able management, so gallantly carried on the structure founded by the British Linen Company, that by 1826 — that is, in sixteen years — it had opened thirty- one new offices, — four in 181 1 (the first being in Dalkeith, then the great seat of the corn trade in Scotland), three in 18 1 2, four in 18 13, three in 18 14, eight between 1820 and 1824, and nine in 1825, just before the English panic. The beneficial influence of one such bank so greatly exceeded that of the various local houses, that for strength, solidity, and power for good it well deserved Mr Kerr's eulogium : " From the outset it appears to have been designed on a large-minded plan, and to have met a decided want. The new establishment was very popular, but it was also very discreet, for while it studied the best interests of the public, it imitated the wisest provisions of the old banks' practice." * No banking method seems to have so direct an influence in extending circulation of notes upon a thoroughly sound basis as the branch system, and a glance at the towns in which the Commercial Bank opened its few first branches will easily show how the authorised circulation came to be fixed at so large a sum in 1845. Dalkeith, where the first * A. W. Kerr's "History of Banking in Scotland.'' I 130 THE ONE POUND NOTE. office was opened, was then the centre of a very wide district, in which, it is needless to add, there were no railways. The whole south country, embracing Earlston, Melrose, Galashiels, part of Berwickshire, and the fertile Lothians, sent in its grain in bulk to the Thursday market, which had grown up under the shadow of Dalkeith Castle. The transactions were very large, and as no bills were taken or given, cash payments by bank notes became the invariable rule. These were taken away by the farmers on their homeward journey, paid out at the south country fairs for cattle or for wages, and might not filter their way back to a bank for several months. Leith was not so marked in this respect, as any notes given out there soon came back ; but Tain and Crieff, the next in order, corresponded closely to Dalkeith, — the former the oitrepot for the rich agricul- ture of Easter Ross, and the latter for Strathearn and the surrounding districts of Perthshire. Thurso and Peterhead were soon visited, and Glasgow and Banff in 1814. In three of those towns the rising fishing industry of Scotland was greatly aided. Placed geographically at considerable disadvantage, the scarcity of money or means of banking had hitherto hampered both curers and fisher- men. A free issue of one pound notes gave ready payment of all sums between employers and employed ; and the circulation of the bank was in consequence widely and per- manently extended, a considerable proportion of the paper being carried away by the workpeople at the close of the season to their native glens or townships, there to be either hoarded for a time, or still further circulated amongst farmers, shopkeepers, and others, until, after the lapse of months, they gravitated towards some of the towns where a branch bank existed, and were there converted into deposits. Any quantity of the notes which had been at once returned to the issuing branch by the fishermen, usually went to swell the deposits of the office, for gold was seldom if ever asked for, even the Yarmouth fishers often carrying home their earnings in Scots bank notes. The class of deposits lodged by means of these notes was both profitable THE ONE POUND NOTE. 131 and safe, consisting of a large number of small sums which might remain for years undisturbed, the danger in time of panic being minimised by the extent of the area from which they had been received. At Wick, in 1825, upwards of 14,000 people were employed in the herring trade, one-half of whom came from other towns, or the Western Highlands, Hebrides, and foreign parts. To keep these in employment required 1068 boats, of which 658 were Scottish, and 410 English, Irish, French, and Dutch. The agent of the Commercial Bank in the town made a report to his head office in 1825, in which he says : ''■ The stranger fishermen almost invari- ably carry home their earnings in bank notes." The circu- lation at the season in question is " augmented to a degree totally beyond what a district situated so far north might be supposed to require, — the sums circulated in this period chiefly arise from the payments made by the regular curers to the fishermen and others employed. As a fair mode of calculation, it may be estimated that ;!^I40,000 is put in circulation by the payments made to the fishermen, coopers, &c., . during the continuance of the season." Then comes the important paragraph : " The small notes are almost the only medium used in circulation in this district. The reason is obvious, because the smallness of their value throws them into the hands of all classes ; and as the fishers, coopers, and women, and others employed are poor, the acquisition of large notes by them seldom takes place. "Another matter of experience maybe adverted to. It frequently happens that foreign vessels coming here to buy or cure herrings, tender gold in payment ; the fishermen, who are ignorant and illiterate, invariably refuse to take it, no doubt in dread of imposition from bad and counterfeit metal, and always ask for bank notes for their herrings. It even occurred last year, that many of the strangers carried gold with them, which they were obliged to get exchanged for notes, as those having bank notes could purchase 132 THE ONE POUND NOTE. herrings at is. to 5s. per barrel cheaper than those having gold." Some of the other offices then opened were equally well adapted to the general convenience and the profit of the bank. Many towns were chosen, in which none of the three large banks had branches, — amongst these Lanark, Kilmar- nock, and Paisley had an extensive weaving trade ; Alloa and Campbeltown were engaged in the liquor traffic ; while the iron works of Falkirk, and the ship-building trade of Dumbarton, owe something to the Commercial Bank. In the same year in which the new bank opened, the Bank of Scotland gave another proof, if any were required, of its adaptability to altered circumstances. A rival bank had to be faced, and a heavy drain for mercantile advances required by the panic of 18 10 had set in. By one clever stroke the old bank met both these necessities, by increased rates of interest allowed upon the new deposit-receipts, — the convenient, but still unnegotiable, successors of the old " treasurer's bond." The rate allowed was 4 per cent., discounts being raised to 5 per cent., with the immediate result that the drain for advances ceased. The Royal Bank and the British Linen Company followed the same course, which was maintained until 18 17, when the rate was again lowered by the Bank of Scotland and Royal Bank. In the following year the British Linen Company also lowered its rate for current accounts ; but the Commercial Bank steadily contrived to pay 4 per cent, on all sums lodged with them, even on current account. Thus throughout the severe pressure of 181 5 and 18 16, with heavy failures in Glasgow, causing severe loss to the Royal Bank, the rates of interest and discount were steadily maintained at such a level as would reasonably check unwise speculation or issue of notes. The following figures may be interesting, as shewing the great shrinkage in the Royal Bank's circulation at this period. For every iJ"iooo of its notes in circulation on 1st THE ONE POUND NOTE. 133 January 18 10, it had, during the undermentioned years, these sums, namely : — Year. Average. Highest. Lowest. I £ £ 181O 950 1080 873 181I 765 826 727 1812 714 774 662 I813 630 732 488 I814 IZO 882 554 18 1 5 560 713 394 1816 375 554 267 1817 1023 1436 652 1818 1145 1 183 1122 1819 1127 1183 ige for 10 years. 1093 Years, 10 8019 801— avert The circulation of the Bank of Scotland upon the same basis, taking 24th December 18 10 as"the date of the ;{J"iooo, was as follows : — Year. Average. Highest. Lowest. £ £ £ 181O 1000 1810 952 1000 928 181I 913 944 873 1812 894 916 883 1813 839 877 811 1814 833 852 808 1815 725 769 629 1816 691 722 672 1817 11^- 754 680 1818 769 748 age for 10 years. 817 Years, 10 8348 834 — aver For sake of comparison of increase, for the figures give no indication of the separate circulation of the banks, we 134 THE ONE POUND NOTE. subjoin those for the British Linen Company, whose i^iooo were dated from 5th January 1810: — Year. Average. Highest. Lowest. £ £ £ 181O 1008 1075 889 181I 920 1003 762 1812 1097 1258 913 I813 1303 1410 1 103 1814 1337 1389 1289 1815 1 104 1217 1072 I816 940 1041 882 1817 918 955 879 I818 1171 1334 972 1819 1 148 age for 10 years. Years, 10 10,946 1094 — aver There is difficulty in ascertaining what each £1000 of the foregoing tables represented ; but if any reliance can be placed on the assumption that the parts of the different circulations bore somewhat similar proportions to each other in 1 8 10 or 1820 as in 1845, when the three banks had a circulation of ^^"936,000 (of which 73 per cent, were small and 27 per cent, large notes), the following results could be worked out.* In the year 18 10 the representative figures opposite the three banks are: — ;^950 Royal Bank, i^952 Bank of Scot- land, and ^1008 British Linen Company, — in all ;i^29io. Of this the banks admitted that ;^38 1,000 were small notes, while in 18 15 they admitted that about 39 per cent, of their circulation were large notes. The ^^38 1,000 may thus be roundly taken as three-fifths (60 per cent.) of the whole circulation, the total being, therefore, say ;^635,ooo in 1810, as against ;^936,ooo in 1845. Supposing that the respective * Not an unreasonable assumption, as may be proved from the statistics of the Dundee bank, and the Parliamentarj' Reports of 18 10 and 1826. THE ONE POUND NOTE. I35 circulations increased in the same ratio from 18 10 to 1845, the ;^iooo figure in the tables may stand for ;^ 124,000 as the Royal Bank's circulation, ^^203,000 for that of the Bank of Scotland, and ^^"307,000 for the British Linen Company's. Thus the lowest point reached by the Royal Bank — that is in 1 8 16 — would probably be ;^ 33,000, and their average for that year ;6^46,ooo, or a fall of ^^78,000 (6}, per cent.) below the sum of 1810 ; the lowest average of the Bank of Scotland — also in 18 16 — would be about i^ 140,000, and their lowest point i^i 27,000; while the smallest with the British Linen Company, in the same period, is about ^282,000. These variations correspond very closely with those in Sir William Forbes & Co.'s circulation, which in 1 8 10 stood at ;^25 1,000 ; whereas by 18 16 it had fallen to i^i72,ooo, and in 1817 to i^i 53,000, rising considerably in 18 18 to i^200,ooo, but not touching the high circulation of 1 810, which seems to have been abnormally large with all the banks. An examination of Sir William Forbes & Co.'s circulation about this time will shew that the largest varia- tions were caused by the big notes, whose percentage was increased from 1800 onwards to 181 5. The Dundee bank exhibits the same feature, its large note circulation rising from 10 per cent, in 1794 to 31 per cent, in 1800, 19 per cent, in 18 10, and 32 per cent, in 1820. The total circulation of these five banks in 18 10 was about i^i, 089,000, to w^hich the Glasgow and country banks w^ould add three millions, bringing up the large total of ^4,000,000. Compared with their exchange power in previous years, this amount is no more than might be expected ; for, as has already been observed, the whole paper currency of the country at this time had lost from an eighth to a fifth part of its purchasing power, and must therefore have been increased by these parts to move the same bulk of commodities ; so that ;^4,ooo,ooo notes in i8ioor 181 5 bought no more than was done by ;^3,6oo,ooo or ^^"3,200,000 before stoppage of cash payments. In 181 5, when the crisis culminated, having spread itself 136 THE ONE POUND NOTE. wellnigh over the space of five years, the Scottish circulation amounted to ^^3,551,496, made up as follows : — I. From banks whose re- turns distinguish between notes of ^5 and upwards and notes below ^5, ^5 and upwards. Below Is- Total. L7A9P93 j ^1,198,490 -£1,947,583 2. From banks who return total circulations only, not distinguishing large notes from small, . . . ^1,603,913 Grand total, l-!^3,55i,496 3. Estimated total of small notes, ^2,185,498, or 61 per cent. Notwithstanding the shrinkage in the following year (18 16) from the losses in Glasgow and Leith, the circula- tion soon resumed and exceeded its former amount, until in 1823 it stood at £^,462, 000, of which there were i^2,o65,ooo small notes ; in 1824, at i^3,997,688 (^^"2, 29(5,492 small) ; and in 1 82 5 , at the huge sum of ^^4,683,2 1 2 (of which ^^2,736,49 1 were small).* By this time the Commercial and British Linen Company Banks had greatly extended their branches in remote but industrious parts of the country, which accounts for a considerable part of the increase. It is impossible to give any particular statistics as to the Glasgow and provincial note issues beyond those given in connection with the Dundee bank, but it has been ascertained that Sir William Forbes & Co. acted as Edinburgh agents for seven of the largest Scots country banks, and also for Lambton & Company of Newcastle, whose notes had a considerable circulation in Scotland from 181 5 to 1826. The seven Scots banks were, the Gla.sgow Ship Bank, the Greenock Banking Company, the Paisley Union Bank, Hunters & Company of Ayr, the Perth * The depreciation of notes from 18 10 onwards, and the high prices of 1823-25, forcibly increased the issues, from the smaller quantity of articles they could be exchanged for. THE ONE POUND NOTE. 137 Banking Company, the Bankint^- Company and the Com- mercial Banking Compan}- both of Aberdeen, all well- founded respectable banks with considerable business. The total amounts retired by Sir William Forbes & Co. for these eight banks during a number of years stand as follows, and may give some idea of the extent of their issues : — 18 1 5, per year ^2,138,000, per week ^41,000 1821, „ 1,761,000, ,, 33,800 1822, „ 1,528,000, ,, 29,300 1823, „ 1,421,000, ., 27,400 1824, „ 1,586,000, ., 30,500 1825, „ 1,674.000, „ 32,100 1826, ., ... „ 28,600 The years from 181 5 to 1821 and part of 1822 were abnormally swelled by the notes of the East Lothian Bank ; but deducting ;!^400,ooo from the total of 1 8 1 5, and ^300,000 from 1 82 1, still shews a larger turn-over of notes in 1815 than in any succeeding year. Amongst the many causes tending to reduce the notes, it may be worth mentioning that the old worn discs of the silver coinage were entire!}- replaced in the following year by new coin, which being beautifully struck would give the people a certain regard for them, which must have told in some degree on the " small note " issue, and all the more so when the gold coinage was rectified in 18 17. With the year 18 17 a sounder and more hopeful era seemed to have dawned on the country. Distress was still widespread, but the war was stopped, and every ballad- singer in the country was shouting at the street corners the now almost forgotten ditty, — "Oh, Boney, he's awa from his warrings and fightings. He is gone to a land that he never can delight ins ; He may sit down and sigh o'er the scenes he has seen a', And forlorn he may mourn on the Isle of St Helena." But " the e\-il that men do li\-es after them," as the British merchants speedil}- found. Animated with the hope of a renewal of their former gains b)- means of the wondrous and varied applications of steam, a forced trade began, 138 THE ONE POUND NOTE. and over-production choked the markets. A few facts may enable the reader to grasp the revolution in trade caused by the new steam machinery. In 1782 the returns of the cotton spinners were estimated at i^2OO,O0o; and in 1803, by a regular progression, they had reached i^20,ooo,ooo. The imports of cotton in 1772 were 4,764,589 lbs., and in 1818 151,000,000 lbs. Canals and improved roads opened up the country to the trade of the world as at no previous time; while the application of steam machinery to printing, gave ample opportunity to scatter broadcast prospectuses for every kind of venture. The year 1820 almost swept Ireland clear of banks, or bankers. The neighbouring kingdom escaped for a time, but its turn was coming. In 1821 the Bank of England finally resumed cash payments, while the country banks continued to spring up in all directions. Scotland mean- while, strong in her powerful banks, gradually lost regard for the city private and small joint-stock provincial banks. As the huge joint-stock banks extended, the smaller offices were slowly but surely compelled to adopt one of two alternatives, — either to submit to the inevitable and accept an honourable absorption by one of the large banks, or go into liquidation. Between 1808 and 1826 no less than fourteen banks had ceased to exist, of which the following issued notes : — The Dumfries Commercial Bank: failed in 1808, and paid los.per,;^. Scott, Smith, Stein, & Co. : in 1812, paying 2s. 4%'d. per^. The Falkirk Union Bank : in 18 16, paying 9s. 6d. per^. The Cupar Bank : retired 181 1. The Glasgow Commercial Bank : retired 1820. The Galloway Bank : retired 1821. The Kilmarnock Bank : joined Hunter & Co. of Ayr in 1821. The East Lothian Bank was compelled to wind up in 1 822, owing to Borthwick's evil deeds ; having a good partnership, they paid in full. John Wardrop & Co. : disappeared in 1823. The Caithness Bank failed in 1825, its business being taken over by the Commercial Bank. A local antiquary of Wick purchases their notes at a few shillings each, with what intention it is difficult to say ; but it is believed that Mr A. D. Macleay of London still pays in full any notes which are presented to him. THE ONE POUND NOTE. 139 The period from 1800 onwards was that in which taxation was first directly levied from banks. In that year of the century the long threatened step was taken which had serious effects on banking profits, a twopenny stamp being required to be impressed on all one pound notes. In 1805 this was raised to threepence, with the troublesome addition that no note was to be considered as properly stamped that had been in circulation for more than three years. In 1808 this vexatious restriction was got rid of, on the ground that notes did not usually last more than three years ; but an additional penny was put on to the duty, and a licence of ^^30 exacted from each bank office that issued notes, with the saving clause that not more than four licences need be taken out in all. In 181 5 the climax was reached, when the exigencies of war demanded a stamp duty of fivepence to be printed on the back of each pound note. These taxes, which were levied solely to aid in carrying on the war, have not yet been repealed, although, fortunately, modified under the com- mutation of 1854. The effects of these measures were serious to the banks. Their ability to have large stocks ready for use was restricted by the heavy loss thereby incurred. Had this provision been in force fifty years earlier, it would have been decidedly useful in abolishing the fallacy that bank notes in the till were as good as money. On one occasion, at a term about 1824, so low had the ready stocks been allowed to run that one of the banks had no more notes to issue, considerable inconvenience being caused in Edinburgh in consequence. The additional expense incurred unhappily deterred the banks from keeping the engraving and style of their notes abreast of the mechanical skill of the time, a neglect of which the criminal classes quickly took advantage. The forgers, who had found such ample scope for their energies in the rustic one pound note of the Bank of England, rapidly found imitators across the Border, though happily their efforts produced no such fearful effect as in England. From 1806 to 1825 eighty-six persons were 140 THE ONE POUND NOTE. prosecuted in Scotland for crimes connected with this offence, chiefly for uttering forged notes, for, strange to say, no actual forgery was proved against any one ; of this number eight were executed, forty-nine transported, three imprisoned, six outlawed, and twenty acquitted, leaving sixty-six criminals. Although, in comparison with England, Scotland escaped thus lightly, a number of forged notes were put in circulation, the engravings of which were easily made quite as good as on the genuine plates. One banking house alone returned thirty-eight of these notes in little over a year, all to different people in various parts of the country. One fellow entered the shop of a respectable Edinburgh grocer, a Mr Lucas, in June 1817, and asked for a few pence worth of nuts, tendering a guinea note of Sir William Forbes & Co. in payment, for which, after some question, he got his nuts and a one pound note and some small change, going off well pleased. Poor Mr Lucas soon found that the note was forged, but too late, the man in the meantime having disappeared. He was described as a tall well-dressed man. Could it have been the villain Mackoull, the murderer of Begbie? The banks paid several of these notes, which had got into the hands of other banks' tellers, so that a considerable loss must have been made. In 1826 the efforts made by the Bank of England to improve its notes led to the Scots bankers preparing a memorial for the Treasury, in which, after repeating the various efforts they had made not only for the detection, but chiefly for the prevention of the crime of forgery, they sent specimens of a new style of note pro- duced by " the most complicated machinery," pledging themselves to issue notes of that description and call in all their old notes, if the Government would give them some relief from the duties, by allowing them new stamps in exchange for all the comparatively new one pound notes of the old issue they should call in. It was clearly the Government's, interest to accede to their prayer, as their own stamp, commonly called the " Congreve," was invari- THE ONE POUND NOTE. 14I ably forged, causing loss to the revenue ; but there is no record that any steps were taken, the banks being left to work out their own remedy, which they afterwards did about 1830 by a finer style of note. Mr, afterwards Sir, Adam Hay of Sir William Forbes & Co., and Mr Macart- ney of the Commercial Bank, were the two most prominent parties in forwarding this memorial. While thus dealing with preventions' of forgery, a few horrors will bring our Newgate calendar down to date. In 1802 William Marshall, the cashier's assistant in the Dundee Banking Company, absconded to St Omer with about ;^3 5,000 of the bank's property. It was discovered that he had falsified the books so as to cause the circulation to appear as ^i_f,ooo only, whereas he had been issuing notes for his own purposes which raised the circulation to ;^50,ooo. Leaving some assets behind him, the total loss was only about ^8000. Certainly the most daring feat of the time was that already referred to, — the murder in 1806 of Begbie, the British Linen Company's porter, in Tweeddale Close,nowthe entrance to Messrs Oliver & Boyd'swell-known premises. This story has been so graphically told by Mr Robert Chambers in his " Traditions of Edinburgh," that it is unnecessary to give more than the leading facts. Begbie had come up from the Leith branch with a remittance of notes, closely followed the whole way by Mackoull, his intending murderer. On reaching the dark shelter of the close down which the bank then carried on business, the villain rapidly closed on his victim, and, stabbing him to the heart, seized the bag from the grasp of the dying man, and escaped. He had apparently been able to put the £680 small notes into circulation, but finding the " large " too dangerous material, hid about ^3000 of them in a wall in Bellevue grounds, where they were subsequently found. Five years afterwards the same man, with two accom- plices, broke into the Glasgow office of the Paisley Union Bank on a Sunday in July 181 1, finding good plunder in a box sent through the previous day from Sir William 142 THE ONE POUND NOTE. Forbes & Co., containing ^^4000 of retired notes. With this and other ^15,000 the three made their way to Edin- burgh, and thence by Haddington to London, where the congregation of the wicked absorbed them for a time. Through the agency of a London detective called Boxer, i^i 2,000 of the booty were given up by Mackoull, on con- dition that the lives of his accomplices should be spared. His efforts were in vain ; for though of avail for that par- ticular offence, both ultimately received their due reward. White being hung at Northampton for robbing a mail- coach, and Harry French being transported for burglary. The arch-villain himself returned to Leith in later years, where his audacity betrayed him. He was seized and imprisoned, and, after a bold endeavour to defeat justice by an action against the Paisley Union Bank, was condemned to death. Strange to say, the Government, which had mercilessly executed hundreds of starving wretches for stealing the value of 5s., or having something to do with a forged note, granted Mackoull a reprieve. He died shortly after in Edinburgh jail, exhibiting in his last moments the most distressing anguish and remorse. Two men, John Brown and James M'Dougal, were executed in Glasgow in 18 14 for uttering forged notes. There are also records of three executions in 18 17 — one at Dumfries, in April of that year, of Robert Morgan, and the other two at Glasgow — for the same crime. The two last referred to — James Macneil and William Mackay — had forged in Belfast (a notorious town for forgeries) some notes of the Greenock bank, which the}' attempted to pass at the house of John Mackenzie, the ferryman at Govan Ferry Point-House of Kelvin. The last recorded execution took place in Glasgow, September 1821, — an unfortunate woman, Anne Wilson or Moore, who had uttered one forged note, being the last victim of these savage laws. On the evening of Saturday i8th December 1824 a parcel, addressed to the Commercial Bank, was abstracted from the Stirling mail coach, near Kirkliston, containing ;^275 in notes and ;^I400 in bills, full particulars of THE ONE POUND NOTE. 143 numbers, &c., being sent to all the banks. The last event to record is the robbery, by some London gentry, of the Greenock bank, in 1828, of ^28,000 notes, most of which were afterwards recovered. Turning from these dark pictures of sorrow and guilty we shall glance briefly at the new banks begun prior to 1825. True to its policy of expansion by branches, the British Linen Company had strengthened its position in 181 3 by increasing its capital from ^200,000 to ^^500,000. It is disappointing to observe that the two elder banks violently opposed this reasonable measure, — possibly in- spired to do so by their private bank directors, who, prudent enough as to ordinary conduct of business, never seem to have been men of great breadth of sympathy. The first new bank was that of Messrs Maberley, exchange dealers and English merchants. In 1818 they began several branches, and are chiefly noteworthy from having success- fully beaten down the exchange on London from forty days to thirty, and subsequently to twenty, A premature attempt to reduce it to ten was profitable neither to them- selves nor the other banks whom they tried to circumvent. As the latter refused to lower their rate for drafts, Maberley's operations induced merchants having payments to make in London to draw the amount from their own banks in notes, which were taken to the new house and exchanged for drafts at ten days' date. English commercial travellers in Scotland followed the same practice, and instead of paying their drawings into branches for security, to be advised to Edinburgh less commission, they retained the notes until their arrival at Maberley's, where their pockets were at once lightened in payment of the much desired short draft. By these means Maberley & Co. became possessed of large quantities of notes, for which they demanded payment in London paper at the usual note exchange currency of ten days, thus practically, though at second hand, placing on the other banks the burden of granting drafts to the public at ten days, while they kept the profits. The respective banks in no way relished a procedure that deprived them 144 THE ONE POUND NOTE. of their remittance business, and at the same time reduced their circulation so summarily ; they accordingly resolved upon a measure which was so novel, and yet so completely checked Messrs Maberley, that it deserves some attention. Their plan was the vulgar one of drowning the miller, by giving him more than he reckoned or hoped for. The new bankers when determining to lower rates, had not reckoned upon an absolute fulfilment of the promise on the notes of their neighbours ; and their consternation may be imagined, when on handing across a packet of notes for usual settlement, bags of gold were told out in payment ! Argument and expostulation were alike unavailing ; the promise upon the notes was to pay gold, and nothing else would be given. Shortly Maberley's coffers were full of unremunerative metal, from which there was no relief save b\' expensive carriage to London. The banks continued this defence, or conspiracy as it might better be called, until their disturbers were compelled to curtail their business, being unable to purchase London paper wherewith to retire the numerous drafts they had granted. Had Maberley & Co. possessed more ample means, they could easily have fought the matter out, by drawing away the enemy's specie ; but the latter had shrewdly guessed the depth of their opponents' purse, and there was no course open but retreat. The mercantile business was sold to Messrs Richards & Co., who still carr}' on the flax-spinning in Alaberley Street, Aber- deen ; the banking department seems to have struggled on, making little headway against the deadweight of opposi- tion from the other banks, until 1832, when the firm failed, their estates being wound up under English law, heavy expenses in liquidation reducing the dividend to 4s. 5d. per £. It is amusing to read of these proceedings being referred to with pride, in the evidence given before the Small Note Commission of 1826, as a proof of the strength and ability of the Scotch banks to meet their obligations ; the real object of the measure, the conspiracy against Maberley, being carefully concealed, either from ignorance or of THE ONE POUND NOTE. I45 design, and boastful prominence given only to the fact of a Scottish bank having refused to satisfy an interloping English firm with any currency save gold!'' In 1 82 1 the Shetland bank began business, and con- tinued to issue notes until 1827. They failed, according tO' Mr Boase, in 1830 ; while Mr Somers, in his " Scotch Banks and Systems of Issue," mentions 1842. A dividend of from 5s. to 6s. per £ was paid. While these ephemeral creations were rising and falling, the old banks and the new Commercial Bank continued steadily to spread their branches (the Royal being still the only exception), until the year 1825 brought new rivals to the front, one of whom was in after years to take its place amongst the foremost banks of Scotland. The Aberdeen Town and County Bank still honourably maintains its. good name as the oldest provincial bank. Beginning with a capital in iJ"! 50,000, it now has in capital and guarantee fund a total sum of ;^4o8,ooo, and a note circulation of about i^200,ooo, issued from fifty-two offices. The Arbroath bank, and the second Dundee Commercial Bank, followed, — the former joining with the Commercial Bank in 1844 ; and the latter, after losing its identity in the Eastern Bank of Scotland in 1838, was swallowed up in 1863 by the Clydesdale Banking Compan}-. Last, but not least, came the tri-une National Bank of Scotland, the happy result of amalgamation of three differ- ent companies projected in the previous year. Altogether, these banks added ^^^740,000 of capital to Scottish banking, backed by strong reserves and large partnerships. The first and last named have increased the paper currency of Scotland by nearly ^900,000, of which fully ;^5 50,000 are one pound notes, while their total liabili- ties amount to upwards of ^19,000,000. * It was not until December 1862 that speedy railway transit com- pelled the banks to lower the par of exchange on London from twenty days to fourteen for drafts, and in the following September from fourteen to seven ; the par for transfers by advice being at the same time changed from twenty-three to seventeen, and at last to ten, days. K 146 THE ONE POUND NOTE. Chapter xi. Joint-Stock Speculation — The Crisis of 1825, and the Legislation of 1826. " We are well, our pulse and complexion prove it, — let those who are sick take physic." — Sir Malachi Malagrowiher. Cratiano. "Why, this i^ like the mending of highways in summer, When the ways are fair enough." — The Merchant of Venice. AMID the circumstances of mechanical development in the early part of the century, it is not surprising that speculation and over-production should have in- creased as they did. South America and Europe had alike regained their independence, the one from the power of Spain and the other from Napoleon. Enormous foreign loans were negotiated in the London markets, amounting nominally to £^2,gg4.,^yi, although none of them were taken at par, while some were so low as 56 and 30 per cent. So far as the latter were concerned, Scotland was compara- tively out of the way of danger, but new companies of every kind came into existence. Besides the banking com- panies already named, the best known of the offices which then began are The Standard Life Assurance Company and The Shotts Iron Company. In England 624 new com- panies arose in 1824 and 1825, with a total capital of ^^372,000,000, of which there was actually advanced ^17,605,000, as only 127 were in existence two years later. As reference is made to the panic which broke out in 1825, and to the subsequent legislation to which it led, when dealing with England, it will be unnecessary to cross the Border as to its effects. In Scotland the distress did not THE ONE POUND NOTE. 147 take the form of a crisis, but rather that of prolonged depression lasting over several years. Glasgow naturally- suffered most, from its mercantile connection ; but beyond some uneasiness, little actual distress occurred. Three small banks failed, — the Caithness Banking Company, the Stirling Banking Company, and the Fife Banking Company, — all bad failures for the shareholders. Against the three Scots banks, whose debts were paid in full, England presented a list of eighty bank failures. We now come to the first pointed attack of English statesmen against the banking system of Scotland. The noble lord at the head of the Government— Lord Liver- pool — proceeded to remedy the condition of affairs^ first, in the southern portion of the kingdom, upon entirely falla- cious deductions ; and secondly, of the northern portion, of whose necessities and institutions he was in abyssmal ignor- ance, — a degree of regard highly flattering to the north, inasmuch as it indicated that England had awakened to the fact of Scotland having acquired an affluence which called for a measure of interference in her affairs. To state the matter as briefly as possible, we must go back to the Act of 1708 (7 Anne, c. 7), which gave a monopoly of joint-stock banking, with note issues, to the Bank of England, no company of more than six members being permitted to act as note-issuing bankers. Unfortunately the idea of banking and note-issuing were inseparably connected in the minds of the financiers of last century, and in consequence it was deemed more profitable to have a note issue and a small number of shareholders, than to adopt the alternative of a large joint-stock deprived of that right. Indeed the latter does not seem ever to have been mooted until after 1822. The small English bankers having failed in large numbers, the loss thereby occasioned necessarily fell to a large extent on the note-holders, because the system of deposits was practically unknown save in London, and there were there- fore few creditors to satisfy save note-holders. As regards liabilities, the condition of the Bank of Scotland, as shewn by its balance-sheet of 1704, was very similar to that of 148 THE ONE I'OUND NOTE. these Southern bankers, although the assets side of the account shews a very different result. Having small capital and little deposit money, resort was made, as in Scotland, to granting advances by an issue of notes, regardless of ability to retire these when presented. These advances, sanctioned in the most reckless way, worked out their own remedy in times of crisis, by bringing the banks by scores into bankruptcy. English financiers, not distinguishing between the imprudence and insecurity of the advances themselves, and one of the media by which they were given, came to the conclusion that the issue of one pound notes was the cause of the evil. Had they gone further, and enacted that the entire note issue of private bankers was radicall)' insecure, they would have been much closer to a proper remedy. This, however, they did not see, or, perhaps seeing, did not dare to propose, their hands being tied by the sacred rights of the Bank of England on the one hand, while on the other they knew what a storm would be raised against that monopoly, if their argument against one pound notes had been carried to its legitimate conclusion, in the abolition of the whole country circulation. When suitable measures were in course of arrangement for England, it was resolved to deal also with Scotland and Ireland. " Because England had eaten sour grapes, the Scottish teeth were to be set on edge ; "* a measure in which Lord Liverpool was eminently successful, though not in the way he had hoped, for no sooner did the news of his proposals reach Edinburgh, than the whole country en masse rose against them, the Scottish lion setting its teeth and erecting its mane in a most unmistakeable manner. Correspondence was carried on in various news- papers ; county meetings took the matter up, from Berwick- shire to Caithness, deluging Parliament with petitions and remonstrances ; Sir Walter Scott contributed mightily to the cause by his letters of "Sir Malachi Malagrowther on the Proposed Change of Currency," published in February * Sir Walter Scott's Scriptural allusion to the proposed legislation. THE ONE POUND NOTE. I49 and ]March of 1826, and addressed to his old friend James Ballantyne, editor of the EdinbiirgJi Weekly Journal. They were eventually collected and published in form of a pamphlet, which ran through several editions. So keen was the antipathy of some of the English members of Parliament, that on various occasions Sir Walter's letters were angrily criticised, and declared to be little better than open rebellion. The ponderous reply of Mr Wilson Croker, Secretary to the Admiralty, was considered by English authorities to be an end of the whole matter, while upon Scotsmen it had absolutely no effect save to call forth various other writers in defence of the one pound and one guinea notes. Sir Walter Scott had little to say of a really practical nature, but rather indulged in the romancing to which his old-world sympathies made him liable when dealing with the stern facts of historyor finance ; but fewwriters could have made so dry a subject gleam with brighter or more humor- ous interest. His overflowing j-epej-toire of tradition, story, and legend was drawn upon with magic effect. The letters teem with allusions and incidents, which entitle them to be reckoned as the foremost classics in the literature of the one pound note ; and, as he himself admits, no sooner was his style recognised under the noui de phime, than "the heather was on fire far and wide." Sir Malachi's opening sentences disarm resentment. " I am by pedigree a discontented person, so that you may throw this letter into the fire if you have any apprehensions of incurring the displeasure of your superiors. I am, in fact, the lineal descendant of Sir Mungo Malagrowther, and have retained a reasonable proportion of his ill-luck, and, in consequence, of his ill-temper. If therefore I should chance to appear too warm and poignant in my observa- tions, you must impute it to the hasty and peevish humour which I derive from my ancestor. But, at the same time, it often happens that this disposition leads me to speak useful though unpleasant truths, when more prudent men hold their tongues and eat their pudding." Then follows a 150 THE ONE POUND NOTE. keen stroke at some of the ill-advised legislative expedients which make up statute law : — ^ " Scotland has been too often subjected to the alterations of any person who chose to found himself a reputation, by bringing in a bill to cure some defect which had never been felt in practice, but which was represented as a frightful bugbear to English statesmen, who, wisely and judiciously tenacious of the legal practice and principles received at home, are propor- tionally startled at the idea of anything abroad which cannot be brought to assimilate with them." Both Lord Liverpool and the Chancellor of the Ex- chequer — Mr Robinson, afterwards Lord Ripon — had ad- mitted, in a letter to the Bank of England, that " the failures which have occurred in England, unaccompanied as they have been by the same occurrences in Scotland, tend to prove that there must have been an unsolid and delusive system of banking in one part of Great Britain, and a solid and substantial one in the other. In Scotland there are not more than thirty banks, and these banks have stood firm amid all the convulsions in the money market in England, and amid all the distresses to which the manu- facturing and agricultural interests in Scotland as well as in England have occasionally been subject. Banks of this description must necessarily be conducted upon the general loiderstood and approved principles of banking^ When the letter was published, of which the foregoing is an extract, the testimony of " those counsel for the opposite side" was not lost on the legal mind of the Sheriff of Selkirkshire. " No proof can be desired better than the admission of the adversary." Seldom has foeman's armour been pierced by more delicate thrusts than those in which he refers to the parrot cry of " For uniformity's sake " raised by the Government officials, or to the punishing of Scot- land for the sins of England. In the first, allusion is made U) an ancient though hypochondriac laird, who found it conducive to his own wellbeing to swallow one pill every night. On calling some of his friends together to supper, he invited each and all to talce just "one Icctlc pill," as he THE ONE POUND NOTE. 151 had found them so beneficial for himself In spite of all remonstrances and resistance, strong or weak, according to the character of the guest, every man from the first to the last was compelled to bolt a pill ; the moral being drawn, that Scotland would be none the better next morning for ^ being forced to sacrifice her note issue " for uniformity's sake." The second illustration cannot be told but in Sir Malachi's own words :— " I must speak to the justice of this point, sir. M}- respected ancestor, Sir Mungo, when he had the distinguished honour to be zvhippi)ig-bo)\ or rather whipped boy, to his Majesty James the Sixth of gracious memory, was always, in virtue of his office, scourged when the King deserved flogging. And the same equitable rule seems to distinguish the conduct of the Government towards Scotland." Amongst the many publications issued at this period may be named " The Life, Adventures, and Serious Remonstrances of a Scotch Guinea Note," by the author of " The Letters of a Plain Man." xA. member of the body of Writers to the Signet, and evidenth^ well acquainted with the leading men of the day, he gives an excellent illus- tration of the uses to which a small note may be put, and the people in whose hands it may circulate.