Skip to main content

Full text of "The History and principles of banking"

See other formats 


thl: 


HISTORY   AND    PRINCIPLES 


BANKING. 


BY 


JAMES   WILLIAM   GILBAllT, 

OKNKRAI.    MANAGER    OF    THE    LONDON    AND    WKSTMINSTKR    UA\K. 


THIRD    EDITION. 


LONDON: 

PKINTEn     FOR 

LONGMAN,  REES,  ORME,  BROWN,  GREEN,  &  LONGMAN, 

FATI'-RNOSTEn    ROW. 


18S7.  6  2  6  1      1  0 


London  ■. 

Printed  by  A.  Siottiswoode, 

New- Street- S((uare. 


^ 


HG 

PREFACE.         '3^7 


This  book  was  not  written   to  applaud  or  censure  the  acts 
of  any  statesman  ;  to  attack  or  defend  any  existing  banking 
establishment;  to  advance  or  refute  any  new  theory  respect- 
ing the  currency.     It  aims  not  to  instruct  the  members  of  the 
cabinet,  nor  to  guide  the  counsels  of  the  senate.     Its  only  aim 
<2  is  to  impart  useful  knowledge  to  the  public  at  large, 
c^      i  Banking  is  both  an  art  and  a  science.     As  an  art  it   is  a 
^  branch  of  trade  intimately  connected  with  every  man's  busi- 
Sc   ness  ;  as  a  science,  it  forms  an  important  portion  of  political 
3   economy.     The  knowledge  of  banking  as  an  art,  is  acquired 
like    that  of  other  arts,    by    serving  an    apprenticeship,    or 
engaging    practically  in  its   operations.      The  knowledge  of 
banking,  as  a  science,  may  be  acquired   like  that  of  other 
sciences,  by  reading,  observation,  and  reflection.     These  two 
branches  of  knowledge  do  not  always  accompany  each  other. 
3    Some,  who  are  practically  engaged  in  banking,  do  not  study 
(O    its  principles  ;  while  those  who  have  written  upon  its  princi- 
ples, have,   for  the  most  part,  been  political  economists  and 
statesmen,  who  were  unacquainted  with  its  pi*actical  details. 
This  publication  will,  perhaps,  be  thought  worthy  of  some 
degree  of  attention,  upon  the  ground  that  it  professes  to  be  a 
scientific  work,  written  by  a  practical  man. 

This  book  may  be  considered  as  a  grammar  of  banking. 

^  The  general  reader  may  here  acquire  a  competent  knowledge 

—  of  most  of  the  facts  and  principles  connected  with  the  sub- 

g  ject :  and  those  who  wish  for  a  more  extensive  reading,  would 

"^  do  well  to   begin  with  this  work,  and   then  proceed   to  the 

perusal  of  those  excellent  pamphlets  and  treatises  which  have 

been  w^ritten  upon  detached  and  controversial  portions  of  the 

science.       "  The  best  way  to  learn   any  science,"  says  Dr. 

Watts,  "  is  to  begin  with   a  regular  system  ;  or  u   .-licrt  ami 

A   2 

tn  >^/f  fe/  -rf  ><  > 


IV  PREFACE. 

plain  scheme  of  that  science,  well  drawn  up  into  a  narrow 
compass."  "  If  a  man  deals  always,  and  only,  in  essays  and 
discourses  on  particular  parts  of  a  science,  he  will  never 
obtain  a  distinct  and  just  idea  of  the  whole;  and  may  per- 
haps omit  some  important  portion  of  it,  after  seven  years' 
reading  of  such  occasional  discourses." 

J.  W.  G. 

9.  Waterloo  Place,  Jan.  31.  1834. 


PREFACE  TO  THE  SECOND  EDITION. 

The  chief  advantage  which  this  edition  possesses  over  its 
predecessor  consists  in  having  an  index.  This  is  framed  so  as 
to  give  facility  of  reference,  and  to  bring  together  in  one  view 
those  observations  that  may  bear  upon  the  same  subject, 
though  occurring  in  different  parts  of  the  volume.  After  a 
careful  perusal  of  the  work,  the  reader  may  recall  to  his  mind 
most  of  its  facts  and  principles  by  an  occasional  inspection  of 
the  index. 

J.  W.  G. 

38.  Throgmorton  Street,  April  22.  1 835. 


PREFACE  TO  THE  THIRD  EDITION. 

In  this  edition  I  have  added  only  a  few  pages,  necessary  to 
bring  the  historical  part  down  to  the  present  period.  As  I 
wish  this  to  be  a  standard  work  upon  the  subject,  I  have  not 
enlarged  upon  matters  of  mere  temporary  interest.  The 
facts  and  principles  of  this  volume  will  remain  perfectly 
unaffected  by  any  change  that  may  take  place  in  the  form  of 
our  banking  institutions. 

J.  W.  G. 

.'?8.  Tliro^'tnorton  Stiwl,  June  12.  1837. 


NOTICES  OF  THE  FIRST  EDITION. 


"  A  WORK  likely  to  be  extensively  useful  at  this  period  has  just 
appeared,  entitled  '  The  History  and  Principles  of  Banking.  By 
James  William  Gilbart'  The  author's  object  has  been  not  to 
advance  any  theories  of  his  own,  but  to  make  the  reader  acquainted 
with  the  facts  and  principles  of  the  question  as  deduced  from  the 
existing  practice.  In  this,  his  long  experience  must  make  him  a 
very  competent  guide.  The  numerous  claims  on  our  crowded 
columns  prevent  our  giving  a  fuller  notice  of  tlie  work:  the  recom- 
mendation of  which  may  be  summed  up  in  his  own  phrase  —  that 
it  is  a  '  Grammar  of  Banking.'" —  Times,  Feb.  20.  1834-. 


"  This  work  may  be  advantageously  consulted  for  a  practical 
knowledge  of  banking  in  all  shapes  from  the  Bank  of  England  down 
to  loan  banks,  and  the  new  law  to  facilitate  the  purchase  of  small 
annuities.  It  should  also  be  added  that  a  variety  of  tables  are 
contained  in  the  volume,  not  mere  transcripts  from  official  docu- 
ments, but  intelligible  recasts  by  a  man  of  business.  So  far  as  we 
are  able  to  judge  by  inspection,  they  seem  to  have  the  rare  merit 
of  containing  what  is  wanted  and  nothing  more."  —  Spectator,  Feb. 
15.  1834. 


"  Combining  a  clear  appreciation  of  the  science  of  banking  with 
the  best  practical  knowledge  of  his  business,  we  have  seen  no  work 
on  this  subject  which  better  deserves  to  be  consulted  and  studied 
than  Mr.  Gilbart's  volume."  —  Literary  Gazette,  Feb.  22.  1834-. 


"  Mr.  Gilbart  claims  for  his  book  that  it  contains  both  features 
(theory  and  practice),  and  is  a  scientific  work  written  by  a  practical 
man.  His  claims  appear  to  be  fully  borne  out  by  the  perspicuity 
of  his  views  and  the  analytical  spirit  in  which  he  treats  the  subject. 
He  is  fully  master  of  the  details,  and  ascends  with  equal  ease  to 
the  examination  of  the  elementary  principles.     His  account  of  the 


VI  NOTICES    OF    THE    FIKST    KDITJON. 

nature  of  joint  stock  banks,  of  branch  banks,  of  deposit,  remittance, 
circulation,  and  discount,  of  cash  credit,  loan  and  savings  banks, 
will  be  found  by  men  of  business  to  be  of  considerable  value  for 
reference."  —  ^//a*,  Feb.  23.  1834.. 


"  We  have  been  highly  pleased  with  its  agreeable  and  instructive 
character ;  and  we  think  that  no  man  connected  with  trade  should 
be  without  this  book."  —  Monthly  Revieiv,  May  1834. 


"  As  the  author  most  truly  says  in  his  preface,  the  aim  of  this 
book  is  to  impart  useful  knowledge.  Those  who  are  ignorant  of 
the  art  or  rather  science  of  banking  (for  banking  may  be  con- 
sidered as  a  science  in  political  economy)  will  here  obtain  a 
knowledge  of  facts  and  principles  which  will  sufficiently  enlighten 
their  minds  on  the  subject,  and  they  will  have  the  good  fortune  of 
not  having  principles  instilled  which  may  lead  them  into  error. 
The  question  of  currency,  cash  payments,  &c.,  which  have  been 
such  a  source  of  labyrinthic  litigation,  are  not  inooted.  It  is  a  clear 
well  written  work,  and  must  have  been  written  by  a  person  endowed 
with  a  lucid  head  and  an  impartial  mind." — 31etropolitan  Magazine, 
August  1834. 


"  A  more  complete  and  accurate  work,  with  less  irrelevant  matter, 
we  never  read." —  Gentleman  s  Magazine,  October  1831. 


"  We  have  before  us  a  most  interesting  work,  from  the  pen  of 
Mr.  Gilbart,  entitled  '  The  History  and  Principles  of  Banking.' 
This  subject,  which  is  generally  considered  abstruse  and  recondite, 
has  been,  by  the  pen  of  Mr.  Gilbart,  rendered  so  plain,  that  the 
most  ordinary  capacity  may  easily  comprehend  it.  It  requires 
such  a  man  as  the  manager  of  the  London  and  Westminster  Bank 
to  produce  this  work.  A  speculative  theorist,  no  matter  how 
acute  his  intellect,  must   have  failed  in  presenting  us  with  those 


NOTICES    OF    THK    FIHST    EDITION.  Vll 

forcible  details  which  belong  only  to  the  practical  man  ;  whilst,  to 
the  mere  man  of  business,  that  power  of  combination  and  mastery 
of  language  must  have  been  wanting,  which  the  literary  abilities 
of  Mr.  Gilbart  have  enabled  him  to  bring  to  bear  upon  the 
subject. 

"  The  peculiar  interest  which  it  possesses  is  owing,  as  the 
author  truly  states  in  his  preface,  to  the  circumstance  of  its  being 
a  scientific  work,  written  by  a  practical  man.'  Tlie  subject  of 
Banking,  at  all  times  of  such  importance  to  a  mercantile  country, 
possesses  paramount  claims  to  attention  at  the  present  moment, 
when  two  fresh  bodies  of  Ai-gentarii  have  come  into  the  field  to 
bear  away  whatever  spoil  may  have  escaped  the  hands  of  the 
veteran  campaigners.  '  The  History  and  Principles  of  Banking' 
should  be  in  the  hands  of  every  man  who  wishes  to  be  acquainted 
with  the  manner  in  wliich  the  money  transactions  of  this  great 
country  arc  carried  on." —  Waterford  Chronicle,  June  9.  1836. 


WORKS 


PUBLISHED     BY    THE    SAME    AUTHOR. 


1.  A  PRACTICAL  TREATISE  ON  BANKING.  Fourth 
Edition.    Price  6s. 

"  A  valuable  and  useful  little  work."  —  Mr,  M'Cidlocb's  Smith's  ircalth  of 
Nations. 

2.  THE     HISTORY     OF     BANKING     IN    IRELAND. 

Price  5s. 

"  It  affords  a  succinct  view  of  the  Acts  of  Parliament,  through  which  the 
banking  operations  of  Ireland  were  effected,  from  the  time  of  Henry  VI.  to  the 
present  day ;  showing  the  main  features  of  the  monetary  system  in  that  country." 
—  Atlas,  June  19.  1836. 

"  It  is  a  valuable  statistical  work,  and  a  desirable  appendix  to  his  '  History 
and  Principles  of  Banking.'  " —  Gentleinaris  Magazine,  July,  1836. 

"  It  gives  a  very  clever  and  succinct  account  of  the  history  of  Banking 
in  Ireland."  —  Monthly  Review,  July,  1835. 

"  It  is  a  useful  book  for  those  who  are  anxious  for  practical  information 
touching  the  money  matters  of  the  sister  kingdom  ;  or  who  wish,  by  investigating 
her  banking  system,  to  track  her  slow  and  late  progress  in  commerce  and  civilis- 
ation."—  Spectator,  July,  1836. 

3.  THE  HISTORY  OF  BANKING  IN  AMERICA: 
With  an  Inquiry  how  far  the  Banking  Institutions  of  America 
are  adapted  to  this  Country,  and  a  Review  of  the  Causes  of  the 
recent  Pressure  on  the  Money  Market.     Price  7s. 


IX 


TABLE  OF  CONTENTS. 


I.  —  The  History  of  Banking, 

Seci'ION  I.  The  Origin  and  Progress  of  Banking    -  ^  1 

II.  The  Rise  of  Banking  in  England     -  -  1 1 

III.  The  History  of  the  Bank  of  England  -     -  26 

IV.  The  London  Bankers           -         -         -  -  106 
V.  The  Country  Banks         -         -         -  -  109 


II.  —  The  Constitution  of  Banks. 

Section  VI.  Joint-Stock  Banks 119 

VII.  Branch  Banks 133 


III.  —  The  Principles  of  Banking. 

Section  VIII.  Banks  of  Deposit         -        -        -         -  -  141 

IX.  Banks  of  Remittance      -         -         .         .  -  1,30 

X.  Banks  of  Circulation             -         -         -  -  156 

XI.  Banks  of  Discount         -         -         -         -  -  170 

XII.  Cash  Credit  Banks 199 

XIII.  Loan  Banks           -         -         -         .         .  -  201- 

XIV.  Savings'  Banks           _         .         .         -  -  i>20 
XV.  The  London  and  Westminster  Bank         -  -  25S 


J 


THE 


HISTORY    AND    PRINCIPLES 


BANKING, 


SECTION  I. 

THE    ORIGIN    AND    PROGRESS    OF    BANKING. 

An  eminent  historian  observes,  that,  "  it  is  a  cruel 
mortification,  in  searcliing  for  what  is  instructive  in 
the  history  of  past  times,  to  find  that  the  exploits  of 
conquerors  who  have  desolated  the  earth,  and  the 
freaks  of  tyrants  who  have  rendered  nations  unhappy, 
are  recorded  with  minute  and  often  disgusting  ac- 
curacy, while  the  discovery  of  useful  arts  and  the 
progress  of  the  most  beneficial  branches  of  commerce 
are  passed  over  in  silence,  and  suffered  to  sink  into 
oblivion."  *  This  remark  is  strictly  applicable  to  the 
origin  and  progress  of  banking.  We  have  but  little 
infoiTnation  as  to  what  kind  of  banks  existed  in  the 
earlier  ages,  or  on  what  system  they  conducted  their 
business.  As  most  of  the  nations  of  antiquity  sub- 
sisted chiefly  on  agriculture,  they  probably  had  little 
occasion  for  banks ;  for  it  is  only  in  commercial 
countries  that  these  institutions  have  attained  to  any 

*  Robertson's  Historical  Disquisition  on  Indiii,  page  46. 

B 


2  THE    HISTORY    AND    PRINCIPLES 

high  degree  of  prosperity.  And  as  even  the  com- 
mercial nations  of  antiquity  were  unacquainted  with 
joint  stock  comj)anies  or  commercial  corporations, 
and  had  not  discovered  the  use  of  paper-money  or 
bills  of  exchange,  the  business  of  a  banker,  even 
among  them,  must  ha\e  been  somewhat  different 
from  that  of  a  banker  of  the  present  day.  The  mer- 
cliants  of  those  early  times  employed  as  money  gold 
and  silver  bullion  ;  and  received  it  and  paid  it  away 
by  weight.  It  is  probable  that  the  merchants  would 
require  that  the  precious  metals  they  received  should 
be  of  a  certain  degree  of  fineness.  We  read  of  Abra- 
ham* weighing  unto  Ephron  400  shekels  of  silver, 
current  rnonei)  with  the  merchant  —  a  })hrase  which 
implies  that  the  money  current  with  the  merchant 
was  different  from  that  in  ordinary  use. 

After  bullion  was  superseded  by  coin,  and  each 
nation  had  a  coin  of  its  own,  the  merchants  would 
necessarily  in  the  course  of  their  business  receive 
coins  belonging  to  different  nations,  and  hence  would 
be  applied  to  by  strangers  who  wished  to  exchange 
their  own  money  for  the  money  of  the  country  in 
which  they  sojourned.  This  would  take  ])lace  more 
particidarly  in  those  oriental  countries  whose  inha- 
bitants were  accustomed  in  certain  seasons  to  meet 
together  for  the  celebration  of  public  festivals.  We 
read  in  the  New  Testamentt  of  money-changers  who 
had  tables  in  the  Temple  of  Jerusalem.  It  is  pro- 
bable they  attended  for  the  ])ur})ose  of  gi\ing  Jewish 
money  hi  exchange  for  those  various  coins  whicli 
persons  coming  from  the  neighbourhig  countries 
miji^ht  have  brought  with  them.  Whether  the  busi- 
ness  of  money-changing  was  carried  on  as  a  separate 
employment,  or  united  with  the  general  business  of  a 
merchant,  we  are  not  informed  ;  but  it  is  stated  that 
the  exchangeis  allowed  interest  for  money  lodged  in 

*  Genesis  xxiii.  16.  f  MaUhew  xxi.  VZ. 


OF    BANKIXG.  3 

their  hands — ''Thou  wicked  and  slothful  servant,  thou 
oughtest  to  have  put  my  money  to  the  exchangers, 
and  then  at  my  coming  1  siiould  have  received  mine 
own  with  usury."*  From  the  circumstance  of  their 
allowing  interest  on  money,  we  may  infer  that  they 
also  lent  money  on  interest ;  otherwise  they  would 
have  had  no  use  for  the  money  they  borrowed.  This 
scanty  information  forms  the  whole  of  oiu'  knowledge 
respecting  the  mode  of  banking  practised  by  the  an- 
cient Babylonian,  Egyptian,  and  Jewish  nations. 

With  respect  to  the  bankers  of  Greece  we  have 
more  ample  details. 

In  Greece  the  first  banks  were  the  temples. 

"  The  wealth  and  growing  estimation  of  Delphi  had  also  ano- 
ther source,  of  which  information  remains  only  so  far  as  to  assure 
us  of  the  fact  with  far  less  explanation  of  circumstances  than  for 
its  importance  might  be  desired.  In  the  genei'al  insecurity  of  pro- 
perty in  the  early  ages,  and  especially  in  Greece,  it  was  highly 
desirable  to  convert  all  that  could  be  spared  from  immediate  use 
into  that  which  might  more  easily  be  removed  from  approaching 
danger.  By  a  compact,  understood  among  men,  with  this  view  the 
precious  metals  appear  to  have  obtained  their  early  estimation. 
Gold  then  and  silver  having  acquired  their  certain  value  as  signs 
of  wealth,  a  deposit  secure  against  the  dangers  continually  threat- 
ening not  individuals  only  but  every  town  and  state  in  Greece, 
would  be  a  great  object  of  the  wealthy.  Such  security  offered 
nowhere  in  equal  amount  as  in  those  temples,  which  belonged  not 
to  any  single  state,  but  were  respected  by  the  common  religion  of 
the  nation.  The  priesthood,  not  likely  to  refuse  the  charge,  would 
have  a  large  interest  in  acquiring  the  reputation  of  fidelity  to  it. 
Thus  Delphi  appears  to  have  become  the  great  bank  of  Greece, 
perhaps  before  Homer,  in  whose  time  its  riches  seem  to  have  been 
already  proverbial.  Such  then  was  found  the  value  of  this  institu- 
tion, that  when  the  Dorian  conquerors  drove  so  large  a  part  of  the 
Greek  nation  into  exile,  the  fugitives  who  acquired  new  settle- 
ments in  Asia  established  there  their  ovvn  national  bank,  in  the 
manner  of  that  of  their  former  country,  recommending  it  to  the 
protection  of  the  same  divinity.  The  Temple  of  Apollo,  at  Bran- 
chidas,  became  the  great  depository  of  the  wealth  of  Ionia."-|- 


*  Matthew  xxv.  27. 

f  Mitford's  History  of  Greece,  vol.  i.  page  193. 
B    Q 


4<  THE    HISTORY    AND    PRINCIPLES 

Afterwards  the  temple  of  Olympia,  like  that  at 
Delphi,  became  an  athantageous  repository  for  trea- 
sure. But,  although  the  temples  discharged  one  of 
the  offices  of  banks,  by  being  places  of  security,  yet 
as  they  did  not  grant  interest  on  the  money  deposited, 
they  did  not  supersede  banks  of  deposit  established 
by  private  individuals.  At  Athens  especially,  bank- 
ing was  a  flourishing  trade. 

"  The  greater  part  of  tlie  Athenians  employ  their  money  in 
trade,  but  they  are  not  permitted  to  lend  it  for  any  place  but 
Athens.  They  receive  an  interest  for  the  use  of  it  which  is  not 
fixed  by  the  laws,  but  stipulated  in  a  contract,  deposited  either  in 
the  hands  of  a  banker,  or  some  friend  to  both  parties.  If,  for  in- 
stance, a  voyage  is  to  be  made  to  the  Cynnnorian  Bosphorus,  the 
instrument  specifies  the  time  of  the  departure  of  the  vessel,  the 
kind  of  commodities  with  which  she  is  to  be  freighted,  the  sale 
which  is  to  be  made  of  them  in  the  Bosphorus,  and  the  merchan- 
dise which  she  is  to  bring  back  to  Athens  ;  and,  as  the  duration  of 
the  voyage  is  uncertain,  some  agree  that  their  money  shall  not  be 
payable  till  the  return  of  the  vessel ;  while  others  more  timid,  and 
contented  with  a  less  profit,  require  that  it  shall  be  repaid  at  the 
Bosphorus  immediately  after  the  sale  of  the  goods  carried  out ;  in 
which  case  they  either  themselves  repair  to  the  place  where  they 
are  to  receive  it,  or  send  thither  some  person  in  whom  they  can 
confide,  and  whom  they  empower  to  act  for  them. 

"  The  lender  has  his  security,  either  on  the  merchandise  or  the 
goods  of  the  borrower ;  but  as  the  dangers  of  the  sea  are  in  part 
risked  by  the  former,  and  the  profit  of  the  latter  may  be  very  con- 
siderable, the  interest  of  money  thus  lent  may  rise  as  high  as 
thirty  per  cent.,  more  or  less,  according  to  the  length  and  hazards 
of  the  voyage. 

"  The  usury  of  which  I  have  spoken  is  known  by  the  name  of 
maritime  ;  that  called  landed  is  more  oppressive,  and  no  less  variable. 

"  Those  who,  without  risking  the  dangers  of  the  sea,  \vish  to 
derive  profit  from  their  money,  lend  it  to  bankers  at  the  rate  of 
twelve  per  cent,  per  annum,  or  rather  one  per  cent,  for  every  new 
moon.  But  as  the  laws  of  Solon  do  not  prohibit  those  who  have 
money  from  demanding  the  most  extravagant  interest  for  it,  some 
persons  receive  more  than  sixteen  per  cent.,  and  others,  especially 
among  the  lower  classes  of  people,  exact  every  day  the  quarter 
of  tlie  principal.  These  extortions  are  not  concealed,  and  cannot 
be  punished,  except  by  public  opinion,  which  condemns,  but  does 
not  sufficiently  despise  those  who  are  guilty  of  them. 

"  Commerce  increases  the  circulation  of  wealth,  and  this  circu- 
lation has  given  birth  to  the  occupation  of  bankers,  which  facili- 


OF    BANKING.  5 

tales  it  still  more.  A  person  who  is  about  to  make  a  voyage,  or 
who  fears  to  keep  by  him  too  great  a  sum  of  money,  lodges  it  in 
the  hands  of  these  bankers,  sometimes  only  as  a  trust  and  without 
requiring  any  interest,  and  sometimes  on  condition  of  sharing  with 
them  the  profit  it  shall  produce.  They  advance  money  to  ge- 
nerals who  go  to  take  on  them  the  command  of  armies,  or  other 
individuals  who  stand  in  need  of  their  assistance. 

"  In  the  greater  part  of  bargains  made  by  them,  no  witness  is 
required :  they  content  themselves  with  entering  in  a  register  that 
such  a  person  has  deposited  in  their  hands  such  a  sum,  which  they 
must  repay  to  such  another,  if  the  former  should  happen  to  die. 
It  would  sometimes  be  very  difficult  to  prove  that  they  have  re- 
ceived a  sum  of  money,  were  they  to  deny  it ;  but  if  they  should 
expose  themselves  to  such  a  charge  more  than  once,  they  would 
lose  the  confidence  of  the  pubhc,  on  which  depends  their  success 
in  the  business  in  which  they  are  engaged. 

"  By  employing  the  money  deposited  in  their  hands,  and  lending 
it  at  a  greater  interest  than  they  are  to  pay  for  it,  they  amass 
riches  which  gain  them  friends,  whose  protection  they  purchase  by 
assiduous  services.  But  all  is  lost  when,  unable  to  call  in  their 
money,  they  are  incapable  of  fulfilling  their  engagements.  They 
are  then  obliged  to  conceal  themselves,  and  can  only  escape  the 
severity  of  justice  by  surrendering  all  their  remaining  property  to 
their  creditors. 

"  Those  who  wish  to  exchange  foreign  money,  apply  to  the  bank- 
ers, who  by  different  means,  as  the  touchstone  and  the  balance,  ex- 
amine whether  they  are  not  adulterated  or  deficient  in  weight."* 

In  a  treatise  published  by  Xenophon  upon  the 
Athenian  revenue,  we  meet  with  the  first  suggestion 
for  the  estabhshment  of  a  joint  stock  bank. 