* The note struck by Sir Walter was largely imitated, the illustrations being fairly good, though scarcel)- equal to those of the master, indeed many of them were merely adaptations of those already given by Scott ; but the writer more than makes up for this lack of literary merit, by a much sounder and closer argument than Sir Malachi aspired to, of whose " Squibs " the unknown author of " The Adventures " speaks somewhat disparagingh- on several occasions. Another of the crowd of writers was "■ Paloeconomicus," whose letters, inserted in the Edinburgh Times of Februar\- and March 1826, contained more scientific expositions on the question of the note issues than those of Scott or the " Plain Man." He points out, that when the commercial * See pages iSo and iSi. 152 THE ONE POUND NOTE. crisis broke out, it at once affected the weakest part, — the EngHsh country bankers ; and ridicules the idea of sup- pressing one pound notes alone, when the whole note issue was defective. " It is altogether inadequate, and, as a , measure meant to be perfect in itself, is legislation " ludicrously de viiniinis ; as if, in a fire, one should knowingly snatch up a box of gold, and neglect a box of pearls of equal weight." He concludes as follows : — " On the general question, therefore, it seems to be apparent that the views and the measures of Government are contracted in their scope and erroneous in their object. They have been concocted hastily, without enquiry ; and are not suited either to work a present cure, or to exhaust and put to rest for ever the vital question of our currency." One of the most important petitions was that prepared apparently by some committee of notables, and addressed in the " Vox Populi " to Sir Robert Peel with the other members of the select committee appointed to inquire into the state of the currency. It is an euphoniously worded print of four and a half pages foolscap. After touching generally on the loyalty of Scotland and the soundness of its banks, as witnessed to by Lord Liverpool and his chancellor, it proceeds to give some particulars of the circulation of specie and paper amongst the 831 banks of Great Britain. The annual land rent of Scotland is then discussed, to prove that the note issue did not equal one year's rent, and was scarcely equal to £2 per head of population, being estimated at three and a half million pounds. Some dubious paragraphs follow on land as a medium of exchange and reserve for notes, which remind the reader strongly of Law's writings of a hundred years before, though more carefully expressed. The petitioners reach safer ground when dealing with the utter impossibility of every bank keeping gold sufficient to meet all its liabilities, or any other than a portion of them. The most important addition to banking literature of the period consists of the reports and evidence of the two committees of the Lords and Commons, appointed by the THE ONE POUND NOTE. 153 now alarmed Government, who, having fired their gun and run away, fell upon this expedient to gain some breathing- space. Without an index, huge in size, consisting of nearly 300 foolscap pages, the reports contained a mass of undi- gested and indigestible matter. One and all the Scotch bankers maintained the perfection of their system, declaring — from ignorance, possibly — the total absence of all "runs for gold," or losses from failing banks, in Scotland up to their own time. The long period which had elapsed since 1797 might excuse them for forgetting the run of that year ; while the report acknowledges, as to the failures, " that there have been only two instances in which the creditors did not ultimately receive the whole amount of the principal and interest of their debt/' It is remarkable that the Commons committee chiefly based their argument for non-interference upon the com- prehensive and well-founded principle of Scots law, which while giving creditors ample security for their debts, at the same time conduced to the proportionate safety of the debtor and of commerce in general. The system of public records enables the merchant or banker to be absolutely certain of the security of any heritable property which may be disponed to him for debt, and can inform him of other properties held by his debtor, with the degree of burdens upon each, thereby giving a fair idea of his standing and means. All secret understandings or alienations of property, were utterly valueless until they had ceased to be secret by being recorded in their appropriate registers, open to all who cared to inspect them. With almost a touch of envy, the committee dilate upon there being no limitation to the number of partners of a banking company in Scotland. The Commercial, National, and Aberdeen Town and Country Banks, with their 2205 partners, might well lead them to ponder the condition of things in their own country, where not more than six partners were allowed for such companies. In 1826 each one of these 2205 was liable, jointly and severally with his co-partners, to the full extent of his fortune, for all the 154 THE ONE POUND NOTE. debts of the company in which he had an interest. The difference between the laws of the two nations was still further exemplified, in the ability of creditors in Scotland to adjudge the heritable estate of his debtor as well as to attach the personal, " for payment of personal debts, among which may be classed debts due by bills and promissory notes, and recourse may be had, for the purpose of procuring payment, to each description of property at the same time ; " not only so, but death itself did not prevent the creditor from obtaining his legal remedy. However unwise the original views of the Government may have been, the questions to which their committees applied themselves were not so unreasonable as was at the time supposed. England had just resumed metallic currency for all sums under £$, and it was considered unfair to that country that Scotland should still be allowed to avail herself of her paper currency for similar amounts. An interesting calculation was drawn up on this point in 1826 by an Edinburgh banker, in which an attempt is made to prove, that from wealth and the smaller proportion of population to the square mile in Scotland than in England, the latter ought to be possessed of a currency five times the value of what was suitable for Scotland, and that therefore the five pound note of England only placed her upon an equalit}- with the one pound note of Scotland. The serious error of reckoning the currency of Scotland at ;^2, 847,000 onl}-, instead of ^^"4,000,000 in round numbers, deranges the author's whole argument and conclusion; but his contention is a reasonable one, and applies even yet when the population of Scotland is only 125 per square mile to the 484 of England. The greater distances at which such centres as Wick, Lerwick, Aberdeen, Berwick, Thurso, Edinburgh, Inverness, Glasgow, and Dumfries are placed from each other, without the gaps between them being filled up, necessitate a currenc}- of such a nature as will cost less for transit than metal, and be more secure against theft from the ease with which it can be concealed in transmission. The natural advantao;es of Scotland are THE ONE rOUND NOTE. 155 not equally distributed over the whole extent of her surface ; consequently, when capital or material have to be removed from one part to another, the distances traversed have often to be much greater than in England, and the charges are there- foreproportionally increased. Forexample,coal is found in all parts of England, but only in the central lowlands of Scot- land to any extent ; the cost of carriage to other parts is therefore most serious, inasmuch as railways do not profit by a heavy local traffic as in England, but have to pass through many miles of absolutely unproductive country, not getting a single passenger except those going consider- able distances. The geographical features of Scotland thus make railways more expensive to construct, slower when constructed, and dearer to the traveller than those of the south. It would be difficult, if not impossible, to strike the exact balance of advantage in the required currencies of England and Scotland ; but from the foregoing observations, it may be seen that Scotland is certainly entitled to a cheaper currency than England, and would incur a serious loss if her present currency were taken from her, — a loss w^hich would have been very much more serious in 1826 than now, but which would still shut out all banking facilities from many parts of the country where they are most required. To these questions the committees of the Lords and Commons do not appear to have given much attention, although abundant evidence bearing upon them was placed before them. Arguing that, on general principles, the rule which had been adopted for England should also be applied to the other parts of Great Britain, they considered that the common burden should be spread over as wide a field as possible (forgetful, apparently, according to the Edinburgh banker, of the greater number per square mile to bear the said burden in England than in Scotland), as " The \\'ider the field over which a metallic circulation is spread, the greater will be the security against its disturbance from the operation of internal and external causes, and the lighter on an}' particular part will be the pressure incidental to a 156 THE ONE POUND NOTE. sudden contraction of currency," — a statement which the branch system of Scotland has proved to be much more true regarding a paper currency, than it was supposed to be of one of metal. The committee then referred briefly to the claims of Scotland for an exemption from the rule which they had laid down for their general guidance, — such as the existence of one pound notes from the earliest days of Scottish bank- ing ; the concurrent progressive increase in manufactures, agriculture, fisheries, and wealth ; the stability of the banks, and the reliance placed in their notes in all times of panic or distress. It was admitted that, for twenty years prior to the Restriction Act, the two countries were in precisely the same position to each otJien as they would be in the future, one pound notes being altogether prohibited in England from 1777 to 1797, without any serious consequences arising from their currency in Scotland. And, lastly, the evidence led upon the reduction of the number of branches and closing of cash credits was so unanimous, that though the committee did not think the dislocation would be so serious as was anticipated, yet they were " unwilling, without stronger proof of necessity, to incur the risk of deranging, from any cause whatever, a system admirably calculated to encourage the use of capital, to excite and cherish a spirit of useful enterprise, and even to promote the moral habits of the people, by the direct inducements it holds out to the maintenance of a character for industry, integrity, and prudence." Only two possible dangers were alluded to, — the circula- tion of Scots one pound notes in England, and the increase in forgery. As to the former, the directors of the Bank of England, in their evidence, urged no objection to the status quo, provided suitable measures were taken to keep the Scottish notes out of England ; while the dread of forgery was dismissed in few sentences, the final verdict being, — " Your committee cannot advise that a law should now be passed prohibiting the future issue in Scotland of notes below five pounds ; " a kind of negative answer, more to be THE ONE POUND NOTE. 157 expected from a cautious Scot than from a bod}' of English gentlemen. The opinion of the Lords was more statesmanlike and concise, and though it is of some length it is thought well to give it verbatim : — " With respect to Scotland, it is to be remarked that, during the period from 1776 to 1797, when no small notes were by law issuable in England, the portion of the currency of Scotland in which payments under ^^5 were made, continued to consist almost entirely of notes of £1 and £1. IS., and that no inconvenience is known to have resulted from this difference in the currency of the two countries. This circumstance, among others, tends to prove that uniformity, however desirable, is not indispensably necessary. It is also proved by the evidence, and by the documents, that the banks of Scotland, whether chartered or joint-stock companies or private establishments, have for more than a century exhibited a stability which the com- mittee believe to be unexampled in the history of banking ; that they supported themselves from 1797 to 181 2 without any protection from the restriction by which the Bank of England and that of Ireland were relieved from cash payments ; that there was little demand for gold during the late embarrassments in the circulation ; and that in the ^\•hole period of their establishment there are not more than two or three instances of bankruptcy. (!) As during the whole of this period a large portion of their issues consisted almost entirely of notes not exceeding £1 and £1. is., there is the strongest reason for concluding that, as far as respects the banks of Scotland, the issue of paper of that description has been found compatible with the highest degree of solidity, and that there is not therefore, while they are conducted upon their present system, sufficient grounds for proposing any alteration, with the view of adding to a solidity which has so long been sufficiently established." And so the question of Scottish currency went to sleep for nineteen years, after the most vigorous awakening it had received since 1765. 158 THE ONE POUND NOTE. The following is a list of the banks of issue in Scotland at the end of 1826, showing the number of partners, and number of branches, if any : — Names of F'irms or Hanks. Head Office. No. of Partners. No. of Branches. I Bank of Scotland . Edinburgh Charter 16 2 Royal Hank of Scotland . , )) I 3 British Linen Co. . M 27 4 Aberdeen Banking Co. . Aberdeen "so 6 5 Aberdeen Town and County Bank )) 446 4 6 Arbroath Banking Co. . Arbroath 112 --> 7 Carrick, Brown, & Co., or Ship Bank . Glasgow 3 None 8 Commercial Banking Co. of Scotland . Edinburgh 521 31 9 Commercial Banking Co. Aberdeen 15 None 10 Dundee Banking Co. Dundee 61 None II Dundee New Co. . j> 6 I 12 Dundee Commercial Bk. J5 202 None 13 Dundee Union Bank 5) 85 4 14 Exchange and Deposit Bank .... Edinburgh I 4 15 Greenock Banking Co. . Greenock 14 3 16 Glasgow Banking Co. Glasgow 19 I 17 Hunters & Co. Ayr 8 3 18 Leith Banking Co. . Leith 15 4 19 National Bank of Scot- land .... Edinburgh 1238 8 20 Montrose Bank Montrose 97 2 21 Paisley Banking Co. Paisley 6 4 22 Paisley Union Bank 55 4 3 23 Perth Banking Co. . Perth 147 5 24 Perth Union Bank . 5) 69 None 25 Ramsays, Bonars, & Co. Edinburgh 8 None 26 Renfrewshire Banking Co. Greenock 6 5 27 Shetland Bank Lerwick 4 None 28 Sir William Forbes & Co. Edinburgh 7 None 29 Thistle Bank . Glasgow 6 None Annexed is the circulation of the Scots banks in 1825, taken from the report of the committee, from information supplied by the different banks. Some of them did not distinguish between small notes and large, but the THE ONE POUND NOTE. 159 committee estimated the proportion as indicated by the figfures marked with an asterisk : — ;^5 and upwards. Under £$. Total. Highest ( Amount ( Lowest ( Amount \ ^1,118,896 *827,825 .£1,572,828 *I, 163,663 i:2,69i,724 1,991,488 ^1,946,721 ^2,736,491 ^4,683,212 ^752,461 *57o,990 ^1,200,025 ♦910,623 i:i,952,486 1,481,613 ^1,323,451 i;2, 1 10,648 i^3,434,099 Both amounts shew an increase of about ^^700,000 over 1824, of which i^400,ooo was in 20s. notes. It may be observed that the difference between the highest and the lowest, i^ 1, 240,000, is ahnost exactly what it is at the pre- sent time, — a coincidence indicative of two opposing causes of elevation and depression. The first may be found in the excessively high prices of 1825, which, by reducing the relative value of money, forced an increase of notes to effect the same work as formerly. This high level, of necessity, shrank violently when prices collapsed towards the end of the year, and extended the difference between the extremes. The other cause, which has tended to decrease the propor- tional advance of notes since 1825, is the vast increase in the cheque system, which has only come into existence since that year, and is as reasonable an advancement on bank notes, for its own special purpose, as the latter were on a metallic currency. Each now has its place, — specie, the reserve basis of all ; notes, the public currency ; and cheques, the private medium of the innumerable settle- ments of commerce, — while only two hundred years back the entire duty was performed by specie alone. l6o THE ONE POUND NOTE. Cbaptcr xil.— 1826-1844. Last Effort of Local Baxkixg, and its Gradual Absorp- tion BY THE National Banks — Extinction of Private Banking — Increase of Branches — Panic of 1837 — The End of the Free Note Issue. Macbeth. " I have lived long enough ; my way of life Is fallen into the sear, the yellow leaf; And that which should accompany old age — I must not look to have ; but, in their stead, Curses not loud, but deep, mouth-honour, breath. Which the poor heart would fain deny, but dare not." — Shakespeare. IT may have been observed by students of the reports of 1826, that nearly all the Scottish witnesses were connected more or less directly with the large joint- stock banks of Edinburgh or Glasgow, local joint-stock banks or private bankers not having much to say for them- selves ; for though Mr Kinnear, the well-known banker, appeared as a witness, it was chiefly as a director of the old bank. This fact is not without significance in the light of subsequent history, for it shews the value which was put upon the one pound note by the leaders of those institu- tions, who required its powerful aid to establish branches throughout the country. Whether it be that the smaller local banks did not interest themselves in the matter, being indifferent to the continuance of small notes, or that they saw only too clearly the weapon of destruction these notes would prove to be against local banking when utilised by the large banks to open branches, it is almost impossible to say ; but the fact is worth remarking, that the chief opposition to the pro- posed legislation came from Edinburgh and Glasgow, and THE ONE POUND NOTE. l6l the county committees, — provincial bankers, with few exceptions, remaining passive. In 1828 the small fragment of the intended legislation for Scotland came into force, — the Act 9 Geo. IV., c. 65, prohibiting Scottish or Irish notes under £^ from being issued in England. For several years after 1826 branches were steadily extended, few being withdrawn compared with the period 1800-15 ; and it is well to bear in mind, that all these branches were begun by means of the small note issue, which alone could make them profitable for the time. T/ie note was the unseen engineer, mining its way through the country, " hoisting " the unhappy local bankers, by means of its connection with the large and influential establish- ments who issued it, for joint-stock banks alone would satisfy the people. Signs were not wanting, among the local and private bankers, that an effort must be made to meet the increased requirements of the time, if their power- ful antagonists were to be kept at bay. These require- ments were not little, for Europe, under the enjoyment of profound peace (only broken by the brief struggle at Navarino), was increasing in wealth with rapid strides. In Britain this was at first tempered by the distress arising amongst the working classes, from the want of labour, and the restrictions laid on the import of corn. The cholera, too, ravaged Scotland somewhat severely in 1832, its influence being alarmingly felt in Edinburgh, not so much from the direct effects of the plague, as from its dreadful havoc in some of the surrounding villages. In consequence of pressure, several small banks failed, and others amal- gamated* for mutual strength ; while one, the second * Banks Amalgamated. — The Montrose Bank, began 18 14, joined the Dundee Union Bank 1829 (one writer says 1826). Thomas Kinnear & Sons with Donald Smith & Co. in 1831, — who, as Kinnears, Smith, & Co., failed in 1834, with liabiHties over ^300,000, of which IIS. per;^i have been paid. The Commercial Banking Company of Aberdeen joined the National Bank in 1833. L l62 THE ONE POUND NOTE. private banking house in Scotland, Ramsays, Bonars, & Co., gave up their business to the Clydesdale Bank, who still occupy the site of the old office, in the High Street of Edinburgh, though formerly it entered from the Exchange Square. Thus in about six years the list of Scottish banks was reduced by thirteen. To take the place of the failures, and to carry on the vastly increased business which rose rapidly from 1833, new banks were originated of a totally different character, being, according to the desire of the time, joint- stock banks, with large capital and proprietary,* and unlimited liability ; even the new chartered banks being unable to escape this dangerous security. The return of prosperity led, as it invariably does, to over-production on speculation ; the railway mania began to make its influence felt, but joint-stock banks were the favourite institution both in England and Scotland. At the time that these English banks (numbering nearly 220 The Thistle Bank joined the Glasgow Union in 1836, after an existence of seventy-five years. Perth Union Bank joined the National Bank in the same year. In 1837 Paisley Bank gave up business in favour of British Linen Company ; and the Ship Bank of Glasgow joined with the Glasgow Bank Company under the name of The Glasgow and Ship Bank, the latter joining the Glasgow Union Bank in 1843. I" 1838 the Paisley Union Bank joined the Glasgow Union Bank. Banks Failed. — James «& Robert Watson, Glasgow ; established 1793, failed 1832, paying 4s. gd. per £. Did not issue notes. Maberley & Co., Edinburgh and elsewhere, in 1832. Kinnears, Smith, & Co., as above, in 1834. Did not issue notes. Robert Allan & Son, established 1776, stopped 1834. Did not issue notes ; paid 4s. per £. James Inglis & Co., in 1835. * Thk New Banks were, — The Ayrshire Bank, in 1830; followed by the prosperous Glasgow Union Bank in the same year — capital, ^350,000; then came the notorious Western Bank in 1832, with its capital of ^209,000; in 1834 the Central Bank of Scotland was opened at Perth, with ^^80,000 of capital ; and, lastly, The North of Scotland Bank in Aberdeen, in 1836. THE ONE POUND NOTE. 163 in the years 1835 and 1836) came into play, the foreign exchanges of London were close upon par, indicating that any increase in the currency leading to an appreciation of the value of gold, would inevitably produce a drain of bullion, and an adverse exchange. The high rates of interest in America had already been too attractive to investors, and gold had left the country in considerable quantities, reducing the exchange to par. Totally regard- less of these signs, the country bankers extended their note issue from ^2,799,000 in December 1835 to ;£'4,2 58,i97 in the same month of the following year. The Bank of England had already considerably raised its rate of dis- count ; but this increase in the country notes, together with the millions of cheques, bills, and similar documents, floated by the same houses, completely upset all calcula- tions. The exchanges began to fall rapidly, and a renewed export of gold took place from the reserves of the Bank of England. In the heavy losses and banking failures which ensued, Scotland had little share ; the Western Bank not having developed its peculiar style of banking to an extent beyond remediable measures. Under the guise of a joint-stock, then deemed infallibly safe, it had gained an undeserved credit amongst depositors, and was besides hugely admired by such impecunious individuals as are ever in need of cash or accommodation. Beginning business in 1832, two years sufficed to obliterate the memories of 1826, and revive in full force the delusions of Douglas, Heron, & Co. ; there was the same reckless dis- counting, with waste of capital, deposits, and note circula- tion upon a speculative market, and the same supreme indifference to reserves of Government securities or other convertible assets. So early as 1834 their difficulties compelled them to ask the assistance of the Edinburgh banks, who only reluctantly gave the required aid, on condition that it should be utilised in the purchase of Government funds to be retained as resei've. This check- had merely a temporary effect, to be forgotten in four years, for the bank was again pulled up in 1838 by the same 164 THE ONE POUND NOTE. guardians of the public security. In view of the extended area and amount of their own operations, the Edinburgh banks were resolved greatly to increase their coin and investments in Government funds, — the latter having been somewhat checked for a number of years from 18 10, by the action and influence of the Commercial Bank. The Western Bank received this second remonstrance with virtuous indignation, upon which they were told, that after the 21st of July in that year, the other banks would decline to receive their notes. Last century this measure would have been matter simply for gratification to the defaulting bank, as its only effect then would have been to increase the issue, — for in 1772 it was on the directly opposite policy that the Bank of Scotland collected as many of Douglas, Heron, & Co.'s notes as they possibly could, and returned them against them, receiving in exchange short dated bills on London, thus bringing about that bank's collapse more speedily, — but in 1838 the Western Bank could not afford the loss oi prestige, and was compelled to submit. Not- withstanding this concession, the Bank of Scotland and the other banks deemed it their duty to send a memorial to the President of the Board of Trade, Mr Poulett Thomson, who in consequence of the information supplied, refused to grant the Western Bank the charter they had applied for. In footnote is given a list of new banks begun in 1838,* of which only the Clydesdale Bank and the Caledonian Bank remain to tell the tale of failures and amalgamations. The following year, 1839, was the black-letter year of Scot- tish banking history, for in it the City of Glasgow Bank saw the light of day. In 1840 four more banks opened, which have all disappeared. With these the free note issue came to an end. In 1843 another strong bank appeared upon the scene under a new name. In the Union Bank of Scotland were incorporated many of the better-class banks, who had * In this year the Clydesdale Bank, the Caledonian Bank, the Eastern Bank, the Edinburgh and Leith Bank, the Paisley Commercial Bank, and the Southern Bank of Scotland, all began business. THE ONE POUND NOTE. l6$ Stood the test of time and its vicissitudes for many years. Amongst these were the old Glasgow Ship Bank, begun in the middle of the eighteenth century ; the Thistle Bank ; the Glasgow Banking Company ; Hunters & Co. of Ayr ; the Kilmarnock Banking Company; and the Paisley Union Bank. In later years the Perth Banking Company and the Banking Company of Aberdeen were added to the list, two of the strongest and best of the provincial banks of Scot- land. The framework of the new bank was composed by the union, in 1838, of the ancient house of John Coutts, Sir William Forbes, & Co. with the vigorous Glasgow Union Bank of the West. In consequence of its numerous branches opened prior to 1844, it was favoured with one of the largest authorised circulations under the settlement of that year ; while its subsequent absorption of the two banks before-named, has placed it at the head of the list, with a total authorised circulation of £4$4.,;^46. l66 THE ONE POUND NOTE. Chapter xill.— 1844-1845. A Retrospect of the Place and Power of the One Pound Note during the Free Issue — The Act 8 & 9 Vict., c. 38, AND ITS Effects. " Weel, weel, my Lords, that's the end o' an auld sang." SO said Lord Seafield, the last High Chancellor of Scotland, when in 1707, with a laugh on his face and sorrow at his heart, he put his seal to the Treaty which was to end the ancient regime. Tradition sayeth he had English gold in his pocket, which, if true, would scarcely lighten the load elsewhere. To a lover of his country, who has searched through the story of its banking, with all its evils and varied defects, it is impossible to consider the end of the " auld sang" without experiencing a feeling stronger than regret. In striking contrast to the temporary legal expediency of some countries, the law of Scotland, upon which its banking and note system were founded, has ever had its base on principles which seem applicable to every age of mankind, — principles which enabled the different creations springing out of them, not merely to meet the necessity of the time which gave them birth, but, partaking of the nature of their parent, to adapt themselves to each new condition which might emerge in the ever-changing stream of life. It has been seen that at the outset, in 1696, the ancient Scottish law had absolutely nothing in it to limit, much less to prevent, the free issue of bankers' notes, nor did the Scottish judges seek in any way to put obstacles in the THE ONE POUND NOTE. \6j way of their negotiability. In England both of these positions were exactly reversed. The only restriction in Scotland — the twenty-one .years' monopoly to the old bank — was owing solely to the influence of the law and practice of England upon the mind of the Englishman who drew up the constitution for the new Scots bank, and had no lasting effect, inasmuch as it dropped out of sight in 17 16. By way of authority, let the reader glance at Macau- lay's vivid sketch of the scene upon which the bank note made its debut, and the character of its rivals on the road to fame : — •" In the autumn of 1695 it could hardly be said that the country possessed any measure of the value of commodities. It was a mere chance whether what was called a shilling was really tenpence, sixpence, or a groat. . . . Three eminent London goldsmiths were invited to send a hundred pounds each in current silver to be tried by the balance. Three hundred pounds should have weighed about twelve hundred ounces. The actual weight proved to be six hundred and twenty-four ounces. The same test was applied in various parts of the kingdom. The evils produced by this state of the currency were not such as have generally been thought worthy to occupy a place in history. Yet it may well be doubted whether all the misery which had been inflicted on the English nation in a quarter of a century by bad kings, bad ministers, bad parliaments, and bad judges, was equal to the misery caused in a single year by bad crowns and bad shillings. . . . When the great instrument of exchange became thoroughly deranged, all trade, all industry, were smitten as with a palsy. The evil was felt daily and hourly in almost every place and by almost every class, — in the dairy and on the threshing-floor, by the anvil and by the loom, on the billows of the ocean and in the depths of the mine. Nothing could be purchased without a dispute. Over every counter there was wrangling from morning to night. The workman and his employer had a quarrel as regularly as the Saturday came round. On a fair-day or a market- day the clamours, the reproaches, the taunts, the curses l68 THE ONE POUND NOTE. were incessant ; and it was well if no booth was overturned, and no head broken. No merchant would contract to deliver goods without making some stipulation about the quality of the coin in which he was to be paid. Even men of business were often bewildered by the confusion into which all pecuniary transactions were thrown. The simple and the careless were pillaged without mercy by extortioners, whose demands grew even more rapidly than the money shrank. . . . The ignorant and helpless peasant was cruelly ground between one class which would give money only by tale, and another which would take it only by weight." Such, then, being the field on which bank notes were first issued, both in England and in Scotland, it is manifest that their primary duty was to replace a large proportion of this miserable currency. Gold was extremely scarce, and was therefore seldom seen, so that the great bulk of payments was made in the clipped, worn, rudely made, and often spurious, discs which struggled to pass current as silver coin. From such competitors it may readily be imagined that bank notes had little to fear, the small note specially so, for it was the lack of a j;//*?// currency that was most keenly felt by the mass of the population. Merchants could make a shift with bills of exchange for their larger transactions, but the millions of small traders, workmen, farmers, and others were powerless to extricate themselves from the whirlpool of confusion to which their Stuart rulers had abandoned them. When therefore their merits were once understood, the nation turned with thankful eagerness from this rude and wrangling barter in bags of metal to these "papers" representing " rights " only, but " rights " which general confidence in the issuers had converted iromjjis ad rem to res itself Their steady equal value, when compared with the varying silver coin, soon led them to be regarded in the same way as money is now defined. They were, first, a general standard of value; and, second, a general medium of exchange. Of course it is unnecessary to remind the reader, that, being intrinsically worthless reckoned as pieces of paper, their whole basis was one of THE ONE POUND NOTE. 169 confidence on the part of the receiver, and of prudence on behalf of the grantors ; but they fairly filled up, indeed they performed better than anything that then existed^ the functions of money. Uniform in value, portable in size, and though not of great value yet truly representative of great value ; and, thirdly, they were most certainly " something desired or demanded." In these different offices they saved time in calculation, steadied prices, gave a more uniform measure of value, and prevented much expense for carriage of coin to the merchants and people of the early years of the eighteenth century. In a few years their PLACE and POWER were assured. By their agency, in small degree at first, but in greater volume as time went on, one pound notes assisted materially in opening up the resources of the country to civilising influences. Viewed as a power in political economy, which has for its primary object the consideration of the nature of wealth, and of the laws which guide its production, exchange, and distribution, the small paper currency of Scotland could not have been introduced more opportunely than in 1699 or 1704. The different parts of the country were separated from each other by tracts of uninhabited waste, across which it was dangerous to travel, alike from the terrors of robbers as from the inclemency of the seasons. Roads were present merely as tracks worn deeply into the soil by centuries of traffic, along which strings of pack- horses crept from town to town twice or thrice in the year, forming the only general means of conveyance open to the public. To settle a debt of ;^ 1200 Scots (equal to ^100 sterling when exchange was at par), by forwarding by such means a bag of silver weighing from eighteen to twenty pounds, was clearly as direct a stoppage to trade as any legal enactment could have effected. Nor must it be supposed that the bills of exchange then current amongst merchants could in measure meet the difficulty, for, as John Coutts's cash- book showed, even down to 1740, in the best of credit and widely acquainted as he was, he had yet the greatest diffi- culty in arranging payments and exchange in different towns, I/O THE ONE POUND NOTE. from the total absence of any agency in these places by zvhich it could be undertaken. A payment of iJ^ioo, made in small notes, would not weigh a sixtieth part of a bag of silver for that amount, and could be hidden with ease about the person of the traveller; so that any merchant or trader, after his long journey across country to some fair, vastly lessened his labour, risk, and inconvenience, by the new medium of exchange. From any dangerous part of the country, where silver could not with safety be risked, and on which there was no facility for obtaining a bill of exchange, trade was com- pletely shut out, and coidd not be commenced. Or if by good fortune " exchange " could be bought on the particular place to be visited, the first trouble was, that it had to be bought with a price, and not drawn for nothing, as bank notes were ; and, secondly, there was the risk of non- payment by the drawee, which compelled the would-be- trader, on arriving at his destination, to cash his draft before he made any purchases, lest at the end of the day he should not be able to obtain the money wherewith to pay for his goods or stock. In this way he was exposed to a third expense, for although compelled to get ready cash, he might not find an}'thing to purchase to his mind, and would thus have the disagreeable alternative of buying that which he did not require, or of repurchasing a bill of exchange on the town from whence he came. It is not to be wondered at that trade was slow to enter the straths of Scotland, having such difficulties to overcome; or that merchants should hesitate ere risking the performance of journeys as profitless as John Gilpin's to the village of Ware. While this was the condition of the trader before bank notes were introduced, let us follow him a few years later, with the same slight swelling of clothes in the region of his heart which still betrays the "bundle" of notes in the modern drover. He would probably have a stouter stick long ago than is now needful for a lowland lad, while if he came from the far north it is quite probable a dirk might be found lurking amidst the notes, ready upon the THE ONE POUND NOTE. 171 smallest provocation to settle accounts with more summary- diligence ; but whether the particular individual be highland or lowland, it is astonishing to see the numbers of "shepherd callants and farmer bodies " from the south, hob-nobbing with so many " shentlemen drovers and crofter craturs " from the north. What has caused this wonderful change ? Would it be wrong to suppose that it was at least helped on by the "sma' note;" and that the highland drover had at last found a safe and ready means of selling his shaggy clean- limbed cattle to a lowland farmer in exchange for a portable and concealable kind of money ? To the highly strung though somewhat superstitious Celt, everything in the shape of paper and erudition has an awe-inspiring effect ; once give the cautious man a sound belief that the note with its elaborate printing is worth twenty silver shillings, and he will stick to it with more sense but with as much tenacity, as the Polynesian to the chip of wood on which missionary Williams told his wife to " hand the bearer an axe." If two races so irreconcileable as the Celt and Saxon could find common ground for increased trade by means of the small notes, how much greater must have been their power in the respective parts of the country in which they had found their place. Acting the part of local bankers before any existed, they gradually accumulated in the hands of some person or persons far distant from the bank town, who, pondering what to do with this increased and new form of wealth, hears that the new bank, whose notes they have already learnt to respect, will give them ^3, or ^4, or £^ per cent, per annum for all money lodged with them on deposit. There will be some dubiety, possibly, as to whether the bank does not mean any other money than its notes, which further enlightenment soon settles. The smallness of the bundle in which his wealth is wrapped, enables the new depositor to journey to town with comparative ease. There the " rights," \.