"  A  very  remarkable  project,  which  seems  to  have  been  original 
with  Xenophon,  next  occurs,  —  the  establishment  of  a  bank  by  sub- 
scription, open  to  all  the  Athenian  people.  The  interest  of  money 
it  appears  was  enormous  at  Athens,  an  unavoidable  consequence 
of  the  wretched  insecurity  of  person  and  property.  Throughout 
modern  Europe,  land  is  of  all  property  esteemed  the  safest  source 
of  income;  but  in  Greece  it  was  held  that  the  surest  return  was 
from  money  lent  at  interest.  For  in  the  multiplied  division  of 
Greece  into  small  republics  witii  very  narrow  territories,  the  pro- 
duce of  land  was  continually  liable  to  be  carried  olF  or  destroyed 
by  an  invading  enemy  ;  but  a  monied  fortune,  according  to  Xeno- 
phon's  observation,  was  safe  within  the  city  walls.  In  proportion, 
then,  to  the  interest  of  money  and  the  insecurity  of  all  things,  the 


*  See  Travels  of  Anacharsis  in  Greece,  by  the  Abbe  Barthelcmy, 
and  the  authorities  there  referred  to. 


b  THE    HISTORY    AND    PRINCH^LES 

profits  of  trade  will  always  be  liigli,  and  thus  numbers  would  be  in- 
duced to  borrow,  even  at  a  high  interest.  Xenophon  therefore 
proposed,  by  lending  from  the  public  stock  and  encouraging  com- 
mercial adventure  by  just  regulations,  to  raise  a  great  revenue; 
and,  by  the  same  means,  instead  of  oppressing,  to  enrich  indivi- 
duals. As  a  corollary,  then,  to  his  project,  when  the  amount  of 
the  subscription  or  its  profits  might  allow,  he  proposed  to  improve 
the  ports  of  Athens,  to  form  wharfs  and  docks,  to  erect  halls,  ex- 
changes, warehouses,  market-houses,  and  inns,  for  all  which  tolls 
and  rents  should  be  paid,  and  to  build  ships  to  be  let  to  merchants. 
Thus,  while  numbers  of  individuals  were  encouraged  and  enabled 
to  employ  themselves  for  their  private  benefits,  the  whole  Athenian 
people  would  become  one  great  banking  company,  from  whose  pro- 
fits every  member,  it  was  expected,  would  derive  at  least  an  easy 
livelihood."* 

At  Rome,  the  bankers  were  called  Argentarii^ 
Mensarliy  JVumuIarit\  or  CoUi/histcB.  The  banking- 
houses  or  banks  were  called  Tahernce^  Argentaricp^ 
or  MenscE  Numularicp.  Some  of  these  bankers  were 
appomted  by  the  government  to  receive  the  taxes, 
others  carried  on  business  on  their  own  account. 
Their  mode  of  transacting  business  was  somewhat 
similar  to  that  which  is  in  use  in  modern  times. 
Into  these  houses  the  state  or  the  men  of  wealtli 
caused  their  revenues  to  be  paid,  and  they  settled 
their  accounts  witli  their  creditors  by  giving  a  draft 
or  cheque  on  the  bank.  If  the  creditor  also  had  an 
account  at  the  same  bank,  the  account  was  settled  by 
an  order  to  make  the  transfer  of  so  much  money  from 
one  name  to  another.  To  assign  over  money,  or  to 
pay  money  by  a  draft,  was  called  perscribere  and 
rescribere  ;  the  assignment  or  draft  was  called  attri- 
butio.  These  bankers,  too,  were  money-changers. 
They  also  lent  money  on  interest,  and  allowed  a 
lower  rate  of  interest  on  money  deposited  in  their 
hands.  In  a  country  where  commerce  was  looked 
upon  with  contempt,  banking  could  not  be  deemed 
very  res})cctable.  Among  most  of  the  ancient  agri- 
cultural  nations,  there  was  a  ])rejudice  against  the 

*  Mitford's  History  of  Greece,  vol.  iv.  page  22. 


or    BAN  KING.  7 

taking  of  interest  for  the  loan  of  money.  Hence  the 
private  bankers  at  Rome  were  sometimes  held  in 
disrepute,  though  tliose  whom  the  government  had 
estabUshed  as  pubhc  cashiers,  or  receivers -general,  as 
we  may  term  them,  held  so  exalted  a  rank  that  some 
of  them  became  consids.* 

The  Romans  had  also  loan  banks,  from  which  the 
poor  citizens  received  loans  without  paying  interest. 
We  are  told  that  the  confiscated  property  of  criminals 
was  converted  into  a  fund  by  Augustus  Caesar,  and 
that  from  this  fund  sums  of  money  were  lent  without 
interest  to  those  citizens  who  could  pledge  value  to 
double  the  amount.  The  same  system  was  pursued 
by  Tiberius.  He  advanced  a  large  capital,  which 
was  lent  for  a  term  of  two  or  three  years  to  those 
who  could  give  landed  security  to  double  the  value 
of  the  loan.  Alexander  Severus  reduced  the  market 
rate  of  interest  by  lending  sums  of  money  at  a  low 
rate,  and  by  advancing  money  to  poor  citizens  to  pur- 
chase lands,  and  agreeing  to  receive  payment  from  the 
produce. 

After  commerce  and  the  arts  had  revived  in  Italy, 
the  business  of  banking  was  resumed.  The  word 
bank  is  derived  from  the  Italian  word  Banco,  a  hencli 
—  the  Jews  in  Lombardy  having  benches  in  the 
market-place  for  the  exchange  of  money  and  bills. 
When  a  banker  failed,  his  bench  was  broken  by  the 
populace  ;  and  from  this  circumstance  we  have  our 
word  bankrupt.  Though  the  States  of  Venice  and 
Genoa  made  the  most  rapid  advances  in  conmierce, 
and  established  public  banks,  yet  the  department  of 
banking  appears  to  have  fallen  more  particularly  into 
the  hands  of  the  Florentines.  "  As  the  Florentines 
did  not,"  like  the  Venetians  and  the  Genoese,  "  possess 
any  commodious  seaport,  their  active  exertions  were 
directed   chiefly  towards  the  improvement  of  their 


*  See  Bcckman's  History  of  Inventions,  vol.  iii.  page  19. 
B    4 


8  THE    HISTORY    AND    PRINCIPLES 

manufactures  and  domestic  industry.  About  the  be- 
ginning of  the  fourteenth  century,  the  Florentine 
manufacturers  of  various  kinds,  particidarly  those  of 
silk  and  woollen  cloth,  appear  from  the  enumeration  of 
a  well-informed  historian,  to  have  been  very  consider- 
able. The  connection  wliich  they  formed  in  different 
parts  of  Europe,  by  fiu'nishing  them  with  the  pro- 
ductions of  their  own  industry,  led  them  to  engage  in 
another  branch  of  trade,  that  of  banking.  In  this  they 
soon  became  so  eminent  that  the  money  transactions 
of  almost  every  kingdom  in  Europe  passed  through 
their  hands,  and  in  many  of  them  they  were  intrusted 
with  the  collection  and  administration  of  the  public 
revenues.  In  consequence  of  the  activity  and  success 
with  which  they  conducted  their  manufactures  and 
money  transactions — the  former  always  attended  with 
certain  though  moderate  profit,  the  latter  lucrative  in 
a  high  degree,  at  a  period  when  neither  the  interest 
of  money  nor  the  premium  on  bills  of  exchange 
was  settled  with  accuracy  —  Florence  became  one 
of  the  first  cities  in  Christendom,  and  some  of  its 
citizens  extremely  opulent.'**  Cosmo  di  Medici  was 
reckoned  the  most  wealthy  merchant  ever  known  in 
Europe  ;  and  in  a  treaty  whereby  Lewis  XL  engaged 
to  pay  Edward  IV.  fifty  thousand  crowns  annually, 
it  was  expressly  stipidated  that  the  King  of  France 
should  engage  the  ])artners  of  the  Bank  of  Medici  to 
become  bound  for  the  faithful  and  regular  })erfbrm- 
ance  of  this  agreement  on  the  part  of  himself  and  his 
heirs.t 

Although  the  business  of  banking  has  probably 
always  been  carried  on  by  private  individuals  before 
it  has  been  carried  on  by  a  ])ublic  company,  yet  most 
coimtries  have  found  it  useful  to  establish  a  public 
or  national  bank.     Some  of  these  banks  have  been 


*  Robertson's  Disquisition  on  India,  page  113. 

■[  Macpheryon's  History  of  Coninicrce,  vol.  i.  page  698. 


I 


I 


OF    BANKING.  9 

founded  for  the  purpose  of  facilitating  commerce, 
others  to  serve  the  government. 

The  most  ancient  bank  was  that  of  Venice.  It  is 
supposed  to  have  been  established  in  1157.*  The 
state  being  involved  in  debt,  through  a  long  and 
severe  war,  the  public  creditors  were  formed  into  a 
corporation,  with  peculiar  privileges,  and  the  debts 
were  allowed  to  be  transferred  from  one  name  to 
another,  much  in  the  same  way  as  our  public  fimds, 
or  the  stock  of  our  public  banks.  It  was  made  a 
particular  regulation  that  all  payments  of  wholesale 
merchandize,  and  bills  of  exchange,  shall  be  in  bank 
money ;  and  that  all  debtors  and  creditors  shall  be 
obliged,  the  one  to  carry  their  money  to  the  bank, 
the  other  to  receive  their  payments  in  banco,  so 
that  payments  were  made  by  a  simple  transfer  of 
stock  from  one  account  to  the  other.  This  bank 
may  be  deemed  a  wonder  for  the  twelfth  century,  but 
requiring  mucli  alteration  to  adapt  it  to  the  modes  and 
manners  of  the  nineteenth.! 

So  early  as  the  year  1849,  the  business  of  banking- 
was  carried  on  by  the  dra])ers  of  Barcelona,  who 
were  probably  the  most  wealthy  class  of  merchants 
in  that  city.  But  by  an  ordinance  of  the  king  of 
Arragon,  they  were  not  allowed  to  commence  this 
branch  of  trade  until  they  had  first  given  sufficient 
security.  In  the  year  1401,  a  public  bank  was  es- 
tablished by  the  magistrates,  and  the  city  funds 
were  responsible  for  the  money  placed  in  the  bank. 
They  exchanged  money,  received  deposits,  and  dis- 
counted bills  of  exchange,  both  for  the  citizens  and 
for  foreigners.^ 

The  bank  of  Genoa  was  established  in  1107.  This 
bank,  like  that  of  Venice,   owed  its  origin  to  the 


*  Anderson's  History  of  Commerce,  vol.  i.  p.  156. 

y  See  Montefiore's  Commercial  Dictionary,  article  Batik. 

\  Macpherson's  History  of  Commerce,  vol.  i.  pp.  SW.  612. 


10  THE    HISTORY    AND    PRINCIPLES 

debts  of  the  state.  Considerable  confusion  had  arisen 
from  the  multitude  of  loans  which  the  republic  had 
contracted  with  its  citizens.  These  various  loans 
were  now  formed  into  one  total  amount,  and  made 
the  capital  of  the  bank.  This  bank  was  called  the 
Chamber  of  St.  George,  and  its  management  was 
intrusted  to  eight  directors,  elected  by  the  proprietors 
of  the  stock.  As  a  security  for  the  debt,  the  state 
made  over  to  the  bank  several  cities  and  territories, 
among  which  was  the  port  of  Catfa  and  the  little 
kingdom  of  Corsica. 

The  bank  of  Amsterdam  was  founded  in  the  year 
1609.  It  was  occasioned  by  the  vast  quantity  of  worn 
and  clipped  coins  tlien  in  circulation,  in  consequence 
of  which  the  value  of  the  currency  was  reduced  above 
nine  per  cent,  below  that  of  good  money  fresh  from 
the  mint.  The  bank  received  these  deficient  coins 
at  nearly  their  intrinsic  value,  and  made  all  its  issues 
in  coin  of  the  standard  weight  and  fineness.  At  the 
same  time  a  law  was  made  that  all  foreign  bills  of 
exchange  should  be  paid  in  bank  money.  This  law 
raised  the  value  of  bills  on  Holland  in  foreign  coun- 
tries, and  compelled  every  merchant  to  keep  an  ac- 
count at  tlie  bank,  in  order  that  he  might  at  all  times 
have  legal  money  to  pay  his  foreign  bills.  The  pre- 
mium (called  the  Agio)  on  bank  money  was  regulated 
by  tlie  market  price  of  gold,  and  was  subject  to  con- 
siderable fluctuations.  To  prevent  the  gambling  to 
which  these  fluctuations  gave  rise,  the  bank  at  length 
determined  to  sell  bank  money  for  currency  at  five 
per  cent,  agio,  and  to  buy  it  again  at  four  per  cent. 
From  this  and  other  sources  of  profit  the  bank  is  sup- 
posed to  have  gained  a  considerable  revenue.  It  was 
the  entire  })roperty  of  the  city  of  Amsterdam,  and  was 
placed  under  the  direction  of  four  burgomasters,  who 
were  changed  every  year.* 


*  Adam  Smith's  \\'caltli  of  Nations 


OF    BANKING.  H 

Tlie  bank  of  Amsterdam  was  the  model  on  which 
were  formed  most  of  the  European  banks  now  in 
existence ;  but  they  have  varied  very  considerably 
from  each  other,  according  to  the  circumstances  of 
he  respective  countries  in  which  they  have  been 
estabhshed. 


SECTION  II. 

THE    RISE    OF    BANKING    IN    ENGLAND. 

The  exchanging  of  money,  the  lending  of  money, 
the  borrowing  of  money,  the  transmitting  of  money, 
are  the  foiu'  principal  branches  of  the  business  of 
modern  banking,  and  in  most  countries  they  seem  to 
have  taken  their  rise  in  the  order  in  which  they  are 
here  named. 

money-changing. 

For  several  centuries  the  only  current  coin  in 
England  was  made  of  silver,  and  the  highest  denomi- 
nation was  the  silver  penny.  This  coin  contained 
the  2i0th  part  of  a  pound  w^eight  of  silver,  which  is 
a  little  more  than  half  the  silver  contained  in  one  of 
oiu-  sixpences.  There  were  also  silver  halfpence  and 
silver  farthings,  and  frequently  the  silver  pennies 
were  cut  into  halves  and  quarters  to  serve  the  pur- 
pose of  halfpence  and  farthings,  until  laws  were  made 
to  prohibit  the  practice.  Copper  was  not  coined  in 
England  until  the  year  1609,  and  then  the  small 
leaden  tokens  previously  issued  by  private  individuals 
were  suppressed. 

Gold  is  supposed  to  have  been  first  coined  in 
England  in  the  year  1344,  when  Edward  III.  issued 
gold  nobles,  lialf  nobles,  and  farthing  nobles  ;  the 
noble  to  pass  for  6.y.  8f/.,  the  half  noble  for  3.f.  4</., 


12  THE    HISTORY    AND    PRINCIPLES 

and  the  farthing  noble  for  Is.  8d.    This  coinage  seems 
to  have  given  rise  to  the  office  of  Royal  Exchanger. 

"  It  was  not  so  easy  a  matter  in  the  times  we  are  now  considering 
to  exchange  gold  and  silver  coins  for  each  other  as  it  is  at  present; 
and  therefore  Edward  III.  and  several  of  his  successors  took  this 
office  into  their  own  hands,  to  prevent  private  extortion  as  well  as 
for  their  own  advantage,  and  they  performed  it  by  appointing  cer- 
tain persons,  furnished  with  a  competent  quantity  of  gold  and  silver 
coins,  in  London  and  other  towns,  to  be  the  only  exchangers  of 
money,  at  the  following  rate: — When  these  royal  exchangers  gave 
silver  coins  for  a  parcel  of  gold  nobles,  for  example,  they  gave 
one  silver  penny  less  for  each  noble  than  its  current  value  ;  and 
when  they  gave  gold  nobles  for  silver  coins  they  took  one  penny 
more,  or  6s.  9d.  for  each  noble,  by  which  in  every  transaction 
they  made  a  profit  of  one  and  one  fifth  per  cent.  These  royal 
exchangers  had  also  the  exclusive  privilege  of  giving  the  current 
coins  of  the  kingdom  in  exchange  for  foreign  coins  to  accom- 
modate merchant-strangers,  and  of  purchasing  light  money  for  the 
use  of  the  mint.  As  several  laws  were  made  against  exporting 
English  coin,  the  king's  exchangers,  at  the  several  seaports,  fur- 
nished merchants  and  others  who  were  going  beyond  seas  with 
the  coins  of  the  countries  to  which  they  were  going,  in  exchange 
for  Englisli  money,  according  to  a  table  which  hung  up  in  their 
office  for  public  inspection.  By  these  various  operations  they  made 
considerable  profits,  of  which  the  king  had  a  certain  share.  The 
house  in  which  the  royal  exchanger  of  any  town  kept  his  office  was 
called  the  exchanye,  from  which  it  is  probable  the  public  structures 
where  merchants  meet  for  transacting  business  derive  their  name.* 

This  institution  continued  until  the  middle  of  the 
reign  of  Henry  VIIL,  when  it  fell  into  disuse.  It 
was  re-established  in  the  year  1627  by  Charles  L, 
who  then  issued  the  following  proclamation  : — 

"  Whereas  the  exchange  of  all  manner  of  gold  and  silver  current 
in  monies  or  otherwise,  as  the  buying,  selling,  and  exchanging  of 
all  manner  of  bullion,  in  species  of  foreign  coins,  billets,  ingots, 
&c.,  fine,  refined,  or  allayed  howsoever,  being  fit  for  our  mint,  hath 
ever  been  and  ought  to  be  our  sole  right,  as  part  of  our  prerogative, 
royal  and  ancient  revenue,  wherein  none  of  our  subjects  of  what- 
ever trade  or  quality  soever  ought  at  all,  without  our  special  li- 
cence, to  intermeddle,  the  same  being  prohibited  by  divers  acts  of 
parliament  and  proclamations  both  ancient  and  modern.  And 
whereas  ourself  and  divers  of  our  royal  predecessors  have,  for  some 

*  Henry's  History  of  England,  vol.  iii.  page  S^?. 


OF    BANKING.  13 

time  past,  tolerated  a  promiscuous  kind  of  liberty  to  all,  but  es- 
pecially to  some  of  the  mystery  and  trade  of  goldsmiths  in  London 
and  elsewhere,  not  only  to  make  the  said  exchanges,  but  to  buy 
and  sell  all  manner  of  bullion,  and  from  thence  some  of  them  have 
grown  to  that  licentiousness  that  they  have  for  divers  years  pre- 
sumed, for  their  private  gain,  to  sort  and  weigh  all  sorts  of  money 
current  within  our  realm,  to  the  end  to  cull  out  the  old  and  new 
monies,  which,  either  by  not  wearing  or  by  any  other  accident,  are 
weightier  than  the  rest,  which  weightiest  monies  have  not  only 
been  molten  down  for  the  making  of  plate,  c*v:c.,  but  even  traded  in 
and  sold  to  nierchant-strangers.  Sec,  who  have  exported  the  same, 
whereby  the  consumption  of  coins  has  been  greatly  occasioned,  as 
also  the  raising  of  the  silver  even  of  our  own  monies  to  a  rate  above 
what  they  are  truly  current  for,  by  reason  whereof  no  silver  can 
be  brought  up  to  our  mint  but  to  the  loss  of  the  bringers,  S:c. — 
For  the  reforming  of  all  which  abuses  we  have,  by  the  advice  of 
our  Privy  Council,  determined  to  assume  our  said  right,  for  our 
own  profit  and  the  good  of  the  realm,  and  for  this  end  we  do  now 
appoint  Henry  Earl  of  Holland  and  his  deputies  to  have  the  office 
of  our  changes,  exchanges,  and  out-changes  whatsoever,  in  England, 
Wales,  and  Ireland.  And  we  do  hereby  strictly  charge  and  com- 
mand that  no  goldsmith  nor  other  person  whatsoever,  other  than 
the  said  Earl  of  Holland,  do  presume  to  change,  &c."* 

As  this  measure  occasioned  some  dissatisfaction, 
the  king  authorised,  in  tlie  following  year,  the  publi- 
cation of  a  pamphlet,  entitled  "  Cambium  Regis,  or 
the  Office  of  his  Majesty's  Exchanger  Royal."  In 
this  pamphlet  it  was  attempted  to  be  shown  — 

"  That  the  prerogative  of  exchange  of  bullion  for  coin  has 
always  been  a  flower  of  the  Crown,  of  which  instances  are  quoted 
from  the  time  of  King  Henry  I.  downward  —  that  King  John 
farmed  out  that  office  for  no  smaller  a  sum  than  five  thousand 
marks  —  that  the  place  or  office  where  the  exchange  was  made  in 
his  reign  was  near  St.  Paul's  Cathedral  in  London,  and  gave  name 
to  the  street  still  called  the  Old  Change  —  that  in  succeeding 
reigns  there  were  several  other  places  for  those  exchanges  besides 
London  —  that  this  method  continued  to  Henry  VHL's  time,  who 
suffered  his  coin  to  be  so  far  debased  that  no  regular  exchange 
could  be  made  —  that  the  said  confusion  made  way  for  the  London 
goldsmiths  to  leave  off  their  proper  trade  of  goldsmithrie,  i.  e.  the 
working  and  selling  of  new  gold  and  silver  plate  and  manufacture, 
the  sole  intents  of  all  their  charters,  and  to  turn  exchangers  of 
plate  and  foreign  coins  for  our  English  coins,  although  they  had  no 

*  Anderson's  History  of  Commerce,  vol.  ii.  p.  324. 


14  THE    HISTORY    AND    PRINCIPLES 

rij^ht  to  buy  any  gold  or  silver  for  any  other  purpose  than  for  their 
manufacture  aforesaid,  neither  had  any  other  person  but  those  sub- 
stituted by  the  Crown  a  right  to  buy  the  same  ;  the  King,  there- 
fore, has  now  resumed  this  office,  not  merely  to  keep  up  his  right 
so  to  do,  but  likewise  to  prevent  those  trafficking  goldsmiths  from 
culling  and  sorting  all  the  heavy  coin,  and  selling  the  same  to  the 
mint  of  Holland,  which  gained  greatly  thereby,  or  else  by  melting 
those  heavy  coins  down  for  making  of  plate,  (witness  the  pieces  of 
thirteen  pence  halfpenny,  old  shillings  of  Queen  Elizabeth,  nine- 
penny  and  fourpenny-halfpenny  pieces,  which  being  weighty  monies 
none  of  them  were  now  to  be  met  with,)  whereby  they  have  raised 
the  price  of  silver  to  two-pence  per  ounce  above  the  value  of  the 
mint,  which  thereby  has  stood  still  ever  since  the  eleventh  of  King 
James  —  that  for  above  thirty  years  past  it  has  been  the  usual  prac- 
tice of  those  exchanging  goldsmiths  to  make  their  servants  run 
every  morning  from  shop  to  shop  to  buy  up  all  weighty  coins  for 
the  mints  of  Holland  and  the  East  countries,  whereby  the  King's 
mint  has  stood  still. 

Not  only  the  Goldsmiths'  Company  of  London,  but 
the  lord  mayor,  court  of  aldermen,  and  common 
council,  petitioned  against  the  revival  of  the  office 
of  the  Royal  Exchanger.  They  were  not,  however, 
successful ;  and  on  a  second  application  of  the  Gold- 
smiths' Company,  the  King  told  them  "  to  trouble 
him  no  farther,  since  his  right  to  the  office  was  un- 
doubtedly clear."  After  the  death  of  Charles  I.  this 
office  was  not  continued,  and  the  business  of  money- 
changing  fell  again  into  the  hands  of  the  goldsmiths. 
Their  shops  were  situated  chiefly  on  the  south  row  of 
Cheapside,  and  extended  from  the  street  called  the 
Old  Change  unto  Bucklersbury.* 

MONEY-LENDING. 

That  ])art  of  the  business  of  banking  which  consists 
in  the  lending  of  money  lay,  during  the  middle  ages, 
under  severe  restraints.  The  taking  of  interest  for 
the  loan  of  money  was  deemed  sinful,  and  stigmatised 
witli  the  name  of  usury.  This  opinion  a})})cars  to 
be  wholly  unwarranted,  either  by  tlie  principles   of 

*  See  Maitland's  History  of  London,  p.  826. 