\\&jus ad rem, are presented to the bank, and then comes the ticklish moment. No matter what they are considered outside, here they are only a right to the 1/2 THE ONE POUND NOTE. thing- signified, not the thing itself. It is possible that the cautious capitalist would first ask for gold or silver, and then pay that in as a deposit ? Such things have been done in the nineteenth century, and there is no reason to doubt of its having been done in the eighteenth. Errors in the Issue. — Our note having thus returned to the bank in its travels, brief notice may be taken of the dangers and abuses of the issue in the early times of banking, before dealing with their effect on deposits. Repeated reference has been made to the fallacy that printed notes were money, even when lying in the bank's till. Save with William Paterson and a very few other sensible men, the haziest notions were afloat at the beginning of the banking era, as to convertibility of paper money. If gold or silver needed no conversion, why should paper notes require it ? the convenient theory being, that land was the only true measure of value or medium of exchange, — surely a more gross form of filthy lucre than the metals usually burdened with that epithet. As this delusion never got a footing in Scotland, it is unnecessary to mention it further, than as shewing the unsound ideas prevalent upon the paper currency. It also gives an estimate of the difficulty of the Bank of Scotland in choosing the path of safety in preference to those in which no regard was paid to the issuer's liability, when called upon to implement the promise on his notes. At their first start, judging from their small capital and infinitesimal metallic reserve, as shewn by their balance-sheet of 1704, it is evident that the bank were not free from the current fallacious opinions, as they had the large sum of ;^50,847 sterling of notes issued, against which only i^ 1,600 of silver was in stock, the rest of their reserve having been drained from them in the run. That they had profited by the experience gained in 1704 and 171 5, is evident from their views expressed in the old " Account of the bank " previously referred to, the author of which in 1727 says, " For the quota of credit in a banking company must be proportioned to the stock of specie in the THE ONE POUND NOTE. 173 nation, learned and understood by long experience, and not extended to a capital stock subscribed for ; which cannot in the least help to support the company's credit, if the specie of the nation decay." Mr Macleod observes on this extract, that " this doctrine contains the refutation of many wild schemes ; and the true plan of regulating a paper currency, is simply to discover how a certain proportion shall be maintained between specie and credit." Precisely the doctrine which Sir Robert Peel afterwards attempted to enforce on the country bankers of England by his Act of 1844. " Let the variations of the foreign exchanges be the rule for the restriction or expansion of your paper circula- tion," was his watchword ; and had he been able to include not circulation of notes merely in the scope of his remedy, but the vastly greater circulation of credit on advances, his plan would have been as nearly perfect as any measure could have been, which has for its object the regulation of monetary affairs. It is possible that a somewhat rigid adherence to the rule pointed at by the writer of 1727, combined with natural aversion to expenses of collecting and maintaining a larger stock of specie, were amongst the causes which kept the old bank running in its narrow groove until the foundation of the Royal Bank ; but the extract suffices to shew that it was a current opinion, in 1727, that notes might be issued to the full extent of the subscribed, though uncalled, capital of a bank, — the old bank itself, with its i^ 100,000 capital, of which only one tenth was paid up, affording a striking example. The most deadly error, and the one that cost most effort to eradicate, was the fallacy that notes were money. Professor Leone Levi, in a recent lecture, remarked that this notion " is quite modern ; " so far, however, as British or Scottish banking is concerned, it is as venerable as the system itself It was simply a part, almost a corollary, of the whole " inconvertible " doctrines, whether based on land or debt, or upon nothing at all. There is no trace whatever of the Royal Bank being tainted with it, and had 174 THE ONE POUND NOTE. subsequent banks acted upon the same rules no more would have been heard of the delusion. Unfortunately a second factor for evil stepped in, when the doubt as to summary diligence upon promissory notes broke down all the old bank's endeavours to inculcate the lesson it had learned upon the Glasgow banks of 1750 and onwards. A third complication arose in the wretched option clause, which continued the mistake in full force until the Act of 1765 remedied both evils, and in a great measure destroyed the fallacy, after an existence of two-thirds of the century. Douglas, Heron, & Co. made one furious attempt to break loose into the old paths, but their speedy collapse in 1772, under the new order of things, was the final blow to the system, which never again raised its head in Scotland in the same for Jii. After Douglas, Heron, & Co. had passed away, there is scarcely any trace of a general over-issue of notes down to the present time. In special cases, such as those of the Western and City of Glasgow banks, the notes helped to keep up the rotten corporations by means of their .power in the branches ; but the advances granted by these banks were not issued in the form of notes, but of discounts and advances on account, drafts, retirements of London bills, and other forms of credit, — the notes having little or no part in the transactions which brought on the ruin of the banks. Large as the circulation of the City of Glasgow Bank was, it was not excessive, compared with that of other banks, in proportion to the number of its branches. The notes and the branches gave a strength to its constitution, which kept it alive long after the centre was hopelessly decayed. To this extent, these strong parts of Scottish banking post- poned, and therefore aggravated, the final collapse ; but the fact that a national good is occasionally put to an evil use, 'is small argument for its abolition. This was partly the cause of the English dislike to the small note, and was as unreasonable as it would be to abolish the British Parlia- ment because it sometimes deserves Carlyle's epithet of " The Great Palaver." THE ONE POUND NOTE. I75 Mr Tookc, and many other English writers, blame small notes for much of the speculation which led to the crisis of 1825, not seeing that they could have had almost nothing to do with it, being too fully employed as a much-needed currency, supplying the place of gold, of which the previous issues of other notes, and war demands, had denuded the country. The guinea note, whose " Adventures " have been referred to, speaks very sensibly on this point : — " Whatever such fellows as my relations, the hundred and the fifty pounders, may have been about, I have been very little con- nected with great speculations ; as when thousands and thousands have to be paid, there would be little thrift of either time or trouble in fyking with such insignificant beings as us sma' notes." The Place and Power of the Note. — Having noticed these burrs and faults that had attached themselves to the skein, the fair thread of the system may be again taken up. The first task of the note was accomplished, and that most successfully. It had established itself as a means of exchange upon so secure a basis, that to this day Scot- land has never sought to return to a currency of coin. While England has been torn with her bi-metallic contests, the sure evidence of a scarce currency, Scotland has main- tained itself in perfect quietness and ease by the aid of its one pound note. Theoretically, the first work of a currency is to be a means of exchange of WEALTH ; and having shewn how that had been accomplished, the effect of the one pound note upon its production and distribution can now be followed. The production of wealth requires the use of land, the employment of labour, and the possession of capital ; and for our purpose the greatest of these is capital. The Bank of Scotland, averse to increase of capital, and yet desirous of equaling the accommodative powers of the Royal Bank, undertook a most original operation when it grafted the deposit system upon the cash credit in 1729. The 176 THE ONE POUND NOTE. importance of this step can scarcely be estimated, unless, by some impossible combination of events, Scotland were suddenly to find herself without a bank, and even in such a case the innumerable agencies at work for transferring capital in the nineteenth century would partly make up for the want ; but, for the Scotland of 1729, the new departure effected the re-construction of the country. For a time its influence was restricted by the lack of branches, or pro- vincial banks ; but as the latter sprang up from 1750, the prosperous era began, and continued with ever-increasing force, until the foundation of the joint-stock bank branches gave its final impetus. In this mighty work the one pound note was the original, and, during many years, one of the most important instru- ments. Let us hear what a Frenchman says of this : — " It is only by the aid of either perverted or ill understood facts that people have been led to suppose that the bank note performs an important part in Scotland. The brilliant success obtained by the institutions of credit in that country rests on a different basis, though wide and solid, — that of the enormous effective capital accumulated by deposits. The illustrious Macaulay was right in saying that her schools and her banks had transformed Scotland. We are quite of the same opinion ; but we make a distinction between banks, as active intermediaries between the capital whose forma- tion they encourage and the labour that they nourish, and the bank note, — a secondary instrument, that produces but a very slight economy in the circulation, and that is more valuable by its facility of transport and convenience of using, than by the slight saving effected by it in the metallic mechanism of the exchanges."* It is well known how Mr Somers' pen has exposed this misconception. M. Wal- owski admits the extreme meagreness of literary work from Scottish bankers, and the absence of definite and particular * M. Walowski's " Les Banques d'Ecosse;" Somers' "Scotch Banks," &c. THE ONE POUND NOTE. ' I// information. In his second chapter he acknowledges that he (or rather conceahng himself under the plural), — " We often discuss arbitrary imaginings until we lose sight of facts, and then the accumulated results of experience find themselves overlooked." In these two admissions we have the reasons for M. Walowski's singular mistake. Having few facts to trust to, and these chiefly of the present century, he simply looks for the largest item in our accounts, finds it to be " deposits," and proceeds to work out his " arbitrary imaginings " until he loses sight of the few facts he began with. Had he been aware that in one of the years of the present decade, notes were exchanged in Scotland, between the banks alone, amounting to ^170,000,000, without taking into account either the incalculable value of transactions this sum represented of settlements amongst the public before they are paid into a bank at all ; or, second, the amount of such transactions now paid by cheque or bill, which prior to 1800 were made by notes, he would scarcely have written such a libel upon the note issues of Scotland. Nevertheless his argument is adroit, for by replacing the word "deposits" in his first paragraph with the word "banks" in his second, he succeeds in opposing bank notes to banks, instead of bank notes to deposits, and thus endeavours to place his opponents in the position of maintaining that a part is greater than the whole, — that notes are greater than the banks of which they are the instruments. When the deposit system was inaugurated, cheques, or " draughts " as they were then called, were little known. Payments of accounts were never made by cheque, — though of course, for distant creditors, bills of exchange were usually drawn when that could be done with profit, but for ordinary hand-to-hand payments, cheques or draughts Jiad no existence. When they were used, it was by direct presentation by the drawer to the bank, who paid the amount in notes and reduced the deposit of the customer. So that in comparison with the present mode of settlement, the proportion of bank notes used for payments of accounts was vastly in excess of payments made by mercantile paper, M 178 THE ONE POUND NOTE. and this fact alone gave them a superior position and importance, which lasted well down into the present century. We have already seen how the first deposit might be made, — a certain quantity of notes accumulating as money in the hands of some individual, who conveyed them to the bank, and exchanged them for a new species of right. As deposits and depositors increased (and let us not forget that by their acceptance as a superior standard of value and medium of exchange to the old silver coinage, the notes had their share in economising the nation's capital from whence these deposits were drawn), the bank found itself in possession of funds, for which it was bound to pay interest, and which, therefore, it must utilise in some way. How was this to be done ? They could not be all laid out in return for discounted mercantile bills, for these are only present in healthy volume where considerable trade is carried on. In Scotland however the trade had largely to be made, before it could be so carried on ; and to assist in this desirable object, the cash credit system had been invented by the Royal Bank to employ its capital, and afterwards adopted by the Bank of Scotland, to be fertilised by its deposits. By this means another great principle of economics was performed, — the distribution of wealth by means of the bank, whose instruments were their notes, and, of these, chiefly their small notes. Thus while a measure of wealth already existed in the country, we have endeavoured to shew how it was increased, and how that increase was produced by means of the exchangeable power of the note. It will be seen how much greater production resulted from more equal distribution. The bank thus possessed of sums belonging to all classes of life, who might or might not have connection with, or knowledge of each other, proceeded to lend these out to second parties, who were equally ignorant of the first. Without the bank's intermediary aid, the capital could not have been collected and distributed. So far, then, M. Walowski is right, but we differ from him as to the position accorded to the means by which the bank made these dis- THE ONE POUND NOTE. I79 tributions. Without their note issues, what had the banks to give ? They had absolutely nothing. Specie was not to be got in such quantity as to carry on increased trade. The expenses of obtaining it were so prohibitive, that it would have been as utter an impossibility to continue the deposit or cash credit system, if deprived of a paper currency, as for George Stephenson to have run his first train without steam. Let us adapt M. Walowski's words to our illustra- tion : — " The illustrious Macaulay was right in saying that her schools and raihvays had transformed Scotland. We are quite of the same opinion ; but we make a distinction between engines, as active intermediaries between the capitals whose formation they encourage, and the steam, — a secondary instrument, that is more valuable by its facility of transport and convenience of using, than by the slight saving effected by it in tJie cost of locomotion .'" Specie did not exist. If notes had not existed, some other means must have been introduced, or the nation zvould have stood still. Cheques might have been used, and M. Walowski might have appeared triumphant. But what are cheques but paper money? though for special purposes not so convenient as bank notes. Each is good in its place ; but clearly cheques of private parties could never have circu- lated as money in the nation, and the want of a proper circulating medium would have paralysed trade entirely. The English at various times were compelled to resort to barbarous bits of notched wood, tied up in bundles, styled "Exchequer tallies," otherwise Scottice "nick- sticks ;" does M. Walowski propose that these would have been more suitable ? From so shrewd a writer in general, we imagine very different propositions would have come, had he been more intimately acquainted with Scotland, its people, and its banks of the eighteenth century. When depositors, or the possessor of a cash credit, wished to draw money from the bank, their position was equally the same ; each presented his cheque and obtained notes, — invariably notes 1 unless for an occasional trip to the south. The great proportion of the banks' creditors l8o THE ONE POUND NOTE. and debtors were men of the middle classes, — shopkeepers, farmers, and tradesmen of different kinds. The transactions of Scotland's commerce at that time were not large, and payments were principally made in small notes ; at least a large proportion of these was used, for their convenience in making up any number of pounds, and their general suit- ability to the wants of the lower orders. Employers of labour used a good deal of silver, as a workman's wages did not amount to so much long ago as to need a paper pound to pay them, but the usual average of small notes for toivn requirements has remained tolerably steady all along at about 50 or 60 per cent. When branches were opened, and a more widely spread and poorer population had to h& met, a considerable increase in the proportion of small notes took place. In Dundee, from its connection with the sur- rounding agriculture of Forfarshire and its mill population, the proportion of small notes was always very high. In other districts it sometimes reached 80 and 90 per cent. ; but the common rate was very much what it still is, 65 to 70 per cent, of the whole circulation. The manner and time during which these notes circu- lated, before a proper national exchange system was intro- duced, is very well related by " A Plain Man," in his " Adventures of a Guinea Note " : — " Sir, — I am now nae chicken, for I was born a good many years ago in the Parliament Close of Edinburgh, within the house of Sir William Forbes & Co., on the south side of King Charles and his bell-metal horse. My debut in life was by entering into the service of a worthy customer of the house, who drew me out in part of an order on his cash account for £\o, and the lad who was sent was bidden 'bring a' sma' notes, for the mistress wants siller for her marketings.' I was then given to the wife, who, with her lass and her basket, took me down to the laigh market, where I was soon exchanged for meat, and then I came to serve a butcher. He gave me for tea and sugar, and a grocer became my master. This man gave me in exchange for a £^ note to a builder, and from him I was transferred in THE ONE POUND NOTE. l8l payment of wages to a working mason. He bought clothes with me. I then served an opulent clothier, but was soon paid by him to a writer to the signet, his agent, who put me into the hands of an advocate, with one or two more, as a fee ' to revise Condescendence and Answers, and make a Note of Pleas in Law ' according to a new form of process. Some one of this family was taken ill, and a doctor was sent for ; there is no rest for the wicked, and I was again obliged to change my quarters, by being slipped into his hand on his leaving the sick room. The doctor paid me away for corn to his horses, and I then took a jaunt to the country. I was carried to St James' Fair [Kelso] ; from thence I went to the Falkirk Tryst ; then to Glesterlaw Market, after which a shopkeeper in Montrose got me, and a bagman one day coming up to him, scraping and bowing, and begging ' for money and orders,' I found my way in his pocket to Glasgow, where I again led a town life. I was handed from master to man there, and became the medium of no small comfort to warpers and weavers, and very many of the numerous people of the West ; and during all my track I was most eident in the service of my liege lords, bringing them by my labour, every year, more than one shilling sterling." Time after time, as these notes accumulated, from profits in the hands of different traders, they were as regularly brought to the bank, to swell the volume of deposits and increase the capital available for cash credits. These might in turn be drawn upon, but akvays in notes ; which, after circulating longer or shorter time, came again back to the bank, either directly to swell its own deposits, or from a sovnxe that indicated they had added to the deposits of some other bank. Branches. — Mention has alreadybeen madeof the great increase in deposits obtained from the country branches, when these were begun about 1760. The progress was steady, until the Free Trade and Railway period added so greatly to the responsibilities of the banks in this direction. l82 THE ONE POUND NOTE. In aiding in the establishment of the branch system, the one pound note again displayed its adaptability to the altered circumstances of time and place, and gave its strongest assistance to the profitable distribution of wealth throughout the land. To open branches, maintained by stocks of gold, in remote parts of a country unsupplied with railways or other regular means of conveyance, would not have been profitable to the banks ; and consequently, had they not been enabled to meet this want by means of their notes, the system could not have come into operation. When giving evidence as to the results of the withdrawal of small notes in 1826, Mr Kinnear, director of the Bank of Scotland, states : — " In Scotland the remote parts of the counties in the Highlands and the Islands require a circula- ting medium almost exclusively in notes of a low denomina- tion. The people employed in the fisheries, in the kelp manufacture, and the purchase of cattle, although the money employed in these in the aggregate amounts to a large sum, require one pound notes for the purposes of the trade. The consequence is, that the one pound note circulation of some of the banks near these districts exceeds the circula- tion of the notes of £s and upwards by two and a half to one, while that of the banks in some of the considerable towns is less than the large note circulation by a half" If the banks had been compelled to keep gold, the pressure would thus have fallen most heavily on those parts of the country whose inhabitants were /east able to bear it; for the town population would naturally object to pay increased rates of discount, or to receive decreased interest, induced by the necessity of keeping gold at the country branches ; although, as far as the city merchants are con- cerned, the destruction of the deposits entailed by the loss of branches would cut off from them the source from whence they draw their advances. Should such an event ever occur, it may be one of the first things to lead to the successful establishment of non-issuing banks, upon the same principles as those of London, and which, like the latter, would confine themselves largely to mercantile centres THE ONE POUND NOTE. 183 such as Glasgow or Dundee. The future new bankers of Edinburgh will, we think, be found to come out of its legal profession. Many of these firms of writers to the signet have large sums deposited with them by clients, and the latest departure has been to supply these clients with regular cheque books, drawn upon the firm, and payable at their place of business. There is no reason why banks of deposit should not arise as safely among lawyers, as banks of issue did from merchants. But we are anticipating. Under the branch system the old " till money " theory found its right place. Delusion as it had proved under the early state of things, just as that was passing away the new branches were opening, and we find our old friend corrected of all his errors, and, chastened by experience, reduced to the " till money " of the existing banks. The cheap management obtained by this measure was seriously affected when the stamp duties came into play in 1800 and 1808, a loss which probably accounts for the Bank of Scotland's withdrawal of a number of its branches subsequent to the former date. The branches, however, gradually increased, but their greatest extension took place after the burden of these duties had been removed from their " till money." When the stamp duties were commuted in 1854 the branches numbered about 550, inclusive of 40 of the Western Bank. In thirty years, with the number of banks reduced to one half, branches have increased to 929, equal to 69 per cent, though the population has only increased by 26 per cent. The immense advantage to the banks of the new- settlement, for their branch system, was most obvious. At present a bank with over a hundred branches keeps, as a general amount, from two millions to two and a half millions of notes ready for issue, to maintain a total circulation of seven or eight hundred thousand pounds. The amount of "large" and "small" delivered from the issue department are not in the same proportion as when in circulation, being, for such a bank as above about three of large to two of small notes; so that, of the above two and a half millions, nearly l84 THE ONE POUND NOTE. one million would be small notes, which under the old stamp duty of fivepence on each note would cost the large sum of ;^ 20,83 3. Upon the assumption that these notes would last for tJtrce years, the annual expense would be equal to £6g44. Under the new system, calculated only upon the average circulation of say ;z^700,000, of which 65 per cent, are small notes, ie., ^^456,000, the cost at 8s. 4d. per cent, for the latter would be only iJ^ 1890, a difference saved to the bank of ^5054 on small notes alone ; multiplying this by eight (seven large banks, and the circulation of the three small) there is a total economy of ;!^40,432, a great part of which must have been met by the branches, had they been opened, notwithstanding the disadvantages of the old duties. The annoyance and expense of the Government stamp was not removed until nine years after the period up to which our history has so far been taken, and it seems strange that no effort was made in 1844 to bring the whole question to the notice of Sir Robert Peel, though it is probable that he would have at once refused to grant alleviation of any means which tended to keep down private issues of notes. In the full burden of this weight, over 500 branches had been opened throughout the country; and though their rates were necessarily higher than they now require to be, — to such an extent as covered the higher expense, — yet they were of the greatest benefit to agriculture and manufactures. Into these it is unnecessary to enter, but it is well again to remember the position of the one pound note in regard to the whole branch system. It was the instrument by which they were at first rendered profitable to the banks, and therefore practicable for the country ; it was the instrument by which the capital of widely separate districts was collected, to be conveyed to the districts where it was required, — only the instrument, but still as necessary, as essential to the whole banking system, as is gunpowder to the science of war. Exchange of Notes. — With the increase of banks THE ONE POUND NOTE. 185 and branches came the exchanges of notes, whereby the circulating medium was economised and prevented from depreciation. Reference has been made to the manner in which these were at first objected to and resisted, until gradually, as more enlightened views prevailed, they were welcomed by all prudent bankers as a benefit in place of an evil. The cheap expansive power of a small paper currency, at such periods as the Scotch half-yearly terms, is one of its greatest advantages ; but it is necessary that, when the special purposes for which the increased issue is granted have been served, systematic means should be adopted for removing the superfluous currency. A large sum might come in, in the ordinary course of business, but a system of exchanges spread over the whole country removes it with certainty and rapidity, and constantly maintains the supply of circulation at a fair proportion to the demand for it, rendering local depreciation well-nigh impossible. Sir Robert Peel's Act. — Such were the conditions which Sir Robert Peel undertook to improve and secure by his new measure (8 & 9 Vict., c. 38), entitled " An Act to Regulate the Issue of Bank Notes in Scotland" (21st July 1845)- So far as he wished additional reserves of specie to be kept, it has had little effect, all the banks now deeming it prudent to maintain larger gold reserves than the limits of their authorised circulation require, save at the two half- yearly terms, when the whole currency has to be tempor- arily enlarged. At these seasons the Act of 1845 needlessly compels banks to bring gold from London, often to be returned without changing bags. The doctrine of averages had so fascinated Sir Robert, as to lead him to adopt the course which produced this unnecessary security. Upon hasty and uncertain data,he fixed the limit of unsecured issue by an arbitrary process, as unjust as it was illogical (clause VI.). Refusing to recognise the possibility of the perfectly natural termly payments being as naturally cleared away by the note exchanges, he insisted that gold should be taken from 1 86 THE ONE POUND NOTE. London to cover them, and thereby succeeded in partially destroying the very purpose he had most at heart, — the regulation of the foreign exchanges. The most important enactment was that effected by clause I, restricting the future power of note issues to the banks possessing that right on 6th May 1844. By one hidden stroke, the establishment of new banks according to Scottish notions was thus rendered impossible, and a monopoly given to the existing offices, which, in view of the fact that these have decreased from nineteen in 1845 to ten in 1885, is cause for some anxiety as to the future currency of the country. Sir Robert Peel's active and intelligent mind had been cognisant of many of the evils of English banking, some of which he did not dare to touch ; but the chief defect, according to his vision in 1844, was the rash use of their rights of issue by the country bankers. These establish- ments, having no offices in London, took little interest in the peculiar movements of the foreign exchange, with which it was supposed only a London banker had any concern. Under the venerable monopoly the whole burden of maintaining proper gold reserves for the nation fell upon the Bank of England, and consequently, when the foreign exchanges reached the adverse point, the whole drain had to be faced by the bank. Of the many causes affecting the exchanges, few are more important than the state of the paper currency of a country ; as it increases beyond the true necessities of commerce into the region of speculation, the effect invariably is, that the competition of various bankers, all promising to pay gold on demand (and yet at a future date), replaces a certain amount of gold and throws it into the market. As the note issues increase, by way of discounts or other advances, the gold decreases; and as the latter is removed from circulation, it accumulates (being after all only an article of commerce) until, from the want of demand, it falls in value, and is eagerly purchased and exported by foreign capitalists ; but as the prices of other articles are stated in gold, the immediate effect of the THE ONE POUND NOTE. 187 decreased price of gold is to give a fictitious value to general prices, so that every one thinks that fortune is within his reach. When these high prices are seen abroad, imports are poured into the country of a value which the exports cannot equal, and the increased indebtedness causes the foreign exchanges to fall rapidly to the bullion point, after which specie has to be exported to meet the nation's debt, thus further reducing the stock and raising its price, according to the urgency of the demand. General prices at once iioviinally fall from the high price of gold, while the glut of foreign imports produces as serious a practical fall. Home manufacturers are at their wMts' end to raise money on their huge speculative stocks ; importers are equally distressed for want of gold to pay their foreign creditors ; both classes are equally anxious to sell before another fall occurs, and force their goods upon the market at ruinous prices ; heavy loss, of course, ensues, followed by acute demand for money ; discounts are looked on with suspicion ; all available notes are run in upon the banks, who, having issued beyond their gold or other convertible reserves, are compelled to stop payment, and general panic ensues. The periodic recurrence of these destructive storms had led Sir Robert Peel to fix on the country bankers' rights of issue as the weak point in the banking edifice, and he accordingly prevented any future over-issue, by fixing a strict line beyond which no English country banks could go, prescribing such heavy penalties for excess that the English country issues have in many cases been kept from 10 to 15 percent, below the authorised limit. The Bank of England was suitably altered to meet the supposed requirements of the new state of things, being divided into the since famous Departments of Banking and Issue. Turning to Scotland with, we are afraid, somewhat indefinite information before him, the Prime Minister determined to compel the banks there also to do their part in regulating the exchanges. His connection with all the financial parliamentary reports of the century ought to have made him well acquainted with the prudence and skill l88 THE ONE POUND NOTE. of northern banking. Over-issue of notes had not been one of its failings for many years, and even if it had, the note exchanges would speedily have remedied the evil. To some extent Scottish banks were specially favoured in comparison with those of the south ; but it is important to notice, that the Scottish people were not secured in any way against possible weakness in the banks by the means adopted under the Act of 1845. Returns were called for from the various banks of the amount of their notes in circulation, but from the uncer- tainty as to the Government's intentions, some of these were sent in with the lai'gest amount current during the year, while others, in the dread that taxation of the issue was intended, returned the snialkst amount. \\"ithout further inquiry, and with no regard to proportion to other items in the accounts of the banks, these sums were at once fixed as the amounts of the authorised circulation ; but, in view of their sound character, the Scottish banks were not prohibited from further issue, provided they held specie in reserve (clause VI.). The inequality of this method gives rise to some glaring anomalies in the security of different banks, — e.g., the greater the amount of authorised notes outstanding, the less is the sum of specie kept to meet it ; and, conversely, when the danger to the public was lessened by a bank having a small authorised circulation, the security was increased by compelling it to keep a larger specie resei've to meet its issue beyond the authorised limit. Sir Robert Peel thus succeeded in producing the ridiculous proposition of, — "The greater the risk, the smaller the security; and the smaller the risk, the greater the security." Another defect in his plan arose from the gold required to be kept not being appropriated sol^el}* for the payment of notes, — an omission which, in event of a run, gives deposi- tors an equal claim to the gold fund which was intended primarily for the security of note holders ; and as the former exceed the latter in extent of obligation by nearly twelve to one, they could compel any bank to stop payment in a single day, leaving the note holders entirely unprotected. THE ONE POUND NOTE. I 89 Nor is the position of the banks improved; for whereas, prior to the Act, their gold or silver was always an available asset at any sudden emergency or for everyday necessities, by it they were absolutely locked up, or at least a large portion, and are of no avail as an asset except at the winding-up of the bank. The monopoly of note-issuing was the bait by which Sir Robert caught the bankers of 1845. Both he and they believed, that so long as Scotland had a paper currency, no other bank could begin business devoid of a note issue with any hope of success. To obtain the necessary deposits to make advances and payments, notes would be required ; and if those could not be issued by the bank, they must be obtained from another bank, ■A.n^ paid for, — a most serious preliminary expense, for it placed the new bank in the position of having to pay for its till-money, which all issuing banks, no matter Jioiv small their authorised circulation, would escape. Bank of England notes or gold would incessantly gravitate to London, and would be no cheaper to purchase. To open a branch system would only aggra- vate the difference between the bank's expenses and those of its issuing rivals, and thus the new institution would find itself blocked at the very outset, from the want of a proper instrument as a medium of exchange. The stop put to the opening of public banks is, in this respect, more than coun- terbalanced by the injustice of the monopoly, of whose pernicious influence we have not yet had time to see the final results. Amalgamation of issues was fortunately permitted (clause IV.) when two banks united, otherwise the consequences of a bad principle might have been sooner felt ; but if, in the future, time works its remorseless ravages on the Scottish banks as it has clone in the past, it maj" be found absolutely necessary to sweep away the monopoly entirely, unless the changed circumstances of the country enable it to adopt some currency different from that of the last hundred and ninety years. As in 1826 considerable discussion took place while negotiations were proceeding, but general interest was not I90 THE ONE POUND NOTE. SO strongly excited as in that year. The country was much wealthier, and was therefore not under the same necessity of looking at both sides of a penny ; but the arguments used were practically the same. Hugh Miller contributed several articles to his paper The Witness^ which formed the only approach to the famous Malagrowther Letters, of 1826. Sir Archibald Alison entered the lists with his " Free Trade and a Fettered Currency," in which Sir Robert Peel was torn to pieces, to the complete satisfaction of the author. His pamphlet displays the same vigorous, thrashing style of argument adopted in his other works, but his complete confidence in his own perfection combined with his lack of insight to lead him into many glaring errors. The division of the Bank of England into two departments was a puzzle he could not master, the most absurd blunder being made on this question, that i^20,ooo of gold taken out of the bank really lessened its ability by ^^40,000. His argument regarding the restricted issues of the Bank of England during the preceding panic is worthy of attention, in con- nection wath the duties of a note issue at such a period. Sir Robert Peel had stated in Parliament that the whole mischief arose through the bank directors giving too large advances in the autumn, \\'hen every one saw a storm was brewing ; had they curtailed their advances, and called in their resources, the evil might have been averted. Upon this Sir Archibald remarks : " The argument of the right hon. Baronet is, ' We are starving for want of money in May ; if we had begun to starve in October, we should by this time have been all right.' It is rather a singular \\'ay, to be sure, to effect a remedy to a summer famine by adding a winter one to it." Here Alison's style is displayed to perfection. If not extrerfie, he was nothing. To him there was no difference distinguishable between starvation and economy. Peel was entirely correct. The Bank of England should not have encouraged advances which results proved to be largely speculative, and had they refused these in the autumn, the spring would have found them with resources sufficient to carry them on without the THE ONE POUND NOTE. I9I sudden sharp restriction of all advances, which created distress, not only among speculators, but also among bond fide traders. Plethora in autumn, and starvation in spring, might thus have been equalised, so as to spread an econo- mical supply over the entire year. Since the Act of 1845 came into force, it has become common with writers of recent times to depreciate the usefulness of the one pound note, under the foolish argu- ment that the country was not in need of so cheap a form of currency, or rather that it was so much increased in wealth, as to be able to pay for a dear currency ; surely a most extraordinary argument, and worthy of all condemna- tion from every thrifty Scot. In these times of the keenest competition, no effort should be spared, or opportunity missed, of lessening the cost of production, where that can be done withont grinding the faces of the poor. The cost of currency is a factor which affects every interest in the country. No trade, profession, or manufacture can plead freedom from its operation, and each is profited to a certain extent by the cheapness and character of the medium through which their transactions are carried on. Nor can it be said that the NATION is unconscious of this, although long familiarity with the small note currency may have blunted the public perception to its real value ; for it can never be said that a currency is not appreciated in Scot- land, when, upon certain proof, it is known to be preferred to all others in the settlement of debts amounting annually to Jmndreds of millions of pounds. Note. — On the next page is given a list of the banks existing in Scotland in 1845, nineteen in number, now reduced, by two failures (embracing three banks) and six amalgamations, to ten. For com- parison, the authorised circulations of 1845 ^"^ 1SS4 are given, with the average circulation and coin held in 1884; shewing that, though the authorised limit has decreased 13.3 per cent., the note issue has increased 89.9, while the banks now existing have exceeded their authorised limit by 120 per cent. 192 THE ONE POUND NOTE. JBanks Si'istins in ScotlanD at tbe asanking Settlement of 1845. Authorised Issue. Propor- tion of Coin to Circula- tion in Banks. Average Circulation of 1884. Coin held 1884. 