OF    BANKING.  15 

natural  equity,  or  the  enactments  of  the  Mosaic  hiw. 
**  The  taking  of  interest  tiom  IsraeUtes  was  forbidden 
by  Moses ;  not,  however,  as  if  he  absolutely  and  in 
all  cases  condemned  the  practice,  for  he  expressly 
permitted  interest  to  be  taken  from  strangers,  but  out 
of  favour  to  the  poorer  classes  of  the  people.  The 
fartlier  we  go  back  towards  the  origin  of  nations,  the 
poorer  do  we  commonly  hnd  them,  and  the  more 
strangers  to  commerce ;  and  where  this  is  the  case, 
people  borrow,  not  with  a  view  to  profit,  but  from 
poverty,  and  in  order  to  procure  the  necessaries  of 
life ;  and  there  it  must  be,  no  doubt,  a  great  hardshij) 
to  give  back  more  tlian  has  been  got.  The  taking  of 
interest  from  Hti'cingera  Moses  has  not  only  nowhere 
forbidden,  but  even  expressly  authorised  it.  Hence 
it  is  clear  that  he  does  by  no  means  represent  interest 
as  in  itself  sinful  and  unjust.  Any  such  prohibition 
of  interest  in  our  age  and  country  would,  without 
doubt,  be  unjust  towards  lenders,  and  destructive  to 
trade  of  every  description.  Among  all  the  remnants 
of  ancient  laws,  it  would  be  difficult  to  find  one  which, 
in  the  present  state  of  society,  it  would  be  more 
foolish  and  hurtful  to  revive  and  enforce.  It  could 
only  suit  a  state  so  constituted  as  was  that  of  the 
Israelites  by  Moses."  *  The  taking  of  interest  for 
the  loan  of  money  was  first  prohibited  in  England  by 
Edward  the  Confessor.  This  law,  however,  appears 
to  have  become  obsolete ;  for,  in  a  council  held  at 
Westminster,  in  the  year  1126,  usury  was  prohibited 
only  to  the  clergy,  who  in  case  they  practised  it, 
were  to  be  degraded ;  and  in  another  council,  held 
twelve  years  afterwards,  it  was  decreed,  "  that  sucli 
of  the  clergy  as  were  usurers  and  hunters  after  sordid 
gain,  and  for  the  public  employments  of  the  laity, 
ought  to  be  degraded."      The  earliest  mention  we 

*  See  Michaelis's  Commentaries  on  the  Laws  of  Moses,  vol.  ii. 
pp.  324'  to  342. 


16  THE    HISTORY    AND    PRINCIPLES 

find  in  the  English  history  of  a  certain  yearly  allow- 
ance for  the  usury  or  interest  of  money  is  in  the 
year  1199,  the  tenth  and  last  year  of  Richard  I. 
In  this  case  the  rate  of  interest  was  10  per  cent. 
This  appears  to  have  been  the  ordinary  or  market 
rate  of  interest  from  that  period  until  the  time  of 
Henry  VIII.  ;  but  there  are  many  instances  on  record 
of  a  much  higher  rate  of  interest  being  taken,  espe- 
cially by  the  Jews  and  the  Lombards,  who,  in  those 
times,  were  the  principal  money-lenders.  The  exor- 
bitant interest  taken  by  them  is  supposed  by  eminent 
writers  to  have  been  the  effect  of  the  prohibition  of 
usury. 

The  Jews,  who  were  previously  famous  in  foreign 
countries  for  their  "  egregious  cunning  in  trade  and 
in  the  practice  of  brokerage,"  arrived  in  England 
about  the  time  of  the  Conquest,  and  soon  became 
remarkable  for  wealth  and  usury.  "  The  prejudices 
of  the  age,"  says  Hume,  "  had  made  the  lending  of 
money  on  interest  pass  by  the  invidious  name  of 
usury ;  yet  the  necessity  of  the  practice  had  still 
continued  it,  and  the  greater  part  of  that  kind  of 
dealing  fell  every  where  into  the  hands  of  the  Jews, 
who  being  already  infamous  on  account  of  their  reli- 
gion had  no  honour  to  lose,  and  were  apt  to  exercise 
a  profession  odious  in  itself  by  every  kind  of  rigour, 
and  even  sometimes  by  rapine  and  extortion.  The 
industry  and  frugality  of  this  people  had  put  them  in 
possession  of  all  tlie  ready  money,  which  the  idleness 
and  profusion  connnon  to  the  English  with  the  Eu- 
ropean nations  enabled  tlicm  to  lend  at  exorbitant 
and  unequal  interest."  *  Henry  III.  prohibited  the 
Jews  taking  more  than  two-pence  a  week  for  every 
20.9.  they  lent  to  the  scholars  at  Oxford.t  This  is 
after  the  rate  of  48/.  (J.v.  <Sr/.  per  cent,  per  annum. 


*  Hume's  History  of  England,  chap.  x. 

f  Henr3''s  History  of  England,  vol.  vi.  page  280. 


OF    BANKING.  17 

Peter  of  Blois,  Archdeacon  of  Bath,  writes  thus  to  his 
friend  the  Bishop  of  Ely,  "  I  am  dragged  to  Canterbury 
to  be  crucified  by  the  perfidious  Jews  amongst  their 
other  debtors,  whom  they  ruin  and  torment  with  usury. 
The  same  sufferings  await  me  also  at  London,  if  you 
do  not  mercifully  interpose  for  my  deliverance.  1  be- 
seech you  therefore,  O  most  Rev.  Father  and  most 
loving  friend,  to  become  bound  to  Sampson  the  Jew 
for  ()/.  which  I  owe  him,  and  thereby  deliver  me  from 
that  cross."  *  The  wealth  and  the  rapacity  of  the  Jews 
occasioned  the  most  cruel  proceedings  against  them 
on  the  part  of  both  the  populace  and  the  government. 
A  statute  supposed  to  have  been  passed  about  the 
third  year  of  the  reign  of  Edward  I.,  recites  that,  "albeit 
tlie  king  and  his  ancestors  have  received  much  benefit 
from  the  Jewish  people  in  times  past :  nevertheless, 
for  the  honour  of  God  and  the  common  benefit  of  the 
people,"  it  is  ordained  that  the  Jews  shall  not  take 
usury ;  "  and  that  all  Jews  shall  dwell  in  the 
king's  own  cities  and  boroughs,  where  the  chests  of 
Chirograph  of  Jewry  are  wont  to  be  kept ;  and  that 
each  Jew,  after  he  be  seven  years  old,  shall  wear  a 
badge  of  yellow  felt,  and  pay  threepence  yearly  to  the 
king  at  Easter,  whose  bondman  he  is,  and  the  same  to 
apply  as  well  to  the  women  as  the  men."  It  is  also 
further  enacted  —  "  And  forasmuch  as  it  is  the  will 
and  sufferance  of  Holy  Church,  that  they  may  live 
and  be  preserved,  the  king  taketh  them  under  his 
protection,  and  commandeth  that  none  shall  do  them' 
harm  in  their  bodies  nor  goods,  and  that  they  shall 
not  be  challenged  nor  troubled  in  any  court,  except 
the  king's,  whose  bondmen  they  are."  —  "  And  the 
king  granteth  unto  them,  that  they  may  gain  their 
living  by  lawful  merchandize,  and  that  they  may  have 
intercourse  with  Christians,  in  order  to  carry  on  lawful 
trade  by  buying  and  selling."  The  following  is  rather 
a  singular  clause  :  —  the  act  provides,  that  "  the  Jews 

*  Henry's  History  of  England,  vol.  vi.  page  280. 
C 


18  THE    HISTORY    AND    PRINCIPLES 

shall  not  contribute  together  with  the  rest  of  the  inha- 
bitants of  the  borough  wherein  tliey  reside,  for  that 
they  are  taxable  to  the  king  as  bondsmen,  and  to  none 
other."  These  persecutions  terminated  by  the  expul- 
sion of  the  Jews  from  England  in  the  year  1290.  They 
were  not  re-admitted  until  the  time  of  Oliver  Cromwell. 
On  this  occasion  the  Protector  summoned  an  assembly 
to  debate  two  questions,  1st,  whether  it  were  lawful 
to  tolerate  the  Jews  ;  and  2nd,  if  it  were,  on  what  con- 
ditions ?  The  assembly  consisted  of  two  judges,  seven 
citizens  of  London,  among  whom  were  the  lord  mayor 
and  the  sheriffs,  and  fourteen  divines.  The  judges 
considered  toleration  merely  as  a  point  of  law,  and  de- 
clared they  knew  of  no  law  against  it ;  and  that  if  it 
were  thought  useful  to  the  state,  tliey  would  advise  it. 
The  citizens  viewed  it  in  a  commercial  light,  and  they 
were  divided  in  their  opinions  about  its  utility.  Both 
these,  however,  despatched  the  matter  briefly  ;  but  tlie 
divines  violently  opposed  it  by  text  after  text  for  four 
whole  days.  Cromwell  was  at  length  so  weary  that  he 
told  them  he  had  hoped  they  would  have  thrown  some 
light  on  the  subject  to  direct  his  conscience,  but  on 
tlie  contrary,  they  had  rendered  it  more  obscure  and 
doubtful  than  before  ;  that  he  desired  therefore  no 
more  of  tlieir  reasonings,  but,  lest  he  should  do  any 
thing  rashly,  he  begged  a  share  in  their  prayers. 

Previous  to  the  expulsion  of  the  Jews,  the  Lombards 
had  settled  in  England,  and  they  soon  became  as  great 
usurers  as  the  Jews  themselves.  By  Lombard,s  were 
generally  understood  Italian  merchants  from  the  four 
republics  of  Genoa,  Lucca,  Elorence,  and  Venice. 
The  foreign  commerce  of  those  times  was  usually 
carried  on  by  com})anies  of  merchants,  who,  on  pay- 
ment of  certain  duties,  were  invested  by  the  govern- 
ment with  a  monopoly  of  the  trade  to  those  countries 
of  which  they  were  natives,  and  they  also  ])osscssed  pe- 
culiar privileges.  "  As  the  Lombards  engrossed  the 
tradeof  every  kingdom  in  which  they  settled,  they  soon 


OF    BANKING.  19 

became  masters  of  its  cash.      Money  of  course  was  in 
their  hands  not  only  a  sign  of  the  value  of  their  com- 
modities, but  became  an  object  of  commerce  itself. 
They  dealt  largely  as  bankers.  In  an  ordonnance,  a.d. 
1295,  we  find  them  styled  mercafores  and  campsores. 
They  carried  on  this  as  well  as  other  branches  of  their 
commerce   with    somewhat   of  that   rapacious    spirit 
which  is  natural  to    monopolizers    who   are  not   re- 
strained   by   the  concurrence  of  rivals  :    an    opinion 
which  prevailed  in  the  middle  ages,  was,  however,  in 
.some  measure  the  cause  of  their  exorbitant  demands, 
and  may  be  pleaded  in  apology  for  them.     Commerce 
cannot   be    carried   on    with    advantage,    unless    the 
persons  who  lend  a  sum  are  allowed  a  certain  premium 
for  the  use  of  their  money,  as  a  compensation  for  the 
risk  which  they  run  in  permitting  another  to  traffic 
with  their  stock.     This  premium  is  fixed  by  law  in  all 
commercial  countries,  and  is  called  the  legal  interest 
of  money.     But  the  Fathers  of  the  Church  absurdly 
applied  the  prohibitions  of  usury  in  Scripture  to  the 
payment  of  legal  interest,  and  condemned  it  as  a  sin. 
The  schoolmen,  misled  by  Aristotle,  whose  sentiments 
they   followed,    implicitly  and   without    examination 
adopted  the  same  error  and  enforced  it.     Thus  the 
Lombards  found  themselves  engaged  in  a  traffic  which 
was    deemed   criminal    and    odious.         They   were 
liable  to  punishment  if  detected.      They  were   not 
satisfied,    therefore,    with    that    moderate    premium 
which   they  might  have  claimed,  if  their  trade  had 
been  open  and  authorised  by  law.     They  exacted  a 
sum  proportional  to  the  danger  and  infamy  of  a  dis- 
covery.    Accordingly,  we  find  it  was  usual  for  them 
to  demand  twenty  per  cent,  for  the  use  of  money  in 
the  thirteenth  century.     About  the  beginning  of  that 
century   the    Countess    of  Flanders  was    obliged   to 
borrow  money  in  order  to  pay  her  husband's  ransom. 
She  procured  the  sum  requisite,  either  from   Italian 
merchants,  or  from  Jews.     The  lowest  interest  whicli 

c  2 


20  THE    HISTORY    AND    PRINCIPLES 

she  paid  to  them  was  above  twenty  j)er  cent.,  and 
some  of  them  exacted  near  thhty.  In  the  fourteenth 
century,  a.  d.  1311,  Phihp  IV.  fixed  the  interest 
which  might  be  legally  exacted  in  the  fairs  of  Cham- 
pagne at  twenty  per  cent.  The  interest  of  money 
in  Arragon  was  somewhat  lower.  James  I.,  a.d.  124-2, 
fixed  it  by  law  at  eigliteen  per  cent.  As  late  as  the 
year  1490,  it  appears  that  the  interest  of  money  in 
Phicentia  was  at  the  rate  of  forty  per  cent.  This  is 
the  more  extraordinary,  because  at  that  time  the  com- 
merce of  tlie  Italian  States  was  become  considerable. 
It  appears  from  Lud.  Guicciardini,  tliat  Charles  V. 
had  fixed  the  rate  of  interest  in  his  dominions  in  the 
Low  Countries  at  twelve  per  cent.,  and  at  the  time 
when  he  wrote,  about  the  year  1560,  it  was  not 
uncommon  to  exact  more  than  that  sum.  He  com- 
plains of  this  as  exorbitant,  and  ])oints  out  its  bad 
etlccts  both  on  agricultiu'e  and  commerce.  Tliis  high 
interest  on  money  is  alone  a  ])roof  tliat  the  profits  on 
commerce  were  exorbitant.  The  Lombards  were  also 
estiiblished  in  England  in  the  tliirtecntli  century,  and 
a  considerable  street  in  the  city  of  London  still  bears 
their  name.  They  enjoyed  great  privileges,  and  carried 
on  an  extensive  commerce,  particularly  as  bankers."  * 

The  English  monarchs  frequently  borrowed  money 
of  the  Lombards,  as  well  as  of  other  public  bodies,  and 
of  private  individuals.  Tlie  companies  of  foreign  mer- 
chants made  advances  of  money,  wliicli  were  repaid  by 
tlie  duties  on  their  merchandise.  The  oldest  and  weal- 
thiest of  these  companies,  the  Steel  Yard  Com})any, 
was  a  ivind  of  bank  to  our  kings,  whenever  they  wanted 
money  on  any  certain  emergency,  but  the  company 
was  sure  to  be  well  paid  in  the  end  for  such  assistance.  "I" 

In  the  year  1516,  the  taking  of  interest  for  money 
was  made  legal  in  England,  and  tlie  rate  was  fixed  at 
ten  per  cent.     This  act  was  repealed  in  the  year  1552, 

*  Robertson's  History  of  Charles  V.,  vol.  i.  p.  257. 
f  Anderson's  History  of  Commerce,  vol.  ii.  p.  292. 


OF    BANKING.  21 

~ — •\ — 

but  it  was  re-enacted  in  1571.     The  legal  rate- ^f  in-  '■ 
terest  was  reduced  to  eight  per  cent,  in  1624,  and  to  \ 
six  per  cent,  in  1651.     In  the  year  17 11,  it  was  re-  / 
duced  to  five  per  cent.,  where  it  now  remains.     The/ 
legal  rate  of  interest  is  still  six  per  cent,  in  Ireland. 
After  the  taking  of  interest  was  sanctioned  by  law, 
the  term  usury,  wliich  was  previously  applied  to  in- 
terest in  general,  became  limited  to  denote  a  rate  of 
interest  higher  than  that  which  the  law  allowed. 


MONEY-BORROWING. 

That  part  of  the  business  of  banking  which  consists 
in  the  borrowing  of  money,  with  a  view  of  lending  it 
again  at  a  higher  rate  of  interest,  does  not  appear  to 
have  been  carried  on  by  bankers  until  the  year  1645, 
when  a  new  era  occurred  in  the  history  of  banking. 
The  goldsmiths,  who  were  previously  only  money- 
changers, now  became  also  money-lenders.  They 
became  also  money-borrowers,  and  allowed  interest 
on  the  sums  they  borrowed.  They  were  agents  for 
receiving  rents.  They  lent  money  to  the  king  on  the 
security  of  the  taxes.  The  receipts  they  issued  foi-  the 
money  lodged  at  their  houses  circulated  from  hand  to 
hand,  and  were  known  by  the  name  of  *'  goldsmiths' 
notes."  These  may  be  considered  as  the  first  kind 
of  bank  notes  issued  in  England.  The  following  ac- 
count of  these  banking  goldsmiths  is  taken  chiefly 
from  "  Anderson's  History  of  Commerce."  * 

When  our  merchants  became  enriched  by  commerce, 
they  wished  for  a  place  of  security  in  which  they  might 
deposit  their  wealth.  Hence  they  usually  sent  theii' 
money  to  the  mint  in  the  Tower  of  London,  which  be- 
came a  sort  of  bank.  The  merchants  left  their  money 
here  when  they  had  no  occasion  for  it,  and  drew  it  out 
as  they  wanted  it.     But  in  1640,  King  Charles  I.  took 

*  Vol.  ii.  p.  402. 
c  a 


22  THE    HISTORY    AND    PRINCIPLES 

possession  of  200,000/.  of  the  merchants'  money  that 
had  been  lodged  in  the  mint,  and  from  that  period 
the  merchants  kept  their  money  in  their  own  houses, 
under  the  care  of  their  servants  and  apprentices.  On 
the  breakhig  out  of  the  civil  war  between  Charles  I. 
and  the  Parliament,  it  became  very  customary  for  the 
apprentices  to  rob  their  masters,  and  then  run  away 
and  join  the  army.  As  the  merchants  could  now  place 
no  confidence  either  in  the  public  authorities  or  in 
their  own  servants,  they  were  under  the  necessity  of 
employing  bankers. 

These  bankers  w^re  the  goldsmiths.  Previous  to 
this  ])eriod,  tlie  business  of  the  goldsmiths  was  similar 
to  what  it  is  in  our  own  time.  They  bought  and  sokl 
plate  and  foreign  coins ;  they  procured  gold  to  be 
coined  at  the  mint ;  and  supplied  refiners,  plate-makers, 
and  others,  with  precious  metals.  To  deal  in  gold  and 
silver  bulhon  to  any  large  extent,  implies  the  possession 
of  considerable  wealth ;  and  as  all  the  money  in  the 
country  then  consisted  of  gold  and  silver  coin,  it  was 
natural  enough  that  the  goldsmiths  should  become 
the  bankers  of  those  w^ho  had  money  for  which  they 
had  no  immediate  use. 

An  account  of  tlie  bankers  of  those  days  is  related 
in  a  curious  pamphlet  published  in  the  year  I676,  and 
entitled  "  Tlie  Mystery  of  the  new-fashioned  Gold- 
smiths or  Bankers  discovered."  The  author  observes :  — 

"  That  this  new  banking  business  soon  grew  very  considerable." 
"  It  happened,"  says  he,  "  in  those  times  of  civil  commotion,  that 
the  Parliament,  out  of  plates  and  old  coins  brought  into  the  mint, 
coined  seven  millions  into  half-crowns  :  and  there  being  no  mills 
then  in  use  at  the  mint,  this  new  money  was  of  very  unequal 
weight,  sometimes  two-pence  and  three-pence  difference  in  an 
ounce ;  and  most  of  it  was,  it  seems,  heavier  than  it  ought  to  have 
been,  in  proportion  to  the  value  in  foreign  parts.  Of  this  the  gold- 
smiths made  naturally  the  advantage  usual  in  such  cases,  by  picking 
out  or  culling  the  heaviest,  and  melting  them  down  and  exporting 
them. 

"  INIoreover,  such  merchants'  servants  as  still  kept  their  masters' 
running  cash,  had  fallen  into  a  way  of  clandestinely  lending  the 
same  to  the  goldsmiths  at  four-pence  per  cent,  per  diem,  who,  by 


OF    BANKING.  23 

these  and  such-like  means,  were  enabled  to  lend  out  great  quan- 
tities'of  cash  to  necessitous  merchants  and  others,  weekly  or  monthly, 
at  high  interest,  and  also  began  to  discount  the  merchants'  bills  at 
the  like  or  higher  interest. 

"  Much  about  the  same  time  the  goldsmiths  (or  new-fashioned 
bankers)  began  to  receive  the  rents  of  gentlemen's  estates  remitted 
to  town,  and  to  allow  them  and  others  who  put  cash  into  their  hands 
some  interest  for  it,  if  it  remained  but  a  single  month  in  their  hands, 
or  even  a  lesser  time.  This  was  a  great  allurement  for  people  to 
put  money  into  their  hands,  which  would  bear  interest  till  the  day 
they  wanted  it ;  and  they  could  also  draw  it  out  by  one  hundred 
pounds  or  fifty  pounds,  &c.,  at  a  time,  as  they  wanted  it,  with  in- 
finitely less  trouble  than  if  they  had  lent  it  out  on  either  real  or 
personal  security. 

"  The  consequence  was,  that  it  quickly  brought  a  great  quantity 
of  cash  into  their  hands,  so  that  the  chief  or  greatest  of  them  were 
now  enabled  to  supply  Cromwell  with  money  in  advance  on  the 
revenues,  as  his  occasion  required,  upon  great  advantages  to  them- 
selves. 

"  After  the  Restoration,  King  Charles  II.  being  in  want  of  money, 
the  bankers  took  ten  per  cent,  of  him  barefacedly  and  by  private 
contracts  ;  on  many  bills,  orders,  tallies,  and  debts  of  that  king, 
they  got  twenty,  sometimes  thirty  per  cent.,  to  the  great  dishonour 
of  the  government. 

"  This  great  gain  induced  the  goldsmiths  more  and  more  to  be- 
come lenders  to  the  king,  to  anticipate  all  the  revenue,  to  take 
every  grant  of  parliament  into  pawn  as  soon  as  it  was  given  ;  also 
to  outvie  each  other  in  buying  and  taking  to  pawn  bills,  orders, 
and  tallies,  so  that  in  effect  all  the  revenue  passed  through  their 
hands." 

The  "new-fashioned  bankers"  were  also  attacked 
by  Sir  Josiah  Child,  in  his  "  New  Discourse  of  Trade," 
in  the  following  terms  : — 

"  And  principally  this  seeming  scarcity  of  money  proceeds  from 
the  trade  of  hankering,  which  obstructs  circulation,  advanceth  usury, 
and  renders  it  so  easy,  that  most  men,  as  soon  as  they  can  make 
up  a  sum  of  from  50/.  to  100/.,  send  it  in  to  the  goldsmith,  which 
doth  and  will  occasion,  while  it  lasts,  that  fatal  pressing  necessity 
for  money  visible  throughout  the  whole  kingdom,  both  to  prince 
and  people. 

"  A  seventh  accidental  reason  why  land  doth  not  sell  at  present 
at  the  rate  it  naturally  should  in  proportion  to  the  legal  interest,  is 
that  innovated  practice  of  bcmkers  in  London,  which  hath  more 
effects  attending  it  than  most  I  have  conversed  with  have  yet  ob- 
served; but  I  shall  here  take  notice  of  that  only  which  is  to  my  pre- 
sent purpose,  viz.  — 

c   4 


24  THE    IIISTOUY    AND    I'RINCirLES 

"  The  gentlemen  that  are  bankers,  having  a  large  interest  from 
his  majesty  for  what  they  advance  upon  his  majesty's  revenue,  can 
afford  to  give  tlie  full  legal  interest  to  all  persons  that  put  money 
into  their  hands,  though  for  never  so  short  or  long  a  time,  which 
makes  the  trade  of  usury  so  easy  and  hitherto  safe,  that  few,  after 
having  found  the  sweetness  of  this  lazy  vyay  of  improvement 
(being  by  continuance  and  success  grown  to  fancy  themselves  se- 
cure in  it),  can  be  led  (there  being  neither  ease  nor  profit  to  invite 
them)  to  lay  out  their  money  in  land,  though  at  fifteen  years'  pur- 
chase ;  whereas  before  this  way  of  private  banking  came  up,  men 
that  had  money  were  forced  oftentimes  to  let  it  lie  dead  by  them 
until  they  could  meet  with  securities  to  their  minds ;  and  if  the 
like  necessity  were  now  of  money  lying  dead,  the  loss  of  use  for 
the  dead  time  being  deducted  from  the  profit  of  six  per  cent,  (com- 
munibus  annis)  would  in  effect  take  off  1/.  per  cent,  per  annum  of 
the  profit  of  usury,  and  consequently  incline  men  more  to  purchase 
lands,  in  regard  to  the  difference  between  usury  and  purchasing 
would  not,  in  point  of  profit,  be  so  great  as  now  it  is,  this  new  in- 
vention of  cashiering  having,  in  my  opinion,  clearly  bettered  the 
usurer's  trade  one  or  two  per  cent,  per  annum.  And  that  this  way 
of  leaving  money  with  goldsmiths  hath  had  the  aforesaid  effect, 
seems  evident  to  me  from  the  scarcity  it  makes  of  money  in  the 
country  ;  for  the  trade  of  bankers  being  only  in  London,  doth  very 
much  drain  the  ready  money  from  all  other  parts  of  the  kingdom."* 

In  tlie  year  IOG7  occiirred  the  first  run  of  which  we 
have  any  account  in  the  history  of  banking.  The 
business  of  the  new-fashioned  bankers  had  increased  so 
fast,  and  they  had  become  so  numerous,  that  their  trade 
was  supposed  to  be  at  its  height  in  this  year  ;  when, 
during  the  time  that  a  treaty  of  peace  was  under  con- 
sideration, the  Dutcli  fleet  sailed  up  the  Thames,  blew 
up  the  fort  of  Slieerness,  set  fire  to  Chatham,  and 
burned  four  ships  of  the  line.  This  disaster  occasioned 
great  alarm  in  London,  particularly  among  those  wlio 
had  money  in  their  bankers'  hands,  as  it  was  imagined 
that  the  king  would  not  be  able  to  repay  the  bankers 
the  money  tliey  had  lent  him.  To  quiet  the  fears  of 
the  people,  the  king  issued  a  proclamation,  declaring 
that  the  payments  to  the  bankers  should  be  made  at 
the  Exchequer  the  same  as  usual. 

In   IG72,   five   years  afterwards,   a   much  greater 

*  Page  45. 


OF    BANKING.  25 

calamity  befcl  the  bankers  :  for  King  Charles  II.  shut 
up  the  Exchequer,  and  would  not  pay  the  bankers 
either  tlie  principal  or  the  interest  of  the  money 
which  he  had  borrowed.  The  amount  then  due  by 
the  king  was  1,3!28,526/.,  which  he  had  borrowed  of 
the  bankers  at  eight  per  cent.,  and  which  he  never 
repaid. 

The  mode  in  which  the  bankers  transacted  their 
loans  with  the  king  was  this  :  as  soon  as  the  parliament 
had  voted  to  the  king  certain  sums  of  money  out  of 
particular  taxes,  the  bankers  advanced  at  once  the 
money  voted  by  the  parliament,  and  were  repaid  in 
weekly  payments  at  the  Exchequer  as  the  taxes  were 
received.  The  mode  of  making  the  repayments  and 
tl\e  rate  of  interest  w^ere  agreed  upon  at  the  time  of 
making  the  loan. 

The  shutting  up  of  the  Exchequer  occasioned  great 
distress  among  all  classes  of  the  people.  Persons  not  in 
trade  had  then  no  way  of  employing  their  money  with 
advantage  but  by  placing  it  out  at  interest  in  the  hands 
of  a  banker.  Hence,  not  merchants  only,  but  widows, 
orphans,  and  others,  became  suddenly  deprived  of  the 
whole  of  their  property.  They  came  in  crowds  to  the 
bankers,  but  could  obtain  neither  the  principal  nor 
the  interest  of  the  money  they  had  deposited. 

The  clamour  became  so  great,  that  the  king  granted 
a  patent  to  pay  six  per  cent,  interest  out  of  his  heredi- 
tary excise  ;  but  he  never  paid  the  principal.  But, 
about  forty  years  afterwards,  the  parliament  made 
arrangements  by  which  the  debt  was  discharged. 

The  business  of  banking  remained  entirely  in  the 
hands  of  the  new-fashioned  bankers  until  the  establish- 
ment of  the  Bank  of  England,  in  the  year  169 1-. 

The  TRANSMISSION  OF  MONEY  was  in  ancient  times 
effected  by  sending  a  messenger  with  the  coin.  During 
the  middle  ages,  it  was  accom})lished  by  means  of  bills 
of  exchange,  which  were  purchased  by  merchants. 
Ultimately,  a  class  of  persons  carried  on  this  kind  of 
traffic,  and  purchased  or  sold  bills  to  suit  the  con- 


'26  THE    HISTORY    AND    PRINCIPLES 

venience  of  parties  who  wished  to  deal  with  them. 
Tlie  pecuniary  transactions  of  independent  nations 
are  still  adjusted  in  the  same  way.  But  the  transmis- 
sion of  money  from  one  part  of  the  coimtry  to  another 
part,  is  more  frequently  effected  upon  the  principle 
of  transfer,  without  the  passing  of  any  bill.  I  shall 
explain  this  mode  of  operation  in  the  Section  upon 
Banks  of  Remittance. 


SECTION  III. 

THE    HISTORY    OF    THE    BANK    OF    ENGLAND. 

The  Bank  of  England  was  first  projected  by  Dr. 
Hugh  Chamberlain,  but  the  plan  actually  adopted  was 
proposed  by  Mr.  William  Paterson.  The  object  was 
to  raise  money  for  the  use  of  the  government.  After 
the  scheme  had  received  the  sanction  of  the  ministry, 
it  was  brought  before  the  parliament.  Here  it  under- 
went a  long  and  violent  discussion.  One  party  expa- 
tiated u})on  the  national  advantages  that  would  accrue 
from  such  a  measure ;  they  said  it  would  rescue  the 
nation  out  of  the  hands  of  extortioners  and  usurers, 
lower  interest,  raise  the  value  of  land,  revive  and 
establish  ])ublic  credit,  extend  the  circulation,  conse- 
quently improve  commerce,  facilitate  the  annual  sup- 
plies, and  connect  the  people  more  closely  with  the 
government.  The  opposition  })arty  affirmed  that  it 
would  become  a  monopoly,  and  engross  the  whole 
money  of  the  khigdom  ;  that  as  it  must  infallibly  be 
subservient  to  government  views,  it  might  be  em- 
])loyed  for  the  worst  ])urposes  of  arbitrary  power; 
that  instead  of  assisting,  it  would  weaken  commerce, 
by  tempting  ])eople  to  witlulraw  their  money  from 
trade  and  employ  it  in  stock-jobbing ;  that  it  would 
produce  a  swarm  of  brokers  and  jobbers  to  prey  u})on 
their  fellow-creatures,  encoiu'age  fraud  and  gambling. 


OF    BANKING.  27 

and  thus  corrupt  the  morals  of  the  nation.*  Notwith- 
standing these  objections,  the  act  passed  botli  houses 
of  parhament,  and  received  the  royal  assent.  The 
following  observations  upon  the  establishment  of  the 
Bank  of  England,  are  taken  from  Bishop  Burnet's 
"  History  of  his  Own  Times  :" — 

"  Some  thought  a  bank  would  grow  to  be  a  monopoly,  all  the 
money  m  England  would  come  into  their  hands,  and  they  would, 
in  a  few  years,  become  masters  of  the  wealth  and  stock  of  the  na- 
tion ;  but  those  that  were  for  it,  argued  that  the  credit  it  would 
have  must  increase  trade,  and  the  circulation  of  money,  at  least  in 
bank  notes.  It  was  visible  that  all  the  enemies  of  the  government 
set  themselves  against  it  with  such  a  vehemence  of  zeal,  that  this 
alone  convinced  all  people  that  they  saw  the  strength  that  our 
affairs  would  receive  from  it.  I  had  heard  the  Dutch  often  reckon 
up  the  great  advantages  they  had  from  their  banks  ;  and  they  con- 
cluded that  as  long  as  England  continued  jealous  of  the  govern- 
ment, a  bank  could  never  be  settled  among  us,  nor  gain  credit 
enough  to  support  itself:  and  upon  tliat,  they  judged  that  the 
superiority  in  trade  must  still  lie  on  their  side. 

"  The  advantages  the  king  and  all  concerned  in  tallies  had  from 
the  bank  were  soon  so  sensibly  felt,  that  all  people  saw  into  the 
secret  reasons  that  made  the  enemies  of  the  constitution  set  them- 
selves with  so  much  earnestness  against  it." 

The  act  of  parliament  by  which  the  bank  was  esta- 
blished, is  entitled  "  An  act  for  granting  to  their  ma-| 
jesties    several    duties    upon    tonnage    of    ships   and! 
vessels,  and  upon  beer,  ale,  and  other  liquors,  for  se- 
curing certain  recompences  and  advantages  in  the 
said  act  mentioned,  to  such  persons  as  shall  volun- 
tarily advance  the  sum  of  fifteen  hundred  thousand 
pounds  towards  carrying  on  the  war  with  France."^ 
After  a  variety  of  enactments  relative  to  the  "  duties 
upon  tonnage  of  ships  and  vessels,  and  upon  beer, 
ale,  and  other  liquors,"  the  act  authorises  the  rais- 
ing of  1,200,000/.    by    voluntary    subscription,    the 
subscribers  to  be  forined  into  a  corporation,   and  be 
styled  "The  Governor  and  Company  of  the  Bank  of 
England."    The  sum  of  300,000/.  was  also  to  be  raised 

*  See  Smollett's  History  of  England,  chap.  iv. 


r 


28  THE    HISTORY    AND    PRINCIPLES 

by  subscription,  and  the  contributors  to  receiv^e  instead 
annuities  for  one,  two,  or  tln^ee  lives.  Towards  the 
1,200,000/.  no  one  person  was  to  subscribe  more  than 
10,000/.  before  the  first  day  of  July  next  ensuing, 
nor  at  any  time  more  than  20,000/.  The  cor})oration 
were  to  lend  their  whole  capital  to  government,  for 
which  they  were  to  receive  interest  at  the  rate  of  eight 
per  cent,  per  annum,  and  1000/.  per  annum  for  ma- 
nagement;  being  100,000/.  per  annum  in  the  whole. 
They  were  not  allowed  to  borrow  or  owe  more  than 
the  amount  of  their  ca])ital,  and  if  they  did  so  the 
individual  members  became  liable  to  the  creditors  in 
proportion  to  the  amount  of  their  stock.  They  were 
not  to  trade  in  any  "  goods,  ware,  or  merchandize 
whatsoever  ;"  but  they  were  allowed  to  deal  in  bills 
of  exchange,  gold  or  silver  bullion,  and  to  sell  any 
goods,  wares,  or  merchandize  upon  which  they  had 
advanced  money,  and  which  had  not  been  redeemed 
within  three  months  after  the  time  agreed  upon. 

The  whole  subscription  having  been  filled  in  ten 
days,  a  charter  was  issued  on  the  27th  day  of  July, 
1091. 

The  charter  declares  — 

*'  That  the  management  and  government  of  the  corporation  be 
committed  to  the  governor,  deputy-governor,  and  twenty-four  direc- 
tors, who  shall  be  elected  between  the  25th  day  of  March  and  the 
25th  day  of  April  each  year,  from  among  the  members  of  the  com- 
pany duly  qualified. 

"  That  no  dividend  shall  at  any  time  be  made  by  the  said  go- 
vernor and  company,  save  only  out  of  the  interest,  profit,  or  pro- 
duce arising  out  of  the  said  capital  stock  or  fund,  or  by  such  dealing 
as  is  allowed  by  act  of  parliament. 

"  They  must  be  natural-born  subjects  of  England,  or  naturalized 
subjects ;  they  shall  have  in  their  own  name  and  for  their  own  use, 
severally,  viz.,  the  governor  at  least  -KKX)/.,  the  deputy-governor 
3000/.,  and  each  director  2000/.,  of  the  capital  stock  of  the  said 
corporation. 

"  That  thirteen  or  more  of  the  said  governors  or  directors  (of 
which  the  governor  or  deputy-governor  shall  be  always  one)  shall 
constitute  a  court  of  directors  for  the  management  of  the  affairs  of 
the  company,  and  for  the  appointment  of  all  agents  and  servants 


OF    BANKING.  29 

which  may  be  necessary,  paying  them  such  salaries  as  they  may 
consider  reasonable. 

"  Every  elector  must  have,  in  his  own  name  and  for  his  own  use, 
500/.  or  more,  capital  stock,  and  can  only  give  one  vote  ;  he  must, 
if  required  by  any  member  present,  take  the  oath  of  stock,  or  the 
declaration  of  stock,  if  it  be  one  of  those  people  called  Quakers. 

'*  Four  general  courts  to  be  held  in  every  year,  in  the  months  of 
September,  December,  April,  and  July.  A  general  court  may  be 
summoned  at  any  time,  upon  the  requisition  of  nine  proprietors 
duly  qualified  as  electors. 

"  The  majority  of  electors  in  general  courts  have  the  power  to 
make  and  constitute  by-laws  and  ordinances  for  the  government  of 
the  corporation,  provided  that  such  by-laws  and  ordinances  be  not 
repugnant  to  the  laws  of  the  kingdom,  and  be  conformed  and  ap- 
proved, according  to  the  statutes  in  such  case  made  and  provided." 

The  following  are  the  names  of  the  first  directors 
of  the  Bank  of  England  :  — 

Sir  John  Houluon,  Knt.,  Governor. 
Michael  Godfrey,  Esq.,  Deputy  Governor. 


Sir  John  Hubard,  Bart. 
Sir  James  Houlbon,  Knt. 
Sir  William  Gore,  Knt. 
Sir  William  Scawen,  Knt. 
Sir  H.  Furnese,  Knt, 
Sir  Thomas  Abney,  Knt. 
Sir  William  Hedges,  Knt. 
Brook  Bridges,  Esq. 
James  Bateman,  Esq. 
George  Boddington,  Esq. 
Edward  Clark,  Esq. 
James  Deney,  Esq. 


Thomas  Goddard,  Esq. 
Abraham  Houlbon,  Esq. 
Gilbert  Heathcote,  Esq. 
Theodore  Jenson,  Esq. 
John  Lordell,  Esq. 
Samuel  Lettriculler,  Esq. 
William  Paterson,  Esq. 
Robert  Raworth,  Esq. 
John  Smith,  Esq. 
Obadiah  Sedgwick,  Esq. 
Nathaniel  Tench,  Esq. 
John  Ward,  Esq. 


1694,  Aug.  8.  The  rate  of  discount  charged  on 
foreign  bills  was  six  per  cent.,  which  was  the  highest 
legal  interest. —  Aug.  30.  The  bank  discounted  foreign 
bills  at  four  and  a  half  per  cent. ;  and  Oct.  24.,  the 
discount  on  inland  bills  was  six  per  cent. 

1695,  Jan.  16.  The  following  rates  of  interest  were 
charged  at  the  bank :  foreign  bills,  having  three 
months  to  run,  six  per  cent. ;  but  to  those  who  keep 
accounts  at  the  bank,  foreign  bills  were  discounted 
at  three  per  cent.,  and  inland  bills  at  four  and  a  half 


30  THE    HISTORY    AND    PRINCIPLES 

per  cent. —  May  19.  Running  notes  and  bills  were 
discounted  at  three  per  cent.  —  May  6.  The  following 
advertisement  appeared  in  the  London  Gazette :  — 
"  The  Court  of  Directors  of  the  Bank  of  England 
give  notice,  that  they  will  lend  money  on  plate,  lead, 
tin,  copper,  steel,  and  iron,  at  four  per  cent,  per 
annum." 

1097.  Bank  notes  were  from  fifteen  to  twenty  per 
cent,  discount.  During  the  recoinage  in  I696,  the 
bank  had  issued  their  notes  in  exchange  for  the  clipped 
and  deficient  coin  previously  in  circulation,  and  they 
were  not  able  to  procure  from  the  mint  a  sufficient 
"quantity  of  the  new  coins  to  discharge  the  notes  pre- 
sented to  them  for  payment.  They  paid  some  of  their 
notes  by  bills,  bearing  interest  at  six  per  cent.  They 
also  advertised,  that  while  the  silver  was  recoining, 
"  such  as  think  it  lit,  for  their  convenience,  to  keep 
an  account  in  a  book  with  the  bank,  may  transfer  any 
sum  under  five  pounds  from  his  own  to  another  man's 
account." 

Exchequer  tallies  and  orders  for  payment  having, 
in  1696,  been  at  a  discount  of  forty,  fifty,  and  sixty 
per  cent.,  and  bank  notes  at  a  discount  of  twenty 
})er  cent.',  the  bank  was  empowered  to  receive  sub- 
scriptions for  the  enlargement  of  their  stock ;  four- 
fifths  in  tallies  and  orders,  and  the  remaining  one-fifth 
in  bank  notes.  The  sum  subscribed  was  1,001,171/. 
10^.,  which,  with  the  original  capital  of  1,200,000/., 
raised  the  capital  to  the  sum  of  2,201,271/.  10a-. 

The  bank  charter  was  extended  or  renewed  until 
the  expiration  of  twelve  months,  notice  to  be  given 
after  the  first  day  of  August,  I7IO,  and  until  pay- 
ment by  the  public  to  the  bank  of  the  demand  therein 
specified  ;  being  an  extension  or  renewal  for  five  years 
(cS  &  9  William  111,  c.  20.).  It  was  also  enacted, 
that  the  "  common  capital  and  principal  stock,  and 
also  the  real  fund  of  the  governor  and  company,  or 
any  profit  or  produce  to  be  made  thereotj  should  be 


OF    BANKING.  31 

exempted  from  any  rates,  taxes,  assessments,  or  im- 
positions whatever,  during  the  continuance  of  the 
bank  ;  "  and  that  the  forgery  of  the  company's  seal, 
or  of  any  of  their  notes  or  bills,  should  be  felony 
without  benefit  of  clergy.  The  dividend  on  bank 
stock  this  year  was  nine  per  cent. 

1704,  Feb.  28.  Foreign  bills  made  pnyahle  at  the 
bank  were  charged  discount  at  the  rate  of  four  per 
cent.,  but  if  not  payable  at  the  bank  they  were 
charged  five  per  cent. 

1707.  The  subscription  of  1,001,171/.  \0s.,  raised 
in  the  year  1697>  was  restored.  This  reduced  the 
bank  capital  to  the  original  sum  of  1,200,000/. 

1708.  The  bank  charter  was  extended  or  renewed 
until  the  expiration  of  twelve  months,  notice  to  be 
given  after  the  first  day  of  August,  1732,  and  until 
payment  by  the  public  to  the  bank  of  the  demands 
therein  specified  ;  being  an  extension  or  renewal  of 
the  said  charter  for  twenty  years.  (7  Anne,  c.  70  By' 
this  act  it  is  provided,  "That  during  the  continuance 
of  the  said  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  persons 
whatsoever  united  or  to  be  united  in  covenants  or 
partnership,  exceeding  the  number  of  six  personSy 
in  that  part  of  Great  Britain  called  England  to  bor- 
row, owe,  or  take  up  any  sum  or  sums  of  money  on 
their  bills  or  notes,  payable  at  demand,  or  at  a  less 
time  than  six  months  from  the  borrowing  thereof." 

From  this  year  until  the  year   1729,   the   anhuaT" 
dividends  varied,  from  nine   to   five   and  a  half  per 
cent. 

1709.  In  this  year  there  was  a  new  subscription 
of  1,001,171/.  10^.,  another  of  2,201,171/.  10.9.,  anda 
call  upon  the  proprietors  of  fifteen  per  cent.,  656,204/. 
\s.  Od' ;  altogether  making  the  total  capital  of  the 


32  THE    HISTORY    -WD    PRINCIPLES 

bank  .'5,0,58,5 1<7/-  1-v.  \)d.  This  increase  of  capital 
became  necessary,  from  the  bank  having  in  tlie  pre- 
ceding year  lent  the  government  400,000/.  v^dthout 
interest,  and  agreed  to  cancel  one  million  and  a  lialf 
exchequer  bills  in  their  possession,  amounting  with 
interest  to  1,775,027/.  17*.  lOld, 

1710.  A  flu'ther  call  of  501,448/.  12.v.  11^/.,  which 
increased  the  bank  capital  to  5,559,995/.  14*.  8f/. 

The  interest  on  foreign  bills  raised  from  four  to  five 
per  cent.,  the  same  as  the  inland  bills. 

1713.  The  bank  charter  was  extended  or  renewed 
until  the  expiration  of  twelve  months'  notice,  to  be 
given  after  the  first  day  of  August,  1742,  and  until 
payment  by  the  public  to  the  bank  of  the  demands 
therein  specified,  being  an  extension  or  renewal  of 
the  said  charter  for  ten  years.  (12  Anne,  stat.  1. 
c.  2.)  In  consideration  of  receiving  this  privilege, 
the  bank  undertook  to  circulate  1,200,000/.  in  ex- 
chequer bills.  In  this  year  the  legal  rate  of  interest 
was  reduced  from  six  to  five  per  cent. 

1716,  July  26.  The  bank  rate  of  discount  on 
foreign  and  inland  bills  reduced  to  four  per  cent. 

1717.  The  bank  cancelled  2,000,000/.  exchequer 
bills,  and  received  interest  from  the  government  at 
five  per  cent,  on  the  amount. 

171 8.  Subscriptions  for  government  loans  were 
first  received  at  the  bank.  From  this  period  the 
government  have  found  it  more  convenient  to  employ 
the  bank  as  their  agents  in  all  operations  of  this 
nature,  than  to  transact  them  at  the  treasury  or  the 
exchequer.  The  bank  becoming  by  degrees  more 
closely  connected  with  the  government,  began  to  make 
advances  of  money  in  anticipation  of  the  land  and 
malt  taxes,  and  upon  exchequer  bills  and  other  se- 
curities. 

1719,  April  30.  The  rate  of  discount  at  the  bank 
upon  bills  and  notes  was  raised  from  foiu'  to  five  per 
cent. 


OF    BANKING.  33 

1720.       The    South    Sea    Bubble    commenced 
April  7. 

"  The  directors  opened  their  books  for  a  subscription  of  one 
million,  at  the  rate  of  300/.  for  every  100/.  capital.  Persons  of  all 
ranks  crowded  to  the  house  in  such  a  manner,  that  the  first  sub- 
scriptions exceeded  two  millions  of  original  stock.  In  a  few  days 
this  stock  advanced  to  34-0/.,  and  the  subscriptions  were  sold  for 
double  the  price  of  the  first  payment.  The  infatuation  prevailed 
till  the  8th  day  of  September,  when  the  stock  began  to  fall.  Then 
did  some  of  the  adventurers  awake  from  their  delirium.  The  num- 
ber of  the  sellers  daily  increased.  On  the  29th  day  of  the  month, 
the  stock  had  sunk  to  one  hundred  and  fifty.  Several  eminent 
goldsmiths  and  bankers,  who  had  lent  great  sums  upon  it,  were 
obliged  to  stop  payment,  and  abscond.  The  ebb  of  this  por- 
tentous tide  was  so  violent,  that  it  bore  down  every  thing  in  its 
way,  and  an  infinite  number  of  families  were  overwhelmed  with 
ruin;  public  credit  sustained  a  terrible  shock;  the  nation  was 
thrown  into  a  dangerous  ferment ;  and  nothing  was  heard  but  the 
ravings  of  grief  and  despair.  Some  principal  members  of  the 
ministry  were  deeply  concerned  in  these  fraudulent  transactions. 
When  they  saw  the  price  of  stock  sinking  daily,  they  employed 
all  their  intiuence  vvith  the  bank  to  support  the  credit  of  the  South 
Sea  Company,  That  corporation  agreed,  though  with  reluctance, 
to  subscribe  into  the  stock  of  the  South  Sea  Company,  valued  at 
400/.  per  cent.,  3,500,000/.  which  the  company  was  to  repay  to  the 
bank  on  Lady-day  and  Michaelmas  of  the  ensuing  year.  This 
transaction  was  managed  by  Mr.  Robert  Walpole,  who  with  his 
own  hand  wrote  the  minute  of  agreement,  afterwards  known  by 
the  name  of  the  Bank  Contract.  Books  were  opened  at  the  bank 
to  take  in  a  subscription  for  the  support  of  public  credit,  and  con- 
siderable sums  of  money  were  brought  in.  By  this  expedient  the 
stock  was  raised  at  first,  and  those  who  contrived  it,  seized  the 
opportunity  to  realize.  But  the  bankruptcy  of  goldsmiths  and  the 
sword-blade  company,  from  the  fall  of  South  Sea  stock,  occasioned 
such  a  run  upon  the  bank,  that  the  money  was  paid  away  faster 
than  it  could  be  received  from  the  subscription.  Then  the  South 
Sea  stock  sunk  again,  and  the  directors  of  the  bank,  finding  them- 
selves in  danger  of  being  involved  in  the  company's  ruin,  renounced 
the  agreement;  which,  indeed,  they  were  under  no  obligation  to 
perform,  for  it  was  drawn  up  in  such  a  manner,  as  to  be  no  more 
than  the  rough  draft  of  a  subsequent  agi'eement,  without  due  form, 
penalty,  or  clause  of  obligation."* 

The  directors  of  the  South  Sea  Company  took  legal 
advice,  with  a  view  to  compel  the  bank  to  perform 


*  Smollett. 

D 


S4f  THE    HISTORY    AND    PRINCIPLES 

their  contract ;  l)ut  the  matter  was  arranged  through 
the  intervention  of  tlie  government,  who  remitted  to 
the  Soutli  Sea  Com})any  two  millions  sterling  as  a 
compensation  for  the  non-performance  of  the  Bank 
Contract. 

1721.  By  the  8th  Geo.  I.  c.  ^21.,  the  South  Sea 
Company  were  authorised  to  sell  ^()0,0()()/.  per  annum, 
government  annuities,  and  corporations  purchasing  the 
same  at  twenty  six  years'  purchase,  were  allowed  to  add- 
tlie  amount  to  their  capital  stock.  The  bank  purchased 
the  whole  of  this  '200,000/.  per  annum,  at  twenty  years* 
purchase,  makhig  400,000,000/. 

1722.  The  bank  capital  increased  3,100,000/.  by 
a  new  subscription.  This  made  the  amount  of  ca])ital 
8,959,99.5/.  14.9.  8rf.  April  23d.  The  rate  of  discount 
on  bills  reduced  from  five  to  four  per  cent. 

I72G.  The  stock  called  three  per  cents.  I72G,  was 
created  this  year  by  the  means  of  a  lottery. 