1845. 1884. 1884. PerC. I Bank of Scotland . ^^300,485 ^343,418 i;867,383 ;£684,3i9 78 2 Royal .... 183,000 216,451 795,812 712,748 89 3 British Linen Company. 438,024 438,024 663,567 358,008 54 4 Dundee .... 33,451 5 Perth Banking Co. 38,656 6 Aberdeen Bank 88,467 7 Commercial . 374,880 374,880 800,383 572,431 71 8 National 297,024 297,024 655,855 483,892 73 9 Town and County 70-133 70,133 208, 8i I 172,840 83 10 Union .... 327,223 454,346 803,425 508,611 75 II Ayrshire 53>656 12 Western 284,282 13 Central .... 42,933 H North of Scotland 154,319 154,319 390,430 285,080 73 15 Clydesdale . 104,028 274,321 577,735 386,878 6S 16 Caledonian 53,434 53,434 101,600 61,451 60 17 Eastern 33,636 18 City of Glasgow . 72,921 19 Edinburgh and Glasgow 136,657 Total . .^3,087,209 ^£2, 676,350 i;5,86s,ooi ^^4,226,258 72 Present authorised Circulation ;t2,676,350 Average amount of Co in held in Forfeited between 1845 and i8i 5S 1884, . .^4 ,226,258 —Western Bank, . 284,282 Average circulation for Ayrshire Bank, purchased b the Western, . y 53,656 1884, Deduct Circula . i authorised tion, 1884 . j5, 865, 001 2,676,350 City of Glasgow Bank, 72,921 ; ,188,651 " Amount of Coin helc in 1884 Total, as at 1845, • .^3.087,209 beyonc statutory req uirement, Ai ,037,607 THE ONi: POUND NOTE. I93 Chapter xiv.— 18451880. The Western Bank — The City of Glasgow Bank — Bank Notes excluded from Limited Liability. " Proud and serene the evening sun went down On many a home, the last for poor and great ; Dying from off the vale, where slept the town In dull oblivion of impending fate : . . . At morn, the new-born earthquake's throbbing beat I Sounds the alarm amid the tottering street." — The Fall of Lisbo.v. FROM the close of free banking to the present time there are not man)' incidents to record bearing upon the one pound note, though some of those form the darkest blots on the mercantile fame of Scotland. Scarcely had the effects of Sir Robert Peel's Act been felt, when an attempt was made b}' various companies to get to the windward of the note-issuing banks, by opening banks styled exchange companies, which, had they fallen on better times, might have succeeded upon the same con- ditions as the great joint-stock banks of London. Comings however, in the full tide of prosperity preceding 1847, they were led by its influence to depart from the prudent principles which have been the rule for the English institu- tions, and the crises of 1847 and 1848 were fatal to several. A few struggled on for some years, while one is still in existence in Glasgow, though what it does, or how it sur- vives, no man can tell. The year 1847 witnessed the second warning of the Western Bank, and the break-up of Sir Robert Peel's settlement of the Bank of England. The automatic machinery having got clogged, it was found necessary to allow its issue department to give notes to the banking department without receiving gold or securities in N 194 THE ONE POUND NOTE. return, and upon its becoming known that accommodation could thus be got the demand instantly ceased. Though Scotland remained very free from panic, there must have been some disturbing influences at work, for the prices of the banks' stocks all fell considerably, as the following list may shew : — 1845 1847 Bank of Scotland, . . • ^178, £^(>9 Royal Bank 170 149 British Linen Company . 230 200 Commercial Bank . 171 161 National Bank 166 136 Their circulations are also considerably enlarged, com- pared with those of the sum fixed as the authorized limit two years previously : — Excess in 1S47 beyond 1845, of Bank of Scotland . . ^40,000 „ „ Royal Bank . . . 22,000 „ „ British Linen Company 9,000 „ „ Commercial Bank . 51,000 ,, „ National Bank . (no increase) ,, „ Union Bank . . . 24,000 ,, „ Western Bank . . 60,000 „ » Clydesdale Bank . . 17,000 ,, „ City of Glasgow Bank . 40,000 These figures may be the measure of the difference between the minimum circulation said to have been returned to Sir Robert Feel in 1845, and the maximum of the same year. The British Linen Company and the National Bank seem to have had the most accurate idea of the purpose for which the returns were required ; the increase in the Western Bank of ^60,000 is, however, ominous of another cause of increase,— their reckless advances. When the troubles of 1847 had passed, there came the usual ten years cycle. At first much repentance for past sins, and dread of cholera, kept the country quiet, until the Crimean war, followed by the Chinese war and Indian mutiny, disturbed her repose. In 1854 a great boon was granted to the banks by the commutation of the oppressive note duties, which necessi- THE ONE POUND NOTE. 195 tated a stamp of the value of fivcpence to be printed on all one pound notes, except those of the three senior banks, who had already received relief from some part of the burden. The new system of charging 8s. 46. per cent, per annum upon the averages of circulation, was so extremely profitable to the banks, that it is difficult to see how a government with a Crimean war debt on its head could think of foregoing the old method. The failure of the Western Bank in 1857 gave another proof to the world of the truth of King Solomon's sarcasm, — " Though thou shouldest bray a fool in a mortar among wheat with a pestle, yet will not his foolishness depart from him." Time after time had this foolish bank received the poundings of the pestle and the remonstrances of the wheat, amongst which its lot had been cast, with utter disregard and scorn. Excessive over-production prior to 1857 had necessitated large advances to merchants, while bankrupt- cies in the United States had caused uneasiness in England ; but beyond some small bank failures, and stoppages of several mercantile houses, no imminent danger was antici- pated, so that, though the Bank of England's reserves were much reduced, it was hoped that the worst had been passed. This was on the ist of November, and the excitement was beginning to abate, when it was suddenly and fiercely aggravated by the news of the Western Bank's failure in Glasgow. Remittances having been cut off from America, the bank's heavy unsecured advances compelled it to seek the assistance of those whose advice it had ever rejected. The Edinburgh banks and the Union Bank, with generous prudence, advanced i^5 10,000, in consols, on 29th October, receiving bills in security for ^767,520. i6s. 8d., but on other severe losses coming to light further aid was refused. The bank's liabilities for its note exchange balances had been very heavy. The large excess circulation (a genuine case of over-issue) had been rendered worse than useless to its issuer by the merciless exchanges, through which it was returned to head-quarters in heavy .sums. In the year 1855 ig6 THE ONE POUND NOTE. the balances against the bank for exchanges had been ^^4,109,726, against ^125,080 in favour. In 1856 the sums were ;^3,494,i39 against, and ^i 14,213 in favour; and up to 9th November 1857, the date of stoppage, ;!^3,393,553 against, was met by iJ" 10 1,8 13 in favour. Thus in three years the bank had been compelled to find funds in London to meet upwards of ten viillion pounds returned against it by the exchange, a very large portion of which was for notes alone, — one of the best testimonials to the worth of the exchange system it is possible to have. On the 9th of November the directors found it impos- sible to meet the debtor balance of that day for iJ"i 12,974, — those of the three last days being ^^384,696 in all, — and the bank's doors were at once shut, the news spreading through Glasgow with proverbial speed. The liabilities to the public were ^^8,91 1,932, all of which were afterward paid in full from the proceeds of calls upon the unfortunate shareholders. The circulation on 26th October stood at ;^ 5 15,863, of which ;;^ 205,740 were large notes and ;:^3 10,123 small. It fell rapidly to ^424,000 on the last day of the month, the chief fall being in the large notes, ^^69,000 (probably held by merchants), the small notes having only fallen ;^22,ooo. On the 4th of November the large rushed up suddenly ;^i6o,ooo, and the small nearly ^38,000 ; increasing the circulation to ;^6i9,55i, for which no doubt term payments were largely responsible. There appears to have been no run of note holders to any extent, though the deposits were being drained away, which would of course increase the note issues for a time, until the paper was paid into other banks as deposits, when the exchanges presented them again to the Western Bank. At its failure the circulation stood at ^^720,083, — ^^{^332,720 large and ;^387,363 small, — but from this falls to be deducted ;!^i 12,974, that day's exchange remaining unsettled in the hands of the banks. For two da)'s the circulation remained stationary, as the notes had been refused payment by the other offices, until the frightful panic which ensued compelled them, on the THE ONE POUND NOTE. I97 iith November, from prudential motives, to advertise their readiness to take up all the notes. In these two days a most determined " run " had been made upon two of the banks specially, thoui^h it is said all the others suffered in some degree ; but the daily returns of the circulation, shewing as they do the respective amounts of large and small, indicate more a " run " of depositors than of note holders ; for, except in the case of the City of Glasgow Bank, the issues were considerably increased for a few days, even beyond what might be required for the Martinmas payments. This is particularly marked in the issue of the Union Bank, whose circulation ^^654,000 on the 9th, rose to ;!f8i2,ooo on the loth, and ^^934,000 on the nth November, falling suddenly on the following day to ;i^674,ooo. The great increase was in the large notes, the small only rising a few thousands. The good business of the bank in Glasgow doubtless increased its term responsi- bilities ; but the evidence of its manager, Mr James Robert- son, to the " Select Committee on the Bank Acts of 1858," fortunately enables us to see how and from what class of creditors the bank suffered most. A run for gold on the savings branches of the City of Glasgow Bank, when opened the previous evening, had shewn the Union Bank authori- ties what might be anticipated next day. " On the Tues- day morning, the loth, a great number of persons appeared with deposit-receipts demanding gold ; in fact, our own establishment was quite filled with parties within a quarter of an hour of the opening of the doors." The other banks were in a similar position. In the course of the day the error of not receiving the Western Bank notes was felt very strongly, but, notwithstanding the failure of the City of Glasgow Bank, the Edinburgh directors still refused their sanction to the step. The run of depositors continuing, the same evening it was resolved to begin to pay the notes next day. Either on Tuesday night or Wednesday morning the military were asked to be in readiness by the Magistrates, who, fearing a disturbance, ordered their collectors to take any Western Bank notes offered to them in payment of 198 THE ONE POUND NOTE. taxes. But further precautions were unnecessary, for whenever the announcement of the bank's decision to take the notes was made pubHc, the whole " run " so completely collapsed, that by two o'clock in the afternoon the telling- room of the Union Bank had scarcely half-a-dozen people in it, though in the morning it had been crammed with an excited crowd of nervous depositors. During the crisis no attention was paid to having the specie reserve kept against authorised circulation, all comers being served, in notes if they would accept of them, and in gold if not. Upon the Wednesday and Thursday ^^620,000 of gold (obtained from the Bank of England by presenta- tion of its notes, got by sale of consols) were carted through the. streets of Glasgow with considerable parade, to be delivered to the Union Bank, a sight which did much to inspire the populace with renewed confidence. At the same time that the successor of the old Glasgow Ship Bank was coming through this ordeal in the west, its Edinburgh con- nection, that of Sir William Forbes, had also to bear a heavy run for deposits, caused almost entirely by the Glasgow fama. Both establishments had a narrow escape, and were only borne through the trial by thoroughly sound management, both prior to and during the crisis. While the Union Bank thus stood the test, the Cit\- of Glasgow Bank had succumbed on the second morning of the " run." The circulation of this bank is the only one which exhibits serious decrease, standing at ^^^477, 174 on the 9th November (a little over one-half small notes) ; it rose, to pay depositors and meet term payments, to ;^640,ooo on the loth, of which ^381,000 were large and ;^258,ooo small. Next day's note exchange could not be paid, and the circulation rose to ;^7 14,000, of which ;^450,ooo were large notes. After the stoppage the amount fell with astonishing rapidity, i^553,000 being paid on the 1 2th, and i^88,ooo between the 12th and 21st November, when the circulation stood at .^41,000 large to ;^3 1,000 small. On the 14th of the following month, the bank reopened, and recommenced its career of folly and crime. THE ONE POUND NOTE. I99 Particular details have been given of this " run," not because it had any co?inection with one pound notes, but to shew that one pound notes were in 710 way responsible for it, the whole danger arising from the depositors, who seem to have been thoroughly alarmed ; and as a " run " is usually associated with notes, it may be well to make it clear that that danger had largely passed away, to have its place taken by a much greater. Mr Robertson, of the Union Bank, states : — " The fact is that very few note holders came forward ; it was almost entirely depositors ; " and again, when asked if small fiotes had caused much inconvenience in the run, his reply is : — " Not the least ; no doubt people exchanged one pound notes for gold, but it was to a very limited extent." The lesson of 1857 is, that the one serio7is danger to be apprehended by the Scottish banks, for which it is almost impossible for them to make sufficient provision, is a " mn " of depositors, — a danger which the years elapsing since that time have regularly and considerably increased. Four- and-a-half millions of gold are but a small security when deposits amounting to eighty million pounds can be demanded at an hour's notice. Yet while the danger is theoretically great, in its very magnitude may be said to lie the safety of the banks, for in the event of any colossal panic shaking the nation's credit to its centre, the only possible course remaining open would be to adopt that tried and proved in 1797, and refuse all cash payments until credit is restored. Necessity recognises no law, and all questions of the illegality of their action would probably be stayed by warrant of the Privy Council, such as has in the past secured the Bank of England in similar circumstances. The physical impossibility of meeting the demand in gold, would be sufficient warrant of itself for the banks to refuse payment before their whole specie was exhausted ; for, upon the supposition that only twenty millions (one-fourth) of deposits were demanded, it is extremely improbable, in the face of such a panic in Scotland, that English banks would part with so large an amount of gold to satisfy the 200 THE ONE POUND NOTE. demands of even one quarter of the Scottish depositors. While a run upon all the banks could be met in this way, a run upon one might be attended with more serious results, as it could scarcely of itself be entitled to defy depositors in the way indicated. In short, nearly all the evidence on the subject given to various Parliamentary committees, as well as the experience of the past, goes to prove that it is the demand for gold by depositors which brings down a bank, and not that of the note holders. In guaging the position of small notes in connection with the failures of the Western and City of Glasgow banks, it is necessary to keep distinctly in view the two operations which combine to make up banking, — namely, collection and distribution of funds. If the collec- tion of deposits is carried on by a system of branches spread over a wide area of country, clearly it is a banker's interest and duty to minimise the risk and magnify the benefit by spreading his advances over an area equally extensive ; and in following out such a principle in both its parts, no instrument has been found more effective than the one pound note. Sir Robert Peel's disciples insist upon the distinction between banking and note - issuing ; but the distinction between collection and distribution of wealth \i even more reasonable and obvious. Let us therefore see how the principle was looked upon by Scotland's two zVzfamous banks. Being compelled to obtain funds, they naturally collected them in the usual way, in deposits from their branches, in which their note issue performed part of its legitimate work, — and so far all was well, as no blame can possibly be attached to notes in this connection. But how about the other side of the account ? Was the second part of the principle recognised ? or does history not tell of something more than a return to the exploded delusions of last century, when it was deemed easier to lend to a few large firms than to distribute over an entire country ? The failure of the Western and City banks to spread their advances, necessarily harassed them through their circula- tion ; for notwithstanding the excessive issues, principally THE ONE POUND NOTE. 20I drawn out on the deposit part of their business, the number of their general country advances was too restricted to utilise so large a quantity of notes, and they accordingly went back to the banks to be paid through the exchanges by continual purchase of exchequer bills, or the more ruinous short drafts on London so effectual with Douglas, Heron, & Co. No better proof could be given of the nature of the Scottish note issue, and of its total want of connection with the operations of the Flemings and Mac- donalds who broke the banks, than the fact that in 1858 and 1879 the circulation of the remaining banks was steadily extended to nearly the amount of the lapsed issues ; shewing that the airreiicy had been nationally required, and that if one source of supply was to be cut off, the banks left standing must increase their circulation by a corresponding amount. Small notes have therefore their twofold use, while the two banks employed them only in one ; their abandonment of the other materially increasing the friction which led to the disasters now so well remembered. In the ten years following the failure of the Western Bank, the country developed its resources, and advanced in prosperity at a rate hitherto undreamt of; railways, steam- ships, telegraphic communication, mechanical invention and scientific research, all combining to provide revenue and accumulate capital by " leaps and bounds," interrupted alone by the havoc of the American War of Secession. Several of the smaller banks amalgamated with the larger institutions, as their business and existence were threatened by the branch systems of the latter. The year of 1866, eventful and disastrous to England by the failure of Overend, Gurney, & Co., passed by in perfect tranquility to the Scottish banks. From this year onwards the latter began to open offices in London, for which the National Bank had set the example in 1864. This step naturally led to the keenest discussion amongst English bankers, rising almost to uproar when the Clydes- dale Bank opened several branches in Cumberland. This 202 THE ONE POUND NOTE. was no new step, as the Leith Banking Company had been registered in CarHsle as an Enghsh company, and had carried on a large business there for some years prior to 1837, yet had never been asked to abandon its issue in Scotland. Maberley, also, was an instance of an English banker opening in Scotland ; not to speak of the competi- tion for deposits caused by the presence of London and Colonial banks in Edinburgh and elsewhere. But all these precedents were completely lost sight of, in consideration of tJie right to issue notes retained by a Scottish bank for its offices in Scotland, while opening an office in London, — a right which had been denied to English pro- vincial banks, from the influence of the Bank of England monopoly. Refusing to see the defect in the anomalous law of England, Mr Goschen and other leaders of finance pressed the matter so strongly on the Government, that the latter were fain to get out of the quandary by adopting the usual course, — adding to their accumulation of verbosity a large blue-book, the labours of the Select Committee of 1875, the masterly result of which was, to let well alone. The evidence produced by the Scottish bank managers gave ground for believing that banking profits in Scotland were not so large as had been generally thought, and that they stood in favourable contrast to English provincial banks, the people, in consequence, reaping the benefit. One important result of the agitation was to lead to daily exchanges of notes throughout the kingdom ; some facts brought out in the evidence having produced a fear, that the note issues would be interfered with, if greater attention was not paid to a closer conformity with the Act of 1845. Under the old method of exchanging only thrice a-week, it had been found that the secured limit of authorised circula- tion, plus the specie reserve, was sometimes exceeded during the week ; and though it was known that the excess was chiefly in the hands of other banks, awaiting the next exchange, it was deemed wise to take this weapon out of the enemy's hand by securing greater economy in the circulation. Sir Robert Peel's banking settlement pro- THE ONE POUND NOTE. 203 vided for the average being fixed every four weeks, and if a limit of circulation was to be fixed at all, it was a reason- able period to fall upon. If the troublesome weekly returns could have been avoided, and the circulation taken only on the fourth week, a statement could have been appended that the average for four Saturdays did not exceed the authorised circulation ; and in this way, without publishing to Government the fact that possibly one Satur- day out of the four was above the authorised limit, the Government, on their part, would have been assured that the limit was not excessively strained. This would have given a degree of elasticity to the circulation, without laying it open to the charge of being loose or uncontrolled, which it might easily be, were a longer period fixed than four weeks. Some currency writers have advocated a yearly average, a most delusive expedient, which would probably lead to the starvation of one season, and abundance at another, to which Sir Archibald Alison refers. In general, banking obtained a fair share of the pro- sperity attending the return of trade in 1 870, until the usual run of over-trading brought about the failures of 1875. Severe depression followed, notwithstanding which, the number of new branches steadily increased, until they reached, in 1878, the large figure of 950 offices. Throughout the early part of the year all was quiet, and nothing of note occurred to shake public confidence, except some slight rumours about " one of the Scotch banks," which appeared in the Glasgow papers, until, on the ist of October, Edinburgh and Glasgow and the whole country woke up to find that the City of Glasgow Bank had closed its doors. The whole story is exactly a counterpart of the Western Bank, but of five-fold magnitude ; — the same character of folly, the same fraudulent efforts to conceal their condition, the same widespread ruin when concealment was no longer possible, magnified beyond comprehension by the length of time over which the bank's good credit had carried it, when in a state of insolvency. 204 THE ONE POUND NOTE. The day following the failure, the remaining banks, wisely profiting by the experience of 1857, advertised that all City of Glasgow Bank notes would be taken up at their respective offices. This measure helped to maintain popu- lar confidence, though the blow seems to have come so suddenly that it took several days before the public fully realised the case. Upon investigation of the bank's books, it was found that it had been reserved for its officials to perpetrate the most extraordinary fraud that errant bankers of Scotland had been guilty of Their balance-sheets were " doctored " systematically, being first prepared with some measure of truth by the accountant, and then gone over by him, in company with the manager and one of the directors, to be made ready for the public view. To do this they were under the necessity of making false returns of their notes and specie to the Commissioners of Stamps and Taxes, under the Act of 1845. The gold and silver found to have been in the cashier's hands at the head office amounted to . . . ^^23 1,500 To which fell to be added that held by the tellers . And at the branches ...... Total Their authorised circulation was . . From which their circulation should have been only But the circulation-book showed a total of 12,156 49,889 ^293,545 72,921 ^366,466 604, 1 96 Bringing out an excess of issue beyond prescribed bounds, of ^237,730 When it was found that all expedients to raise cash were failing, the specie reserve was ruthlessly sent to London to meet acceptances, at first to the extent of ;^6o,ooo in January of the same year, and afterwards at intervals, until ;^20o,ooo of gold had been removed. To cover this, the books, returns, and balance-sheets were falsified in the most audacious manner. THE ONE POUND NOTE. 20$ Although the bank was Hable to a heavy penalty in respect of the over-issue of notes, the Government, in view of the heavy losses already incurred by the shareholders, mercifully took no steps to enforce their rights, the only notice taken of the matter being in the cold, formal intimation of the facts made to the London and Edinburgh Gazettes in the form of a supplement to the usual monthly notice under the Act of 8 & 9 Vict, c. 38. The bank had failed to send in the return for 28th September, so that the notice for that day appeared with the words " not received " opposite the name of the bank. Next month the following statement was appended to the list of the bank's notes and coin : — * " The above-named Bank, which has had in circulation an amount of notes beyond that authorised in its certificate, has not held the amount of gold and silver coin which it is required to hold during the period to which the return belongs. (Signed) W. H. COUSINS, Dated, 17th day of Oct. 1878. Registrar of Bank Returnsy The return referred to shews ^216,942 of large notes and ;^400,i3i of small,-^in all iJ"6 17,073, or ^^229, 163 beyond its limit. So disappeared the City of Glasgow Bank. The total loss which the unfortunate shareholders had to make good was nominally i^5, 190,983. lis. 3d., but was in reality far greater. The country is still suffering from the tremendous collapse of prices that ensued. Upon a market already extremely depreciated, stocks were forced by the reckless shareholders, many of whom, knowing themselves to be utterly ruined, were regardless what prices their investments produced. The dreadful suffering caused to the shareholders, under the principle of unlimited liability, led to the passing of an Act, in 1879, which has, and may yet have, still more important interest for note holders. Act 42,43, Vict, c. ^6, the Companies Act (1879), provided for the limitation of unlimited companies on the basis of a certain amount of paid-up capital, backed by a reserve liability, only to be called up in the event of bankruptcy. While this was to 206 THE ONE POUND NOTE. be the rule for all ordinary debts, Section VI. continued the provisions of the Companies Act 1862 for the security of debts upon bank notes, in respect of which the liability of the shareholders was to remain as unlimited as if they were members of an unlimited company. One of the original clauses in the bill was specially designed to harass the Scottish banks who had, or wished to have, offices in London, as they were not to be allowed to retain the right of issue in Scotland if they should wish to remain in London and register under the new Act. It was pointed out by the Standard that this would unjustly affect the unlimited Scotch banks, as the three old banks, being already limited, would not require to come under the provisions of the Act, and could therefore remain in London without giving up their issue. The London press had little sympathy with their countrymen, wisely seeing the real cause of the evil in the state of their own law. The Times advised the Chancellor of the Exchequer to be cautious, and not rouse multitudes of Malachi Mala- growthers, for " the pith of the case lies in the indefensible fact that English provincial banks cannot open branches in the capital without relinquishing their note issue, while Scotch banks labour under no such disability. But anomalies are not to be cured by fresh anomalies ; the true course, in such circumstances, is to trust to freedom, and to throw doivn restrictions instead of enacting new." The Daily TelegrapJi characterised Sir Stafford Northcote's device as " not only paltry, but will be to a large extent inoperative," the three senior banks already enjoying "under their charters the particular limitation which Sir Stafford designates reserve. If the London bankers really feel the rivalry of their Scottish neighbours, and wish to deprive the public of the facilities these active invaders offer, it would be more manly and straightforward to say so openly, and invite the House of Commons to sanction this latest development of guild jealousy and trades-unionism." Language like this from the three most powerful sup- porters of the Government, naturally made the latter pause, THE ONE POUND NOTE. 20/ and finally led them to abandon the objectionable part of the bill, to the profound disgust of the justly annoyed English bankers. For some time no action was taken upon this measure, owing to the varied constitutions of the banks, the three seniors, of course, declining to bring themselves under an Act which had no benefit to bestow other than they already possessed. After ascertaining the hostility of the Treasury to private bills which they had endeavoured to place before Parliament, they withdrew entirely from the controversy ; so that the question as to the liability of their shareholders for notes^ apart from their other obligations, has not been settled, though probably it would be found that, were the much debated point of their limitation judicially decided, no difierence would be found to exist between the two classes of creditors. Either the banks would be held wholly limited, or their position would be the same as that of the other unlimited banks prior to i88i. The latter finding that further co-operation was impos- sible with their seniors, wisely undertook the matter for themselves, and on the 3d day of April 1882 effected the most important alteration Scottish joint-stock banking has ever witnessed. Notwithstanding the magnitude of the change, so thoroughly was the public mind prepared for it, and so well was it understood, that scarcely a voice was raised, nor a deposit uplifted, the banks resuming their business next day as limited companies as if nothing had happened. This extraordinary change, so peacefully accomplished, brings down the history of the one pound note to the pre- sent time. If Sir Robert Peel's Act failed to secure its convertibility on demand, no legislation could have more effectively secured its ultimate payment than that of the Act of 1879, — unless it should ever happen that bank notes are made d. first cJiarge upon a bank's assets, all other debts, no matter how secured, being ranked in a second place, to be paid out of the funds remaining over after the last note has been paid, or funds set aside for its payment. 208 THE ONE POUND NOTE. Should occasion ever arise to disturb the status quo, the banks might take further advantage of the Act by adding to their notes the clause specially allowed to them, printing upon the back a brief statement, as free as possible from parliamentary jargon and suitable to the ordinary intelli- gence, declaring the perfect surety for their payment, secured by the unlimited responsibility of each shareholder for the ivJiole circulation of his bank. THE ONE POUND NOTE. 209 Cbaptcr XV. Conclusion of Part relating to Scotland. " ' Experience teaches,' — so the proverb goes ; The heedless man gives birth to all his woes ; But he who pondereth his past well o'er, For learning, hath the world ior his store." — Old Proverb. OF the effects of the Act of 1845, which was expected to work such wonders, it is very difficult to judge, principally from the veto it put upon all new banks of issue, and the consequent impossibility of calculating what might have occurred had the Act not been passed. Had that particular clause not been inserted, it is possible, though not probable, that new banks would have sprung up as of old, when some curious, but profitable, questions must have arisen in fixing the amount of their circulation. The issue of these new banks would necessarily have curtailed that of the other establishments, so that in place of the authorised circulation being exceeded, and gold kept in large quan- tities as now, there might possibly have been a number of banks all ujidei^ t\\Q\x authorised circulation, the more reckless of whom would not require to have kept any gold stock whatever so far as the Act of Parliament was concerned. Apart from these considerations, it cannot be denied that the leading principle in the Act was one which, had its details been more systematically arranged, would have proved, and has proved, of great advantage to the nation, — not to the banks alone, but also to the people whom they serve. Regulation had been the felt want of the British note issues, from their origin nearly tvv'o hundred years ago, — such a guidance, or control, by a central authority of O 210 THE ONE POUND NOTE. numerous and widely dissimilar interests, as would maintain the currency at the precise limit of national requirement for the time being, and yet progress or decrease as years passed on, and greater or less need of such a currency arose out of the changed circumstances of the nation's life. A regula- tion theoretically perfect will never be seen in Great Britain, unless some general assembly of bankers, under Govern- ment sanction, prescribe the limits year by year, from careful study of the signs of the times, sternly pulling up the issues when cheap money causes speculative production to become rampant, and loosening the reins as the demand ceases. Scottish bank issues, thanks to the prudence of their guides, and the splendid system of exchanges, have been attended with a much greater measure of success than those of England, and therefore the need of regulation has not been so greatly felt ; still there have been melancholy proofs that prudence is not an invariable attendant of Scottish banks, and Scotland may be none the worse for the Govern- ment regulations. At the present time, however, there can be little doubt that the self-imposed regulation of the note exchang-e exercises a much more constant and beneficent effect on the Scottish issues than those imposed by law. The one is continually active, not a day passes without each bank being compelled to recognise its influence, and meet its requirements in hard cash, or its still more expensive equivalent, — payment in London at four days after date. ;fioo,ooo paid in Edinburgh in gold could be brought from London at an expense not exceeding ;^20, while payment of a similar sum in London involves a direct payment in Edinburgh of £^2. 