1727.  The  bank  advanced  to  government  1,750,000/. 
upon  the  coal  and  culm  duties,  at  four  per  cent,  interest 
(1  Geo.  II.  c.  8.). 

1728.  Tlie  bank  advanced  to  government  1,250,000/. 
upon  the  lottery,  at  four  per  cent.  (2  Geo.  II.  c.  3.) 

1730.  The  half-yearly  dividend  at  Lady-day  was 
at  the  rate  of  six  per  cent,  per  annum,  and  that  at 
Michaehnas,  at  the  rate  of  five  and  a  half  per  cent,  per 
annum. 

1731.  The  dividends  were  tlie  same  as  in  the  pre- 
ceding year. 

1732.  The  dividends  were  the  same  as  in  the  pre- 
ceding year.  From  this  year  until  tlie  year  1717»  the 
dividends  were  at  the  rate  of  five  and  a  half  per  cent, 
per  annum. 

Thursday,  3d  of  August,  about  one  o'clock,  the 
governor,  sub-governor,  and  several  of  the  directors 
of  the  bank,  came  to  see  the  first  stone  laid  of  their 
new  building,  in  Threadneedle  Street ;  and  after  they 
had  \  iewed  the  stone,  on  which  his  Majesty's  and  their 


Matthew  Raper. 
Moses  Raper. 
John  Rudge. 
William  Snelling. 
Bryan  Benson. 
Stamp  Brooksbank. 
Clement  Boehm. 


OF    BANKING.  3.5 

sevenil  names  were  eiigraved,  the  same  was  covered 
with  a  })late  of  lead,  and  tliat,  with  the  base  of  a 
pillar.  They  then  gave  twenty  guineas  to  be  dis- 
tributed among  the  workmen.  The  following  are  the 
names  of  the  directors  in  this  year. 

Sir  Edward   r)ELLAMY,   Governor. 
Horatio  Towns  end,  Deputy  Governor. 

Robert  Alsop,  Alderman. 

Robert  Attwood. 

John   Bance. 

Sir  Ger.  Conyers,  Knt.  Aid. 

Delillers  Carbonnel. 

Sir  Joseph   E^yles. 

Nathaniel  Gould. 

SirGil.HeathcotEjKhI.  Aid.  I   William  Faukener. 

John  Hanger.  |  James  Gaulter. 

Samuel  Holden.  '  Christopher  Lethieullier. 

William  Hunt.  ;  Henry  Neal. 

Joseph  Paice,  Jun.  '  Robert   Thornton. 

The  last  eight  were  not  in  the  direction  the  preceding  year. 

1734,  Thursday,  5th  of  June.  The  directors  began 
to  transact  business  at  their  new  house  in  Thread- 
needle  Street.  The  business  of  the  bank  had  previ- 
ously been  carried  on  at  Grocer's  Hall,  in  the  Poultry. 
In  the  hall  of  the  new  building  was  erected  a  curious 
marble  statue  of  King  William  III.  with  a  Latin  in- 
scription, of  which  the  following  is  a  translation  : 

For  restoring  efficacy  to  the  laws, 

Authority  to  the  courts  of  justice, 

Dignity  to  the  parliament, 

To  all  his  subjects  their  religion  and  liberties, 

And 

For  confirming  these  to  posterity, 

By  the  succession  of  the  illustrious  House 

Of  Hanover 

To  the  British  Throne, 

To  the  best  of  princes,  William  III. 

Founder  of  the  Bank, 

This  corporation,  from  a  sense  of  gratitude. 

Has  erected  this  statue. 

And  dedicated  it  to  his  Memory, 

In  the  year  of  our  Lord  M.DCC.XXXIV. 

And  the  first  year  of  this  building. 

D    2 


36  THE    HISTORY    AND    PRINCIPLES 

1737.  Considerable  public  discussion  about  the  pro- 
priety of  again  renewing  the  bank  charter.  The  fol- 
lowing extracts  from  the  London  Magazine,  of  this 
year,  will  shew  the  sentiments  which  different  writers 
entertained  n])on  the  subject : 

"  The  bank  have  power  to  lend  money  on  land,  and  no  doubt 
miglit  have  put  out  prodigious  sums  that  way,  and  have  had  a  bet- 
ter interest  for  their  money  than  most  private  people.  Had  the 
bank,  then,  lent  out  their  money  on  land,  they  would  have  strength- 
ened their  credit  and  their  interest,  and  also  extended  their 
usefulness  by  relieving  the  landed  property,  of  which  there  is  a 
great  deal  at  this  time  in  mortgage,  most  unaccountably,  at  five  per 
cent.,  while  inferior  securities  bear  a  premium  at  three  per  cent. 

"  Another  branch  of  business  which  the  bank  have  power  to  trans- 
act, but  yet  never  meddle  with,  is  the  remittance  of  money  back- 
wards and  forwards  to  London  from  all  the  chief  trading  cities  in 
England,  for  which  they  should  have  proper  offices  or  inferior 
banks  erected  in  all  such  cities  and  towns  as  they  intend  to 
manage  a  remittance  with  ; —  this,  besides  what  profit  might  be  ex- 
pected upon  the  remittances,  would  naturally  bring  great  part  of  the 
cash  which  is  circulated  in  the  country  to  be  lodged  in  their  hands. 

"  I  must  next  observe  that  in  that  branch  of  business  in  which 
they  do  employ  themselves,  which  is  that  of  a  London  hanher.,  they 
very  much  contract  and  narrow  their  dealings,  by  refusing  to  take 
in  payment  the  foreic/n  coins,  for  which  reason  it  is  impracticable 
with  many  traders  to  keep  their  cash  with  them. 

"  This  very  privilege  which  the  bank  has  for  so  long  enjoyed,  I 
could  demonstrate  to  be  a  most  heavy  burthen  upon  the  people, 
and  a  great  prejudice  to  the  landed  interest  as  well  as  the  trading 
interest  of  this  kingdom  ;  for  if  it  had  not  been  for  this  privilege, 
we  should  have  had  a  bank,  perhaps,  in  every  county  in  England, 
and  probably  half  a  dozen  different  banks  in  London,  by  which 
means,  no  merchant  of  tolerable  credit  could  ever  have  been 
straightened  for  want  of  ready  money  at  a  low  interest  when  he 
had  occasion  for  it,  nor  would  any  landed  gentleman  who  had  a 
good  title  to  his  estate  have  been  obliged  to  pay  such  premiums  to 
brokers,  or  such  an  interest  to  mortgagees  as  they  have  now 
generally  to  pay;  —  whereas  our  present  bank  has  never,  so  far 
as  I  have  heard,  assisted  any  landed  gentleman,  or  any  merchant, 
except  in  and  about  London  only." 

"  I  am  of  opinion  that  with  respect  to  the  banking  trade  and  the 
trade  to  the  East  Indies,  neither  the  one  nor  the  other  can  be  car- 
ried on  with  such  success,  or  in  such  an  extensive  manner,  by  pri- 
vate adventurers,  as  by  a  public  company,  with  such  an  exclusive 
privilege  as  our  present  companies  have.  The  circulating  of  bank 
bills  or  cash  notes  must  certainly  increase  the  current  cash  of  any 
country,  and  must,  therefore,  be  of  great  use  in  trade  ;  consequently, 


OF    BANKING.  S'lf 

the  more  extensive  and  the  more  general  such  a  circulation  is,  the 
better  will  it  be  for  the  inland  trade  of  that  country.  It  is  true,  a 
private  man  or  set  of  men  may,  by  a  long  series  of  good  manage- 
ment, gain  a  very  extensive  credit,  but  that  credit  can  never  come 
to  be  so  extensive  or  near  so  general  as  the  credit  of  a  rich  public 
company,  that  has  supported  itself  with  honour,  perhaps,  for  some 
ages;  because  the  credit  of  a  private  man  always  depends  upon 
himself,  so  that  when  he  dies,  his  credit,  as  to  any  further  circula- 
tion, generally  dies  with  him,  for  it  must  require  some  time  before 
those  who  succeed  can  revive  or  regain  it ;  whereas  a  public  com- 
pany never  dies,  nor  can  their  credit  meet  with  any  such  inter- 
ruption ;  and  as  their  managers  are  always  chosen  annually  by  the 
company,  there  is  a  greater  security  for  its  being  under  good 
management  than  a  private  bank,  whose  chief  managers  are  ap- 
pointed by  the  chance  of  natural  or  legal  succession  :  therefore  I 
shall  always  think  it  better  for  a  trading  country  to  have  a  public 
bank  than  to  trust  entirely  to  private  bankers. 

"  There  certainly  never  was  a  body  of  men  that  contributed  more 
to  the  public  safety  than  the  Bank  of  England.  This  flourishing 
and  opulent  company  have,  upon  every  emergency,  always  cheer- 
fully and  readily  supplied  the  necessities  of  the  nation,  so  that  there 
never  have  been  any  difficulties  —  any  embarrassments  —  any  delays 
in  raising  the  money  which  has  been  granted  by  parliament  for  the 
service  of  the  public  ;  and  it  may  very  truly  be  said  that  they 
have,  in  very  many  important  conjunctures,  relieved  the  nation  out 
of  the  greatest  difficulties,  if  not  absolutely  saved  it  from  ruin." 

1738,  Dec.  14.  The  bank  commenced  issuing  post 
bills,  payable  seven  days  after  sight,  that  in  case  the 
mail  was  robbed  the  parties  might  have  time  to  stop 
payment  of  the  bills.  Highway  robberies  appear  to 
have  been  very  frequent  at  this  period. 

1742.  The  bank  charter  was  extended  or  renewed 
until  the  expiration  of  twelve  months'  notice,  to  be 
given  after  the  first  day  of  August,  I764,  and  until 
payment  by  the  public  to  the  bank  of  the  demands  in 
this  Act  specified,  being  an  extension  or  renewal  of  the 
said  charter  for  twenty-two  years.  (15  Geo.  II.  c.  13.) 
In  consideration  of  obtaining  this  charter,  the  bank 
lent  to  government  1,600,000/.  without  interest.  To 
raise  this  sum  the  bank  made  a  call  u])on  the  pro- 
prietors of  810,004/.  5s.  4r/.,  which  increased  their 
capital  to  9,800,000/.  Oct.  18.  The  rate  of  discount, 
on  bills  drawn  within  the  kingdom,  was  raised  to  five 

D   3 

"  T  t-^V'  -.  ^-"R  1^  C'"» 


38 


THE    HISTORY    AND    PUINCIPLES 


per  cent.  ;  bills  drawn  without  the  kingdom  were 
still  discounted  at  four  per  cent. 

1715.  A  RUN  upon  the  bank,  occasioned  by  the 
rebellion  in  Scotland,  and  :up})osed  to  be  for  the  pur- 
pose of  supplyhig  the  rebels  with  gold.  A  public 
meeting  was  held,  and  one  thousand  one  hundred  and 
forty  merchants  signed  a  declaration  expresshig  their 
readiness  to  take  bank  notes. 

1746,  May  1.  The  rate  of  discount  on  foreign  bills 
reduced  from  five  to  four  per  cent. :  inland  bills  and 
notes  were  still  charged  five  per  cent.  These  rates 
continued  until  the  year  IJ'Jo.  By  the  19  Geo.  II. 
c.  6.,  the  bank  delivered  up  to  be  cancelled  980,000/. 
exchequer  bills,  in  consideration  of  an  annuity  of 
09,472/.,  being  three  per  cent,  per  annum.  To  raise 
the  above  sum  the  bank  made  a  call  of  ten  per  cent, 
upon  their  pro})rietors ;  this  increased  the  bank 
capital  from  9,800,000/.  to  10,780,000/. 

The  following  table  shews  the  particulars  of  the  per- 
manent debt  due  from  the  government  to  the  bank. 


1694 
1697 
1708 

1717 

1722 
1728 
1729 
1742 
1746 

Paid 
off  in 
1707 

1728 
1729 

1738 


Acts. 


5  W.  &  M.  c. 

8  &  9  Wm.  c. 
7  Anne,  c,  7. 


20. 
19. 


3  Geo.  I.  c.  8.  .. 
8     —     C.21..., 

1  Geo.  II.  C.8..., 

2  —  c.  3..., 
15  —  C.13... 
19    —     c.    6..., 


Original  Subscription 

Ingrafted  Tallies 

Exch.  Bills  cancelled. 
Advan^'  without  Int'- 
Excli.  Bills  cancelled. 
Trans.  Ir.  So.  Sea  Co. 

Advanced , 

Ditto    , 

Ditto , 

Exch.  Bills  cancelled 
Total  sum  advanced 


Ingrafted  Tallies 

Fart  of.  1' 1,775,028 

Remainder  of  ditto 

And  part  of  .-/:  2,()0(),()00  of  1717 

Further  part  of  ^^  2,()00,()00  of  1717. .. 

Not  amount    oi"  permanent  debt   in  J 
1746,  and  as  it  stood  up  to  1816    j 


1,200,000 
1,001,171 
1,775,028 

4()(),0()0 
2,000,000 
1,000,000 
1,750,000 
1,250,000 
1,600,000 

986,800 


1,001,171 

1,000,000 

775,028 

500,000 

1,000,000 


15,962,999 


4,276,199 


.^'11,686,800 


OF    BANKING.  S{) 

It  will  be  observed  that  the  permanent  government 
debt  is  not  exactly  the  same  amount  as  the  bank 
capital,  as  the  directors  did  not  always  lend  to  the 
government  the  exact  sum  they  received  from  the 
proprietors. 

1747.  The  bank  dividend  was  at  the  rate  of  five 
per  cent,  per  annum  :  it  continued  at  this  rate  until 
the  year  ]7<53. 

17-50.  A  reduction  took  place  in  tlie  interest  of  part 
of  the  national  debt.  Tiie  bank  held  a  court  at 
Merchant-Taylor's  Hall,  and  consented  to  receive  a 
reduced  rate  of  interest  upon  8,486,800/.  of  the  debt 
due  to  them  by  the  government.  The  bank  also 
agreed  to  advance  to  the  government  a  sum  of  money 
to  pay  off  the  dissentients. 

1751.  In  order  to  raise  the  sum  promised  to  be 
lent  to  the  government,  the  bank  established  what 
was  called  "  I3ank  Circulation."  Books  were  opened 
to  the  public,  and  any  person  might  enter  his  name 
and  the  sum  he  was  willing  to  lend  to  the  bank,  in  case 
it  should  be  called  for.  The  books  being  closed,  the 
bank  had  the  power  of  calling  for  the  whole  or  any 
part  of  the  sum  subscribed  at  any  time  they  pleased. 
The  subscribers  were  to  receive  2*.  per  cent,  on  the 
total  amount  of  their  subscription,  and  4/.  per  cent,  on 
the  sum  actually  advanced. 

1752.  By  25  Geo.  II.  the  balance  of  annuities 
granted  by  8  Geo.  I.  was  carried  to  a  three  per  cent, 
stock,  formed  in  1731,  and  they  were  consolidated 
into  one  stock  —  the  new^  stock  is  still  called  "  three 
per  cent,  consols."'  The  word  consols,  is  a  contraction 
tor  consolidated. 

1753.  The  bank  dividend  this  year  was  at  the  rate 
of  four  and  three-quarters  per  cent. 

1754.  The  bank  dividend  was  at  the  rate  of  four 
and  a  half  per  cent.  It  continued  at  this  rate  until 
the  year  17()4. 

1757.     The  government  stock,  called  "  three  per 

D  4 


40 


THE    HISTORY    AND    PRINCIPLES 


cent,  reduced,"  derives  its  name  from  the  operation 
of  this  year.  This  stock  had  borne  four  per  cent, 
imtil  the  year  1750  ;  from  that  time  it  paid  three 
and  a  half  per  cent.,  and  this  year  it  was  reduced  to 
three  per  cent. 

1758.  It  was  legally  determined  that  those  per- 
sons who  had  given  value  for  bank  notes  stolen  from 
the  mail  had  a  right  to  receive  payment  of  them 
from  the  bank. 

In  this  year  occurred  the  first  instance  of  the 
forgery  of  a  bank  note.  It  was  committed  by  a  per- 
son named  R.  W.  Vaughan,  w^ho  had  been  a  linen- 
draper  at  Stafford.  The  note  was  for  ^20/.,  the 
smallest  amount  then  in  circulation.  He  was  con- 
victed and  executed. 

1759.  The  bank  commenced  issuing  notes  and 
post  bills  of  1.5/.  and  10/.  It  was  proved  by  expe- 
riment, that  five  hundred  and  twelve  10/.  bank  notes 
weighed  one  pound. 

17()3.  In  this  year  terminated  the  seven  years' 
war.     The  following  are  the  government  loans  con- 


tracted  during  this  war. 

Years. 

Loans.           Interest  per  cent. 

Date. 

1                     1 

Loans.          | Interest  per  cent.; 

1 

1756 

1757 

1 758 

1 759 

£2,000, 000'a£3   12     0 
3,000,000      3   14.     3  i 
5,000,000      3     6     5 
6,600,000|     3  10     9  ! 

1760 
1761 
1762 
1763 

^8,000,()()(y  £3   13     7 

12,000,000      4.      1    11 

12,000,000      4   10     9 

3,500,000      4     4     2 

1764.  The  bank  cliarter  was  extended  or  renewed 
until  the  expiration  of  twelve  months'  notice,  to  be 
given  after  the  first  day  of  August,  178^->,  J^nid  until  pay- 
ment by  the  public  to  the  bank  of  the  demands  therein 
specified  ;  being  an  extension  or  renewal  of  the  said 
charter  for  twenty-two  years.   (1  Geo.  III.   c.  25.) 

\n  consideration  of  obtahiing  this  charter  the  bank 
advanced  1,000,000/.  one  xchequer  bills  until  the  year 
\''i(')(\  and  ])aid  into  the  exchequer  1  10,000/. 

The  dividends  this  year  were  raised  to  fi\e  per  cent. 


OF    BANKING. 


41 


per  annum,  at  which  rate  they  continued  until  the 
year  1767. 

17()7.  The  bank  dividend  was  raised  to  five  and  a 
half  per  cent.,  and  was  continued  at  that  rate  until 
the  year  I78I. 

1773'  The  rate  of  discount  on  foreign  bills  raised 
from  four  to  five  per  cent.  The  discount  on  both 
foreign  and  inland  bills  remained  at  five  cent,  until 


the  year  1822.  "^ 

177'5.     Bankers  were  prohibited  to  issue  notes  of  a 

less  amount  than  20*.    (15  Geo.  III.  c.  51.) 

1777*     Bankers  were  prohibited  to  issue  notes  of  a 

less  value  than  5l.    (I7  Geo.  III.  c.  30.) 

1781,  The  bank  charter  was  extended  or  renewed 
until  the  expiration  of  twelve  months'  notice,  to  be 
given  after  the  first  day  of  August,  1812,  and  until 
payment  by  the  public  to  the  bank  of  the  demands 
therein  specified  ;  being  an  extension  or  renewal  of 
the  said  charter  for  twenty-six  years.  (21  Geo.  III. 
c.  60.)  In  consideration  of  obtaining  this  renewal  of 
their  charter,  the  bank  advanced  to  the  government 
2,000,000/.  for  three  years,  at  three  per  cent. 

The  bank  dividend  raised  to  six  per  cent.,  at  which 
rate  it  continued  till  the  year  I788. 

It  is  legally  decided  that  the  bank  is  not  liable  to 
])ay  forged  notes. 

1782.  A  call  of  862,400/.,  making  the  total  capital 
of  the  bank  11,642,400/.  There  was  no  further  in- 
crease of  capital  until  the  year  I8I6. 

1784.  In  this  year  terminated  the  war  with  the 
revolted  colonies  of  America.  The  following  loans 
were  contracted  by  the  government  during  this  war. 


Ycius. 

Loans. 

Intercf  t  per  cent. 

Years. 

Loans. 

Interest  per  cent. 

1776 

^2,000,000 

£?>     9     8 

1781 

^a  2,000,000 

^5  11      1 

1777 

5,000,000 

4     5     2 

1782 

13,500,000     5   18     1 

1778 

6,000,000 

4.  18     7 

1783 

12,000,000      1-  13     9 

1779 

7,000,000 

5   18  10 

1784. 

6,000,000      5     6   11 

1780 

12,000,000 

5  16     8 

"\ 


42  THE    HISTORY    AND    PKIXCn'LES 

I78G.  Previous  to  this  year  the  bank  received  an 
allowance  from  the  government  on  account  of  the 
nianagcjnent  of  the  public  debt  ;  that  is,  for  trouble 
ill  paying  the  dividends,  superintendhig  the  transfer 
of  stock,  &c.,  of  BiVZl.  lO.v.  a  million.  It  was  now 
reduced  to  4o0/.  a  million  ;  the  bank  being  at  the 
same  tune  entitled  to  a  considerable  allowance  for 
trouble  in  receivmg  contributions  on  loans,  lotteries, 
&c.  This  scale  of  allowance  was  continued  mitil  the 
year  1808. 

17 88.  The  bank  dividend  raised  to  seven  per  cent., 
at  which  rate  it  continued  until  the  year  I8O7. 

1791.  A  bUl  was  brought  into  parliament  to 
render  500,000/.  of  the  imclaimed  dividends  on  the 
public  funds  available  for  the  service  of  the  public  ; 
but  the  bank  agreed  to  lend  that  sum  to  the  govern- 
ment without  interest,  and  the  bill  was  withdrawn. 

1792.  A  calculation  was  made  witli  a  view  to 
ascertain  the  number  of  days  that  a  bank  note  of  each 
denomination  remained  in  circulation  in  this  year. 
The  following  are  the  results  :  — 


Notes  of  10/.  each, 

236  days. 

Notes  of  50/.  each, 

124  days, 

_       15/.    — 

114     — 

—     100/.    — 

84    — 

—      20/.    — 

209     — 

—     200/.    — 

31     — 

—       25/.    — 

74     — 

—     300/.    — 

24    — 

—       .SO/.    — 

95    — 

_     500/.    — 

24    — 

—       40/.    — 

Cy5    — 

—  1000/.    — 

22    — 

1793.  An  act  of  parliament  was  j)assed  (33  Geo. 
III.  c.  32.)  declaring  that  the  bank  should  not  be 
subject  to  any  ])enalties  for  advancing  money  to  the 
government  for  the  ])ayment  of  bills  of  exchange, 
accepted  by  the  commissioners  of  his  Majesty's  trea- 
sury, and  made  payable  at  the  bank.  The  amount  of 
sums  so  advanced  was  required  to  be  anmially  laid 
before  parliament.  According  to  their  originiil  char- 
ter, the  bank  were  prohibited  lending  money  to  tlie 
government  without  the  consent  of  ])arliament,  under 
a  penalty  of  three  times  the  sum  lent :  one-fifth  part 
of  which  was  to  <>o  to  the  iiiformer. 


OF    BANKING.  43 

This  was  a  year  of  groat  commercial  distress  : 
twenty-two  commissions  oi"  bankru})tcy  were  issued 
against  country  bankers. 

17{H.     The  bank  connnenced  issuing  notes  for  51. 

1795.  The  bank  having  resolved  to  reduce  their 
discounts,  placed  the  following  notice  in  the  discount 
office. 

*'  Bank  of  England,  'i\st  December,  1795. 

"  Pursuant  to  an  order  of  the  Court  of  Directors  : 

"  Notice  is  hereby  given, 

"  That  no  bills  will  be  taken  in  for  discount  at  this  office  after 
12  o'clock  at  noon,  or  notes  after  12  o'clock  on  Wednesday. 

"  That  in  future,  whenever  the  bills  sent  in  for  discount,  shall  in 
any  day  amount  to  a  larger  sum  than  it  shall  be  resolved  to  dis- 
count on  that  day,  d.  pro  rata  proportion  of  such  bills  in  each  parcel 
as  are  not  otherwise  objectionable,  will  be  returned  to  the  person 
sending  in  the  same,  without  regard  to  the  respectability  of  the 
|)arty  sending  in  the  bills,  or  the  solidity  of  the  bills  themselves. 

"  The  same  regulation  will  be  observed  as  to  the  notes." 

1797-    'i'HE    SUSPENSION    OF    CASH    PAYMENTS. 

This  took  place  on  Monday,  Feb.  ^7th,  in  conse- 
quence of  an  order  m  council,  which  ran  in  the  fol- 
lowing terms  :  — 

"  Upon  the  representation  of  the  Chancellor  of  the  Exchequer, 
stating  that  from  the  results  of  the  infoi'mation  which  he  had  re- 
ceived, and  of  the  inquiries  which  it  has  been  his  duty  to  make, 
respecting  the  effects  of  the  unusual  demand  for  specie  that  has 
been  made  upon  the  metropolis,  in  consequence  of  ill-founded  or 
exaggerated  alarms  in  different  j)arts  of  the  country  ;  it  appears, 
that  unless  some  measure  is  immediately  taken,  there  may  be  rea- 
son to  apprehend  a  want  of  a  sufficient  supply  of  cash  to  answer 
the  exigencies  of  the  public  service,  It  is  the  unanimous  opinion 
of  the  Board,  that  it  is  indispensably  necessary  for  the  public  ser- 
vice, that  the  directors  of  the  bank  of  England  should  forbear  issuing 
any  cash  in  payment,  until  the  sense  of  parliament  can  be  taken  on 
that  subject,  and  the  proper  measures  adopted  thereupon,  for  main- 
taining the  means  of  circulation  and  supporting  the  public  and 
commercial  credit  of  the  kingdom  at  this  important  conjuncture  ; 
and  it  is  ordered  that  a  copy  of  this  minute  be  transmitted  to  the 
directors  of  the  bank  of  England,  and  they  are  hereby  required,  on 
the  grounds  of  the  exigency  of  the  case,  to  conform  thereto  until 
the  sense  of  parliament  can  be  taken  as  aforesaid." 


44  THE    HISTORY    AND    PRINCIPLES 

Among  the  crowd  assembled  at  tlie  bank,  with  a 
view  of  demanding  gold,  hand-bills  were  distributed, 
of  which  the  following  is  a  copy  :  — 

"  Bank  of  England,  Feb.  21th,  1797. 
"  In  consequence  of  an  order  of"  his  Majesty's  Privy  Council, 
notified  to  the  bank  last  night,  a  copy  of  which  is  hereunto  annexed, 
the  governor,  deputy-governor,  and  directors  of  the  bank  of  England, 
think  it  their  duty  to  inform  the  proprietors  of  the  bank  stock,  as 
well  as  the  public  at  large,  that  the  general  concerns  of  the  bank 
are  in  a  most  affluent  and  prosperous  situation,  and  such  as  to  pre- 
clude every  doubt  as  to  the  security  of  its  notes.  The  directors 
mean  to  continue  their  usual  discounts  for  the  accommodation  of 
the  commercial  interest,  paying  the  amount  in  bank  notes,  and  the 
dividend  warrants  will  be  made  in  the  same  manner." 

On  the  same  day  was  held  a  meeting  of  merchants, 
bankers,  and  others,  the  lord  mayor  in  the  chair,  when 
the  following  resolution  was  unanimously  passed  :  — 

"  That  we,  the  undersigned,  being  highly  sensible  how  neces- 
sary the  preservation  of  public  credit  is  at  this  time,  do  most  readily 
declare,  that  we  will  not  refuse  to  receive  bank  notes  in  payment 
of  any  sum  of  money  to  be  paid  to  us,  and  we  will  use  our  utmost 
endeavours  to  make  all  our  payments  in  the  same  manner." 

Tliis  resolution  was  left  for  signatin-e  at  several  of 
the  most  respectable  taverns,  and  a  similar  resolution 
was  subsequently  adopted  by  other  public  assemblies. 

Immediately  afterwards,  the  House  of  Commons  ap- 
pointed a  committee  to  inquire  into  the  affairs  of  the 
bank.  The  committee  re])orted,  that  "  The  total 
amount  of  outstanding  demands  on  the  bank,  on  the 
25th  of  Feb.  was  13,770,390/. ;  and  that  the  total 
amoimt  of  the  funds  for  discharging  those  demands 
(not  including  the  permanent  debt  due  from  govern- 
ment, of  ll,G8(vS00/.,  which  bears  an  interest  of  three 
per  cent.)  was  17,-5975280/.  ;  and  the  result  is,  that 
there  was,  on  the  25th  day  of  February  last,  a  surplus 
of  effects  belonging  to  the  bank,  beyond  the  amount 
of  their  debts,  amounting  to  the  sum  of  3,825,890/., 
exclusive  of  the  above-mentioned  ])crmanent  debt  of 
11,684,800/.  due  from  government."    From  accounts 


OF    BANKING.  4.5 

since  published,  it  appears  that  tlie  amount  of  gold  and 
silver  in  possession  of  the  bank  was  reduced  by  the 
previous  run  to  1,086,170/. 

March  3.  The  bank  were  authorised  to  issue 
notes  under  5l.  ;  37  Geo.  III.  c.  ^8.  It  is  entitled, 
'*  An  Act  to  remove  doubts  respecting  promissory 
notes  of  the  governor  and  company  of  the  bank  of 
England,  for  payment  of  sums  of  money  under  5/." 
Accordingly,  on  the  10th  of  March  the  bank  issued, 
for  the  first  time,  notes  for  1/.  and  ^/. 

March  6.  The  bank  issued  the  following  notice  :  — 

"  In  order  to  accommodate  the  public  with  a  farther  supply  o. 
coin  for  small  payments,  a  quantity  of  dollars,  which  have  been 
supplied  by  the  bank  and  stamped  at  the  mint,  are  now  ready  to 
be  issued  at  the  bank  at  the  price  of  four  shillings  and  sixpence  per 
dollar,  and  a  farther  quantity  is  preparing." 

After  the  issuing  of  the  above  notice,  it  was  ascer- 
tained that  the  dollars  were  intrinsically  worth  about 
two-pence  more  than  the  price  at  which  they  were 
intended  to  be  issued.  The  following  notice  appeared 
three  days  afterwards  :  — 

"  Bank  of  England,  March  9.  1797. 
"  In  consequence  of  its  appearing  to  be  the  general  opinion  that 
the  dollars  will  be  more  conveniently  circulated  at  the  rate  of  four 
shillings  and  nine-pence  per  dollar,  than  at  that  of  four  shillings 
and  sixpence  which  had  been  proposed,  Notice  is  hereby  given, 
that  dollars  are  now  ready  to  be  delivered  accordingly  at  the  rate 
of  four  shillings  and  nine-pence  per  dollar." 

May  3.  The  bank  restriction  act  passed.  It 
is  the  37  Geo.  III.  c.  45. ;  and  is  entitled,  "  An  Act 
for  continuing,  for  a  limited  time,  the  restriction 
contained  in  the  minute  of  council  of  the  26th  of 
February,  1797»  on  payment  of  cash  by  the  bank." 
By  this  Act  the  bank  directors  were  indemnified 
against  any  legal  proceedings  on  account  of  having 
complied  with  the  order  of  council.  They  were  not 
permitted  to  issue  cash,  except  for  any  sum  under 


46  THE    TIISTORY    AXD    PRINCIPLES 

twenty  shillings.  Rut  if  any  person  lodged  cash  in 
the  bank,  he  might  be  repaid  in  cash  to  the  extent 
of  three  fourtlis  of  the  sum  lodged  ;  but  the  sum 
lodged  must  not  be  less  than  500/.  The  bank  were 
also  allowed  to  advance  to  the  bankers  of  London, 
Westminster,  and  Southwark,  any  sum  of  cash  not 
exceeding  in  the  whole  100,000/. ;  and  also  '25,000/. 
each  to  the  bank  of  Scotland  and  the  royal  bank  of 
Scotland,  during  the  continuance  of  this  Act.  The 
bank  could  not  be  sued  for  payment  of  any  of  their 
notes,  for  which  they  were  willing  to  give  other  notes  ; 
and  no  person  could  be  held  to  special  bail  upon  any 
process  issuing  out  of  any  court,  imless  the  affidavit 
made  for  the  purpose  stated  also,  that  the  party  had 
made  no  offer  to  pay  in  bank  notes.  This  act  was 
to  be  in  force  till  the  24th  day  of  the  following  June, 
a  duration  of  fifty-two  days. 

Jime  22.      Another  Act  was  passed,    continuing 
the  bank  restriction  until  one  month  after  the   com- 
^^^.-Ttiencement  of  the  then  next  session  of  parliament. 

Nov.  30.  A  third  Act  ])assed,  continuing  the  re- 
striction until  six  months  after  the  conclusion  of  the 
war. 

An  Act  was  also  passed  (37  Geo.  III.  c.  32.)  sus- 
pending the  Acts  passed  in  1777»  which  })rohibited 
bankers  issuing  notes  below  tlie  amount  of  5/.,  and 
""^^the  country  bankers  commenced  issuing  notes  of  1/. 

\1'\)''.),  Jan.  3.  The  bank  gave  notice,  '*  That  on 
and  after  the  14th  instant,  they  would  })ay  in  casli 
all  fractional  sums  under  5/.  ;  and  that  on  and  after 
the  1st  day  of  February  next,  the  bank  will  pay  cash 
for  all  notes  of  1/.  and  2/.  value  that  are  dated  prior 
to  the  1st  day  of  July,  1798,  or  exchange  tliem  for 
new  notes  of  the  same  value,  at  the  option  of  the 
holders." 

This  year  the  bank  j)roprietors  received  a  bonus  of 
ten  per  cent,  on  their  capital.  The  bonus  was  made 
in  five  per  cents.,  1797. 


OF    BANKING.  4<7 

1800.  Tlie  ])ank  charter  was  extended  or  renewed 
until  the  expiration  of  twelve  montlis'  notice,  to  be 
given  after  the  1st  day  of  August,  1833,  and  until 
payment  by  the  pubHc  to  the  bank  of  tlie  demands 
therein  mentioned  ;  being  an  extention  or  renewal  of 
the  said  charter  for  twenty-one  years.  (40  Geo.  ill. 
c.  28.)  In  consideration  of  obtaining  tliis  renewal 
of  their  charter,  the  bank  agreed  to  lend  the  govern- 
ment the  sum  of  3,000,000/.  without  interest  for  six 
years. 

The  40  Geo.  III.  c.  36.  was  enacted  to  enable 
courts  of  equity  to  com])el  a  transfer  of  stock  in  suits, 
without  making  the  Bank  of  England,  or  the  East 
India  Company,  or  the  South  Sea  Company,  partners 
in  the  sales. 

1801.  41  Geo.  III.  c.  .57.  was  enacted  "  For  the 
better  prevention  of  the  forgery  of  the  notes  and  bills 
of  exchange  of  persons  carrying  on  the  business  of 
bankers. 

"  After  July  10th,  1801,  no  person  shall  use  or  make  any  frame 
or  mould  for  making  paper,  with  the  name  or  firm  of  any  persons 
or  body  corporate  appearing  in  the  substance  of  the  paper,  without 
a  written  authority  for  that  purpose  ;  or  shall  make  or  vend  such 
paper,  or  cause  such  name  or  firm  to  appear  in  the  substance  of  the 
paper,  whereon  the  same  shall  be  written  or  printed,  —  on  being 
imprisoned  for  the  first  offence,  not  exceeding  two  years,  nor  less 
than  six  months  ;  and  for  the  second  offence,  transported  for  seven 
years. 

"  No  person  shall  engrave,  &c.,  any  bill  or  note  of  any  person  or 
banking  company,  or  use  any  plate  so  engraved,  or  any  device  for 
making  or  printing  such  bill  or  note,  nor  shall  knowingly  have  in 
his  custody  such  plate  or  device,  or  shall  utter  such  bill  or  note 
without  a  written  authority  for  that  purpose,  under  a  like  penalty. 

"  No  person  shall  engrave,  &c.,  on  any  plate,  any  subscriptions 
subjoined  to  any  bill  or  note  of  any  person  or  banking  company, 
payable  to  bearer  on  demand,  or  have  in  his  possession  any  such 
plate,  on  penalty,  for  the  first  offence,  of  being  imprisoned  not 
exceeding  three  years,  nor  less  than  twelve  months  ;  and  for  the 
second  transported  for  seven  years." 

1801.  Tlie  proprietors  of  bank  stock  received  a  bonus 
of  five  per  cent,  on  their  capital  in  navy  five  per  cents. 


48 


THE    HISTORY    AND    PRINCIPLES 


The  war  with  the  French  repiibhc  terminated  this 
year  by  the  peace  of  Amiens.  The  following  loans 
were  contracted  dnring  tliis  war  :  — 


Vears. 

Loans. 

Interest  per  cent. 

Years. 

Loans. 

Interest  per  cent. 

1793 

^4,500,000 

^4     8     7 

1797 

^'14,500,000 

^6     6  10 

1794 

11,000,000 

4  10    7 

1798 

1^000,000 

6     4     9 

1795 

1 8,000,000 

4  15     8 

1799 

3,000,000 

5  12     5 

1796 

1 8,000,000 

4  14     9 

1799 

15,500,000 

5     5     0 

1796 

7,500,000 

4  12     2 

1800 

20,500,000'     4  14     2 

1797 

18,000,000j     5  14     1 

1801 

28,000,000     5     5     0 

180'2.  The  war  having  been  concluded,  the  Bank 
Restriction  Act  would  have  expired  six  months  after- 
wards, but  it  was  by  a  new  Act  continued  in  force  till 
tlie  1st  day  of  March,  1803. 

The  bank  proprietors  received  a  bonus  of  two  and 
a  half  per  cent,  on  their  capital  in  navy  five  per  cents. 

1803,  Feb.  28.  The  Bank  Restriction  Act  was 
continued  until  six  weeks  after  the  connnencement  of 
the  next  session  of  parliament. 

Dec.  15.  War  having  recommenced,  the  Bank  Re- 
striction Act  was  continued  imtil  six  montlis  after  the 
conclusion  of  a  definitive  treaty  of  peace. 

The  bank  is  said  to  have  lost  this  year  no  less  a 
siuii  than  300,000/.,  llu'ough  a  fraud  connnitted  by 
one  of  their  principal  cashiers,  Mr.  Astlett. 

1804.  The  bank  proprietors  received  a  bonus  in 
cash  of  five  ])er  cent,  on  their  capital. 

In  consequence  of  the  scarcity  of  silver,  tlie  bank 
issued  five-shilling  dollars.  These  dollars  liad  on  the 
obverse  side  an  impression  of  his  Majesty's  head,  and 
the  following  superscription  :  "  Georgius  III.  Dei 
Gratia  Rex  ;  "  and  on  the  reverse  side,  the  impression 
of  Britannia  and  the  following,  "Five  shillings  dollar. 
Bank  of  England  1804."  The  bank  subsequently 
issued  silver  tokens  for  three  shillings,  and  for  one 
one  shilling  and  sixpence.     By  an  Act  passed  in  1812, 


OF    BANKING.  49 

the  couiitert'eiting  these  dollars  and  tokens  was  liable 
to  a  punishment  of  fourteen  years'  transportation. 

By  44  Geo.  III.  c.  98.,  the  following  duties  were 
imposed  upon  the  notes  of  country  bankers  : — 

s€  s.  d. 

Not  exceeding ^1     \s ,.     0  0  3 

Exceeding             1      1  not  exceeding  ^^ 2     2,?....     0  0  6 

Exceeding             2     2  not  exceeding      5     5   ...     0  0  9 

Exceeding             5     5   not  exceeding  20     0  ...     0  1  0 

These  duties  continued  until  the  year  1808. 

1805.  The  bank  proprietors  received  another  bonus 
of  five  per  cent,  in  cash. 

1806.  Another  bonus  of  five  per  cent,  in  cash. 

1807.  The  dividend  on  l)ank  stock  was  raised  from 
seven  to  ten  per  cent.,  at  which  rate  it  continued  until 
the  year  1823. 

1808.  The  allowance  from  the  government  to  the 
bank  for  managing  the  public  debt  reduced  from  450/. 
a  million  to  340/.  a  million  on  six  hundred  millions 
of  the  debt,  and  to  300/.  a  million  on  all  that  it  ex- 
ceeded that  sum.  This  was  exclusive  of  some  sepa- 
rate allowances  on  annuities,  &c. 

By  48  Geo.  III.  c.  149.,  the  following  duties  were 
imposed  upon  country  bank  notes  :  — 


^ 

s. 

d. 

Not  exceeding 
Exceeding- 

1 

\s 

.     0 
.      0 

0 
0 

4> 

1  not  exceeding 

^2 

2s... 

8 

Exceeding 

2 

2  not  exceeding 

5 

5   .. 

.     0 

1 

0 

Exceeding 

5 

5  not  exceeding 

20 

0  .. 

.     0 

1 

6 

Exceeding 

20 

0  not  exceeding 

30 

0  .. 

.     0 

3 

0 

Exceeding 

30 

0  not  exceeding 

50 

0  .. 

.      0 

4 

6 

Exceeding 

50 

0  not  exceeding 

100 

0  .. 

.     0 

7 

6 

These  duties  remained  the  same  until  the  year  1815. 

1810.  The  BULLION  committee,  appointed  by 
the  House  of  Commons  for  the  purpose  of  inquiring 
into  the  causes  of  the  high  price  of  gold  bullion,  and 
its  effect  on  the  circidating  medium. 

The  committee  delivered  a  very  long  report,  in 
which  they  discussed  a  variety  of  matters  connected 

E 


so  THK    HISTORY    AND    PRINCIPLED 

with  the  currency,  and  concluded  by  recommending 
that  the  bank  sliould  resume  cash  payments  at  the  end 
of  two  years.     The  following  are  extracts  : — 

"  Your  committee  have  found  that  the  price  of  gold  bulHon,  which, 
by  tlie  regulation  of  his  Majesty's  mint,  is  3/.  17^.  I0\d.  per  ounce 
of  standard  fineness,  was,  during  the  years  1806,  1807,  and  1808, 
as  high  as  4/.  in  the  market.  Towards  the  end  of  the  year  1808  it 
began  to  advance  very  rapidly,  and  continued  very  high  during  the 
whole  of  the  year  1809,  the  market  price  of  standard  gold  fluctu- 
ating from  4/.  95.  to  4/.  I2s.  per  oz.  The  market  price  at  4/.  lOs.  is 
about  1.5^  per  cent,  above  the  mint  price. 

"  Your  committee  have  likewise  found  that  towards  the  end  of 
the  year  1808,  the  exchanges  with  the  Continent  became  very  un- 
favourable to  this  country,  and  continued  still  more  unfavourable 
through  the  whole  of  1809,  and  the  three  first  months  of  the 
present  year. 

"  Mr.  Whitmore,  the  late  governor  of  the  bank,  stated  to  the 
committee,  that  in  regulating  the  general  amounts  of  the  loans  and 
discounts,  he  did  '  not  advert  to  the  circumstance  of  the  exchanges, 
it  appearing  upon  a  reference  to  the  amount  of  our  notes  in  circu- 
lation, and  the  course  of  the  exchange,  that  they  frequently  have 
no  connection.' 

"  Mr.  Pearce,  now  governor  of  the  bank,  agreed  with  Mr.  Whit- 
more in  this  account  of  the  practice  of  the  bank,  and  expressed  his 
full  concurrence  in  the  same  opinion.  Mr.  Pkakce.  —  'In  con- 
sidering this  subject  with  reference  to  the  manner  in  which  bank 
notes  are  issued,  resulting  from  the  applications  made  for  discounts 
to  supply  the  necessary  want  of  bank  notes,  by  which  their  issue  in 
amount  is  so  controlled  that  it  can  never  amount  to  an  excess,  I 
cannot  see  how  the  amount  of  bank  notes  issued  can  operate  upon 
the  price  of  bullion,  or  the  state  of  exchanges;  and  therefore  I  am 
individually  of  opinion  that  the  price  of  bullion  or  the  state  of  the 
exchanges  can  never  be  a  reason  for  lessening  the  amount  of  bank 
notes  to  be  issued,  always  understanding  the  control  which  I  have 
already  described.' 

*'  The  bank  directors,  as  well  as  some  of  the  merchants  who  have 
been  examined,  showed  a  great  anxiety  to  state  to  your  committee 
a  doctrine,  of  the  truth  of  which  they  professed  themselves  to  be 
most  thoroughly  convinced  :  that  there  can  be  no  possible  excess  in 
the  issue  of  Bank  of  England  paper,  so  long  as  the  advances  in 
which  it  is  issued  are  made  upon  the  principles  which  at  present 
guide  the  conduct  of  the  directors  —  that  is,  so  long  as  the  discount 
of  mercantile  bills  is  confined  to  paper  of  undoubted  solidity, 
arising  out  of  real  comn)ercial  transactions,  and  payable  at  short 
and  fixed  |)eriods.  That  the  discounts  should  be  made  only  upon 
bills  growing  out  of  real  commercial  transactions  and  falling  due  in 
a  fixed  and  short  period,  are  sovmd  and  well  established  principles. 


OF    BANKING.  51 

But  that  while  the  bank  is  restrained  from  paying  in  specie,  there 
need  be  no  other  limits  to  the  issue  of  their  paper  than  what  is 
fixed  by  such  rules  of  discount;  and  that  during  the  suspension  of 
cash  payments,  the  discount  of  good  bills  falling  due  at  short 
periods  cannot  lead  to  any  excess  in  the  amount  of  bank  paper  in 
circulation,  appears  to  your  committee  to  be  a  doctrine  wholly 
erroneous  in  principle,  and  pregnant  with  dangerous  consequences 
in  practice. 

"  Upon  a  review  of  all  the  facts  and  reasonings  which  have  been 
submitted  to  the  consideration  of  your  committee  in  the  course  of 
this  inquiry,  they  have  formed  an  opinion  which  they  submit  to  the 
house  —  That  there  is  at  present  an  excess  in  the  paper  circulation 
of  this  country,  of  which  the  most  unequivocal  sympton  is  the  very 
high  price  of  bullion,  and,  next  to  that,  the  low  state  of  the  Conti- 
nental exchanges  ;  that  this  excess  is  to  be  ascribed  to  the  want  of 
a  sufficient  check  and  control  in  the  issues  of  paper  from  the  Bank 
of  England,  and  originally  to  the  suspension  of  cash  payments, 
which  removed  the  natural  and  true  control. 

"  Your  committee  would  suggest,  that  the  restriction  on  cash 
payments  cannot  safely  be  removed  at  an  earlier  period  than  two 
years  from  the  present  time  ;  but  your  committee  are  of  opinion 
that  early  provision  ought  to  be  made  by  parliament  for  termi- 
nating, at  the  end  of  that  period,  the  operation  of  the  several 
statutes  which  have  imposed  and  continue  that  restriction." 

This  report  was  delivered  late  in  the  session,  and 
was  not  taken  into  consideration  by  the  house  until 
the  following  year. 

1811.  The  commercial  distress  of  the  country  had 
become  so  great,  that  parliament  authorized  the  sum 
of  six  millions  to  be  advanced  to  merchants  on  their 
giving  sufficient  security  ;  but  such  had  been  the  fall 
in  the  price  of  mercantile  property,  that  not  many 
could  give  the  required  security,  and  bankruptcies 
were  numerous.  Whether  this  distress  arose  from 
any  preparations  of  the  bank  to  return  to  cash  pay- 
ments, from  the  American  embargo,  or  from  Buona- 
parte's Berlin  and  Milan  decrees,  was  a  matter  of 
much  controversy.  From  the  accounts  since  pub- 
lished, it  does  not  appear  that  the  bank  had  taken 
any  measures  to  increase  their  stock  of  gold  ;  but 
during  the  years  of  1810,  1811,  and  1812,  they  con- 
siderably reduced  their  private  securities  and  increased 
the  amount  of  their  public  securities.     Thus,  on  the 

E  2 


52  THE    HISTORY    AND    PRIXCIPLES 

•last  day  of  Feb.  1810,  their  public  securities  were 
14,32'2,()31/.,  and  their  private  securities  21,0.55,946/. 
On  the  same  day,  in  1813,  tlieir  public  securities  were 
25,036,62(3/.,  and  the  private  securities  12,891',324/. 
This  progressive  reduction  of  the  discounts  no  doubt 
occasioned  great  distress,  though  it  was  in  some  degree 
counteracted  by  an  increase  m  the  same  period  of  above 
two  millions  in  the  circulation.  It  has  been  asserted, 
however,  that  the  reduction  of  discounts  was  not  the 
cause  but  the  effect  of  the  distress ;  that  the  bank 
were  as  ready  to  discount  as  before,  but  that  in  con- 
sequence of  the  falling  off  in  prices,  and  the  stagnation 
of  trade,  the  amount  of  bills  offered  for  discount  was 
considerably  reduced. 

The  report  of  the  bullion  committee  was  taken  into 
consideration  by  the  House  of  Commons,  and  after 
much  discussion  rejected.  Instead  of  the  measures 
reconmiended  by  the  committee,  the  House  adopted 
certain  resolutions  proposed  by  Mr.  Vansittart  (now 
Lord  Bexley),  declaring  that  the  value  of  bank  notes 
was  not  de})reciated,  but  that  the  value  of  gold  was 
enhanced ;  and  that  the  political  and  commercial 
relations  of  Great  Britain  with  foreign  states  were 
sufficient  to  account  for  the  unfavourable  state 
of  the  foreign  exchanges  and  the  high  price  of 
bullion. 