14s. gd. for interest. The system of exchanges would have stopped Murdoch & Co., and all the band of over-issuers of last century ; it did stop Douglas, Heron, & Co., and its influence in sucking the little life-blood left in the Western and City of Glasgow banks has never been fully appreciated. Like the law of holy writ, it is a continual punishment to evil-doers, and for the praise of those who do well. Why then has such an THE ONE POUND NOTE. 211 efficient remedy not been made matter for legal enactment throughout Great Britain ? In Scotland, at the present time, such a law would simply carry on compiilsorily that which is already vohintarily in force, but its future effects would be great, not only in Scotland but in England. The banks in the latter country should endeavour by every means to enlarge their system of exchanges upon the same footing as in Scotland, not merely at head offices, but in every town where two or more banks exist. Let the great bank itself descend from its throne, and agree to take up its notes when presented at its various branches, — not neces- sarily in specie, but, as in Scotland, by London payments. By these means contraction of paper currency would take place, which would have no effect in restricting banking facilities, but would only tend to prevent depreciation of the paper, and consequent elevation of prices, which invari- ably ensues when notes are not regularly taken up. It is by the aid of the exchanges that the value of the one pound note can best be measured. More than half a million of notes are delivered at the exchanges in Scot- land every business day. Once every ten days the whole circulation of Scotland is renewed ; nearly i^6,ooo,ooo being drawn out, passed from hand to hand, and returned to the banks thirty times every year. Of the sum constantly in circulation one pound notes represent from 65 to 70 per cent, of the whole, and in view of their smaller individual value represent an innumerable number of transactions. Large notes come more rapidly back to the bank, the per- centage passing through the exchanges differing at times from the exigencies of the moment. At the terms of Whitsunday and Martinmas they rush out and come ilovving back with the strength and suddenness of a High- land spate ; but the small notes, though going out also somewhat rapidly, take a much longer time to come back, so that for days after the stream of " large " has subsided to its usual level, the " ones " continue in a steady current of considerable volume, until gradually the circulation falls to its normal limits. In the months of February, March, and 212 THE ONE POUND NOTE. April, when the circulation is usually smallest, the averages of the three kinds of notes passing through the exchange may be taken as follows : — Per cent. ;^ioo notes, . . . . .21 Large (;{;2o, £10, and ^5), . . . 34-8 55-8 Small notes, ..... 44-2 Total, . . ioo"o x^t the terms, such as from the loth to the 20th of May, the averages may be approximately taken at, — Per cent. ^100 notes, ..... 25"6 Large (^20, ^^lo, and ^5), . . .36 6r6 Small notes, ..... 38'4 Total, . . ioo"o Thus it will be seen that, though one pound notes form more than two-thirds of the circulation, they only form about two-fifths in value of the notes exchanged, indicating apparently that the public must find them proportionally more useful than large notes, and therefore retain them longer in circulation. But in number of transactions the small notes have a prodigious advantage over the large ; and from various calculations of the numbers coming through the exchange, it has been estimated that they exceed the latter in number in the proportion of 8 or 9 to i. If this is so in the exchanges, where they are only two-fifths in value of the whole, how much greater must be the number of transactions performed by them when in circulation, where they exceed the large by 2 to i in value, and may be reckoned to exceed them in number by about 20 to i ! Of the total iJ" 1 70,000,000 of notes passed annually through the exchanges, a very moderate calculation would give of that amount iJ"6o,ooo,ooo for small notes, while the remaining ;^ 1 10,000,000 of large notes could not probabl}' exceed 5,000,000 in number. In computing these amounts THE ONE POUND NOTE. 213 every advantage has been given to the volume of large notes, and correspondingly taken from small notes, so that, if it were possible to obtain official statistics on the subject, it would be found that the small notes represent even a larger proportion of transactions than is shewn by the above statement. It has often been regretted by English financiers that no means could be discovered of tracing the number of transfers effected by the gold coinage ; but i-n view of the gigantic circulation of the Scottish one pound note, representing as it does only a sjiiall part of its work, namely, that betzveen bank and bank, they have some insight afforded them of the manner in which the precious metals are wasted in England, and economised in Scotland. Even upon the assumption that only one transfer took place outside of the bank, — that the money was drawn out from bank A by customer Lawson to be paid to his creditor Jones, and by creditor Jones paid into his bank B, the three or rather six countings upon hard mahogany tables, jingling into Lawson's pocket, thence into Jones', to be rubbed down upon various hard keys or fustian breeches, must involve a considerable loss when carried on throughout the entire year to the total amount of one hundred million pounds in gold ; but with the Scottish currency shewing no such waste of metal, the most inveterate statistician would have difficulty in calculating the average waste of vegetable fibre or " size " rubbed from a piece of printed paper, which at the first costs only one penny sterling, even when multiplied by four million. Yet we are told in the face of such testimony that the one pound note is daily losing its hold upon the Scottish people! Since 1845 the extraordinary increase of branches throughout the country has been one of the causes tending to prevent the proportion of notes from increasing in the same degree as other forms of credit. When one branch existed in a town or village, naturally the exchange of notes would be sluggish, and circulation remained much longer in the hands of the public ; but now, when nearly every town- 214 THE ONE POUND NOTE. ship can boast of its two or three banks, the exchanges are brisker, being more convenient, while larger amounts pass through than formerly, so that the same notes go oftener through the banks than in years bygone. It is an incon- testible fact that the amount of currency, whether metallic or paper, has not increased in the same ratio as the volume of business ; but, on the other hand, we have it on the authority of Professor Leone Levi, that " the proportion of coin to the general amount of currency ie less and less e\-ery year," — a fact which affords evidence of the increased appreciation of paper money, alike from necessity and economy. The Professor adds, — " Paper currenc}- is univer- sally displacing metallic currency ; " while the necessity for the former does not increase as it formerly did, as " the system of pa}-ing by cheques, and the wonders of the clear- ing-house, have a powerful influence in lessening the need of bank notes." Lessening the need in proportion to the increase of business, does not infer that the amount of bank notes is actually decreasing ; on the contrary, the circula- tion of Scotland shews that they have been slowly increas- ing, while the average of one pound notes has maintained itself with surprising regularity at from 6o to 70 per cent, for more than a hundred years. Once very poor, now very rich,- Scotland, through all the various gradations, from the one condition to the other, has employed the same propor- tion of small notes out of its total bank note currency. Notwithstanding all the agencies at work at different times, or in combination, — cheques, bills, bank drafts, bank cheques, post-office orders, postal orders, postage stamps, — nothing seems materially to affect the position of the one pound note, or the proportion of its appreciation by the public. If anything can be said to have shaken public regard, it will be found in the gold discoveries of California and Australia, for it is only since these were made that the public necessity for small notes is said to have decreased. In combination with these extraordinary additions to the world's wealth, came the great changes effected by steam machinery, railwa)-s, and free trade. For thirty or forty THE ONE POUND NOTE. 215 years Britain multiplied her capital at an incredible rate, and so old and humble a servant as the one pound note seemed to be in danLjer of neglect by the Alnaschars of modern finance ; the giant " steam " appeared to be driving the world into a millennium, until at last the hatmakers, the bootmakers, the cotton manufacturers, and the button- makers are only now beginning to realise the alarming fact, that they can make more hats and boots, and cotton and buttons, than the world can consume. The change from hand labour to steam power was so utterly beyond the power of experience to estimate, that, of necessity, produc- tion of wealth advanced, as has been said, by " leaps and bounds," where formerly men had been contented with a much smaller and less universal ratio of increase. If no new invention of British genius gives an additional and unheard of impetus, and if Continental nations continue to supply themselves with manufactures in place of import- ing from this country, it is very probable that in the next forty years Britain wall discover that she cannot continue the express speed of the past forty, — that a slower and safer speed must be adopted ; that capital will not increase as it has done ; that, in fact, the leap from hand labour to macJimery has been made, and the country must return to a rate of progress more suitable to the necessities of its population. For while the revolution of recent years has brought in its train unheard of blessings, it has also been followed by untold misery ; the cheapening of the cost of production has told as fearfully upon the poor as any of the old sorrows of the Corn Laws. Mr Bright is correct when he says that never were articles of common use so cheap ; but that is only one side of the picture, — they are so cheap to every one, because the labour which produces them is likewise cheap. If the working classes are indeed so well clothed, how has the producer of these clothes been paid ? A modern writer, who has given considerable attention to production, answers the question. In London, large firms " give out coats to be made at sixpence each, and vests at threepence ; and these low rates are paid to ' sweaters,' who 2l6 THE ONE POUND NOTE. let out the work at still lower rates, and leave the workman and workwoman to find their own thread. And if the labourer and the labourer's children are going about decked in the ' sweater's ' finery, they are — fortunately for them- selves unconsciously — wearing a piece of the starved work- woman's shroud." The dumb misery of the very poor was perfectly well known for years past to London philanthropists, though the gifted author of " The Bitter Cry " has only recently attracted public attention to it. Machinery, which was to find employment for and put a coat on every man's back, has only driven men with its own irresistible force, until the experience of the last seven years is beginning to prove to them that the pace is killing, and that our present dull trade is not necessarily a sign of decay, but simply that the rate of progress, produced primarily by our practical monopoly of the world's trade for fifty years, and latterly by steam, free trade, and other causes, has reached its maximum, and cannot be maintained. Conjoined with this slackening of the current, and per- haps two of its causes, are the important changes in the position of the precious metals forming our metallic currency. Gold is becoming scarcer year by year, not so much from decreased output from mining, as from increased demand on the Continent and elsewhere. At the same time silver is becoming cheaper and cheaper every day, from exactly the opposite reasons which are tending to make gold dear,— viz.. Continental demonetisation, and superabundant supplies from new mines. Within about sixteen years silver has fallen from 5s. to 4s. the ounce, which, with gold steady at £'^. 17s. gd., implies a fall from one-fifteenth the value of gold to one-nineteenth. Should this increase in the demand for gold continue, so as to cause its appreciation, the one pound note will take a new lease of life, for it will become a matter of urgent necessity for all to economise the national and the international stocks of specie in every possible way. So far as can be seen it is extremely improbable that THE ONE POUND NOTE. 21/ Scotland will return, for many years, if ever, to a purely metallic currency, for sums less than £$ ; but as this subject has been a good deal canvassed in past years, it may be well to notice slightly, national effects to which the abolition of the one pound notes would lead. At present the banks have a small note circulation of about four millions, against which ^2,866,000 of coin is nominally kept, — i.e., ^^730,000 beyond zvJiat is required by the Act of 18^5. For the past forty years, but especially since the failure of the Western Bank, the other banks have uni- formly maintained a gold reserve of such size as leads to the supposition, that it is not held so entirely on account of the note issue as it once was, but is rather held against the entire liabilities of the bank for deposits and otherwise. Sir Robert Peel's Act omitted to provide for any hypothe- cation of gold against notes ; and as a note run is of itself a thing extremely improbable now, it is the duty of bankers to spread the cost of the gold reserve over the whole of the bank's debts, and not load it upon one item, when facts shew that the burden gives no corresponding security to the item so burdened. Mr Fleming, of the Royal Bank, when asked, in the Committee of 1875, by Sir Stafford Northcote, whether the doubling of their authorised issue would lead the Scotch banks to do without so much gold ? replied, " I am not prepared to say that there would be less, because, as I have already stated, I think it is fortunate for Scotland that we have such an amount of gold as ^^4,000,000 lying to meet any possible contingencies. No doubt it lies locked up in a vault, and is untouched from the beginning to the end of the year ; but notwithstanding that, I am not prepared to say that it would be wise to interfere in any shape or form with the existing regulations, which have led gradually to the accumulation of a store of coin, increased from about iJ^400,000 in 1844 to ^^"4,000,000 now ; and I think it for the advantage of Scotland, and for the stability of the Scotch banks, that it should be so." Here Mr Fleming speaks of " any possible contingencies," surely implying that he recognises the gold to be held 2l8 THE ONE POUND NOTE. against any of the liabilities, a view of the matter which receives strong corroboration from the steady increase in the amount of specie held beyond the requirement of the Act of 1845 (now ^^1,037,607) ; so that in place of the cost of the four millions of gold being placed against the six millions of notes, they should more correctly be spread over the ninety millions of liabilities, — out of which the paper currency would bear its share of one -fifteenth part and the one pound notes their twenty-second part, namely, ^177,777, which at £1, per cent, yields iJ^533i as the true interest expense for gold against small notes, leaving a profit, at the same rate of interest, of £\ 14,669 on the small note circulation of Scotland. From this there falls to be deducted the cost of production, the Government dut}% and cost of note licenses, all easily ascertained. One pound notes cost one penny each, and may be said to last for three years at least ; 4,000,000 notes at id. amount to i^ 1 6,666, which divided by the three }'ears of the notes' life produce ;^5555 per annum. Duty at 8s. 4d. per cent, on i^4,ooo,000 is i^ 16,666, and licenses cost annually about i^i6,ooo, of which i,'i 1,000, or two-thirds, may be placed as against small notes. Thus the three items of charge, — manufacture of the notes, Government duty, and licenses, — amounting to ;;^33, 22 1, when subtracted from iJ": I4,669,leave a direct profit upon the one pound note circulation of i^S 1,448,* * Interest at 3 per cent, qn small note circulation of four millions, ...... ^120,000 Deduct — I. Interest at 3 per cent, on ^177,777 proportion of gold held nominally against small note circulation, .£5,331 2. Manufacture of four millions notes at id., ^16,666 for three years, and for one year, . 5.555 3. Government duty, 8s. 4d. per cent, on four millions, . . 16,666 4. Licenses to Government, — say, . . . i;i6,5oo Less one-third due by large notes, . . 5,500 1 1 ,000 38,552 ^81,448 THE ONE POUND NOTE. 219 or about i8s. lod. per cent, on the paid capital of the banks, and 2s. 4d. per cent, upon ;^8o,ooo,ooo of deposits. To these figures might be added the indirect advantages accruing from the ability to conduct business all over the country, while there would be deducted the sum of the increased charges incurred by banks with a number of branches. While the money advantages of the present system are seen not to be large, yet sufficiently appreciable to make a difference in comparison with non-issuing banks, the expense of keeping gold would be a much more serious item. In the first place, the whole labour and expense of bringing down from London ^^4,000,000 of specie to replace their one pound notes would fall upon the banks, who would have the additional trouble of withdrawing their own notes and issuing the coin. This might be spread over years, but nevertheless would be a costly toil. To maintain such a circulation would necessitate the keeping of at least twice the amount of gold presently held by the banks, — probably more ; so that, in addition to the actual loss of their own issues, the banks would have the loss of maintaining an additional supply of gold as " till money," — a task formerly performed by the notes free of all expense, except that of manufacture ;* while the nation would have to face the absolute loss from wear upon the gold currency, — unless, as usual, the burden were thrown upon the banks, who would of course, be compelled to recoup themselves for this, and the other loss of revenue, by decreasing the interest on deposits, or raising the rate for discounts. Depositors would suffer more than discounters, as the latter even now are endeavouring to get facilities in London, and thereby compel the banks to sink to the London rates. Depositors thus discouraged by low interest would uplift * The till money presently supplied by notes may be roundly taken at ;^ 1 3,000,000, small notes being ^6,000,000. At 3 per cent, the latter sum implies a saving to the banks of ^{^ 180,000 annually (less ^8000 charges for the notes), or 4s. 5d. per cent, on the deposits, and £,1 per cent, on the capital, which a gold till money would entirely sweep away- 220 THE ONE POUND NOTE. their money, seeking its employment in ways that would leave little doubt that the millions of Scotch deposits are more usefully invested in the banks, than they would be by individiial depositors ; and thus action and reaction decreas- ing the banking fund, and its consequent profit, disjointed speculation would take the place of united investment, with little gain either to the banks or the nation. The question of a national state issue is left for some short consideration under the chapter of " Adaptability to England ; " but even of that Scottish banks need have little fear, so long as they continue to exercise the same abilities, of which one of Old England's courteous writers remarks with kindly wit : — "Englishmen and Americans, and natives of all countries, may well admire the wonderful skill, sagacity, and caution with which Scotch bankers have developed and conducted their system. There is no doubt that Scotch bankers are guiding the course of development of the banking system in England, India, the Australian colonies, and elsewhere, with conspicuous success. If we were all Scotchmen, I believe the unlimited issue of one pound notes would be an excellent measure." — (" Money," S. Jevons.) Profiting by the experience of nearly two hundred years, the Scottish banks, and the Scottish people, may long retain their issue of "One Pound Notes repayable in Gold on demand." The original idea, on which William Paterson insisted through good and evil report in 1696, is the same now, with not one whit of change. The instru- ment, now purged from many of the evils clinging to it in old days, is as powerful, as useful, as cheap, as safe, when properly controlled, as various in its capacity, as ever it has been. It may be giving it too great place to call it the still living architect of a noble edifice, but we are tempted to think, that if the old pound note of 1723 were to uprear itself as did the one guinea note of the "Plain Man" in 1826, we should hear, in the gentle rustle of its ghostly voice, — " Si quaeris nio}iunic)itnvi circumspice.^' THE ONE POUND NOTE. 221 Table shewinc; Growth ok Note Circulation and Stock of Coin OF THE Scottish Banks from 1845 to 1884. Year. 1845 Circulation. Coin. Year. Circulation. Coin. 3,087,209 (?)400,ooo 1S74-75 6,032,399 4,274,447 1858-59 4,113,319 2,502,899 1875-76 6,062,397 4,323,420 185960 4.219,569 2,552,361 1876-77 6,167,432 4,377,079 1865-66 4,434,962 2,500,926 1877-78 5.976.197 4,220,092 1867-68 4,554,376 2,667,727 1878-79 5,582,921 4,203,422 1868-69 4,718,680 2,797,740 1879-80 5,454,582 3,907,621 1869-70 4,878,120 2,960,903 1880-81 5,543,001 3,902,982 1870-71 5,175.935 3.299,703 18S1-82 5,640,747 3,929,518 1872-73 5,597.006 3,786,032 18S2-83 5,854,565 4,194,312 1873-74 5,857,871 4,067,981 1883-84 5,865,001 4,226,258 The only breaks in the steady line of advance are, the sudden increase of 1872-73-74, the result of commercial inflation, and the temporary decrease of 1878-79, caused by the lapse of the circulation of the City of Glasgow Bank. Average of Large and Small Notes. Year. Large. Small Total. Per cent. Percent. 1815 39 61 100 1825 42 58 100 1845 27 11> 100 1855 36 64 ICO 1865 37 63 100 1870 39 61 100 1875 34 66 100 1884 31-8 68-2 100 1^85 31 69 100 The rise in •' small " since 1870 is wholly caused by an increase in their amount of nearly ;£i,ooo,ooo, while the " large " have been comparatively stationary. 1845-1885. — History seems here to repeat itself in the want of gold causing universal depression and throwing large notes out of the race. Increase of Deposits, Branches, and Coin kept beyond Requirement of Act of 1845. Year. Deposits. Branches. 1 Coin. 1819 1830 1845 1855 1865 1874 1884 ^33,192,105 43,270,612 56,185,061 78,405,261 83,293,743 97 145 382 480 654 884 929 Average for 5 years ending Dec. 1S69 . .£837,851 Average for 5 years ending Dec. 1874 . 899,133 .Average for year ending Dec. 1S74 . . 952,313 Average for year ending Dec. 1884 . . 1,037,607 222 THE ONE POUND NOTE. List of Scottish Banks, with Authorised and Present Circulation, AS FROM Messrs Oliver & Boyd's Almanac for 1881;. Name of Bank. Authorised Circulation. Circulation, 1884. Bank of Scotland .... Royal Bank of Scotland . British Linen Company Bank Commercial Bank of Scotland, Lim. National Bank of Scotland, Limited Union Bank of Scotland, Limited . Clydesdale Bank, Limited Town and County Bank, Limited . North of Scotland Bank, Limited . Caledonian Banking Co., Limited . -^343,418 216,451 438,024 374,880 297,024 454,34i 274,323 70,13 154,319 53,434 i:867,383 795,812 663,567 800,383 655,855 803,425 577,735 208,811 390,430 101.600 ^2,676,350 ^5,865,001 Of the actual circulation, large notes were ^1,865,000, and small notes ;^4, 000,001. Chart showing Circulation of Scotland in 1884, taken from the Monthly Averages published in the Edinburgh Gazette. Letters T^ ,V, and L stand for Total, Small, and Large respectively, and Dotted Lines are the respective Averages of each. 1^ / / 1 1 .._. / ' \ 1 1 1 1 w i 1 \i 1 ] 1 t H. 1 1 1 \ U 3 < 1 1 1 / "a 1 i c 3 / 1 1 /! t~ / "s 1 1 1 r 1 \ 1 S '' 1 1 ^ s \ ' a. < 1 1 1 1 \ 1 ! \ 1 n 1 1 1 1 1 1 J i 1 1 j !/ 1 — -i- 1 1 / r /: fl y "4 1 1 ^ i 1 1 : 7: ^ < '-J '^ D i. S c a D c ^ c i 8 D q 5" d 0" CO g 8 'c c 6 c c -1- (■ 5 c 8 8 4 4 H — 1 ' ! ' 1 ' 0000 0000 0000 8 8 8 8 Tf PI q rx5 -r 'f 4 po Q 000000 0_^ q_ 0' 0" d d 0' d c ■o tt M CO v::, PO PO PO P'n PI pi 2,400,000- 2,000,000. 1,800,000 1,600,000 Percentage of Large and Small Notes in Scotland, 1 884. Large Notes. Per Cent. Jan. Feb. Mar. Apr. May. June. July. Am«- Sept. Oct. Nov. Dec. 36- 35 34 33 32 31 -/ t: \ \ -- -N, V -/- ^ Small Notes. Per Cent. Jan. Feb. Mar. Apr. May. June. July. Aug. Sept. Oct Nov. Dec. 70 69 68 67 66 65 / -- il / - y^ " s: / -\ N^ote. — For the suggestion of this and the preceding table, the Author i.s iiidehlcil to MrGalletly of the British Linen Company Bank, Edinburgh. THE ONE POUND NOTE. 22$ Chapter XVI. Law Affecting the Issue and Circulation of the One Pound Note, and Rules of the Exchanges for Effect- ing Payment. " Law is the command of a Sovereign, containing a common rule of life for his subjects." — Erskine. ■■u~ TIL the introduction of the Feudal system, the in the subjects composing the estate of a deceased person, had been the rule for the nations of Europe. 2. With the estabHshment of feus, whereby the holder was bound to furnish service to his superior, a new element and a new law came into existence. From the same desire to perpetuate a certain line in possession- of an individual estate, which centuries afterwards led to the Entail Acts, the right of the more permanent or feudal part of the " hcereditas " was confined wholly to one of any number of individuals who might be in the same degree of consan- guinity to the deceased ; the other, and more perishable portion, being left to the next of kin. Thus the ancient h(2reditas was divided into heritable and moveable. 3. Mr Erskine, in his opening chapter on this subject, states that the doctrine of moveable rights depends chiefly on the nature of obligations, i.e., " a legal tie by which one is bound to pay or perform something to another." 4. Under this head are included bills of exchange or promissory notes, which are simply obligations by writ 224 THE ONE POUND NOTE. founded upon debt, and according to the rule of law, " Debts [iiomina debitonini) when due by bill, promissory note, or account are moveable." Thus there is a regular catena, — first, rights in general, of which moveable rights are one great division ; in these in turn are embraced obligations by writ, a large part of which is made up of bills of exchange and promissory notes, the last named covering notes of a banker and " the one pound note." 5. A Scots bank note exhibits in a peculiarly simple way the distinction between obligation and contract drawn by Professor Moir : — " Obligations are distinguished from contracts in this, that the former are unilateral, the latter mutual. There must, no doubt, be always two parties concerned, the one who becomes bound and the other in whose favour the obligation is undertaken ; but the latter is under no counter obligation, e.g., where a party promises to pay or perform something to another. In a contract, on the other hand, e.g., of sale, while the one party becomes bound to deliver, the other comes under the counter obliga- tion of paying the price." In the case of a bank note the sole obligation is on the part of the grantor to pay when- ever payment is demanded ; so that from the superior security presently afforded to the holder of a Scots bank note, over that given by a mercantile bill, arising out of the greater financial stability of the debtor in the one case than in the other, the holder of a note knows, or need know, almost nothing of the duties and responsibilities attaching to the holder of even so simple an obligation as a bill. Ex facie, in neither case is there any obligation due to the issuer ; but the note holder has absolutely no care as to endorsations or sexennial prescription, and has practi- cally none as to the writ itself, the sufficiency of the stamp, presentation when due, notice of dishonour, liability for a note once held, or necessity for recourse to prior holders ; while, if he loses his note, though he has no remedy against the onerous holder, he is recouped should he himself be the onerous holder of a found or stolen note, b}' the loser having no recourse against him. At the present THE ONE POUND NOTE. 22$ time in Scotland we can happily consider the grantor's duty to pay as the beginning and ending of the whole matter, but it will of course be necessary to mention briefly the various perils which may arise in the event of non- payment or other contingencies. 6. The Act passed by Sir Robert Peel in 1845 — 8 & 9 Vict., c. 38 — defines the term "bank notes" as follows: — " The term ' bank notes ' used in this Act shall extend and apply to all bills or notes for the payment of money to the bearer on demand other than bills and notes of the Gover- nor and Company of the Bank of England." x'\s the above definition, and also those in the Acts applicable to England and Ireland, failed to prevent some parties from attempting to evade its provisions, it was further enacted by Act 17 & 18 Vict, c. 83 (1854), that it was expedient to stop such evasions in future by defining " What shall be deemed to be bank notes ; " and " that all bills, drafts, or notes (other than notes of the Bank of England) which shall be issued by any banker, or the agent of any banker, for the payment of money to the bearer on demand, and all bills, drafts, or notes so issued which shall entitle, or be intended to entitle, the bearer or holder thereof, without endorsement or without any further endorsement than may be thereon at the time of issuing thereof, to the payment of any sum of money on demand, whether the same shall be expressed or not, in whatever form, or by whomsoever such bills, drafts, or notes shall be drawn or made, shall be deemed to be bank notes of the banker by whom, or by whose agent, the same shall be issued, within the meaning of the three several Acts," — for Eng- land, Scotland, and Ireland, — " and within all the clauses, provisions, and regulations thereof respectively." 7. The liberty to issue bank notes in Scotland is per- mitted to the five Edinburgh banks, the two Glasgow banks, and the three northern banks, and to no other or future companies or bankers, these ten being the sur- vivors of the nineteen banks of issue existing in 1844 and 1845 to whom the Bank Acts of these years granted a P 226 THE ONE POUND NOTE. monopoly of issue, in respect of their being bankers law- fully issuing notes on the 6th day of May 1844, and thence up to the 1st of May 1845. 8. The Bank of Scotland, the Royal Bank, and the British Linen Company had received special rights to issue small and other notes upon unstamped paper, on accounting for the duties to the Commissioners of Stamps and Taxes (Acts 39, c. 107 ; 48, c. 149 ; and 55, c. 184, of Geo. III.). 9. The lawful issue of bank notes implied that at least two requirements of the State regarding them had been complied with, — first, that the banker had been duly licensed so to issue ; and, second, that the notes were either stamped according to Act of Parliament, or that arrangement had been made for issuing them on unstamped paper. 10. The first restriction of a banker's right to issue notes by requiring a license for the exercise of what had previ- ously been a right at common law, was instituted in 1808 as a war tax. Subsequently, by Acts 55 Geo. III., c. 184 (181 5), and 7 Geo. IV., c. 6"] (1826), it was provided that not more than four licenses were required for any number of offices in Scotland. By the Act of 1844, 7 & 8 Vict., c. 32, s. 22, the law was changed, to the effect that each office opened after 6th May in that year for the circulation of notes required a separate license, though two covered three or more branches in one town, — all offices in existence prior to that date remaining secured as before by the four licenses. The amount for each license is iJ^30, which has to be renewed annually, as changes in the partners of the bank are only covered by the license to the loth of October in each year. Any banker issuing notes in con- travention of the statute (now 33 & 34 Vict., c. 97, s. 47 — Stamp Act 1870) is liable to a penalty of ^f 50 for each note so issued, while any one knowingly accepting such a note forfeits the sum of ^20 for each offence. 11. Prior to 1 800 no taxation was levied upon one pound notes, but in that year (under Act 39 Geo. III., c. 107) a duty of twopence upon each note was imposed to meet the war expenditure. In 1805 the duty was raised to three- THE ONE POUND NOTE. 227 pence, and no note was allowed to circulate for a longer period than three years without being restamped. In 1808 the vexatious restriction as to time was abolished, but the duty was raised to the following rates (Act 48 Geo. III., c. 149) :— s. d. Not exceeding^i I 4 Exceeding I I but not exceeding £2 2 8 2 2 5 5 I 5 5 „ 20 I 6 20 „ 30 3 30 50 4 6 50 „ 100 7 6 These rates remained in force until 181 5, when Act 55 Geo. III., c. 184, again raised the duties to the scale at which they now nominally stand, although fortunately robbed of their sting by the commutation of 1854 : — s. d. Not exceeding £1 I 5 Exceeding I I but not exceeding ^2 10 11 n 5 5 I 3 J5 5 5 10 I 9 )> 10 20 2 20 30 3 )J 30 50 5 11 50 ,, 100 8 6 A higher rate being fixed than upon ordinary bills of exchange, on account of the power to re-issiie ; for, as it has been said by Lord Ellenborough, a bill " is negotiable ad infinit2iin until it has been paid or discharged," — a bank note possessing the further advantage of being re-issued any number of times. Any notes stamped under the scale of 1808 were allowed to be re-issued upon being stamped with the additional duty. Prior to 18 15 the stamp was impressed upon the face of the note, but after that date it was printed in red ink upon the back, a somewhat rough design being employed similar to those still to be seen in the stamps upon patent medicines. Though supposed to form a protection against forgery, it was soon forged with- out difficulty.* * The stamp was called the " Congreve," from its inventor. 228 THE ONE POUND NOTE. 12. By 3 & 4 Wm. IV. all banks of issue were required to send in returns of the quarterly average of their notes in circulation, calculated upon the sum in the hands of the public at the end of each week, the returns to be made upon the 1st of January, April, July, and October of each year. 13. Notwithstanding repeated efforts to obtain such a settlement of the duties as would put a stop to the trouble and expense of sending to London to have a number of notes stamped, only to be useless for some time in the banks' tills before issue to the public, the Government declined to move, until 1853, when a deputation of Scots bankers had an interview with the Lords of the Treasury, who promised to look into the matter with a view to a change. After some negotiation the Government intimated that they were willing to compound, if some mutually equitable principle could be agreed upon. A common basis having been arranged, an Act was passed in August of that year, 16 & 17 Vict, c. 63, stating that as it was advisable to grant to the other banks in Scotland the same right of issuing notes upon unstamped paper enjoyed by the Bank of Scotland, the Royal Bank, and the British Linen Company, and also to arrange some method of compounding with all the banks in Scotland and elsewhere for the stamp duties upon their notes, therefore power should be given to the Commissioners of Stamps and Taxes, or any three of them, to make such arrangement with " all or any of the banks for a composi- tion," " on such terms, and with such security for the payment of the same," as the Commissioners might see fit. In the following December a commutation was finally sanctioned, whereby the banks have since been charged 8s. 4d. annually upon every i^ioo, or part of that sum, of their notes circulating in the hands of the public. Certain of the bank directors were required to give their bond to the Crown for several thousand pounds, as security for due payment of the compositions. 14. Payment of the duty is made half-yearly at the rate of 4s. 2d. per centum, or part thereof, and is calculated by means of the returns sent in to the Commissioners of THE ONE POUND NOTE. 229 Stamps and Taxes under the Act of 1845. A notice is sent to the bank at the beginning of each year by the Inland Revenue in Edinburgh, stating the dates up to which returns are to be made (a notice, by the way, which has to be carefully checked by the bank authorities, as on one occasion lately the Revenue Board tried to prove that there were fifty-three weeks in the year). The accounts by the banks have to be handed in to the Comptroller of Stamps and Taxes in Edinburgh, and the duty paid, within fourteen days after the ist of January and the ist of July in each year, bearing an affidavit by officers of the banks that it is a true and just account, to the best of their knowledge and belief, of the amount or value of all unstamped promissory notes in circulation on Saturday in every week, from the date of Saturday following the last entry in the previous half-year's return, to the same day in the last week of the half-year current, together with the average amount of such notes so in circulation, the twenty-six weekly amounts being added up and divided by the number of Saturdays (usually twenty-six), the quotient being the average upon which duty is paid for the half-year ; the account is then signed and sworn to before a justice of the peace. 15. A question arose during the first half-year of the new arrangement as to whether the old stamped notes could be re-issued without being counted as part of the circulation, but the difficulty was soon got over by the Inland Revenue allowing the banks' claims to exemption from further stamp duty in this respect. 16. In addition to the penalty for issuing notes without a license, any one not a banker issuing notes payable to bearer for any sum less than £^ incurs a farther fine of ^20 for every such note so issued. 17. The issue of notes with printed dates was pro- hibited by 55 Geo. IV., c. 184, but is now sanctioned by 23 & 24 Vict, c. iii., s. 19. 18. Returns are required to be made to the Commis- sioners of Stamps and Taxes, London, under the Act of 230 THE ONE POUND NOTE. 1845. The first of these is made weekly of the amount of notes in circulation upon Saturday, accompanied by a statement of the total sum of gold and coin, — first, for each day of the week in the principal office or place of issue ; and second, the whole amount held by the bank in Scotland for Saturday only. Second, every fourth Saturday the following items are added to the above return : — (a.) The amount of notes, first, of £$ and upwards, and second, below that sum (now, of course, all £1 notes) ; (d.) Amount of the authorised circulation ; (r.) Average amount of notes in circulation during the four weeks, distinguishing those for £1 from higher denominations ; (d.) Average amount of coin at head office during the four weeks, distinguishing between gold and silver, each average being obtained by dividing the sum of the four weeks by the number of weeks. The penalty for neglect or refusal to make these returns, or for any false return, is £100 for each offence. 19. Circulation. — When the issue of the notes is in excess of the amount sanctioned in the bank's certificate, gold coin must be held against such excess to an equal amount, of which it is allowed that one-fourth may be silver coin. 20. The Commissioners may at any time demand an inspection of the banks' circulation books, or other relative books or papers ; they may also require to see the gold and silver coin held in reserve. Any person having the custody of such books, paper, or coin refusing to satisfy the demands of the Commissioners, is liable to a penalty of ;^ioo for each offence. The inspection referred to in this clause has never been put in force. 21. If it be found that any bank has exceeded the amount of its authorised circulation without having the excess covered by possession of an equivalent amount of coin, such bank shall forfeit a sum equal to the excess. 22. Scotch bank notes are not allowed to be issued in England. No bank notes are legal tender in Scotland, Bank of England notes being specially excluded by statute of 1845, while Scots notes are only counted as cash if received THE ONE POUND NOTE. 231 as such. The question of legal tender was decided regarding Scots notes so far back as 1756 in Watson v. Chalmers. Mr John Watson, an Edinburgh writer to the signet, having been offered Glasgow bank notes in payment of a bill by Mr Chalmers, a Leith merchant, declined to accept them, and sued Chalmers for recovery of the bill. Chalmers pled tender of payment by bank notes. The court held that bank notes did not form a legal tender, and that all contracts to pay money must be understood to mean payment in standard coin of the realm, unless otherwise stipulated. It has been held in England, that a creditor taking country bank notes when he might have had gold, thereby lost all recourse against cautioners. 23. To lose sight of bank notes in the character of bills of exchange, is also to forget their other rights, such as recovery by summary diligence ; so that while the popular idea of notes being cash, is correct so far as usage and precedent has made it so, it is well to keep in mind the distinction between the two. So long as gold is the only legal tender for large amounts, notes cannot be correctly termed cash unless they are accepted as such. On the other hand, a bank note has so much of the attributes of cash as to lose its identity when circulated or commixed with other notes or coin ; and " whenever money or cash is used in law, in its popular sense it includes bank notes, — a bequest of cash includes bank notes, and in construing certain old Annuity Acts the Courts attached the same meaning to the words " (Thomson's " Bills of Exchange," p. 122). This was decided in the case of Crawford v. Royal Bank, in February 1749, mentioned in " Morison's Dic- tionary." " Hew Crawford, clerk to the signet, sent a ^20 Old Bank note by post, noted t/ie number, and zvrote his name upon it. It was lost, and the note at last appeared in hands of the New Bank. Crawford raised a process of multiple- poinding in name of the Old Bank. The judges were unanimous on two points, — first, that money is not subject to any vitiuvi reale, and that it cannot be vindicated from the ^^;/^^477 2,482 still due to Royal. 27,773 25,291 over from Clydesdale, Which pays 4th Creditor, Union . 25,291 and clears account. 242 THE ONE POUND NOTE. The Bank of Scotland and the Royal Bank carry through the settlement upon alternate months, but neither of them incurs any responsibility in this capacity. Should any bank fail to effect the payment in London within the proper time, and be unable to give a " prompt and satisfactory explanation of the cause," it is liable to be excluded from the exchange-room and clearing-house. Country Exchanges. — Exchanges for notes have long been established in various provincial towns, and are now regularly held, wherever there are two or more banks, every business day except Monday, with a final exchange on Saturday afternoon. A rule of the Edinburgh clearing-house says, that " all exchangeable notes received at these agencies must be exchanged there, and must on no pretext be forwarded to meet the exchanges in Edinburgh or at the other agencies." When the balances of these country exchanges are below ^loo, they are debited and credited by local vouchers to accounts kept in the current account ledgers of the branches. These are brought into next day's exchange, and carried on until they amount to over ^lOO, or until Saturday afternoon, in which cases the balances are cleared off by exchange vouchers on Edinburgh. In order to reduce the circulation as much as possible, in view of the Act of 1845, the subscribing banks bind themselves to bring into the exchange all exchangeable notes they have in their possession, and not to issue notes of another bank without sanction first asked and obtained. The banks in the exchange and clearing-house are as follows : — The Bank of Scotland, who retire the notes of the Caledonian Bank. The Royal Bank, who retire the notes of the Town and County Bank, Aberdeen. The British Linen Company Bank. The Commercial Bank of Scotland Limited, who retire the notes of the North of Scotland Bank. The National Bank of Scotland Limited. The Union Bank of Scotland Limited. The Clydesdale Bank Limited. THE ONE POUND NOTE. 243 Cbaptcr XVII. The Material and Preparation of the Bit of Paper. "Pregnant with thousands flits the scrap unseen, And silent sells a king or buys a queen." — Pope. THE two chief requisites of a one pound bank note are, that it should be of such strength as to stand the tear and wear to which it may be subjected, and to be so contrived as to present the fewest points of attack to the " infamous forger." The Bank of Scotland had not been in existence over five or six years, when they found it necessary to adopt some means whereby imitation of their notes would be made more difficult, and detection of fraud correspondingly more easy. It is difficult to decide whether it is more humbling or gratifying to Scotsmen to know that the superior educa- tional advantages of their country enabled the idea of forgery of bank notes to arise first in Scotland ; although it is more probable that the novelty and poor workmanship of the Scotch notes were the principal attractions in the early part of the eighteenth century. England was not troubled in this respect until the very end of the century, when her national bank began to issue small notes of very poor execution. Schoolmasters and engravers were the first forgers, from which a lesson may be learned by those who care to read. The early notes both of the Bank of Scotland and the Royal Bank, even after they had invented " special checks against forgery," were of brittle paper, bald and simple in 244 ■ THE ONE POUND NOTE. design, and roughly engraved in comparison with those of the nineteenth century.* The printing and the watermark were the only really good features in them, — the former being generally cleanly done, the ink retaining its black colour notwithstanding the lapse of years ; and the latter produced by the venerable wire process, specimens of which are extant on various MSS. dating back to the thirteenth century. At the time the Bank of Scotland began, paper- making was in its infancy in Scotland, the first company starting on the Water of Leith in the same year that the bank opened, so that possibly the paper for our first notes came from France or Holland. Manufacture of Paper. — At all times bank notes were made, as they still are, from new linen rags, which ought to be of good quality, as the better the material so much the tougher and lighter is the note. From the small size of the notes, and the necessity for having paper exhibiting the deckle edges, most of the bank note paper is produced by modifications of the old "handmade" process. The rags are cut, sorted, dusted, washed, bleached, and comminuted by rotary motion in various cylinders fitted with knives and beaters, in which they are placed, with due proportion of water and strong caustic alkali, to reduce the material to the pure vegetable fibre, until the liquid pulp is poured out upon the wire frames which first convert it into something like paper. These are composed of a network of very fine wire stretched on frames of the same size as the paper to be made (the huge endless-web machines being wholly inapplicable). Into this rectangular network of wire are sewed the designs of the watermark, usually in wire or brass work of various breadth or thickness. The Bank of England's watermark is now produced from brass dies, which ensure that every repetition of the mark, to almost any number, shall be * Specimens of these may be seen in the Antiquarian Museum, Edinhurg;h. THE ONE POUND NOTE. 245 absolutely identical, a degree of accuracy which it would be impossible to acquire with the wire process in such a complicated mark as that upon their notes. To complete a mould for such a note as that of the Bank of England formerly required over one thousand wires and sixty-eight thousand twists, and " the same repetition when the stout wires are introduced to support the under surface. There- fore, with backing, laying, large waves, figures, letters, and borders, before a pair of moulds are completed there are some hundred of thousands of stitches." To produce perfect similarity by such a method is clearly impossible, as for such as the Bank of England four or five new moulds were needed each year. Much of our Scotch bank note paper is, however, still made by this process, although now simplified and improved. The mark upon the notes of the Bank of England and some other banks is produced by an invention of Messrs Brewer, Smith, & Co., for which they received a medal at the Great Exhibition of 185 1. The required pattern is engraved on steel-faced dies, which are afterwards hardened by being heated in leather- charcoal and then plunged into cold water. To prevent any change from the dies wearing out, they can be im- pressed upon soft steel plates which in turn can be hardened, and so the original mark may be multiplied almost ad infinitum. The die, once made, is used by a stamping machine to give its impress to soft plates of sheet brass, which thus become embossed, " and are filed at the back to the requisite proportions to allow the moisture of the pulp of the paper to pass through the apertures. The different pieces of brass, when struck, filed, and put together, form the mould for the manufacture of the paper, and are so arranged that each mould 'is designed for two pairs of notes." * When one mould wears out, a new one is struck, mathe- * Journals of Society of Arts ; Article by Alfred Smee, F.R.S. ; Extracted from Mr E. Wilson's " How to Detect Forged Bank Notes." 246 THE ONE POUND NOTE. matically the same as the old, the only care required being in the filing of the raised parts of the back. The peculiarities of a genuine watermark lie chiefly in the different shades produced by the varying thicknesses of the paper. When the note is wetted, these appear more dis- tinct in a good note. In a spurious watermark produced by mere pressure, such as many of the old forged notes bore, damping destroys the mark altogether, as it swells the fibre of the paper, the pressed part in consequence becoming of the same thickness as the other. A pressed or rolled mark is always smooth and greasy, compared with that on a genuine note. There are also the tests of refiected and transmitted lights. In a transmitted light, obtained by holding the note between the eye and the sun, the thicker parts of the paper appear dark ; while under a light reflected down upon the paper, these dark parts appear lighter, as they have more white pulp in their thickness than the other parts. A pressed or photographed watermark exhibits none of these characteristics, and may therefore be easily detected, although by photography it is surprising how the appear- ance of the mark seems to be worked into the very texture of the paper. But even photography will not stand both tests of examination by transmission or reflection of light ; in one light or another failure is certain, and the fraud maybe detected. A new method of imitating watermarks has recently been perfected by an Edinburgh gentleman, which completely defies the water test, but may be detected by heat or other chemical means. As it has fortunately been kept private so far, there is no necessity for giving further publicity to so dangerous an invention, except by saying, that as the process does not affect the thickness of the paper, the spurious watermark may be distinguished from the true, by its being perfectly uniform in surface both to sight and touch. Each piece of paper is made the size of two notes, and is cut down the middle before printing. After the pulp has settled upon these moulds before described, the superfluous moisture escapes through the interstices of the wire or brass THE ONE POUND NOTE. 247 work, leaving only the fibre in a damp and partially coagulated condition ; this is carefully removed, and passed through felt rollers and heated steel cylinders to dry, smooth, and harden it to the required texture. In this condition a Bank of England £^ note weighs about iS}4 grains, and a Scotch £1 note from 20 to 25 grains, accord- ing to the bank, — some being lighter than others. When this process is completed the paper is again slightly moistened, and about one grain of " size " is added to each note, the material used being any substance with sufficient gelatinous properties, such as skin, parchment, fish bones, sheep's feet, &c., into which is mixed a small quantity of alum to harden it. The superfluous " size " having been removed by pressure, the paper is again taken to the drying room, after which it is counted and packed in reams ready for delivery. Messrs Portal, of Laverstoke, supply the Bank of England with nearly fourteen thousand reams annually, while a good deal of Scotch paper is made by Messrs Stacey, Wise, & Co., of Northampton, — ^the old-world trade of the Water of Leith manufacturers, who made all the old Scotch notes, having entirely left them. The production of the paper may thus be seen to be no easy task, and of itself is a considerable safeguard against criminal effort. Mr Granville Sharp, in the Gilbert Prize Essay, suggests that to secure uniformity, which is a good part of the battle, it would be advisable for a number of bankers in a given district, or even in an entire country, to combine, so as to have the same watermark upon all their notes. This could be done in a general way with advantage, as no bank need lose its identity, the general design being the same, while the name of each bank could be added to their respective notes. Mr Sharp's idea would certainly lead to a considerable saving in expense. The paper, when ready for printing, is as carefully guarded and counted as if it were cash, being usually placed under the charge of the bank's cashier until required. Engraving and Printing. — The engraving of the old one pound notes was the part in which the mechanical 248 THE ONE POUND NOTE. skill of the time was furthest behind. The designs were made up of a quantity of flourishing, more or ]ess elaborate, down the one side, by way of a check mark, the remainder being taken up with the words and figures of the promise. Last century, printing gave little or no encouragement to engravers, hence they were few, their work was dear, and often not very good. This kept the banks from expending money upon an elaborate design, and simplified the work of the forger immensely. The workmanship of the Royal Bank note of 1750 for £12 Scots, shewn opposite, may be taken as a very good note for the period ; but careful examination will reveal many weak points, such as in the flourish down the side, where, instead of being smoothly and perfectly rounded, so that no break could be seen in the continuity of the cur\'es, a magnifying glass will shew simply a num- ber of straight lines changing their direction as they are joined end to end ; nor are the letters much better in the scrip part, some are higher than others, while uniform thickness is not maintained throughout. Considerable advance must have been made by 1826, as a forged guinea note of Sir William Forbes, James Hunter, & Co., of that date, shews a style of engraving as superior to the Royal Bank note of 1753 as that was to the Bank of Scotland note of 1723 ; and yet to an engraver of modern times the forgery of 1826 is thoroughly 'prentice work, the fivepenny Government stamp upon the back is rude in execution, and is presumed to be a forgery also, unless the perpetrator was more daring than skilful. Under the humane influence of Sir Samuel Romilly, Sir James Mackintosh, and others, the public feeling began to revolt at the number of hangings for forgery ; and both bankers and judges were compelled to find some means of proving that " prevention is better than cure," and that to remove temptation from the criminal classes was as much the duty of every citizen as it was for them to award punishment for the perpetration of crime. So far as Scotland is concerned, soon after 1830, a THE ONE POUND NOTE. 249 better style of engraving was adopted, the National Bank upon this occasion setting the example. The large book trade of Edinburgh gave ample employment to such , high-class engravers as the Messrs W. & A. K. Johnston and Mr A. H. Lizars, who speedily raised the Scots bank note to a high standard of excellence. Prior to 1837 copper plates were used, and from their softness, caused much trouble and expense in their renewal. At that time, however, the reproduction of designs by mill and die was brought to this country by Messrs Perkins & Heath, the predecessors of the now famous house of Per- kins, Bacon, & Co. The founder of the firm, Mr Jacob Perkins, was born in Massachusetts, and came to England to push his splendid inventions. The first engraving by this process is upon soft steel, which on completion is hardened. This plate is not used for printing, but as a die from which many impressions are taken upon soft steel plates afterwards hardened. In this way the absolute identity of every plate with its predecessor is ensured, and year after year may elapse without the slightest difference becoming observable. In addition to very fine powers of engraving vignettes, Mr Perkins adapted the old rose-engine for turning patterns upon the backs of watches, to the profession of which he soon became the head, and it is by aid of this engine — a purely mechanical operation — that some of the finest parts of our notes are produced. The vast saving of labour and time effected by these means is almost incredible. Taking an extract regarding the firm's work upon the. postage stamps, and supposing that the new modes had never been invented : — " It took Mr Heath a fortnight's hard work to engrave, on the original steel die, the profile which is the progenitor of all the rest" (that of Queen Victoria). " Since the introduction of cheap postage, Messrs Perkins, Bacon, & Petch have transferred the matrix upon one hundred and forty-two plates, each having two hundred and forty heads upon it. In other words, the number of single heads given off from steel to 250 THE ONE POUND NOTE. Steel has been thirty-four thousand and eighty. Every one of these, but for the transferring process, must have been engraved laboriously by hand, at the expense of a fort- night's time." To keep up such an amount of engraving would have required one hundred and ten first-class work- men to be constantly employed ; and as these sentences were based upon the figures of 1850, it may be imagined what will be the economy now. The inventor of such a system is more honourably entitled to the rank of public benefactor than many of those who get the name. The one point aimed at in engraving was, of course, " inimitabilityr To secure this, not onl}" \\-as quantity of work needed, but superior quality of art, as also variety of w^ork. For all those purposes the engine machinery can be turned to endless advantage. Being accomplished by a peculiar lathie, the process is almost impossible of imitation by a forger, owing to the great difficulty of bringing the parts of the machine to the same positions at which they stood in the maker's lathe ; manual imitation is almost futile, from the time needed for the task. The elaboration on the Scots notes of " one pound," written nearl}- two thousand times in each, is chiefly produced by mechanical means, the " stump engraver " being employed for this purpose. A further improvement in Messrs Perkins, Bacon, & Co.'s method of transferring to steel, is to have the original plate made up of a number of separate dies, which can be put together when required, and render it all the more difficult to obtain an impression without combination amongst the employees. Thus from beginning to end, provided the plates are not allowed to get into wrong hands, the work requires that those perfecting it must be artists of no mean ability and skill, — men who could receive so hand- some an income as the reward of their honest labours, that the probability of their giving time and attention to that which can only ensure their destruction, is made as remote as it can well be. The introduction of photography brought a new foe to THE ONE POUND NOTE. 25 I the front, and put banks and forgers once more upon the qui vive. Up to the middle of the present century all notes had been printed in black, — a colour perfectly suitable for photo- graphic purposes. Various methods were introduced with a view to secure the note against this danger ; amongst these the most important is printing with coloured inks, and adding some ornamental device upon the back of the note, so that when printing in the sun these back designs come through, appear upon the front, and thus foil the forger's plan. Photographic imitations of the watermark have already been referred to ; and we now quote from Mr A. Claudet's letter to the Times, about 1850 (mentioned by Mr Sharp), regarding the effects upon different colours: — "In photography, red, orange, yellow, and green produce black ; while blue, indigo, and violet produce white. Now, from these different properties of the various colours, it is evident that a bank note, with its printing, emblems, devices, writing, &c., printed in variegated colours, would offer the greatest difficulties to the perpetration of the fraud ; for the lightest colours to the eye would produce the darkest effect in the copy, whilst the darkest colours, such as blue, indigo, and violet, would be hardly represented at all, or but very slightly. It is indeed fortunate that photography, while offering to the forger the temptation to exercise his dangerous skill, at the same time teaches us the means to render his attempts abortive. The Bank of England, and bankers in general, instead of issuing notes in their present dull state of black and white, have only to transform them into the most elegant and ornamental coloured designs, and they will frustrate all attempts of the forger." Exactly what the Bank of England has not done, with the result that it is almost the only bank to which forgers still pay their attentions. The idea of coloured paper was abandoned ; a white ground being chosen, and coloured inks employed in printing. In the well known case of the Greatrix forgeries of the 252 THE ONE POUND NOTE. Union Bank notes, about 1865, the imitations were pro- duced by photographing the black ink, there being no colour upon the notes. Two gentlemen (?) appeared in Dalkeith at the shop of a worthy draper, now departed, and tendered a Union Bank note in payment of some purchases. A shrewd shopman, not caring for their looks, went out into the High Street, and discovered that his customers had bestowed similar favours on some of his neighbours. The police were called in, and the gentlemen were removed to the Edinburgh prison, after a considerable number of forged Union Bank notes had been found in their possession. But these were only the utterers ; the artist himself was wanted, a Glasgow photographer narfied Greatrix, who had fled to America. Thither he was followed by a British detective, now Captain M'Call, chief constable of Glasgow, accompanied by one of the bank's officials, who traced him to New York and there lost him. Quite equal to the occasion, the official spiders spun their web, advertising in the New York papers " A first-class photographer wanted," with the result that in a few hours the fly walked into their parlour, whence he was transported to Scotland, to receive in the Edinburgh Justiciary Court sentence of penal servitude for fourteen years. As in all things the forces of positive and negative, good and evil, are ever opposing each other, the one obtaining a temporary ascendancy only to be overthrown by some application of the other, so in the manufacture of notes and documents of value, just as a way was beginning to be seen through the mass of different plans against photographic forgery, bankers were again plunged into dubiety by Messrs Glynn & Appel's introduction of their anastatic process of printing. Immediately struck with the opening thus created for fraudulent purposes, this ingenious firm a few years afterwards secured their scheme from the evil-minded • by another process equally ingenious. To produce a copy of any print by anastatic printing, the subject is damped with a weak solution of nitric acid, which has the effect of attacking only the paper, the printed THE ONE POUND NOTE. 253 portions being completely p/otected by the greasy nature of the ink. The print is then laid flat upon a zinc plate, out of which the nitrous paper eats a surface all over, except on the portions opposite the printed parts of the paper, upon which no acid lies. The paper is removed, and common printer's ink is now rolled over the plate, which, of course, is only received upon such parts as can assimilate it, namely, the oily parts transferred from the printing. Phosphorous acid in solution is poured over the plate, cor- roding still deeper the unprotected parts of the zinc, and producing a surface on these parts to which printer's ink does not attach itself. " The process is now complete, and from such a prepared zinc plate any number of impressions may be struck off" As in photography, all the finest efforts of engravers and engine-turners were rendered useless, the smallest lines and the most delicate work being perfectly copied ; while the process had this advantage over photography, that any combination of colours could be printed. Messrs Glynn & Appel's defence consisted in printing the notes upon paper into which some phosphate of copper is introduced when in a state of pulp, along with a small quantity of oily non-drying soap. On the would-be forger wetting a note printed on such paper, the usual nitric acid solution coming in contact with the zinc plate firmly cements the note to the plate by a thin film of metallic copper, which is deposited by the contact of the salts of the copper with the zinc. So firm is the adhesion, that the note must be destroyed before it can be removed from the zinc, — a very profitable beginning of crime for the banker who issued it. The oily soap used in the manu- facture of the paper prevents any attempt to remove the note by chemical means, while destruction of the soap is in turn accompanied by the disappearance of all the printing on the note, leaving a white bit of note paper devoid of any promise to pay. Messrs Perkins, Bacon, & Co. can secure notes, by their patent " facing " process of printing in transparent coloured ink, against both anastatic and photographic forgery ; but, 254 THE ONE POUND NOTE. apart from that patent, the anastatic process is no longer dreaded by engravers. The necessity which was forced upon the banks at an early period of having each note identical with every other, was the means of taking the note business largely away from Scotland to London, as such perfection of manufacture could only be obtained through Messrs Perkins & Co.'s patent process, which no other maker dared to use during the continuance of the patent. Other manufacturers could only ensure that from 40,000 to 50,000 notes would be identical, one pilate giving off that number of impressions before being worn out, after which a new plate had to be engraved, — a task in itself, not only expensive, but extremely difficult of execution, as the most accomplished workman cannot produce two steel plates perfectly similar. The lapse of their patent, and subsequent inventions, have quite upset the well-merited monopoly of the London firm, as any engravers can now attain to the same identity in their notes. The first of the two principal discoveries which have realised this change, consists of printing from electro- types. In this process the original plate may be either of steel or copper, usually the former. From the original, casts are taken in stucco or plaster of Paris, which, when hardened, are placed in a bath of distilled water of about 100 degrees Farenheit, in which are dissolved proportions of carbonate of copper, hyposulphite of soda, and carbonate of soda. The action of a current of electricity from a thermo-electric battery, also of about 100 degrees, when passed through the water, precipitates the chemicals so as to give a coating of copper to the casts, which, thus armour- plated, may be used for printing. Bank of England notes are produced from electrotypes at the rate of about 50,000 daily, to replace an equivalent number withdrawn from circulation in the same time. The second invention to secure identity, is to engrave an original steel plate, which, when hardened, is kept solely to impress its image upon plates of copper. These could be at once used for printing, as in days bygone, were it not THE ONE POUND NOTE. 255 that the softness of the metal compared with steel would necessitate frequent renewal. To obviate this, the copper surface is coated with a layer of steel, so fine as not to interfere with the most delicate lines, yet so hard as to give a much longer life to the plate ; when the steel wears out, it can be renewed without the least injury to the copper bed of the engraving. Before printing, all paper ought to be damped, as where this is omitted, the printing is sure to be defective and unequal. In the Bank of England this is accomplished by placing a number of reams in a chamber, from which the air is pumped out, water being pumped into its place, with the result that in an incredibly short time the solid mass of paper is thoroughly damped ; on being removed, superfluous moisture is driven off by pressure. It is usual with other makers to adhere to the old method of dipping the paper in water by a few sheets at one time, and afterwards pressing it to the condition required for printing. Scottish notes are printed from steel plates, or copper plates steel-faced, at a rate of 1000 per day for one plate, and when completed their approximate weight is as follows : — X. Bank of Scotland . 23 grains 6. Union Bank . 23 grains Royal Bank . 23 5) 7 • Town & County Bk. 24 „ 3- Brit. Lin. Co. Bank 22 35 8. N, of Scotland Bk. 24 „ 4. Commercial Bank 21 )) 9- Clydesdale Bank . 27 „ 5- National Bank 01 >) 10. Caledonian Bank . 21 „ A Bank of England ^5 note weighing 19^ grains. From the difficulty of pouring exactly the same quantity of pulp into each frame, and also of straining off super- fluous water in the manufacture of handmade paper, varying thicknesses occur in different notes of the same issue ; indeed, of two notes cut from the same piece, one might be heavy and the other light, as the pulp may have been shaken more to one end of the frame than to the other, so that the above figures will not apply to every clean note, while to " dirties " or " colliers," as they are called, they are no guide whatever. 256 THE ONE POUND NOTE. Quite a romance might be made of tales that could be told by the Scotch notes, as to the places in which they hav^e sojourned. One dirty Royal Bank note, which had evidently circulated in a greasy population, weighed 27 grains ; while another note of the same bank weighed only 21 grains. One dirty Commercial Bank note weighed 19I grains, and a still dirtier one was 23 grains. Appar- ently " evil communications corrupt good manners " as much amongst bank notes as with bankers. If a note on its first issue gets into the hands of a butcher or grocer, a film of grease or saccharine matter is put on it, which not only does not leave it for a long time, but attracts to it dust sufficient to add materially to its weight. The power of such a note to convey disease is worthy of the consideration of the medical faculty. Differences in the materials of the " size " seem to cause a loss of weight sooner in some notes than in others. The notes of the Bank of Scotland,* the British Linen Company, the Commercial, the National, the Union, and the Town and County banks are all printed by Messrs Perkins, Bacon, & Co., of Fleet Street, London. It is in the marvellous clearness and minuteness of the engine graving that the work of the London firm may readily be distinguished from that of other manufacturers. The broad band at the side of the Bank of Scotland note, upon which is engraved the figure of King William, and the oval medallions bearing the denomination on some of the others, approach more closely to nature's works than almost any kind of artistic effort ; the more they are magnified the more perfect they appear. The celebrated Lizars, in one of hfs designs for the Bank of Scotland notes, produced work quite equal to this, while in general appearance, his note was * The bank's old note is here alluded to, the new note having been issued since these pages were written. This latest production in note manufacture has been somewhat unfavourably criticised, but this is scarcely the place to point out its merits or demerits. The bank would, however, be well advised to withdraw it, and employ entirely different methods in all stages of manufacture. THE ONE POUND NOTE. 2$/ superior, both for elegance and security, to any other Scottish note, and only required to be printed in colours to make it the safest, as it would undoubtedly be the most beautiful note in Scotland. The Royal Bank, the North of Scotland, and the Caledonian Bank notes are engraved by Messrs W. & A. K. Johnston, of Edinburgh, and are beautiful speci- mens of engraving, the vignettes being carefully done, but little attempt is made to secure the note by intricate engine work. The Clydesdale Bank note is engraved by Messrs E. Bacon & Son, of London, and is not beautiful, the three vignettes appear dull and black against the white paper, while the red ink engine work gives it a staring appearance anything but aesthetic. The peculiarity of the two styles of notes is, that Messrs Perkins, Bacon, & Co. " consider the engine-turned parts of the plate a more effectual protection against forgery than the vignettes ; but," they add, " it is very desirable to combine as many kinds of security as possible ; " while the absence of engine-work from other makers' designs, as a predominating feature, is on account of their considering the vignette parts the better security, as requiring greater artistic skill for successful imitation, an opinion in which they are supported by many engravers. On the other hand, nearly all manufacturers and gravers are agreed in looking upon the general effect of notes as an important element in their security. The more minute and intricate the design, the more difficult it certainly is to produce a good copy by engraving; but just in proportion to its intricacy is it easy to imitate the general effect, for of the mass of the public, few remember distinctly the peculiar pattern of minute engine work, although many recognise the leading outlines and general appearance, especially where a well known view heads the plate, such as the King's College at Old Aberdeen in the North of Scotland note. Following this up, the notes designed by Messrs Johnston are less delicate and intricate, but more pronounced in their line work, than those of Messrs Perkins, Bacon, & Co. ; at the same time it has to be admitted, that the extreme intricacy of the London firm's designs must R 258 THE ONE POUND NOTE. prove a very powerful deterrent to forgers, who in these days of educational progress would be more bold than prudent to pass engraved forgeries of slovenly workman- ship. It is not, however, to the engraver's profession that note-makers need now look with suspicion, for the time has undoubtedly come when delicate engraving, once con- sidered the primary security against forgery, must be rele- gated to a second rank, or at least must share an equality with the discoveries of chemistry. Photography and photo- graphic printing have completely superseded engraving as a means of imitation, unless guarded against by special features in the original to be copied. Any one possessed of photographic apparatus, and with no other aid than the light of day, can reproduce in a negative the most intricate engraving it is possible to cut ; this negative can then be placed on chemically-prepared paper coated with gelatine (a process common to all photographers), and upon ex- posure the action of the light renders the gelatine insoluble in water upon those parts alone which require to be printed ; after a time the glass negative is removed, and a charge of printing ink is rolled over the surface of the paper, which is then soaked in water until the moisture swells and detaches the soluble parts of the gelatinous coating, which float off, leaving those portions that have been fixed by the light ; the workman has only to transfer this to a lithographic stone, carefully prepare his colours, and begin to print off forged notes so perfectly identical with the genuine article, so far as printing is concerned, as to defy the most careful scrutiny. Fortunately such w^ork can only be accomplished when the original note is printed in black, or such colours as appear dark in a photograph. To provide against this is the aim of all note manufacturers ; and, so far as is at present known, those notes are safest which are printed in blue tints with a back plate, and protected by red or brown initial or amount scrolls upon the front. The latter is a special safeguard, as where such a note is placed opposite the camera, only the brown ink is photographed, the THE ONE POUND NOTE. 259 remaining blue part making no appearance, while pro- bably the back plate would shine through to add to the confusion. The cost of small notes, including paper, is about id. per note ; those of the British Linen Co. have been calcu- lated by Mr Mackay, the bank's accountant, at r043d., and their large notes at n35d. The other banks may some- what vary from this, but of course only fractionally, the greater or less size of some designs and the amount of ink used making a slight difference upon the total. They are usually estimated for per thousand. When the printing is dried, the notes are numbered by the new numbering machine, after which they are packed flat in lots of one thousand each, and delivered to the bank to be signed. When given out to the tellers they are usually tied in bundles of ^500, made up of twenty-five packages of twenty each, folded in two for security. From the severe handling they receive, small notes are removed from circulation every three or four years, as at the end of that period they become so dirty and greasy that on being paid they are not re-issued. The abolition of the Government stamp on the back of the notes on the commutation of the duties, has enabled the banks to main- tain a much cleaner issue than formerly, when each note burnt implied a loss of at least 6d. The number of notes now burnt is enormous, almost the entire circulation having to be removed and replaced in a few years, although a number remain in circulation for a much longer period, especially in the northern parts of the kingdom. The English people are very fond of reviling the filthy Scots bank notes, — an imputation which is no longer applicable, except to those which happen to cross the Border. It ma}- be observed by any one in the course of bank work, that the" notes received in retirements /rojn EnglisJi bankers are invariably dirtier and more disreputable than any other notes. This does not apply merely to notes received from Yarmouth and similar places, where the fishing population convey a good many notes, but to all parts of the country ; 260 THE ONE POUND NOTE. not only are they dirty, but they are all dirty, a clean note coming back from England being quite a i'ara avis, — a fact which can only be accounted for, by supposing that the English are so fond of them that they do not readily part with them. Each note has its own little bit of history to tell. In addition to the date of foundation on the Bank of Scot- land notes, the beautifully graved medal, representing the Great Seal of Scotland as in 1695, exhibits on the obverse side the motto " Deo favoite" with an equestrian figure of William of Orange standir " on heathy ground, from which a view of Edinburgh is given with its castle rock, set against the Forth covered with shipping, and backed by the hills of Fifeshire. The view is either taken from Blackford or Corstorphine Hill. On the reverse King William is designed Second of ScoticB, AnglicE, FrancicB, et HibcrnicE, — the English title of King William the Third receiving no recognition from the only bank created by a Scottish Parliament. From amid the royal arms the face of George I. looks out from the Royal Bank notes, with the words "Established 1727, Geo. I*^ Reg-" around his head. The British Linen Company also bears the royal arms, by virtue of its " Incorporated by Royal charter 1746;" while upon the right, Britannia is meekly seated with a spear in her left hand, and a twig in her right, representing either the olive branch of peace, or the stalk of flax which indicates the bank's origin. Along the top of the Commercial note is beautifully engraved the elegant sculpture which adorns the facade of their head office in Edinburgh. Peace in the centre is attended by Justice, Plenty, and some other figures, while Literature, Mechanics, Mathematics, and Invention are engaged at the corners in various pursuits. Scotland's patron, Saint Andrew, stands between the branches of his cross in the National Bank note, upon a pedestal surrounded by a very fine trophy of the British arms. The Union Bank note revives the old Edinburgh and Glasgow memories of Sir Wm. Forbes & Co. and the Glasgow Union Bank, by its figures THE ONE POUND NOTE. 261 of Justice and Commerce at the top supporting the com- bined arms of Edinburgh — the Constable's Tower — with the Glasgow tree, bell, fish and bird ; while at the foot are the statues of King Charles II. in Parliament Square and the more noble King William in the Trongate. The Town and County Bank exhibits its office in Aberdeen, with a distant view of the city from above the railway bridge across the Dee. The Clydesdale has the Broomielaw, Dumbarton Castle, and the grand old Cathedral, accom- panied by six somewhat aimless damsels, all drawn in very cloudy weather. On the North of Scotland note is a beau- tiful cut of King's College in Old Aberdeen, still more finely drawn in the large notes of the bank, the dark shadows on the heavy buttresses seeming to throw the building to one side in the small notes, a bias which is redeemed by the noble crown dominating the picture. Last of all, Scotland's youngest bank exhibits its head- quarters in a fine view of the town of Inverness, as seen from the River Ness below the suspension bridge, — an engraving which is scarcely shewn to advantage on a paper that, although very tough, soon becomes like tracing paper, having rather a black appearance. Upon the corners of the note are figures of a shepherdess with her dog and sheaf of corn, while opposite a brawny Highlander, with a badly swollen leg, sits beside a hind which his two dogs have just pulled down. The Union and the North of Scotland bank notes have the advantage of a back plate, — the former being in the shape of an elegant ornamental design into which their name is woven ; while the latter gives its name, date of establishment, and relative Acts of Parliament upon a chaste circle con- taining the arms. The British Linen Company has a very indistinct watermark ;* while the Town and County and the Caledonian Banking Company have none that is visible. The other banks have their own name, of which the Bank * Since the above remarks were written the British Linen Bank have produced a note with a peculiarly distinct watermark. 