July  24.  Lord  Stanhope's  Act  passed.  This  Act 
(51  (jco.  III.  c.  127.)  is  entitled,"  An  Act  for  making 
more  effectual  provision  for  preventing  the  current 
gold  coin  of  the  realm  from  being  paid  or  accepted 
for  a  greater  value  than  the  current  value  of  such 
coin ;  for  preventing  any  note  or  bill  of  thegovernor  and 
company  of  the  Bank  of  England  from  being  received 
for  any  smaller  sum  than  the  sum  therein  specified ; 
and  for  staying  proceedings  u})on  any  distress  by 
tender  of  such  notes."  It  enacts,  that  the  taking  of 
gold  coin  at  more  than  its  value,  or  Bank  of  England 
notes  'or  less  than  their  value,  shall  be  deemed  a  mis- 


OF    BANKING.  .5.T 

demeanor.  This  Act  was  to  be  in  force  until  the  15th 
of  March,  181^.  It  was  introduced  by  the  Earl  of 
Stanhope,  in  consequence  of  the  following  notice 
having  been  addressed  by  Lord  King  to  his  tenantry :  — 

"  By  lease,  dated  1802,  you  have  contracted  to  pay  the  annual 
rent  of  47/.  'js.  in  good  and  lawful  money  of  Great  Britain.  In 
consequence  of  the  late  great  depreciation  of  paper  money,  I  can  no 
longer  accept  any  bank  notes  at  their  nominal  value,  in  payment  or 
satisfaction  of  an  old  contract.  I  must,  therefore,  desire  you  to 
provide  for  the  payment  of  your  rent  in  the  legal  srold  coin  of  the 
realm ;  at  the  same  time,  having  no  other  object  than  to  secure 
pijyment  of  the  real  intrinsic  value  of  the  same,  stipulated  by  agree- 
ment, and  being  desirous  to  avoid  giving  you  any  unnecessary 
trouble,  I  shall  De  willing  to  receive  payment  in  either  of  the  man- 
ners following,  according  to  your  option: — 1st.  By  payment  in 
guineas ;  2d.  If  guineas  cannot  be  procured,  by  a  payment  in 
Portugal  gold  coin  equal  in  weight  to  the  number  of  guineas  re- 
quisite to  discharge  tlie  rent  ;  3d.  By  a  payment  in  bank  paper 
of  a  sum  sufficient  to  purchase  (at  the  present  market  price)  the 
weight  of  standard  gold  requisite  to  discha-ge  the  rent.  The  al- 
teration in  the  value  of  paper  money  is  estimated  in  this  manner  :  , 
the  price  of  gold  in  ISCJ'i,  the  year  of  your  agreement,  was  4/.  an 
ounce:  the  present  market  price  is  4/.  It*.,  arising  from  the 
diminished  value  of  paper.  In  that  proportion  an  addition  of  171. 
IQs.  percent,  in  paper  money  will  be  required  as  the  equivalent 
for  the  payment  of  rent  in  paper." 

1812.  "  An  Act  passed  for  the  further  prevention 
of  the  counterfeiting  of  silver  tokens  issued  by  the 
governor  and  company  of  the  Bank  of  England,  called 
dollars,  and  of  silver  pieces  issued  and  circulated  by 
the  said  governor  and  company,  called  tokens,  and  for 
the  further  prevention  of  frauds  practised  by  the  imi- 
tation of  the  notes  or  bills  of  the  said  governor  and 
company."     (52  Geo.  III.  c.  138.) 

Lord  Stanhope's  Act  continued  by  52  Geo.  III. 
c.  5.  until  three  months  after  the  commencement  of 
the  next  session  of  parliament. 

1814.  Lord  Stanhope's  Act  revived  and  continued 
by  54  Geo.  III.  c.  52.  during  the  continuance  of  the 
Bank  Restriction  Act. 

1815.  The  following  stamp  duties  were  imposed 
upon  the  notes  of  country  bankers.  (56  Geo.  III. 
c.  184.)  , 

E  3 


54 


THi;    HISTORY     AM)     I'HINCTI'LF.S 

£ 

*.                                 £    s. 

s. 

d. 

Not  exceed! 

ig    1 
1 

1      

.     0 
0 

5 

Exceeding 

1  and  not  exceeding  2     2     ... 

10 

— 

2 

2              5     5     ... 

1 

3 

— 

5 

5              10     0     ... 

1 

9 

— 

10 

0              20     0     ... 

2 

0 



20 

0              30     0     ... 

3 

0 



30 

0              50     0     ... 

5 

0 

— 

50 

0              100     0     ... 

8 

6 

1S1.5.  In  tliis  year  terminated  tlie  war  with  the 
French  Empire,  by  the  defeat  of  Napoleon  Buonaparte 
at  the  battle  of  Waterloo  by  the  Duke  of  Wellington. 
The  following  loans  were  contracted  during  this  war. 


Years. 

Loans. 

Interest  per  cent. 

Years. 

1810 

Loans.            Interest  per  ct. 

1803 

^'12,000,000 

£5     2     0 

56*12,000,000^^4     4  2 

ISOi 

14,000,000 

5     9     2 

1811 

12,000,000     4  13  6 

1805 

22,500,000 

5     3     2 

1812 

32,500,000     5     5  7 

1806 

20,000,000 

4   19     7 

1813 

27,000,000     5     8  6 

1807 

14-,200,000 

4  14     7 

1814 

24,000,000'     4  12  1 

1808 

10,500,000 

4  14     6 

1815 

36,000,000      5  12  4 

1809 

U,600,000 

4   12  10 

1 

Peace  being  restored,  the  Bank  Restriction  Act 
would  have  expired  six  months  afterwards,  but  it  was 
continued  by  a  new  Act  until  the  fifth  July,  181 6. 

ISlf).  The  Bank  Restriction  Act  continued  from 
July  1816  to  July  1818. 

The  bank  was  authorised  to  increase  its  capital  from 
ll,r)t2,4()0/.  to  14,553,000/.,  being  an  addition  of 
twenty-five  })er  cent,  to  the  stock  of  tlie  several  pro- 
prietors. This  addition  was  made  out  of  the  surplus 
profits  without  any  furtlier  call.  (56  (leo.  III.  c.[)6.) 
In  consideration  of  obtaiiiing  tliis  privilege,  tlie  bank 
agi-eed  to  lend  the  government  the  sum  of  3,000,000/. 
at  three  per  cent.  This  increased  the  permanent 
debt  due  from  government  from  1 1,()8(),800/.  to 
14,680,800/. 

Tiie  following  table  exhibits  the  variations  which 
have  taken  })lace  in  the  amount  of  the  capital  of 
the  bank  at  different  periods  from  the  date  of  the  first 
charter  t^  the  present  time  : — 


OF    BANKING. 


55 


Years. 


1694 
1709 


1710 
1722 
1742 
1746 
1782 

1816 


Original  Subscriptions...  1,201,000     0  0 

New  Subscriptions   1,001,171   10  0 

Ditto  2,201,171   10  0 

A  Call  of 656,204     1  9 

A  Call  of 501,448   12  11 

New  Subscriptions 3,400,000     0  0 

A  Call  of 840,004     5  4 

A  Call  of 980,000     0  0 

A  Call  of I    862,400     0  0 

Augmented     l-4th'j 

out   of  the    sur-  j- .2,910,600     0  0 

plus  profits J  I 


Augmentations. 


Aggregate. 


{ 


1,200,000  0  0 

2/201,171  10  0 

4,402,343  0  0 

5,058,547  1  9 

5,559,995  14  8 

8,959,995  14  8 

9,800,000  0  0 

10,680,000  0  0 

11,742,400  0  0 

14,553,000  0  0 


The  new  subscription  of  1,001, lyi^^  10.9.  raised  in 
1697  having*  been  returned  in  I707  is  not  noticed  in 
the  above  table. 

1817j  April  17.  The  bank  gave  notice  that  on 
and  after  the  second  day  of  May  next  ensuing,  they 
would  pay  cash  for  all  notes  of  1/.  and  2/.  value,  dated 
prior  to  the  first  day  of  January,  18 16,  or  exchange 
them  for  new  notes  of  the  same  value,  at  the  option 
of  the  holders. 

Sept.  18.  The  bank  gave  notice  that  on  and  after 
the  first  day  of  October  then  next  ensuing,  they 
would  be  ready  to  pay  cash  for  their  notes,  of  every 
description,  dated  prior  to  the  first  day  of  January,  18 17. 

1818.  The  Bank  Restriction  Act  continued  from 
the  5th  July,  1818,  to  5th  July,  1819- 

A  calculation  was  made  this  year,  to  ascertain  the 
number  of  days  that  a  bank  note  of  each  denomination 
remained  in  circulation  ;  the  following  are  the  results  : 

Notes  of  40/.  38  days. 


Notes  of  1/.  and  21... 
—        51.     

.   147  days. 
.   148 

_      10/ 

.   137 

—      15/.     

.     66 

—      20/.     

.   121 

—      25/.     

.     43 

—      30/ 

.     55 

501. 

—  1 00/. 

—  200/, 

—  300/. 

—  500/. 


72 
49 
18 
14 
14 


—  1000/. 13 

The  bank  had  always  been  in  the  practice  of  de- 

E  4 


.5()  THE    HISTOHY    AM)     I'HIXCIPLKS 

taining  the  tbrgeil  notes  ottered  tor  payment.  But 
two  persons,  wlio  had  forged  notes  retin*ned  to  them 
by  tlie  bank,  paid  tlie  amount,  and  ke])t  the  notes. 
They  were  charged  with  having  forged  notes  in  their 
possession,  and  tried  on  this  charge,  but  the  juries 
acquitted  tliem.  In  consequence  of  this  decision  the 
bank  have  since  returned  all  forged  notes  to  the  par- 
ties presenting  them,  after  having  stiunped  them  in 
several  places  with  the  word  "  forged." 

I8I9.  A  bill  passed  through  "  parliament  in  the 
course  of  two  nights  to  restrain  the  bank  paying  away 
any  more  gold  imder  its  notice  of  September,  I8I7, 
or  any  previous  notice.  A  committee  of  the  House 
of  Commons  had  reported  that  the  bank  had  paid 
away  above  five  millions  in  gold  ;  the  greater  part  of 
which  had  been  taken  to  tlie  Continent,  and  there  re- 
coined  into  foreign  money. 

From  an  account  submitted  to  parliament  of  the 
total  amount  of  outstanding  demands  on  the  Bank  of 
England,  and  the  funds  for  discharging  the  same,  it 
appears  that  there  was  a  surplus  in  favour  of  the 
bank  of  5,^202,320/.,  independently  of  their  ca})ital  of 
14,686,800/. 

Mr.  Peel's  Bill  passed.  This  bill  (59  Geo.  III. 
c.  490  contains  the  followhig  ])rovisions  : — 

1.  The  Bank  Restriction  Act  was  continued,  abso- 
lutely, from  the  5th  of  July,  1819,  to  Feb.  1.  1820. 

2.  Between  Feb.  1  and  Oct.  1.  1820,  the  bank 
were  required  to  pay  their  notes  in  gold  bullicm  of 
standard  fineness,  at  the  rate  of  4/.  l.v.  per  ounce,  but 
not  to  l)e  liable  to  a  demand  for  a  less  quantit}'  than 
sixty  ounces  at  one  time. 

3.  Between  Oct.  1.  1820,  and  May  1.  1821,  the 
bank  were  required  to  pay  their  notes  in  gold  bullion 
upon  llie  same  plan,  at  the  rate  of  3/.  l<)s.  6c/.  per 
ounce. 

4.  Between  May  1.  1821,  and  May  1.  1823,  the 
bank  were  to  pay  in  gold  bullion  upon  the  same  plan, 


OF    BANKING.  5J. 

at  the  rate  of  3/.  17*'.  lO^d.  per  ounce,  which  was  the 
mint  price  of  gold. 

5.  From  May  1.  1823,  the  bank  were  to  pay  their 
notes  in  the  gold  coin  of  the  realm. 

6.  But  between  Feb.  1.  and  Oct.  1.  1820,  the  bank 
might  make  payments  at  a  less  rate  than  4/.  l.y.,  and 
not  less  than  Si.  19-v.  Qd,  per  ounce ;  and  between 
Oct.  1.  1820,  and  May  1.  1821,  the  bank  might  pay  at 
any  rate  less  than  Si.  VJs.  6d.,  and  not  less  than  Si. 
IJs.  lOid.,  on  giving  three  days'  notice  in  the  Gazette. 
Such  payments  to  be  made  in  ingots  or  bars  of  gold, 
of  the  weight  of  sixty  ounces.  The  bank  were  also 
permitted  to  pay  in  gold  coin  on  or  after  May  1. 
1822. 

7.  All  the  laws  which  restrained  the  exportation  of 
gold  and  silver  cohi  were  repealed,  and  the  coin  was 
allowed  to  be  exported  or  melted  witlioiit  incurring 
any  penalty. 

The  bill  did  not  give  satisfaction  to  the  bank  di- 
rectors. They  wished  to  be  allowed  to  pay  their  notes 
in  gold  bullion  at  the  market  price  of  the  day. 

The  59  Geo.  III.  c.  7G.  was  passed  to  prohibit  the 
bank  making  advances  to  government  without  the  au- 
thority of  parliament.  But  the  bank  were  allowed  to 
purchase  exchequer  bills,  or  to  advance  money  on 
them  ;  but  the  amount  of  such  bills  must  be  laid  an- 
nually before  parliament. 

1820.  An  Act  passed  for  the  further  prevention 
of  forging  and  counterfeiting  of  bank  notes  (1  Geo. 
IV.  c.  92.)  It  also  enacted,  that  the  names  of  per- 
sons authorised  by  the  bank  directors  to  sign  the 
notes  might  be  impressed  by  machine  instead  of  being 
subscribed  in  the  hand- writing  of  such  persons. 

1821.  The  bank  commenced  paying  off  their  notes 
under  51.  in  gold.  The  directors  had  procured  an 
act  of  parliament,  1  &  2  Geo.  IV.  c.  26.,  permitting 
them  to  do  so  from  the  first  day  of  May,  1821.  The 
gold  coins  issued  by  the  bank  were  not  guineas,  but 


5S  THE    HISTORY    AND    PRINCIPLES 

sovereigns,  of  the  value  of"  twenty  shillings,  which 
were  now  first  coined.  The  gold  coined  at  the  mint 
this  year  amounted  to  9,<5!20,7«58/.,  and  the  silver  to 

r — 4^3,686/. 

\  1822.  In  this  year  an  Act  was  passed,  permitting 
the  country  bankers  to  continue  the  issuing  of  notes 
mider  5l.  until  the  expiration  of  the  bank  charter  in 
\l833.  As  the  law  previously  stood,  these  notes  were 
prohibited  on  the  resumption  of  cash  payments  by  the 
bank.  The  directors  made  the  following  reference  to 
■"this  subject,  in  a  memorandum  they  delivered  to  the 
parliamentary  committee  of  1832:  — 

"  By  the  resolution  of  the  House  of  Commons  of 
1819,  the  bank  w^ere  required,  within  four  years,  to 
pay  off  in  gold  the  amount  of  their  one-pound  notes 
then  in  circulation  (about  7>500,000/.)  ;  further,  to 
provide  the  coin  for  paying  off  the  country  small  notes 
in  1825  (about  seven  or  eight  millions  more),  in  ad- 
dition to  which  the  necessity  was  imposed  of  })roviding 
the  requisite  surplus  bullion  for  insuring  the  conver- 
tibility of  all  their  liabilities,  whicli  addition  of  bullion 
to  their  then  stock  could  not  be  estimated  at  less  than 
5,000,000/. ;  making  in  the  aggregate  20,000,000/.  of 
gold  as  necessary  to  be  provided  from  foreign  countries 
within  the  space  of  four  years  from  1S19. 

"  That  supi)Iy  of  gold  could  only  be  ])urchased  by 
reduced  prices  of  connnoditics  ;  tlie  bank  withdraw- 
ing a  given  amount  of  securities,  in  tlic  first  instance, 
the  notes  for  which  might  be  re-issued  in  payment  of 
the  gold  as  imported.  The  low  prices  and  general 
state"  of  trade  from  1S19  to  1821,  and  the  withdrawal 
of  the  bank's  securities,  enabled  the  bank  to  cancel 
their  small  notes  in  the  latter  year  ;  and  in  the  follow- 
ing (1822),  three  years  prior  to  the  time  fixed  by 
])arliament,  they  were  in  a  situation  to  furnish  the 
gold  for  ])aying  off  the  country  small  notes,  when, 
without  any  communication  with  the  bank,  the  go- 
vernment thought  proper  to  authorise  a  continuance 


OF    BANKING.  59 

of  the  circulation  of  the  country  small  notes  until 
1833.  The  consequence  of  that  measure  was  to 
leave  in  the  possession  of  the  bank  an  inordinate 
quantity  of  bullion  (14,200,000/.  in  January,  1824)  ; 
and  further,  to  afford  the  power  of  extension  to  the 
country  bankers'  issues,  which  it  is  believed  were 
greatly  extended  from  1823  to  1825." 

By  a  retiu'n  from  the  stamp  office,  it  appears  that 
the  number  of  country  banks  this  year  was  fiv^e  hun- 
dred and  fifty-two,  and  the  number  of  persons  in  those 
firms  was  one  thousand  six  hundred  and  seventy-three. 

1822,  June  22.  The  bank  reduced  the  rate  of 
interest  upon  bills  of  exchange  from  five  to  four  per 
cent.,  and  extended  the  time  of  such  bills  from  sixty- 
one  to  ninety-five  days. 

In  this  year  the  government  reduced  the  interest 
of  the  navy  five  per  cents,  to  foiu*  per  cent.  Each 
holder  of  100/.  stock  received  105/.  new  stock  bearing 
four  per  cent.,  with  a  guarantee  that  the  interest  should 
not  be  farther  reduced  until  the  year  1829.  This  new 
stock  was  distinguished  by  the  name  of  "  new  fours." 
The  bank  agreed  to  advance  the  money  to  pay  off  the 
dissentients. 

In  consequence  of  the  abolition  of  the  notes  un- 
der 51.  the  bank  found  they  had  many  more  clerks 
than  were  necessary.  A  good  number  were  therefore 
discontinued  ;  the  bank  giving  them  either  a  pension, 
or  the  value  of  a  pension  in  ready  money,  at  the 
option  of  the  clerks.  The  conduct  of  the  bank  on 
this  occasion  was  highly  liberal,  and  met  with  universal 
approbation. 

1823,  Lady-day.  The  dividend  on  back  stock  was 
reduced  from  ten  to  eight  per  cent. 

The  bank  engaged  to  advance  to  government,  be- 
tween April,  1823,  and  April,  1828,  the  sum  of 
13,089,419/-,  for  the  purpose  of  defraying  the  charge 
of  military  and  naval  pensions,  and  to  receive  in  lieu 
of  this  sum  585,740/.  per  annum  ;  to  commence  from 
the  5th  of  April,  1823,  and  to  continue  for  a  term  of 


60  THE    HISTORY    AND    PRINCIPLES 

fotty-four  years,  and  then  to  cease.  This  cliarge  is 
commonly  called  "  the  dead  weight." 

In  the  latter  end  of  this  year,  the  bank  commenced 
advancing  money  upon  tlie  security  of  go\  ernment 
stock.  They  also  lent  1,500,000/.  to  the  East  India 
Company. 

18'24.  The  bank  extended  their  advances  upon 
stock,  and  commenced  lending  money  on  mortgage. 

The  old  four  per  cents,  were  reduced  to  three  and 
a  half  per  cent.  The  new  stock  is  called  "  three  and 
a  half  per  cent,  reduced." 

This  and  the  subsequent  year  were  remarkable  for 
the  commencement  of  a  great' number  of  joint-stock 
companies.  The  total  number  of  projects  were  six 
hundred  and  twenty-six,  and  to  carry  them  all  into 
effect  would  have  required  a  capital  of  372,173,100/. 
They  have  been  thus  classified  * :  — 

74- Mining  companies  .^^'S 8,^570,000 

29  Gas  diUo 12,077,000 

20  Insurance  ditto    35,820,000 

29  Investments  ditto    52.600,000 

54  Canal  Rail-road  ditto 4k051,000 

67  Steam  ditto 8,555,500 

11  Trading  ditto  10,450,000 

26  Building  ditto 13,781,000 

24  Provision  ditto 8,360,000 

292  Miscellaneous  ditto 148,108,600 

626  ^'372,173,100 


The  above  companies  are  divided  by  Mr.  English 
into  four  classes.  First,  companies  which  continued 
to  exist  hi  the  year  1827  ;  secondly,  conqjanies  whose 
shares  had  been  sold  in  the  market,  but  were  after- 
wards abandoned  ;  thirdly,  com])anies  which  ])ublished 
prospectuses,  or  which  were  announced  in  the  papers, 
but  which  are  not  known  to  have  issued  shares  ; 
fourthly,  companies,  the  formation  of  which  was  no- 

*  See  "  A  complete  View  of  the  Joint-Stock  Companies,"  formed 
during  the  years  1824  and  1825,  by  Henry  English. 


or    BANKING. 


61 


ticed  ill  the  public  papers,  but  the  particulars  not  spe- 
cified.    The  following  is  the  general  summary  :  — 


Companies. 

Capital  required. 

Amount  actually 
advanced. 

127  Companies  existing  in  1827* 
118  Ditto  abandoned 

a^n  02,781,600  .^'15,185,950 
56,606,500       2,419,675 
143,610,000 
69,175,0001 

236  Ditto  projected 

143  Ditto  ditto  not  particularized 
624 

5^372,173,100^^7,605,625 

Besides  the  capital  required  for  the  above  com- 
panies, large  sums  of  money  were  granted  as  loans  to 
foreign  powers,  as  appears  from  the  following  table  :  — 

A  list  of  the  foreign  loans  contracted  in  England,  with  the  amounts 
of  the  same  ;  the  names  of  the  contractors,  the  years  in  which  the 
contracts  were  made,  and  the  prices  at  which  they  were  issued. 


Austrian* 

Belgian*    

Brazilian* 

Ditto* 

2,500,000 

per  ct. 
n 

N.M.Rothschild 

1823 
1832 
185i4 
1825 
182^. 
1824 
1822 
1822 
1824 
1825 
1824 
1825 
1825 
1825 
1824 
1825 
1824 
1818 
1822 
1823 
1822 
1824 
1825 
1822 
1821 
1823 

per  ct.i 

82 

75 
75 
85 

85 

70 

84 

881 

75 

59 

56i 

73 

60 

58 

89| 

92i 

72 

84 

87 

88 

82 

78 

82 

56 

3Ji 

2,000,000   — 
3,200,000   — 
2,000,000^  — 

800,000,  — 
1,000,000^    6 
1,000,000   — 
2,000,000   — 
4,750,000   — 
5,500,000     3 

800,000    5 
1,000,000   — 
1,428,571'    6 

600,000    5 
3,200,000   — 
3,200,000    6 
2,500,000    5 
5,000,000   — 

Ditto 

T.  Wilson  &  Co 

N.M.Rothschild  

Ditto* 

Rothschild  &  Wilson 

Baring  &  Brothers 

Buenos  Ayres 
Chili 

Hullett,  Brothers  

Columbian 

Ditto   

Herring,  Graham,  &  So. 
B.  A.  Goldschmidt  &  Co. 
T.Wilson  &  Co 

Danish* 

Greek 

Loughnan  &  Co 

Ditto   

Ricardos 

Guatemala    ... 
Guadaljava  ... 

Mexican  

Ditto 

I.  &  A.  Powles  

W.  EUvvard,  jun 

B.  A.  Goldschmidt  &  Co. 
Barclay,  Herring,  &  Co... 
N.  M.  "Rothschild  

Neapolitan* ... 

Prussian* 

Ditto*  

Ditto 

3,500,000 

1,500,000 

450,000 

750,000 

616,000 

3,500,000 

1,500,000 

6 
5 

Ditto 

Portuguese  ... 

Peruvian  

Ditto  

B.  A.  Goldschmidt  &  Co. 
Frys  &  Chapman  

Ditto 

Ditto     

Ditto 

Russian* 

Spanish 

Ditto 

N.M.Rothschild  

A.  F.  Haldimand  

1,500,000   — 

J.  Campbell  &  Co 

Those  I 

narked  thus  *  continue  to  pay  the  divide) 

ids. 

*  Many  of  these  have  since  been  discontinued. 


62  TUr    IIlSiT<">UY    ASD    PRINCIPLES 

1821-.  In  this  year  ]Mr.  Fauiitleroy,  the  acting- 
partner  in  tlie  banking-liouse  of  Messrs.  Marsh, 
Sibbakl,  and  Co.,  of  Berners  Street,  Oxford  Street, 
was  executed  for  forging  powers  of  attorney  for  the 
sale  of  government  stock.  The  following  statement 
was  made  at  the  trial :  — 

"  The  Attorney-General,  in  his  address  to  the  jury,  described  the 
prisoner  as  the  acting  partner  in  the  house  of  Marsh  and  Co.  in 
Berners  Street.  Mr.  Fauntleroy,  the  father  of  the  prisoner,  became 
a  partner  at  its  establishment,  and  continued  such  till  his  death,  in 
1807.  At  that  period  the  prisoner  was  admitted  into  the  concern, 
and  became  the  most  active  member  of  it.  In  1815,  Frances  Young, 
of  Chichester,  a  customer  of  the  house,  lodged  in  their  hands  a 
power  of  attorney  to  receive  the  dividends  on  5,4^501.  3  per  cent, 
consols.  The  dividends  were  regularly  received ;  but  soon  after- 
wards another  power  of  attorney,  authorising  the  prisoner  to  sell 
that  stock,  was  presented  to  the  bank,  and  the  sale  was  effected  by 
him  ;  to  this  power  the  prisoner  had  forged  the  names  of  Frances 
Young,  and  of  two  witnesses  to  it.  But  the  most  extraordinary 
part  of  the  case  was,  that  among  the  prisoner's  private  papers, 
contained  in  a  tin  box,  there  had  been  found  one  in  which  he 
acknowledged  his  guilt,  and  adduced  a  reason  for  his  conduct. 