262 THE ONE POUND NOTE. of Scotland is the largest, and the Commercial Bank (from the lighter colour of the printing) the most distinct. The notes of the Bank of Scotland, National Bank, and North of Scotland Bank, are printed in black, with the denomination in large letters in Indian red ; the Royal Bank, the British Linen Company, and the Union Bank, are in blue and Indian red ; the Commercial is also blue and bright red ; the Town and County in black and green ; the Clydesdale and the Caledonian are black and bright red. In printing the second colours, little care is taken by any of the printers to have the " register " so adjusted that each note shall receive its colour precisely upon the same spot as its predecessors ; an examination of a few of the notes will exhibit such startling differences in the position of the red colours, as would lead to the sup- position of their having been done by design, rather than through carelessness. The Union Bank alone meets public convenience by being payable at two places, Edinburgh and Glasgow ; and the Clydesdale has no deckle edge, all four sides being cut. Such are a few of the features of the Scots bank notes, which have filled, and daily fill, so important a part in the everyday life of the nation. They are evidences of the power of " faith," for surely no other power could transmute pieces of printed paper into rights whereby Scotland can adopt the motto of its first bank, — " Tanto Uberior." THE ONE POUND NOTE. 263 Cbaptcr xviii. The Adaptability of the One Pound Note to England. "Gold, gold, gold, gold! Heavy to get, and light to hold ; Price of many a crime untold ; How widely thy agencies vary I To save, to ruin, to curse, to ble^s ! As even thy minted coins express — Now stamped with the image of good Queen Bess, And now with a bloody Mary." — Hood. *' TT ERE stands Theory, a scroll in her hand full of J^ J^ deep and mysterious combinations of figures, the least failure in any one of which may alter the result entirely, and which you must take on trust, for who is capable to go through and check them ? There lies before you a Practical System, successful for upwards of a century. The one allures you with promises, the other appeals to the miracles already wrought on your behalf. The one shews you provinces, the wealth of which has been tripled under her management ; the other, a problem which has never been practically solved. Here you have a pamphlet, there a fishing town ; here the long continued prosperity of a nation, and there the opinion of a professor of economics, that in such circumstances she ought not, by true principles, to have prospered at all." In these sentences the glowing pen of Walter Scott throws into vivid contrast the dangers of setting up new landmarks and institutions, based upon theories which have never been tested in practice. For this reason almost no attempt is made in the succeeding pages to prove the applicability of the small note to English institutions, upon 264 THE ONE POUND NOTE. other grounds than those which have already stood the trial of a long and varied experience. .So far as possible, precedents will be taken from English banking history ; but as these will be chiefly of a negative character, there is no sound reason, should occasion require, why the rich mine of Scottish finance should not be permitted to add its quota of positive argument. For our purpose. Englishmen are fortunate in not requiring to base opinions upon any theory whatever, as in the hardly earned experience of nearly a hundred years, they have a fund of information from which such conclusions may be drawn as will enable them to decide :— I. Whether this small note reall}^ was the dangerous thing it was represented to be ? II. What were the different circumstances in their country as compared with Scotland, which caused it to be so represented, and finally abolished ? III. Whether these circumstances have been in any way altered since 1826? and, IV. What are the probabilities of success now, were the Acts of 1826 and 1845 to be partially repealed, so far as they relate to one pound notes in England ? In order satisfactorily to answer these questions, it is necessary to go to the very origin of English banking in 1696, when the great Bank was founded. At that time it may be said of the various financial schemers, that if Scotland was scourged with whips, England was chastised with scorpions. Lowndes, Chamberlain, Law, Mackworth, Brisco, and, a little later, the South Sea Company, flourished in one happy family about this time. Fortunately there were not wanting men who could lay bare the delusions gendered by these individuals. Had it not been for the restraining influences of Sir Isaac Newton, John Locke, and William Paterson, or Montague, the evils perpetrated would have been vastly more serious, though perhaps in their very greatness might have been found their cure ; for had Chamberlain and Law been enabled fully to carry out their theories, without let or hindrance, the inevitable catastrophe THE ONE POUND NOTE. 265 would have cleared away, not only the particular evils of the moment, but others which in less aggravated form have come do\\^n to our own time, and which still, by their strength and influence, bar the road of the one pound note. Chief amongst these was the monopoly, granted by the Government of the day to the Bank of England in 1697, as a joint-stock bank of issue, — a privilege which it had no right to sell. The severe pressure upon King William's Government, arising from distress of war, internal disaffec- tion, and the renewal of the debased silver coinage, made them only too ready to transfer a national privilege to a private use, in order that they might be supplied in exchange with the " last louis d'or" which was to carry the day against Le Grand Monarque. By this Act, 8 & 9 William III., c. 20, sec. 5, it was enacted, that during the existence of the Bank of England no corporation, society, or company, of the nature of a bank, should be erected or permitted in England by Act of Parliament. As this left the way clear for private joint-stocks, it was at once taken advantage of by the promoters of the " Money Bank," whose subsequent history gave only too good reason for the additional monopoly given to the Bank of England by Act 7 Anne, c. 7 (1708), of which the famous clause 61 was as follows : — " During the continuance of the Corporation of the Governor and Company of the Bank of England, it shall not be lawful for any body politic or corporate whatsoever, created or to be created (other than the said Governor and Company of the Bank of England), or for any other parties whatsoever, united or to be united, in covenants or part- nership, exceeding the number of six persons, in that part of Great Britain called England, to borrow, owe, or take up any sum or sums of money on their bills, notes payable on demand, or at any less time than six months from the borrowing thereof." This clause, originally aimed for a mere temporary purpose at such concerns as the Money Bank (otherwise the "Mine Adventurers of England "), was not repealed zvhen the necessity for its existence passed azvay, and still exercises its pernicious influence on English banking. William Paterson's shrewd sense had seen, as early as 1696, that the Bank of England would not suffice even for 266 THE ONE POUND NOTE. London, much less for all England ; and after the resigna- tion of his seat in the directorate, he endeavoured, in several instances, to establish joint-stock banks of issue in the metropolis, but his efforts do not appear to have met with success. They were doubtless founded upon premises much too practical and sound to have attraction for the company jobbers of his time. A fair exhibition of the public estimate of his character was given, when the London stockbrokers burned his " Wednesday Club Dialogues " in front of the Exchange about 1700. Great as had been the bank's services to the Govern- ment, in enabling it to carry the war to a successful termi- nation, the price paid was a heavy one, and has entailed an amount of suffering and loss of treasure without parallel in British history. By its ready subservience to the rulers of politics, it has been the means of carrying on wars which should never have been entered upon, adding mountains of debt to debt, until the culminating point was reached at Waterloo. In its frantic race with the South Sea Com- pany, the bank was fortunately beaten by the latter, whose proposals were accepted by Government. Had the result been otherwise, writers might have recorded the bursting of the " Bank Bubble " instead of that of the " South Sea." While thus absorbing to itself so great and powerful privileges, the absorption necessarily left other members of the banking profession proportionally weak, from the depri- vation of their natural rights. The history of English private banking up to this period had been most honour- able. Checked for a time by Charles II.'s seizure of the exchequer, it was beginning to revive under the new dynasty, and would soon have developed itself into larger copartneries more suitable to the time, had the fatal Act of 1708 not suddenly and absolutely stopped its growth, and distorted the whole future of banking in England. The entire episode — the temporar}.' purpose of the law, gradually and conveniently lost sight of by the legislature, who should have left the market to clear itself, which time would inevitably have done — is only one of the innumer- THE ONE POUND NOTE. 267 able instances of similar, though fortunately less disastrous, interferences with temporary troubles. What a contrast is presented in Mr Somers's description of contemporary law in Scotland : — " Banking in Scotland was happy in its exemp- tion from the impecuniosity of Governments, and in its freedom from the weakening effects of the monopoly, and exclusive privilege by which Governments, deeply indebted to their bankers, have pretended to give compensation, in public rights, for liabilities which they were unable or unwilling to discharge." In the reasons for the English legislation, the chief consideration which strikes a modern reader, is the extreme value set upon the power to issue bank notes. From the custom of the goldsmiths, the issue of paper credit had come to be looked upon as banking, and the possibility of carrying on the profession without such an issue was for many years not dreamed of, much less discussed as impos- sible. Indeed, notwithstanding the daily evidence given to the Bank of England, by the London private bankers, after 1780, the great bank does not seem to have realised the ability of a company of any importance to begin banking, until the establishment of the London and Westminster Bank in 1834. Thus in England, as in Scotland, the note issue was looked upon as a primary piece of a banker's business. In view of the importance attached to it, it is amazing that the Legislature of 1708 did not see the dangers attend- ing the lack of reserve security for the notes of these small bankers, whom they were now making t]ie only means of a national note issue, as for many years the notes of the Bank of England were little known out of London, while for nearly sixty years more they did not form a common cur- rency, except in the south or midlands, within a hundred miles of London. This was one of the reasons which led to the sixty-five mile radius being fixed in 1826, as up to that time, from want of branches. Bank of England notes had no general circulation out of London save in Lancashire. Looking at the matter from a theoretical point, the private 268 THE ONE POUND NOTE. issues were on a safer footing than those of the bank, inas- much as the partners of the former were Hable to their last shilling of personal estate* for the whole debts of the firm, while the shareholders of the latter were liable only for the amount of their shares. But here, as in many other cases, that which was scientifically weaker in principle, had all the vast practical power which the prestige and credit of the nation could give ; and in the panics of the then coming century, when the Bank of England stopped payment, it was invariably floated again upon some new method, while the unfortunate country or private note issues had no such favour shewn them, being mercilessly cleared out of existence. At the beginning of the note issues, England suffered from the same fallacy as affected Scotland, but it required a much longer and more severe experience to teach the southern kingdom, that notes in a till were not money. Professor Leone Levi, as has been already referred to, asserts that the same error still exists, in the permission given to the Bank of England to issue notes to the extent of ;^i 5,000,000 without gold. One of the few sensible writers of 1692 (supposed to have been Paterson), in a " Brief Account " of the intended Bank of England, strongly deprecates the unlimited issue of paper upon an insufficient backing of gold, boldly asserting, " that all money or credit, not having an intrinsic value to answer the contents or denomination thereof, is false and counterfeit, and the loss must fall one where or other. All credit not founded on the universal species of gold and silver is impracticable, and can never subsist either safely or long ; ... at least till some other species of credit be found out, and chosen by the trading part of mankind over and above, or in lieu thereof." At a somewhat later date, and subsequent to the first * It was not until many years afterwards (about 18 10; that the heritable property of a bankrupt could be attached in England ; and even then, from the want of public records, it was extremely difficult to find out that any such estate existed, or to what extent it was mortgaeed. THE ONE POUND NOTE. 269 stoppage of the bank * Paterson himself had indicated the dangerous example the bank was giving to other bankers, in not retaining sufficient gold to meet its notes, which had become excessively depreciated : — " The discredit of the coin being clipped or worn, and the discredit of the bank's notes, in consequence of the refusal of payments in good coin, on demand, a^-e the same tiling ; to be safe, they must pay the amount of their notes /;/ coin on demand, ivhatever it juay cost them. ... If the necessity of reforming paper money be clear, can any one doubt of the manner of it ? Was it not a legal security, confirmed by a settled course of payment upon demand when due, that converted paper into money? Can anything but a return to the first settled course of ready payments restore its value ? " These ^^•ords might have been written for 1800 instead of 1700, so per- fectly do they describe the delusions of both periods, and point out the only remedy for each. In its desire to extend its note issues, the bank lost a golden opportunity for doing so, by adopting too high a denomination for its notes ; none were below ^20, and this, at any time too high a sum for current use, was preposter- ously so in 1696, when the state of the coinage caused the most serious distress to all ranks of life, from London to Aberdeen. The stoppage of both countries' first banks was owing pi" imarily to the same cause, — the state of the metal- lic currency ; the want of experience in the banks laying them equally open to attack. As in Scotland, so in Lon- don, small change could scarcely be got ; and an issue of one pound notes would have been no little benefit to England, as it afterwards proved to Scotland. In addition to the heavy discount of 20 per cent, charged on the bank's * The bank, when consenting to carry out the new coinage schemes of the Government, omitted to notice that the same notes they had given out in exchange for old worn silvei", would require to be paid when sent in against them in new coin, worth one-third more than the old. The immediate result was a rush of its enemies with bank notes, to serve their double purpose of ruining the bank and filling their own pockets ; — in consequence the bank stopped. 270 THE ONE POUND NOTE. notes, during its stoppage, the holders of i^20 notes had to submit to other deductions for the mere privilege of getting them changed, apart altogether from the question of confi- dence in the bank. The results of the attack by the London bankers proved that the common people of the metropolis had no sympathy with them, but had confidence in the new bank ; and had the directors availed themselves at once of the need and the confidence, their small notes might have got into the hands of a class wholly out of touch with the private bankers, who, thus deprived of their principal means of attack, — purchasing the bank's notes in large quantities, — could scarcely have forced the bank into failure. The course of banking in England during the first half of last century, appears to have run in the same confined channels as in Scotland. The joint-stock mania had been almost entirely demolished, both north and south of the Tweed, by the bursting of the South Sea Bubble in 1720 ; the only banking concern of any consequence opened for nearly twenty years being the Royal Bank of Scotland, whose proprietors had preserved their talent intact with wonderful prudence, until a suitable opportunity presented itself for laying it out to usury in 1727. In England, where the monopoly barred the way, a very few private country bankers began business, both they and the London houses issuing notes for various sums ; but, precisely as in Scotland, it was not until after the extinc- tion of the Jacobite hopes in 1745-6, that these bankers increased to any great extent. In 1793 Mr Burke stated to the House of Commons, that when he came to London in 1750 there were not twelve country banks in the whole of England ; and allowing for possible error, from want of those statistics always so distasteful to an orator and an Irishman, his estimate cannot have been far wrong, as the universal alarm caused by Prince Charles's invasion must have swept away numbers of country bankers, if they had existed, for the bank itself had to resort to measures to sustain its credit, from which even Murdoch & Co. might have taken a lesson. THE ONE POUND NOTE. 2/1 From the middle of the century the evil of the bank's monopoly began to come into play with greater force ; hitherto it had existed, though its influence had not been felt, from various causes ruling even in Scotland where no such monopoly obtained. One distinguishing feature of Scottish private banking, compared with English, seems to have been that, as a rule (there were many exceptions, doubtless), the rank in social status of the northern banker was higher than that of the southern, and consequently from his better education he was more able to understand and adopt correct banking principles. In both cases these principles were notoriously neglected by many ; but even after their failure, the Scottish bankers were found to be possessed of more ample funds than those of England, and consequently the ////;//r loss was so much less than in the south. From 1750 private banking went on at a great rate, with few serious checks, until 1772 ; and it was doubtless the country issues of small notes, as much as consideration for public convenience on account of bad coinage, which at last forced the bank to issue notes of ten pounds and fifteen pounds in 1759, for these country bankers were perfectly free from all restrictions, and issued notes for sums below one pound in the same way as was done in Scotland, and probably from the same causes. In Yorkshire thousands of sixpenny notes circulated from want of small change. Before adversely criticising the large issue of notes below one pound in the course of last century, the culpable negligence of Government, in failing to provide any other, must ever be kept in view. It would be well nigh impossible to estimate the distress caused by a deficient metallic currency, had the very " small note " issue not supplied its place. So gross was the neglect, that in 1780 an attempt was made to place the coinage under charge of the Bank of England, as no remonstrances had any effect with Government. In 1798 one firm took the law into their own hands by sending bullion to the Mint, where it was coined under payment of the dues. On this becoming 2/2 THE ONE POUND NOTE. known, the imbecile authorities melted it doivn, on the ground that no coinage was lawful until a proclamation had been made. In 17 17 ^^46,000 of copper were coined, and a small quantity of guineas and half-guineas came out in 1737. From this time on to 1787 almost no silver was coined, save £S79'^ hi 1762. In 1787 ^55,459 of shillings and sixpences were put out, and at once passed to the melting-pot, being much too fine to be allowed to pass current by the bullion merchants. So things went on past 1803-4 (when some Spanish dollars were stamped with the king's head) to 18 16, when the first true renewal of the coinage was madeVhich had taken place since 1696. Gold coins had been issued regularly from 1760, but in such small quantity as scarcely affected the prevailing scarcity. These facts may afford some evidence of the convenience of the small note issues of England, weak as their issuers may have been, and also of the acute distress after 1775 and 1777, when all notes below five pound were summarily declared illegal. The British public may well set off the present philosophic dfstinctions of its rulers, as to all currency being a prerogative of the Crown, against the shameful neglect of last century, and invite Sir Robert Peel's school to give finance and currency the same boasted freedom they gave to trade. We now draw near the region of those mercantile storms which periodically swept the private bankers into bankruptcy. The effects of 1772 in Scotland have already been named ; 525 bankruptcies took place in England during that memorable year, the greatest losses being incurred by some of the leading London bankers, who still issued notes. The latter fact is not mentioned as having any connection with the over-trading which led to the failures ; events subsequent to 1826 prove, beyond a doubt, that bank notes have no more effect in producing a crisis than can be as easily accomplished if they did not exist. The reckless advances leading to the failures of 1772 were totally apart from the question of the note issues, except that these might be used to furnish ready cash for discounts, THE ONE POUND NOTE. 2/3 instead of the deposits^ which did not then form a part of English banking. The absence of deposits, or some similar fund, such as a large capital, was the chief reason for the prevalence and conthiuance of the till-money fallacy in England, A large capital was impossible in the great majority of cases, from the limited number and condition of the partners ; and then, in the absence of deposits, the only ready fund — if fund it may be called — consisted of the printed promises lying in their tills, which, when issued, they had neither the means nor the intention of paying All this came out of the Act of 1708, and its withering restrictions. To give a privilege to one company, a rigJit was withheld from all others, except those who could not nse it with public safety. Logic, commonsense, and public right, were alike thrown overboard in the storms of debt and war through which the Governments were carried by the herculean exertions of the great bank. It would have paid England well had her Government left banking free, and raised taxation sufficient to have paid the bank a dividend of 10 per cent, for many years, in lieu of their monopoly. But this could not be ; it would have b^en " unpopular ; " it might have been correct and righteous ! " True," said the Government, " we admit it ; but we prefer to cheat the country without their knowing it, to compelling them to stand and deliver in such an unpopular manner." The testimony of Parnell, Macleod, and other writers, concurs in fixing the seven years prior to 1793 as those in which the bank's monopoly sowed the bitter seed which in that year brought forth such terrible fruit. In these years, in which the three old Scottish banks were deepening their foundations and spreading themselves over the country, let us see how England was endeavouring to accommodate the extraordinary prosperity and advancement of the period. It was the time of invention ; canal making, spinning, weaving, and mechanical improvement were making a new England, and the one dead drag upon the wheels was the banking system. What was required, was not a number of deposit banks alone, or note issuing banks alone, but joint- s 274 THE ONE POUND NOTE. stock banks of deposit and issue, upon some such plan as the Scottish banks, — banks who could provide a currency to supply the deficiencies of the debased coinage, and thus carry on successfully, yet with such prudence as ruled else- where, the various enterprises of the day. The Bank of England gave no real currency ; her smallest note was of ten pounds, only payable in London, and gold was extremely scarce. Of what use, then, could a ten pound note be in the far west or north of the kingdom, or even in the midlands, where the canals were opening up the land to commerce ? Yorkshire and Lancashire were beginning to raise their heads, with their host of weaving and spinning looms, yet they had not a single bank of any size, such as those huge joint-stocks which now carry on their business. Writing upon this period, Mr Macleod, with his usual vigour, remarks, that " as England required a currency, and as it could not have a good one, it had a bad one. Multitudes of miserable shopkeepers in the country, grocers, tailors, drapers, started up like mush- rooms and turned bankers, and issued their notes, inundating the country with their miserable rags." Another writer, Mr Chalmers, quoted by Sir Henry Parnell, points out the dangers of such an irruption : — " The vast business of the country created these banks, and these banks created by their facilities vast business. They tried various projects to force a greater number of their notes into circulation than the business of the nation demanded. They destroyed, by their own imprudence, the credit of their own notes, which must ever depend on the near proportion of the demand to the supply. The whole number of country bankers in England was unknown, their capitals and cJiaracters were unknown ; their imprudence only was known." In this universal increase the Bank of England was not behind ; it enlarged its note issues from ;^6,ooo,ooo in 1779 to ^^9, 160,479 in 1782, an increase of 3,000,000, in which there were no one pound notes, — none less than ten pounds. In 1793, with the Bank of England circulation at THE ONE POUND NOTE. 2/5 £i 1,420,000, war was declared against France, and instantly the whole fabric fell to the ground. From Newcastle to London, and all over England, only a few banks stood firm. One hundred banks suspended payment, and nearly four hundred of the remainder were severely shaken. Of the failures, seven were in Northumberland, twelve in York- shire, five in Lancashire, seven in Lincoln, four in North- ampton, six in Sussex, four in Somerset, and others in different counties. To meet the outstanding notes and other liabilities of these hundred banks, the law of England deemed six hundred partners amply sufficient ; or rather the law of England cared nothing for the whole matter, so long as they could get their funds out of the Bank of England, by bolstering it up in its unjust privileges. Judging from later evidence, there would not actually be so many partners, as, in 1826, out of the nine hundred private country banks only twenty-five had six, and all the others had a smaller number ! For our subject. Nemesis could scarcely have chosen a more fitting time for closing on her victims than the year 1793. Entirely misled as to the cause of the failures of 1772, and irritated by the amount of small notes, Government had prohibited notes below 20s. in 1775, and two years later the embargo was raised to cover all under £$ ; so that t//e total absence of small notes from 1777 to 1797, is one of the strongest and most convincing proofs banking history can afford, that one pound notes are not more conducive to speculation, panic, and failure, than any other form of paper credit. Yet to this fact, as to the whole teachings of experience of nearly a century and a half, Lord Liverpool deliberately shut his eyes, and complacently saw no lesson for English legislators, — another instance of the blind leading the blind, to fall into the ditch of future panics. But there are other points worthy of notice in 1793. First, there was no real necessity for the panic ; second, it was aggravated by the controlling power of the Bank of England, badly applied ; and, lastly, in its latter phase the distress would have been lessened by a small note issue. 2/6 THE ONE POUND NOTE. A popular dread seized the people, who, hearing of a large failure in London, which would probably affect other houses in the provinces, lost all confidence in their bankers, and ran for gold, — not only on country banks, but on those in London, who by this time had largely ceased to issue notes, and relied chiefly on their large capital to do business with. These, pressed in their turn, from their limited partnerships did not, or could not, keep sufficient reserves, and went to the bank, who, seeing rocks ahead, refused all discounts and acconiniodation, wath utmost stringency. Merchants and bankers, who were perfectly good for their engagements could they but have realised their securities, or got advances against them, were compelled to close in large numbers, and the panic increased in intensity as it gradually rolled beyond the banks to the various mercantile classes. With the lower classes, supplied only with the inconvertible large notes of failed banks, and merchants in a similar if not a worse position, the boon of an issue of one pound notes, of any safe bank, against securities lodged, would have been inestimable. There would certainly have been a risk in issuing against securities merely, unless gold were kept in stock, but both the risk and the reasons against such a course would be reduced to their minimum in a time of such national necessity. As it was. Government was forced to give one kind of currency, in the shape of promised accom- modation ; and whenever this became public, the whole panic instantly ceased. From 1793 to 1797 the extreme scarcity of a good currency became more and more serious every year. London bankers had entirely given up their note issues, while those of the country bankers, not having recovered from the blow of the former year, were cut down by one- half, probably as much by want of public confidence, as a salutary fear on the part of the issuers. The disgust at their paper currency which was then instilled into the English nation, began to shew itself in an increased partiality for a gold currency, which they have not yet lost. Unhappily no one seems to have touched or observed THE ONE POUND NOTE. 2/7 the source of the evil ; for while country bankers were blamed and their notes banned, and the Bank of England was accused of various wickednesses, no voice was raised against the vicious laws which, deep down and out of sight, turned the whole ship about whithersoever they listed. At no period of her history had England so urgently needed a good paper currency, based upon specie, though even paper money was then in a highly dangerous condition from the continued dread of invasion ; for, as it has been remarked by Mr Macleod, no paper money, however secured, has ever been known to stand the shock of war. Let the dread of war or invasion enter a country, and instantly paper money is expelled from circulation, being returned to the banks, and gold demanded in exchange. If found to be inconvertible, it becomes depreciated to a greater or less degree, according to the circumstances of each case. Plunged into her foolish struggle with the French republic by Pitt, England was using up her gold currency with alarming rapidity. It had been slightly increased when the country note circulation subsided, but as the Bank of England could not possibly replace the whole amount, greatly as they added to their own circulation of large notes (as a currency practically useless), repeated demands were made on them by merchants for guineas, of which a considerable stock was held. Along with this mercantile drain for internal use, came the war drain for foreign require- ments. The bank itself wow began to feel in full force the dubious pleasure of being the only bank worthy of the name, the privilege which had hitherto given it a full and unen- cumbered power began now to let it measure its responsi- bility. Instead of being supported by other institutions as substantial as itself, it found its movements hampered, and its very existence endangered, by the despairing clutch of country bankers, London merchants, and an impoverished Government, who all clung to it as to the one strong man in a sinking vessel. In 1794 the bank endeavoured to meet the public necessity by issuing £'^ notes, which it did for the first time, and that in the face of an adverse exchange ; 278 THE ONE POUND NOTE. but, notwithstanding this, a smaller currency was wanted, and the drain of gold went steadily on. As Napoleon, in his splendid victories in Italy, svv'ept the enemies of France from his path, the country bankers, gloomily looking for- ward to impending dissolution, were eagerly collecting every ounce of gold the}^ could get, a measure which had no other effect than to increase the demand from the bank, until in December 1796 the bullion sank to iJ^2, 508,000. The state of affairs led a number of bankers and mer- chants to pass the following resolution at a meeting held in the London Tavern : — " ist. That it is the opinion of this meeting, that there has existed for a considerable time past, and does exist at present, an alarming scarcity of money in the city of London ; 2d, That this scarcity proceeds chiefly, if not entirel}', from an increase in the commerce of the country, and from the great diminution of mercantile discounts which the Bank of England has thought proper to introduce in the conduct of the estab- lishment during the last three months." Here, again, is evidence of the effects of the law of 1708, If Scotland gave business for four or five large banks, and a number of lesser but yet strong houses, how was it possible for the one institution in London, harassed by constant Govern- ment demands, to answer the need of such a commerce as that of England ? Her position was doubly aggravated from the retiral of the London bankers from note issuing. These gentlemen, doubtless, saw the danger to such houses as theirs of an issue, and, objecting to keep the reserves necessary to minimise the dangers, had stopped their notes entirely, at the very time they were most required ; and now, looking like children to the great bank which the law had placed over them, they met together to complain because it would not, or could not, grant the accommodation they stood in need of At this point it would be unfair to found any argument on the contemporary condition of banking in England. The dread of invasion was terrible, and the national mind was so unhinged by alarm, that the strongest species of THE ONE POUND NOTE. 279 banking could not have been blamed for succumbing to the frantic demands made on it. Public confidence, always in a precarious state as regards banking in England, was now completely gone, many of the banks closing their doors from mere dread of a run, before there was any immediate necessity for their doing so. It is unnecessary to detail the further events which at last compelled the Bank of England, for the second time in its history, to come to a complete stoppage of payment. The balance- sheet published in 1797 shews the notes outstanding to have been ^^8,640,000, and in the previous February ;^io,909,694, an amount which could only be in the hands of about 800,000 people at the outside, supposing no one to hold more than one note ; so that, in all probability, out of the whole population of England, then about ten mil- lions, not over 100,000 individuals would be possessed of a circulating medium in the shape of Bank of England notes. In the inquiry made by the House of Commons imme- diately after the suspension, the universal testimony of Bank of England directors, country bankers, London merchants, and others, proved that one large bank ivas totally inadequate to the wants of the country, whether as grantors of accommodation, or issuers of currency, metallic or paper ; that even before the war this had been the case, but that since the renewed oppressive demands of Pitt, the bank had been utterly unable to meet the drains of the two classes of its customers, — namely those of commerce on the one hand, and those of an impoverished Government on the other. To satisfy the imperious requests of the Minister, the vastly more urgent claims of commerce were ruthlessly put aside ; and to furnish gold for war, discount and paper money were denied for purposes of peace. The bank directors protested that their hands were tied by the huge advances already given to Government. Had these been repaid, accommodation could have been given to the public, but not otherwise. The merchants and private bankers as strongly maintained, what few denied, that it 280 THE ONE POUND NOTE. was owing to the bank's excessive contraction of its note issue that public credit was shaken, and an universal demand was raised iox guineas. Now this assertion should bear some examination. Public returns shew, that when- ever the bank — the only safe banking institution — began to issue £^ notes, they were so eagerly taken advantage of, that the circulation went up from ten millions in August 1794 to thirteen millions in February 1795, shewing that not only an increased circnlation was required (no matter where it came from, so long as it was safe), but that notes of a smaller denomination were seriously wanted. Yet much as a safe £^ note was appreciated, it was practically useless for ordinary daily buying and selling, — the purchase of food and other articles for individuals or families, and the paying of wages to the nation's artificers. Instead of meeting this demand, most unhappily, within six months of the increase, and before any other step had been taken to lower the amount of their notes, the bank was compelled to cut down its issues with a considerable severity, in order to meet the monstrous demands of the Government, until, in February 1797, that is, in two years only, the bank's circulation had shrunk — partly from its own will, and partly by external pressure for gold — from thirteen mil- lions to eight millions, a decrease of 39 per cent. Serious as this must have appeared to the merchants and others, to whose evidence reference has been made, the diVQdi primarily affected was small, being confined chiefly to London ; and from the large denomination of the notes, only a very small proportion of the inhabitants could be possessed of them, — but that small proportion was largely made up of London bankers, many of whom acted as agents for the country banks, and through them the secondary ejects of the restricted circulation were felt If bank notes were not to be got by the London firms, clearly they would be compelled to look sharply after any advances they, as agents, might be asked to give to their country employers. In this way incon- venience was spread all over the country. The bankers there, discovering the difficulty of their London agents to THE ONE POUND NOTE. 281 meet their drafts, of course restricted their issues in turn, lest they should be returned against them in such quantity as would necessitate the granting of bills on London in pay- ment. Throughout the provinces the most intense annoy- ance was manifested, — growing all the more acute, as the people realised their powerlessnessto help themselves. Silver was debased, and was nearly as unreliable as in 1696 ; gold could only be got with the greatest difficulty ; and between these and the £$ note was a great gulf fixed, across which the insane Government declined to erect even a Jyons asiiwriiin. How the lower middle classes endured the evil so long is still a mystery ; but it was fortunate that the bank was at last compelled to stop, before the misery had reached greater dimensions, as Pitt now saw the necessity for doing something to remedy the distress, of which he himself had been a principal cause. His prime remedy was, as every one knows, " The Restriction Act." Bank of England notes were declared to be legal tender, and the bank was to pay no more gold except in a few specially defined cases. But while the fountain of gold was thus sealed up, 710 provision was made for securing the country bankers, who were liable to meet their notes in gold, on pain of legal " distress," unless they were paid within three days after the demand. The great- est benefit, however, was yet to come. Passed chiefly as a sop to Cerberus, the Act of 1797, cap. 28, permitted the issue of notes below £^, both to the bank and to all country bankers. /;/ this time of national emergency, the one pound note carried the country through its difficulties. The demand for gold stopped whenever these notes were issued, and in consequence of the exchanges turning in favour, specie- came pouring into the country. The London merchants were not to be put off merely with permission and good intentions ; so they met again in the London Tavern, and passed resolutions to the effect, that it was absolutely essential that the bank should greatly increase its discounts and accommodation, in order that a larger currency might be obtained for circulation amongst the 282 THE ONE POUND NOTE. public. These resolutions were passed in face of the facts that the bank's circulation had never been higher than in their own time, and that it had been doubled within twelve years. The scarcity which was caused was not merely by the necessities of increased trade, but b}' the stocks of the bank's notes being locked up as //// money by many London and country banks who had timidly given up their issues. The prime cause of the evil was still the noxious monopoly, — everywhere the monopoh', which, like a great mist, hung over the land, from Berwick to Beechy Head, hiding the sun, preventing natural growths, yet fostering those para- sitic invertebrs, who can but cling to something mightier and stronger than themselves. The Government was, of course, primarily at fault for permitting the system, but the bank itself is not less blame- worthy for its arrogance of the rights of others. When the country lost all confidence in the currency of its private bankers, for whose weakness the monopoly was solely responsible, the latter again came in to prevent the estab- lishment of joint-stock banks, such as those of Scotland, whose branches could have filled the vacuum. Left with- out a provincial currency, England's bank refused to help the country whose mone}' maintained it, and whose rights it had absorbed ; it \\-ould neither open branches, nor allow any other joint-stock bank to come into existence for that purpose ; and, lastly, it only got into direct touch with the working people of England when it was compelled to put forth an issue of one pound notes. How it did so, and with what want of precaution, will be shortly noticed. To follow the bank's career through the mazes of the long years of restriction would serve little purpose ; their action has been severeh' criticised, and can only be justi- fied on the ground of national emergenc}-, if it is to be justified at all. Freed from the necessity of paying gold, the directors fully met the wishes of their former critics, and issued an enormous circulation, which soon became and remained depreciated, though, according to the happ)- ideas of the time, their depreciation was wholly ascribed to THE ONE POUND NOTE. 283 the high price of gold. Never throughout its career had the old many - sided delusion of till money seen such glorious days. P^or nearly a quarter of a century it reigned supreme at the centre of the world's finance. Its myrmi- dons were engraved, printed, and scattered broadcast over the land in return for good or bad bills of exchange, which had their origin in veritable goods and gear. This was the time of high dividends for the bank, for, in spite of forgeries, their profits were great. Parliament resolved that cash payments should still be postponed ; and the bank direc- tors, after one assertion of their ability to meet their obliga- tions, gave no further opposition to a system which so prodigiously increased their gains. The country bankers, though not protected by legisla- tion, seem to have been as little pressed as those in Scot- land, and accordingly took advantage of the immunity from demand to extend their issues as far as possible, until the rise in prices, from the lowering of that of paper money, brought about the inevitable rush of imports, fall in the exchanges, and demand for gold for exportation. Cause and effect were utterly lost sight of, and the only Remedy pro- posed was an increased paper circulation, with the certain result of its further depreciation far below what could be explained by the difference in the bullion points. As the exchange fell, the price of gold rose above the mint price, or its supposed value in bank notes, until, in 18 14, it touched £^. 4s. per ounce. In 1779 we have seen the bank's circulation (all large notes) was ...... ^6,000,000 In February 1793, also large notes, it stood at For the first six months of 1799 it was „ „ 1S04 „ . 1810 „ . 1 1,428,000 1 3,000,000 1 7,000,000 20,000,000 In the last-named year the bank directors maintained the impossibility of an over-issue of their notes, a notion pronounced to be most dangerous by the celebrated Bullion Committee of that }'ear, who saw the real cause of the high price of gold in the unlimited issue of intrinsically worthless printed paper, issued without any provision for its absorp- 284 THE ONE POUND NOTE. tion or retirement. Parliament refused to listen to reason, and having supported the directors in their false views, a further increase at once took place in the notes, with the intention of helping commerce, and thereby raising the exchanges. From January to July 181 1, the circulation was . ^23,471,000 181 3, „ • 23,939,000 „ „ 181 5, „ . 27,155,000 From July to December 1817, „ . 29,210,035 In 1 819 the true remedy was proposed, and cash payments were gradually resumed from 1820 ; the true balance between gold and paper being restored by a reduction of the latter by nearly ten million pounds, seven-tenths of which was made up of one pound notes, the steadiest and most truly useful part of the whole circulation. The country bankers all this time were no wiser in their generation than their betters, and appear to have had their full share in the universal over-issue, with this difference in the result, that they got all the blame of the over-trading and speculation when subsequent committees of Parliament inquired info the affairs of the market. They evidently found the non-cash-payment plan to pay, for between 1800 and 181 3 they increased in number from four hundred to nine hundred and twenty-two, scattered all over England, Some houses employed and paid persons to travel round the fairs and markets, taking up notes of rival banks in exchange for those of the banks who employed them ; they were called " money changers," and received substantial commissions for their work. One pound notes were speci- ally easy to change in this way, and when the absurdity was made public, as usual in England, or rather in London, these notes were re-declared to be the cause of all the rise in rents and prices which afflicted the nation. Throughout the whole period from 1797 to 1820, what- ever responsibility may rest upon the /«;^^ 7iotes for their share in the speculations of the over-issue, it is certain that the country would have come to a dead-lock had it not been for the one pound note as a small currency. In 18 17, of THE ONE POUND NOTE. 285 the total circulation of ;^27,ooo,ooo, one pound notes, as ma)- be seen from the following details, amounted to 28"5 per cent, of the whole; and excluding;^ 1000 notes and bank post bills, were 35 per cent. Circulation of 1817. 5 „ 3,120,130 10 „ 3,637,670 20 „ 1,822,340 30 „ 667,860 50 „ 1,824,000 TOO „ 1,406,620 200 „ 643,390 300 „ 611,820 500 „ 570,400 1000 „ 3,702,190 Bank post bills 1,389,260 ^27,169,390 Their use as a currency, and their total absence from those fluctuations so often ascribed to them, is absolutely proved by the returns to the House of Lords' committee of 1 8 19. For the three previous years one pound Bank of England notes were upon an average i^/, 546,701, and large notes ^^19,837, 841. The extremes were as follows : — Small notes, highest, August 1817, „ lowest, April 17 19, Large notes, highest, July 15, 1817, „ lowest, March 15, 18 19, Small notes, highest above average, „ lowest below average. Large notes, highest above average, „ lowest below average. ^8,035,340 7,168,960 23,507,020 17,222,310 ^488,639 377,741 ^3,669,179 2,615,531 Difference between extremes, — Small, ^866,380 ; Large, ^6,284,710. During all the panics of 18 10 and 181 5, with their pre- ceding overtrading, a few hundred thousand pounds covered the fluctuations of the one pound note, the principal varia- tions being in the large notes. In 18 17 the bank intimated 286 THE ONE POUND NOTE. that all one and two pound notes dated prior to January 1815 would be paid in gold ; but the public knew when they had got a good medium of exchange, and only availed themselves of the offer to the extent of about one million. Mr Francis, in his history of the bank, ascribes this to their circulating amongst the working classes, to whom they were a great boon ; and adroitly points out the difference between their conduct and that of the bullion speculators holding large notes, who, when their turn came to be paid in specie, " ran " to the bank in crowds to draw gold, in the hope of making their profit out of the transaction, — proving that, however small note holders may be accused oi panic in time of panic ^ the large note holders are the dangerous men to the banks in ordinary years. By the Act of 18 19 one pound notes had been doomed to withdrawal in the year 1824; but as this decision had been come to upon some finely spun theories of Mr Ricardo, which events proved to be fallacious, the distress of 1822 compelled the Government to pass the Small Note Act of that year, permitting their continuance until 1833. In the following year the joint-stock mania began to develop itself, having received its first impulse from the lowering of the interest on i^2 15,000,000 of national debt ; such a reduction in their income leading many to look for a still lower rate, and exciting a feverish anxiety for any scheme, however absurd, which might allow of a higher profit being earned. When making payments on this account, the Bank of England was so ill-advised as to issue its notes in large quantity, in the face of an adverse exchange, thereby adding to the confusion. Mr Henry Ayre, in his " Financial Register," says : — " Attempts have been made to shew that the country bankers were the primary cause of these disasters, but an examination of the facts prove incon- testibly that this assertion has no foundation in fact." Lord Liverpool, in his violent speeches against the country bankers in 1826, asserted that their issues shewed a very large increase in the three years preceding the panic, giving as his reason for believing so that they had paid a. larger THE ONE POUND NOTE. 287 sum to the stamp office for note stamps tJian usual ! He could scarcely have taken a more delusive means of calcu- lating their circulations. The returns of stamps of the three Scottish chartered banks at the same period are most unequal, and bear no proportion to their circulation, such as would enable the reader to judge of the increase. There is another reason for the rise in the stamp duties, which does not appear to have been mentioned or thought of by his lordship. Chiefly through their own neglect of good engraving, the British banks were almost at their wits' end at the time to devise proper checks against the numerous forgeries of their notes. Again and again, particular banks, at great expense, were compelled by some attempted forgery to call in all the notes of a certain issue, and as there was no hope of the Government refunding the stamp on the back, the old notes were simply burned, and new ones stamped in their place, without the stamp office knowing anything of the reasons for the change. In this way very large sums of duty went to swell the stamp revenue, having absolutely no connection with increased circulation, although, with peculiar shortness of vision, no other possible reason could be seen by Lord Liverpool. When at last the real amounts of the circulations were got, it was found that they were actually smaller than they had been for some time, except in 1825, when they were somewhat higher. But the discovery did not in the least affect the Prime Minister's decision,- — he had made his assertion, arrived at his conclusion, and saw no necessity for altering his proposals. One important cause of the increase of country circula- tion in 1825, will probably be found in the action of the Bank of England, who called in all their small notes, amounting to nearly ;^7 ,000,000, in 1824-25. Such an issue, circulating as it did over a considerable part of England, could not be permanently recompensed by the gold paid by the bank in exchange, as, from the constant determination of specie to the capital, the provinces were in a very short time deprived of seven million pounds of their daily cur- 288 THE ONE POUND NOTE. rency. Yet because the country bankers were almost compelled, by national requirement for a currency, to issue their notes in larger amount to replace this zuithdrawal, Mr Tooke, and other writers, use their action as an argument against them, and assert that they added seven million pounds to the currency, solely for their own speculativ^e cus- tomers, and that this- small note paper produced the panic of 1825. If so, why was Scotland so completely exempted from the scourge ? or why does Mr Tooke .elsewhere admit, that the issue of one pound notes by the Bank of England stopped the distress? In his work on "The State of the Currency," the same writer states that the Bank of England was saved from a " run " by the contraction of the country currency; when the real fact was, that that contraction, being caused by the failure of the country hd,n]is, produced a run on the bank, which was only stopped by their again issuing one ponnd notes to replace those of the failed banks. The foreign loans floated at this time amounted to ^^48,000,000 in five years, to which hundreds of millions fall to be added for other projects. In all this the small note circulation had almost no place, the transactions being carried on by other forms of credit. Of necessity, as prices rose, the purchasing power of notes fell, thereby increasing the demand for currency by the people, who required the same amount of commodities, but now needed more notes to purchase them with. The Bank of England and the country banks were both compelled in this way to increase their issues, though not nearly in the same proportion as the rise in prices. The bank shews an increase of ^^4,000,000 compared with 1823. During the restriction period, it had been the excessive issues of notes which raised prices, but in 1825 the high prices were the primary cause of the increase in notes. The bank directors were shrewd enough to see the coming danger, and contract d their own issues by refusing discounts ; but unfortu.iately their attempted remedy was ludicrously absurd, ^\•hen they called on the Government to recall the Act of 1822, and exclude small notes at once from circulation. Prices, which had run up THE ONE POUND NOTE. 289 to fabulous amounts, suddenly came toppling down.* Failure followed failure, until the notes of the country banks were completely discredited. London bankers came next, and the bank itself was severely run upon. By the irony of fate, it fell to the poor, despised, one poimd note to be again the salvation of England. Messrs Gurney & Co., of Norwich, placed a pile of Bank of England small notes on their counter, and they were troubled no more. The Bank of England, which had stopped the issue of these notes, by mere chance found a box containing nearly iJ"700,ooo ; and, according to the testimony of Mr Har- mer, one of its directors, — " They worked wonders, and it was by great good luck that we had the means of doing it ; because one box containing a quantity of one pound notes had been overlooked, and they were forthcoming at the lucky moment. As far as my judgment goes, it saved the credit of the country T Before glancing at the remedies proposed by Lord Liverpool, it may be well to point out two of the principal reasons for the unconquerable aversion exhibited by the Bank of England to the one pound note. Prior to 1797 there had been no such aversion, the probable reason for their not being issued lying in the fact that the bank was a Government bank, or a bankers' bank, but not particularly a national bank in the sense that the large Scottish banks are. A gold currency was always fairly plentiful in London, and the provinces, so far as the bank was concerned, were left to look after themselves. Small notes, from their number, were both ex- pensive and troublesome to prepare and keep in circulation ; so that as the bank had abundant other means of getting rid of its capital in advances to Government, there was 1824. 1S25. 1826. * Cottons, 9d. IS. 6Xd. 7Xd. Coffee, 58s. 88s. 50s. Saltpetre, 20s. 36s. 23s. Silk, IIS. 6d. 17s. IIS. Tobacco, 2Xd. T 6Xd. 3'^d. 290 THE ONE POUND NOTE. no inducement to make a profit off these notes, which, in addition, were supposed to be the first portions of a currency affected by a " run " or rumour of panic. While this was the state of things up to 1797, after that year the bank had no objections to launch out a small note currency of seven millions, for which it could not be called upon to pay coin, and accordingly a large profit was made. " Runs " were impossible ; numbers would be lost and burnt, all adding to the profit ; so that, had other things been equal, the one pound note might possibly have had its life spared.* But unfortunately a weak spot was discovered in the bank's armour, by the criminal classes of England who made their ignorant countrymen their prey. Supposed to be merely a temporary expedient, no care had been taken, in preparing the notes, to make them of a character difficult of imitation. On the contrary, they were as bald and simple as the old notes which illustrate the previous chapters ; the engraving was poor, the printing unequal, and even the paper did not present the beautiful appearance it now does. In 181 8 the Royal Society of London took up the matter, and invited communications from the London engravers. One of these, Mr Beaumont, says : — " Forgeries of Bank of England notes are so frequent, because they are so easy of imitation. They are of inferior workmanship to common engraved shop bills. An apprentice to a writing engraver, of two years standing, by three or four days work, is able to copy a bank note plate so that ordinary judges cannot tell the genuine from the spurious. There are not less than ten thousand persons in this country who are able to engrave successful imitations of Bank of England notes, and nine-tenths of these are in needy, and many of them in distressed, circumstances." Similar testimony was given by all the other witnesses regarding the small note * It is surprising how the Bank of England did not discover what evil things small notes were, until the resumption of cash payments forced it to pay them in gold. ^.„ vo,^ ^^ _ - -, ^ ^ yd\?.\\mi jq o\ )ou " aijojyj >|iTug b jo U3iapd branches, 78, 129, 143 ; aban- don trade, 83 ; notes refused, 85 ; circulation of, 121, 133, 135 ; private bill, 207. British trade, 302. Bullion Committee of iSio, 283. CAITHNESS Bank, 138, 147. Caledonian Bank, 164. Campbell, John, land mint, 25. Cash credits, 52, 53, 178, 179; increase note issues, 54, 173, 176, 178, 179 ; restricted, 82. Cash payments. See Bank of England. Central Bank, 162. Chalmers, Mr, remarks on Eng- lish banks, 274. Chamberlain, Dr, 4, 25, 264. Charles, Prince, 7, 75. Cheques, 177, 179, 214. Childers, Mr, proposals for gold currency, 300, 301. Circulation, 230. See Notes ; Bank of England ; Scotch banks. City of Glasgow Bank, 94, 164, 174, 197, 198; failureof,203-205. Clearing House, 239, 240, 241. Clydesdale Bank, 145, 162, 164; opens in England, 202. Cochrane, Andrew, 35, 42. Coinage, state of, 1 7, 1 8, 1 69, 1 79 ; amount in 1707, 18 ; renewal of, 137; neglect of by Govern- ment, 271, 272 ; cost of, 300. See Currency. Commercial Bank of Scotland, — begun, 127 ; branches, 129- 132, 145- Continental rivalry in trade, 302, 303- Country banks, exchanges of 3i8 INDEX. notes, 242. See English banks ; Private bankers ; Local bank- ing. County meetings on state of paper currency, 61, 64. Coutts & Co., John, 9, 43, 165. Crimes, in, 112, 140-143, 251, 252, Cruikshank's, George, note, 291. Cumberland, memorial by people of, in 1826, 297-299. Gumming «S: Co., 57, 91, Cupar Bank, 126, 138. Currency, metallic, in 1707, 18 ; scarcity of, 14, 18, 65-67, 167- 170, 179 ; causes failure of Bank of England, 269 ; injures trade, 272, 276 ; how scarcity aggravated, 66 ; cost and mode of transit, 20, 107, 300 ; silver the common, 21 ; of England and Scotland contrasted, 154, 155 ; not increasing propor- tionally, 214. 5i?(? Gold; Silver. paper. See Notes. r^AIL V Telegraph on Com- '^ panies Act 1879, 206. Darien Scheme, the, of the African Company, 4, 11, 13, 24. Dempster & Co. See Dundee Bank. Deposits, 52-56, 90, 96, 100, 104, 132, 176, 177, 178, 181, 201 ; how begun, 171, 173; danger of, 198-200 ; how affected by gold till-money, 219 ; increase of, 221 ; not common in Eng- land, 147 ; absence of in Eng- land maintains till - money fallacy, 273. receipts, 132. Depreciation. See Bank of England ; Notes. Dividends, 96. See Bank of England. Douglas, Heron, & Co., 66, 83, 84, 87-90, 174. Drafts on London, 121, 122, 143, 145. Dublin exchange on London, 120. banks, note issues, 120. Dumfries Commercial Bank, 138. Dundee Bank, 64, 70, 81, 88, 91, 100, 105, 106, 107, 113. Union Bank, 127, 161. Banking Company, 83. Commercial Bank, 103, 145. Dunlop, Houston, & Co., 42, 47, Duty on notes. 112, 139, 140, 183, 184, 194, 195, 287; amount of, 218 ; law of, 226 ; rates of, 227 ; commutation of, EASTERN Bank of Scot- land, 145, 164. East Lothian Bank, 127, 138. Edinburgh bankers' trade in exchanging notes, 48, 65, 81. society for insuring houses, 28. English banking, Lord Liver- pool's opinion, 296 ; opened to joint-stocks, 297. country and private banks, failures of, 114, 115, 272, 275, 307 ; business, 148, 163, 186, 187 ; checked, 266 ; number of, 270, 271, 274, 284; effect of fluctuations in Bank of England circulation on, 280, 281 ; during Restriction period, 283, 284 ; not responsible for 1826, 286, 287 ; forced to ex- tend small note issues, 287 ; Lord Liverpool's accusation, INDEX. 19 English country and private banks {cotiti/iued) — 295 ; difficulty of exchange of notes, 306 ; legislative divi- sions in, 312. note issues, 148, 274, 281, 284, 286, 287 ; dread of for- gery, 311. Engraving. See Manufacture of notes ; Bank of England. Equivalent Company, 24, 27, 31. Exchange companies, 193. Exchanges, commercial, 21, 67, 71, 100, 123, 124, 145 ; London and Dublin, 120 ; on Paris, 124. of notes, 41, 43, 47, 81, 82, 87, 185 ; opposition to, 88 ; effect on Douglas, Heron, & Co., 88, 92, 93 ; Maberley & Co., 143, 144 ; Effect, in 1797- 1819, 121, 122, 124; Western Bank, 196 ; economised and perfected, 202 ; self-imposed, 210, 211 ; stringency and cost of, 210 ; in England, 211, 306 ; history and rules of, 236 et seq. trade, 81. FAILURES. See English; Glasgow ; Leith ; Douglas, Heron, & Co. ; City of Glasgow Bank. Fairholme & Co., 57. Falkirk Banking Co., 103, Union Bank, 126, 138. Fife Banking Co., 126, 147. Fleming, Mr, evidence in 1875, 217. Forbes, Sir William, & Co., 9, 43, 57,83,91, 107 ; "runs" on, 114-116 ; note issue, 108, 109; circulation, no, in, 117, 135 ; agents for nine banks, 136, 137 ; join Glasgow Union Bank and Union Bank of Scotland, 165. Forgery of notes, 15, 16, 17, 80, n I, 139, 140, 142, 233 et seq., 243, 252, 253 ; increases stamp duties, 287 ; Bank of England notes, 290 ; execu- tions for, 291, 292 ; reasons for epidemic of, 292 ; English fear of, 3n. Fowler, Mr Wm., M.P., 304. Free trade, 181 ; lines on, 9. French revolution, 11;}, et seq. GALLOWAY Bank, 138. Germany, checks on banks, 304, 305. Gladstone, Mr, opinions on paper currency, 313. Glasgow Arms Bank, ^7. See Murdoch & Co. and Ship Bank, 162. Banking Company, 127, 162. Banking facilities in, prior to 1749, 42. Commercial Bank, 127, 138. failures in, 102, 132, 147, 195 et seq., 203 et seq. Ship Bank, 87, 162, 165. See Dunlop &l Co. Union Bank, 162. See Union Bank of Scotland, 127, 138. "^ Gold, 100; price of, 118, 119, 124, 216, 283 ; not missed in Scotland during Restriction, 121 ; in foreign exchanges, 188 ; not hypothecated for notes in Scotland, 188, 217, 218 ; waste of, in currency, 213, 300 ; production of, 214 ; scarcity of, 216, 272, 301 ; 320 INDEX. Gold {continued)— causes fall in prices, 301 ; held against notes, 217, 218, 221 ; as till-money, 219 ; pre- ferred in England, 276 ; cost of, 300, See Currency, metal- lic. Goldsmiths, 4, 5, 267. Goschen's, Mr, opposition to Scotch banks in London, 202. Government action for lowering price of gold, 1 19. bank of issue, lo"] ct seq. See Notes, state issue. Greenock Banking Co., 103. Gurney & Co. stop a run by small notes, 289. HERITABLE property may be attached for debt, 1 53, 154,268. Hogg & Co., 57. Holland, John, 10. Hunters & Co., loi, 165. IUDESLEIGH, Lord. See Northcote. Inglis, James, & Co., 162. Ireland, failures in, 138. See Dublin, Belfast, banks in, 301. JEVONS, Professor, 220, 299, 300. *?; Johnston & Lawson, 84, 87. Johnston, W. & A. K., 249, 257. Joint-siock banks, 125, 127, 138, 162 ; in England, 297, 305, 307- companies, 146, 295, 302. TV'ILMARNOCK Bank, 138, Kinnears & Co. and Kinnear & Smiths, 57, 161, 162. I AND Mint, The, 25, 26. -V Law, John, 3, 25. Law, as to note issues, 166, 223 et seq. See Shareholders ; Notes ; Summary diligence. Legislation of 1826, 147 ei seq. Leith Bank, 103, 202. losses in, 136. sugar house, 58. "Letters of a Plain Man," 151, 180. Levi, Professor Leone, 214, 268. Licenses, 139, 218, 226. Limited and unlimited liability. See Shareholders. Liverpool, Lord, 147, 150 ; on English banks and banking in 1826, 286, 287, 295, 296, 297. Livingstone, Mowat, & Co., 41. Lizars, A. H., 249, 256. Loans, foreign floated, 146, 288. Local banking, 160. London bankers give up note issue, effects on Bank of England circulation and their own business, 276, 278, 281. merchants' meeting, 278, 281. exchange on Dublin, 120. exchange on Paris, 124. MACADAM, John, & Co., 83, 100, lOI. M -aulay. Lord, on coinage, I 7, 176. Ma:koull, James, 141. Macleod, H. D., 173 ; on Eng- lish banks, 274 ; on paper credit in time of war, 277. Maberley & Co., origin and INDEX. 321 contest with Scottish banks, 143, 144, 162. Machinery, effects on trade, 215, 216. Malagrowther, Sir Malachi, let- ters of, 148 et seq. Mansfield, Ramsay, & Co., 57, 91. See Ramsays, Bonars, & Co. Manufacture of notes, 243 et seq.j colours for printing, 251, 262 ; cost of, 218, 259 ; design and inimitability, 250, 256, 257 ; electrotypes, 254 ; engraving, 139, 248, 249, 254, 255, 293 ; general effect, 257, 294 ; paper and watermark, 244, 245, 246, 255 ; photographic forgery, 251, 258 ; printing, 244 ; an- astatic process, 252, 253 ; weight of notes, 255. Manufactures and state of coun- try, 74, 75> 125, 138, 215, 273, 274, 302. Mason Barrowman Co., 61. Merchant Bank of Stirling, 103. Monopoly. See Bank of Eng- land ; Scottish banks. Montrose Bank, 161. Murdoch & Co., 42 ; contest with Edinburgh banks, 43-47 ; notes refused in Aberdeen, 61 ; failure, 114. NAPOLEON, on Bank of England notes, 119 ; vic- tories of, 278 ; opinion of his conquerors, 313. National Bank of Scotland, 145, 161. debt, 286. Newcastle banks, 114, 136. Newton, Sir Isaac, 264. Northcote, Sir Stafford, 206, 217) 313. See Lord Iddesleigh. North of Scotland Bank, 162. Notes, — Common law right to issue, 4, 5, 13, 67, 267 ; Lords Coke's and Holt's decisions, 4, 5 ; goldsmiths, 4 ; legal deci- sion in 1875, 6 ; Paterson and Chamberlam on, 5 ; nick- sticks, 42, 179 ; profit from, compared with deposits, 53, 96 ; country notes refused, 47, 64, 127 ; exchange trade in, 48, 65, 81 ; bonds lodged for private issues, 48 ; North American issues, 60 ; depre- ciation of, 64, 1 18-124, 135, 269, 283 ; travelling agents employed to extend issues, 64, 88, 284 ; their duty changed from capital to currency, 95 ; runs for, 18, 102, 107, in, 114, 115, 197, 288; Scottish notes in 1797 and Restriction period, 117, 118; capital a guide for issues, 173 ; errors in issue, 172 ; M. Wolowski's opinion of, 176, 177 ; amalga- mation of issues, 189 ; double duty in banking, 201, 202 ; dirty, 255, 256 ; bits of his- tory, 260, 261 ; state of Go- vernment issue, 308-310. ^i note in England, 264 et seq.; prohibited, 275, 286 ; its value in 1793, 276; per- mitted, 281 ; benefit, 1800 to 1826, 284, 285, 289, 297, 299; not useful for speculation, 285, 286 ; had not a fair chance, 299 ; waste and expense of gold coinage saved by, 300. ^i note in Scotland — £1 sterling (;^I2 Scots), first issue of, t4, 15, 16, 17 ; aver- INDEX. Notes {cojttini(ed) — ages of, 53, 182, 221 ; issue stopped by old banks in 1768, 81 ; preferred to gold, 131, 179 ; attempts to abolish, 147 ; as a currency, 168, 169 et seq.; place in political economy, 168, 169, 171, 175, 178 ; place and power, 175 ; not used for speculation, 175,286; amount of, 217 {sec Averages) ; gold held against, 217, 218 ; profit from, 218 ; saving as till- money, 219. Large and small, con- trasted, 178, 184, 185 ; fluctua- tions, 197 ; in note exchanges and circulation, 212, 213 ; number of transactions, 53, 54, 212, 213. Circulation, time in, 54 ; increased by private bankers, 56 et scq.j prices how affected by, 63, 119, 283, 288 ; effect of Act of 1765, 70 ; restricted by old banks, 85 ; Douglas, Heron, & Co., 92 ; during Re- striction, 133, 135, 136 ; addi- tions to in 1825, 145 ; amount of in 1825, 159 ; in 1845, 192 ; statistics of, 221. Law of, 41, 42, 223 et scg.j excluded from limited liability, 206, 207 ; definition of, 225 ; who may issue, 225, 226 ; re- turns to Government, 228- 230 ; printed dates, 229 ; penalties, 229, 230 ; legal ten- der, 230, 231 ; treated as cash, poinding, recourse, 231, 232 ; lost, stolen, 70, 224, 231, Guinea, Adventures of a, 151, 180, 181. Guinea, 80, 81, no, in, 248. Notes, — under £1, 14, 61-64, 67, n6, i\7, 271, 275. Over-issue of, 47, 63, 67, 172, 174 ; effect on foreign ex- changes, 167, 178 ; City of Glasgow and Western Banks, 200, 204 ; checks on, 304. See Bank of England ; Bank of Scotland ; Duty ; Ex- changes ; Forgery ; Licenses ; Option clauses ; Summary diligence ; Till money. OAKES Son, 118. Option clauses, 41,45, 46, 60 et seq., 1 74. Overend, Gurney, & Co., 201. PAISLEY Bank, loi, 162. Commercial Bank, 164. Union Bank, 103, 162, 165. Panics, — 1772, 88-91, 272 ; 1793, 114, 274-276 ; 1797, n4, n5, n6, 278, 279; 1826, 147, 286-289 ; since 1826, 297 ; 1837, 163, 164 ; 1847, 193 ; 1857, 195-201 ; of 1866, 201 ; traditionary fear of, in England, 306, 307, 3n. Paloeconomicus, letters of, 151. Parliament. JT,?^ Acts of; Lords' and Commons' reports, 54, 152 et seq., 202, 279, 283. Parnell, Sir Henry, 122. Paterson, William, 3-6 ; opinion of Bank of Scotland, 24 ; life of, 4, 8 ; ideas on convertibility ■ of notes, 220, 264, 265, 268, 269. Peel, Sir Robert, address to, 152 ; Bank Act of, 185 et seq., 193. See Alison. INDEX. 323 Perkins, Bacon, & Co., 250, 256, 257. Perth, banks in, 63, 64, 84, 162, 165. Population of Scotland, 18, 154. Post-office service between Lon- don and Edinburgh, 60. Prices in relation to circulation and purchase power of notes, , 289, 301. See Notes ; Bank of England. Private bankers, notes refused, 48 ; origin, how encouraged, increase issues of old banks,' effect on business of old banks, nature of their business and speculations, 56-58 ; directors of old banks, 59, 102, 125 ; credits increased, 66 ; increase of, 64, 104 ; credits restricted, 82, 104 ; decrease of, 74, 94, 125, 138 ; extinction of, 71 ; apathy in 1826, 160. RAILWAYS, effect on bank- ing, 105, 145, 181. Ramsays, Bonars, & Co., 162. See Mansfield & Co. Rebellions of 171 5 and 1745, 26, 75, 76. Registration of deeds, 153. Renfrewshire Banking Co., 126. Reserves, difficulty of getting, 20, 107 ; of coin in 1845 ^"^ 1884,192,217. Restriction Act, 71, 115, 118, 281. 6"^^ Notes ; Bank of Eng- land ; English and Scottish banks. Robinson, Mr, Chancellor of Exchequer, 1 50. Royal Exchange Company of London, 28. Society of London, 290. Royal Bank, 32 ; contest with Bank of Scotland, 32 et seq.j capital, ■})2i-, loi ; cash credits, 53; option clause, 65 ; guinea notes, 80 ; conflict with coun- try banks, 87 ; Glasgow- branch, and losses at, loi, 102, 132 ; quarrel with Bank of Scotland, 102 ; stock price of, 113; circulation during Re- striction, 121, 133, 135. Runs on banks, 18, 26, 8g, 91, 107, III, 114-117, 197, 158. SCOTLAND, condition of, 6, 7,74,99, 125, 138,161,169. Scott, Smith, Stein, & Co., 138. Sir Walter, 148 et seq., 263. Scottish banks, confined to Edin- burgh, 72, 7;^, 102 ; unpro- tected condition of, 117, 121 ; circulation, 135, 136, 159, 194, 221, 222 ; list of, in 1826, 158 ; in 1845, 192 ; in 1884, 222 ; combine against Western Bank, 164 ; monopoly of issue, 186, 189 ; enter London, 201 ; excitement in London as to, 202, 203 ; limitation of, 207 ; coin held by, 192. See Notes, depreciation of. Shareholders, liability of, 91, 153, 162, 196, 205, 302 ; for notes, 207 ; number of, 153, 158. Shetland Bank, 145. Silver money, 18, 20, 21, 26, 66, 160,216. ^'d'^? Currency, metal- lic. Smith, Adam, 60, 61, 71, 86. Somers, Mr, 176, 267, 308. Southern Bank of Scotland, 164. Southsea Co., 30, 264, 266. Speculation, 85, 86, 146, 147, 195, 203. 324 INDEX. Stamp duty on notes. See Duty. ^/a^^an/ newspaper, remarks on Sir Stafford Northcote's pro- posals in 1879, 206. Stirling Bank, loi, 147. Stocks, prices of Scotch banks, 113, 194. Summary diligence, 11, 36,41, 69, 117, 174, 235. THISTLE Bank, 83, 87, 162, 165. Tickets, ticquets, meaning of, 12. Till money, 82, 95, 96, 173, 174, 183, 268, 273, 281. Times newspaper, remarks on Sir Stafford Northcote's pro- posals, 206 ; " F.'s " letter to, on small notes, 303, 304. Tooke, Mr, on crisis of 1826, 173, 288. Trotter, Mr, 43-46. UNION Bank of Scotland, 64, 83, 84 ; formation of, 164, 165 ; run on, 197-199 ; notes forged, 252, 253. The, of 1707, 8 ; payments through, 24. United States of America, 163, 195, 302. ^1 EARDROP, John, & Co., Watson, James and Robert, 162. David, & Co., 83. Wenley, James A., 22. Western Bank, 162, 163, 193 ; failure, 195-197. Westmoreland, memorial from, as to Scotch notes, 297 et seq. Wick, circulation of notes near, 131- Wolowski, M., 176, 177. Wren, Sir Christopher, inscrip- tion on tomb, 220. EDINBURGH CO-OPERATIVE PRINTING COMPANY LIMITED. UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. .'\ JUL 5 Mmmm 19IHI u) DISCHARG?-URl URL OCT? ^1001 NOV 41981 |\V)^ 4ASBe> t OCTOSISW '-.im APR 19 xim Form L9-32ot-8,'57(.C8680s4)444 3 1158 00282 1303