"  The  Attorney-General  then  read  the  paper,  which  presented 
the  following  items,  Sec.  : — De  la  Place,  1 1,1.50/.  '^  per  cent,  consols; 
E.  W.  Young,  5,000/.  consols ;  General  Young,  6,000/.  consols ; 
Frances  Young,  5,000/.  consols ;  H.  Kelly,  6,000/.  consols  ;  Lady 
Nelson,  11,995/.  consols;  Earl  of  Ossory,  7,000/.  4  per  cents.; 
W.  Bowen,  9,4-00/.  4  per  cents. ; Parkins,  4,000/.  consols. 

"  Sums  were  also  placed  to  the  names  of  Mrs.  Pelham,  Lady 
Aboyne,  W.  R.  and  H.  Fauntleroy,  and  Elizabeth  Fauntleroy  ;  and 
the  learned  gentleman  observed  that  all  the  sums  were  added  toge- 
ther, and  the  sum  total,  120,000/.,  ajjpeared  at  the  foot  of  this  list 
in  the  prisoner's  handwriting.  The  statement  was  followed  by  this 
declaration  :  — 

"  '  In  order  to  keep  up  the  credit  of  our  house,  I  have  forged 
powers  of  attorney  for  the  above  sums  and  parties,  and  sold  out  to 
the  amount  here  stated,  and  witiiout  the  knowledge  of  my  partners. 
I  kept  up  the  payment  of  the  dividends,  but  made  no  entries  of 
such  payments  in  our  books. 

"  '  Signed, 

"  '  Henry  Fauntleroy. 
"'Berners  Street,  May  7.  1816. 

«' '  P.  S.  The  Bank  began  first  to  refuse  to  discount  our  accept- 
ances, and  to  destroy  the  credit  of  our  liouse  ;  the  Bank  shall  smart 
for  it.'  " 


OF    BANKING.  63 

''J'he  total  loss  sustained  by  the  Bank  of  England  by 
all  the  forgeries  committed  by  Mr.  Fauntleroy  up  to 
the  time  of  his  apprehension,  amounted  to  360,000/. 
The  banking-house  of  Marsh,  Sibbald,  and  Co.  imme- 
diately became  bankrupts. 

1825.  At  the  commencement  of  this  year  there  was 
every  appearance  of  general  prosperity,  but  in  Decem- 
ber occurred  "  the  panic." 

The  course  of  exchange,  being  unfavourable,  had  oc- 
casioned a  demand  for  gold  for  exportation.  The  bank 
became  under  the  necessity  of  restraining  its  issues. 

The  house  of  Sir  Peter  Pole  and  Co.,  who  were 
agents  to  several  country  banks,  stopped  payment. 
This  occasioned  a  general  alarm,  and  the  notes  of 
private  bankers  became  discredited  throughout  the 
country.  As  the  Bank  of  England  had  ceased  to  issue 
notes  under  51.,  they  were  obliged  to  find  gold  to  the 
country  bankers  to  pay  off  their  notes  ;  but  their  gold 
failing,  they  re-issued  their  1/.  notes,  some  of  which, 
happily,  had  not  been  destroyed.  Notwithstanding 
the  great  liberality  of  the  bank,  several  London  bank- 
ers, and  a  much  greater  number  of  country  bankers, 
were  obliged  to  suspend  their  payments.  Most  of  the 
joint-stock  companies  that  had  been  formed  in  the 
season  of  speculation  fell  to  the  ground. 

The  following  is  the  opinion  of  J.  H.  Palmer,  Esq., 
the  governor  of  the  bank,  as  to  the  causes  of  the  wild 
spirit  of  speculation  which  had  preceded  the  panic  :  — 

"  Will  you  state  to  the  committee  what,  in  your  opinion^  was  the 
nature  and  the  march  of  the  crisis  in  1825?  —  I  have  always  con- 
sidered that  the  first  step  towards  the  excitement  was  the  reduction 
of  the  interest  upon  the  government  securities;  the  first  movement 
in  that  respect  was,  I  think,  upon  135,000,000/.  of  five  per  cents., 
which  took  place  in  1823.  In  the  subsequent  year,  ISSi,  followed 
the  reduction  of  80,000,000/.  of  four  per  cents.  I  have  always  con- 
sidered that  reduction  of  interests,  one  fifth  in  one  case,  and  one- 
eighth  in  the  other,  to  have  created  the  feverish  feeling  in  the 
minds  of  the  public  at  large  ;  which  prompted  almost  every  body  to 
entertain  any  proposition  for  investment,  however  absurd,  which 
was  tendered.     The  excitement  of  that  period  was  further  pro- 


64  Tin:  HISTORY   and  principles 

moted  by  the  ackiiowledgnuMit  of  South  American  republics  by  this 
country,  and  tlic  inducements  held  out  for  engaging  in  mining 
operations,  and  loans  to  those  governments,  in  which  all  classes  of 
the  conmiuuity  in  England  seem  to  have  partaken,  almost  simulta- 
neously. With  those  speculations  arose  general  speculation  in 
commercial  produce,  which  had  an  effect  of  disturbing  the  relative 
values  betWL';,'n  this  and  other  countries,  and  creating  an  unfavour- 
able foreign  exchange,  which  continued  from  October,  1824-,  to 
November,  1825,  causing  a  very  considerable  export  of  bullion  from 
the  bank  ;  about  seven  millions  and  a  half.  Commercial  specula- 
tions had  induced  some  bankers,  one  particularly,  to  invest  money 
in  securities  not  strictly  convertible,  to  a  larger  extent  than  was 
prudent ;  they  were  also  largely  connected  with  country  bankers. 
I  allude  to  the  house  of  Messrs.  Pole  and  Co.  :  a  house  originally 
possessed  of  very  great  property,  in  the  persons  of  the  partners, 
but  which  fell  with  the  circumstances  of  the  times.  The  failure  of 
that  banking-house  was  the  first  decisive  check  to  commercial  and 
banking  credit,  and  brought  at  once  a  vast  number  of  country  bank- 
ers, which  were  in  correspondence  with  it,  into  difficulties.  That 
discredit  was  followed  by  a  general  discredit  throughout  London 
and  the  interior. "  (p.  47  j. 

Some  of  the  other  witnesses  considered  the  panic 
to  have  arisen  from  an  over-issue  of  notes  on  the  part 
of  tlie  Bank  of  England  and  the  country  bankers. 
But  whatever  may  have  been  the  cause,  the  bank 
certainly  acted  with  great  liberality  at  the  period  of  the 
alarm,  even  at  tlie  risk  of  its  own  stoppage  of  payment. 

"Will  you  describe  the  manner  in  which  the  bank  lent  its 
assistance  at  that  time  ?  — We  lent  it  by  every  possible  means,  and 
in  modes  that  we  never  had  adopted  before.  We  took  in  stock  as 
security;  we  purchased  exchequer  bills;  we  made  advances  on  ex- 
chequer bills;  AV^e  not  only  discounted  outright,  but  we  made  ad- 
vances on  de[)0s.it  of  bills  of  exchange  to  an  immense  amount ;  in 
short,  by  every  possible  means  consistent  with  the  safety  of  the 
bank;  and  we  were  not  upon  some  occasions  over  nice:  seeing  the 
dreadful  state  in  which  th.e  public  were,  we  rendered  every  assist- 
ance in  our  pow  er. 

"  Did  any  communication  take  place  between  the  bank  and  the 
government  respecting  an  order  in  council  to  restrain  payments  in 
gold  at  that  period? — Yes,  it  was  suggested  by  the  bank. 

"  What  answer  did  his  majesty's  government  give  to  that  ?  — 
They  resisted  it  from  first  to  last. 

"  The  Bank  of  England  issued  one-pound  notes  at  that  period. 
Was  that  done  to  protect  its  remaining  treasure?  —  Decidedly; 
and  it  worked  wonders,  and  it  was  by  great  good  luck  that  we  had 


OF    BANKING. 


05 


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. 

"  Had  there  been  no  foresight  in  the  preparation  of  these  one 
pound  notes  ?  —  None  whatever,  I  solemnly  declare. 

"  Do  you  think  that  issuing  of  the  one  pound  notes  did  avert  a 
complete  drain  ? — As  far  as  my  judgment  goes,  it  saved  the  credit 
of  the  country." 

(Evidence  of  Jeremiah  Harman,  Esq.,  page  154.) 

On  the  last  day  of  December,  1825,  the  coin  and 
biilhon  in  the  bank  amounted  to  only  1,260,890/. 

Dec.  13.  The  bank  raised  the  rate  of  discount  from 
four  to  five  per  cent,  upon  bills  not  having  more  than 
ninety-five  days  to  run.  This  rate  continued  until 
July,  1827. 

1826,  Jan.  13.  The  government  made  a  communi- 
cation to  the  bank  directors,  stating  their  intention,  in 
order  to  prevent  a  recurrence  of  panic,  to  propose  to 
parliament  the  gradual  abolition  of  country  bank  notes 
under  5l.  :  and  also  proposing  to  the  bank, 

"  First,  That  the  Bank  of  England  should  establish 
branches  of  its  own  body  in  different  parts  of  the 
country. 

"  Secondly,  That  the  Bank  of  England  should  give 
up  its  exclusive  privilege  as  to  the  number  of  partners 
engaged  in  banking,  except  within  a  certain  distance 
from  the  metropolis." 

The  directors  were  at  first  unwilling  to  establish 
branches,  but  ultimately  they  acceded  to  both  the 
above  propositions. 

The  government  also  induced  the  bank  to  make 
advances  upon  the  security  of  goods,  and  accordingly 
the  bank  established  boards  for  this  purpose  at  the 
following  places,  and  advanced  to  the  undermentioned 
amounts :  — 


Manchester  ^115,490 

Glasgow     81,700 

Sheffield     59,500 

Liverpool 41,450 


Huddersfield ^30,300 

Birmingham  19,600 

Dundee 16,500 

Norwich     2,400 


To  carry  these  measures  into  effect  several  Acts  of 
Parliament  were  passed,  viz. 

F 


66  THE    HISTORY    AND    PRINCIPLES 

*'  An  Act  to  facilitate  the  advancing  of  money  by 
the  governors  and  company  of  the  Bank  of  England, 
upon  deposits  and  pledges."  (7  Geo.  IV.  c.  70  It 
was  enacted  that  })ersons  in  possession  of  bills  of 
lading,  warrants,  &c.  should  be  deemed  owners  of  the 
goods  therein  mentioned,  so  far  as  to  make  valid  any 
contracts  for  the  advance  of  money  thereupon  by  the 
Bank  of  England. 

*'  An  Act  to  limit,  and  after  a  certain  period  to 
prohibit  the  issuing  of  promissory  notes,  under  a 
limited  sum,  in  England."  (7  Geo.  IV.  c.  6.)  By  this 
Act  no  further  notes  under  5l.  were  allowed  to  be 
stamped,  and  those  already  stamped  could  not  be 
issued  or  re-issued  after  the  5th  of  April,  1829,  under 
a  penalty  of  20/.  The  Bank  of  England  were  required 
to  make  monthly  returns  to  the  treasury,  of  the  weekly 
amounts  of  their  notes  in  circulation  under  51.  to  be 
published  in  the  Gazette,  and  laid  before  parliament. 
And  after  the  5th  of  April,  1829,  all  bankers*  notes 
under  20/.  were  to  be  made  payable  at  the  place  of 
issue,  though  they  might  also  be  made  payable  at 
other  places. 

"  An  Act  for  the  better  regulating  copartnerships 
of  certain  bankers  in  England,   &c."      (7  Geo.  IV. 

re^6.)  According  to  this  Act — 
1.  Banks  having  more  than  six  partners  might 
carry  on  business  in  England  at  a  greater  distance 
than  sixty-five  miles  from  London,  provided  they  have 
\  no  establishment  as  bankers  in  London,  and  that  all 
the  partners  are  liable  for  the  whole  debts  of  the  bank, 

2.  The  banks  shall  not  issue  tlieir  notes  at  a  place 
within  sixty-five  miles  from  London,  nor  draw  any 
bills  on  London  for  a  less  amount  than  50/. 

3.  The  banks  may  sue,  and  be  sued  in  the  name  of 
their  public  officers  ;  and  when  judgment  is  obtained 

V_against  such  public  officers,  execution  may  be  issued 
against  any  member  of  the  copartnership. 

4.  Previous  to  issuing  notes,  tlie  bank  shall  deliver 
to  the  stamp  office,  schedules  containing  the  name  or 


OF    BANKING.  6? 

title  of  the  bank  —  the  names  and  places  of  abode  of 
all  the  partners  —  the  names  of  the  places  where  the 
banks  are  established  —  and  the  names  and  descrip- 
tions of  the  public  officers  in  whose  names  the  bank 
wishes  to  sue  and  be  sued. 

5.  These  banks  are  allowed  to  compound  for  the 
stamp  duties  on  their  notes,  at  the  rate  of  seven  shil- 
lings per  cent,  per  annum  for  every  100/.  in  circulation. 

By  the  fifteenth  clause  of  this  Act,  the  Bank  of 
England  were  expressly  authorised  to  establish 
branches.  This  was  enacted  to  "  prevent  any  doubts 
that  might  arise "  upon  the  subject.  The  bank  ac- 
cordingly opened  branches  this  year  at  Gloucester, 
Manchester,  and  Swansea. 

1827,  July  5.  The  bank  reduced  the  rate  of  dis- 
count from  five  to  four  per  cent. 

The  extension  of  the  branches  of  the  Bank  of  Eng- 
land  this  year  occasioned  great  dissatisfaction  among 
the  country  bankers.  The  establishment  of  rival 
banks  in  their  own  neighbourhood,  was  a  circum- 
stance that  the  country  bankers  could  not  view  with 
indifference.  They  declared  that  the  Bank  of  England, 
and  not  themselves,  had  been  the  cause  of  the  previous 
spirit  of  speculation  ;  that  the  Bank  of  England,  by 
their  advances  to  government  and  loans  on  mortgage, 
had  made  excessive  issues,  and  that  now  to  extend 
their  influence,  at  the  expense  of  the  country  bankers, 
was  to  reward  the  guilty,  and  to  punish  the  innocent. 
The  country  bankers  had  been  accustomed  to  charge 
five  per  cent,  on  the  bills  they  discounted,  and  at 
some  places  five  or  six  shillings  commission  besides 
the  discount,  but  the  branches  of  the  Bank  of  England 
charged  only  four  per  cent,  without  any  commission. 
The  country  bankers  were  of  course  compelled  to  do 
business  on  the  same  terms,  or  to  permit  their -.cus- 
tomers to  go  to  the  branch.  The  chief  advantage  the 
country  bankers  possessed  over  the  branch  banks  was, 
that  they  continued  to  allow  interest  on  deposits, 
which  the  branch  banks  did  not.     But  the  additional 

F   2 


68  THE    HISTORY    AND    PRINCIPLES 

confidence  which  was  then  possessed  by  tlie  branch 
banks  may,  notwithstanding, h  ave  induced  some  dc' 
positors  to  give  them  a  preference  to  the  coimtry 
bankers. 

On  December  7'>  the  country  bankers  held  a 
meeting  at  the  London  Tavern,  Bishopsgate  Street, 
where  they  passed  several  resolutions,  and  appointed 
a  deputation  to  wait  upon  Lord  Goderich,  the  First 
Lord  of  the  Treasury,  and  Mr.  Herries,  the  Chancellor 
of  the  Exchequer.  Among  other  resolutions,  are  the 
following  :  — 

"  That  the  late  measures  of  the  Bank  of  England  in  the  establish- 
ment of  branch  banks  have  the  evident  tendency  to  subvert  the 
general  banking  system  that  has  long  existed  throughout  the 
country,  and  which  has  grown  up  with,  and  been  adopted  to  the 
wants  and  conveniences  of  the  public. 

"  That  it  can  be  distinctly  proved  that  the  prosperity  of  trade, 
the  support  of  agriculture,  the  increase  of  general  improvement, 
and  the  productiveness  of  the  national  revenue,  are  intimately  con- 
nected with  the  existing  system  of  banking. 

"  That  the  country  bankers  would  not  complain  of  rival  esta- 
blishments, founded  upon  equal  terms ;  but  they  do  complain  of 
being  required  to  compete  with  a  great  company,  possessing  a  mo- 
nopoly and  exclusive  privileges. 

"  That  should  this  great  corporation,  conducted  by  directors, 
who  are  not  personally  responsible,  succeed  by  means  of  these  ex- 
clusive advantages,  in  their  apparent  object  of  supplanting  the  ex- 
isting banking  establishments,  they  will  thereby  be  rendered  masters 
of  the  circulation  of  the  country,  which  they  will  be  enabled  to 
contract  or  expand  according  to  their  own  Hill,  and  thus  be  armed 
with  a  tremendous  power  and  influence,  dangerous  to  the  stability 
of  property  and  the  independence  of  the  country." 

At  a  meeting  lield  at  tlie  same  place,  on  the  l6th 
of  December,  Sir  John  Wrottesley,  Bart.,  M.P.,  the 
chairman,  reported  to  the  meeting  the  result  of  the 
interview  of  the  deputation  with  Lord  Cxoderich  and 
tlie  cliancellor  of  tlie  exclicquer  on  that  day,  and  read 
their  answer  as  follows  :  —  "  Lord  Goderich  and  the 
chancellor  of  the  exchequer  state  to  the  deputation, 
tliat  they  were  fully  sensible  of  the  great  importance 
of  the  subjects  wliich  were  brought  before  them  by 
the  deputation  ;  and  that,  ahhough  it  w^as  obviously 
impossible  that  they  could  undertake,   on  the  part  of 


OF    BANKING.  69 

tlie  government,  to  express  upon  tliat  occasion  any 
o])inion  upon  the  matters  under  consideration,  they 
could  assure  the  deputation  that  all  that  had  been 
communicated  should  receive  the  most  deliberate  and 
serious  attention." 

The  country  bankers  complained,  too,  that  the 
branch  banks,  instead  of  meeting  them  on  the  footing 
of  equality,  had  refused  to  take  their  notes,  unless  the 
bankers  had  previously  opened  accounts  with  the 
branch  banks,  and  provided  funds  for  the  purpose. 

1828.  Another  subject  of  complaint  on  the  part  of 
the  country  bankers.  —  The  Bank  of  England  had 
always  issued  their  notes  and  post  bills  unstamped,  in 
consideration  of  paying,  as  a  composition  for  the 
stamp  duties,  3500/.  per  annum  on  every  1,000,000/. 
in  circulation.  When  the  branches  were  established 
they  issued  bills,  drawn  upon  the  parent  establishment 
in  London  at  twenty-one  days  after  date,  without 
being  stamped,  alleging  that  these  were  included  in 
their  composition.  At  the  same  time  the  country 
bankers  could  not  draw  bills  upon  London  without 
paying  the  stamp  duty.  In  a  memorial,  presented  to 
the  government  by  the  bankers  in  the  town  and 
neighboiu'hood  of  Birmingham,  it  was  shown  that  the 
stamp  duty  on  a  bill,  drawn  at  twenty-one  days  on 
London,  is  three  shillings  and  sixpence,  while  under 
the  composition  the  Bank  of  England  would  pay  but 
five-pence  ;  and  that  a  circulation  throughout  the  year 
of  10,000/.,  in  bills  of  exchange  of  20/.  each,  would 
subject  the  Bank  of  England  to  a  payment,  in  lieu  of 
stamp  duty,  of  only  35 1. ,  while  other  banks  would 
have  to  pay  6501.  An  Act  of  parliament  (9  Geo.  IV. 
c.  23.)  was  accordingly  passed,  to  enable  country 
bankers  to  compound  for  their  stamp  duties  on  the 
same  terms  as  the  Bank  of  England,  and  to  include 
bills  drawn  upon  London  at  twenty-one  days'  date  in 
the  composition.  By  this  law  the  country  bankers 
have  the  advantage  of  paying  duty  only  on  the  amount 
of  notes  in  circulation. 


70  THE    HISTORY    AND    PRINCIPLES 

May  9.  ''  The  humble  memorial  of  the  country 
bankers  in  England  and  Wales'*  was  presented  to 
"  the  lords  commissioners  of  his  Majesty's  treasury" 
against  the  branch  banks.     It  concludes  thus  :  — 

"  Your  memorialists  therefore  deeply  regret  that  your  lordships 
do  not  feel  justified  in  adopting  measures  for  the  withdrawal  of  the 
branch  banks,  and  they  hope  that  your  lordships  will  be  pleased,  as 
far  as  lies  in  your  lordships'  power,  to  prevent  any  interference  with 
the  business  of  your  memorialists  ;  and  that  your  lordships  will  be 
pleased  to  institute  an  inquiry  into  the  system  of  country  banking, 
and  take  into  your  lordships'  consideration  the  claims  of  the  country 
tankers  to  be  regarded  as  parties  in  the  intended  application  for  the 
renewal  of  the  bank  charter,  and  that  no  special  privilege  or  mono- 
poly be  granted  or  continued  to  the  governor  and  company  of  the 
Bank  of  England  ;  but  that  they  may  be  placed  on  a  perfect  equality 
with  country  bankers  in  the  competition,  which,  by  means  of  their 
branches,  they  are  now  carrying  on  with  your  memorialists." 

The  government  replied,  *'  that  the  interests  of  the 
country  bankers  should  not  be  neglected  in  any  nego- 
tiation between  the  government  and  the  Bank  of 
England  for  the  renewal  of  the  bank  charter." 

In  order  to  relieve  the  money  market  from  the 
pressure  which  was  always  felt  during  the  seasons 
that  the  funds  were  closed  previous  to  the  payment 
of  the  dividends,  the  bank  commenced  the  practice 
of  advancing  loans  during  those  periods  upon  the 
lodgment  of  securities.  The  following  notices  were 
accordingly  issued  :  — 

*'  Bank  of  England,  December  3.  1829. 
"  The  governor  and  company  of  the  Bank  of  England  do  hereby 
give  notice,  that  from  and  after  the  5th  instant,  they  will  be  ready 
to  receive  applications  for  loans,  at  an  interest  of  3/.  per  cent,  per 
annum  upon  the  deposits  of  bills  of  exchange,  exchequer  bills,  and 
East  India  bonds  ;  such  loans  to  be  repaid  with  interest  on  or  before 
the  15th  January  next,  and  to  be  for  sums  of  not  less  than  2000/., 
and  for  a  period  of  not  less  than  ten  days." 

''  December  %  1829. 
"  The  governor  and  company  of  the  Bank  of  England  do  hereby 
give  notice,  that  from  and  after  this  day  they  will  be  ready  to  receive 
applications  for  loans  upon  the  deposit  of  gold  bullion,  valued  at 
77*.  9rf.  per  ounce,  at  11.  per  cent,  per  annum  interest." 

1830.  The  government  reduced  the  interest  on  the 
new  four  per  cent,  stock  to  three  and  a  half  per  cent. 


OF    BANKING. 


71 


This  stock  was  formed  in  the  year  1822,  by  the 
reduction  of  the  navy  five  per  cents,  to  four  per  cent. 
The  holders  had  the  option  of  receiving  for  every 
100/.  new  four  per  cents. ;  either  100/.  stock  at  three 
and  a  half  per  cent.,  not  redeemable  until  the  year 
1840,  or  70/.  at  five  per  cent.,  not  redeemable  until 
the  year  1873.  Most  of  the  holders  chose  the  former. 
This  stock  is  called  "  7iew  three  and  a  half  per  cent.," 
and  amounts  to  above  139,000,000/.  The  other 
stock,  formed  by  those  who  chose  the  70^' »  is  called 
the  new  five  per  cents.,  and  amounts  to  little  more 
than  46(3,000/. 

1831.  '*  An  account  of  the  amount  of  silver  coin 
melted ;  also  the  loss  sustained  by  the  Bank  of 
England  thereby,  in  1831.'* 

Amount  of  silver  coin  melted  in  bars  ^565,000 

Ditto,  melted  and  re-coined 35,000 

a£600,000 

Loss  on  sixpenny  pieces ..^ijeoi     1   3 

Loss  on  other  denominations 62,982  19  2 

^67,584     0  5 


1832.  May  22.  A  committee  of  secrecy  was  ap- 
pointed by  the  House  of  Commons,  to  inquire  into 
the  expediency  of  renewing  the  charter  of  the  Bank 
of  England,  and  into  the  system  on  which  banks  of 
issue  in  England  and  Wales  are  conducted. 

The  committee  w^as  composed  of  tlie  following 
members  :  — 


Lord  Vise.  Althorp. 
Sir  R.  Peel,  Bart. 
Lord  John  Russell. 

Mr.  GOULBURN. 

Sir  J.  Graham,  Bart. 
Mr.  Herries. 
Mr.  P.  Thomson. 

Mr.  COURTENAY. 

Colonel  Maberly. 
Sir  H.Parnell,  Bart. 
Mr.  Vernon  Smith. 


Mr.  J.  Smith. 

Mr.   ROBARTS. 

Sir  M.  Ridley,  Bart, 
Mr.  Attwood. 
Sir  J.  Newport,  Bart. 
Mr.  Baring. 
Mr.  Irving. 
Mr.  Warburton. 
Mr.  G.  Phillips. 
Mr.  J.  Morrison. 
Lord  Vise.  Morpeth, 
F   4 


Mr.  Heywood. 

Ld.  Vis.  Ebrington. 

Mr.  Lawley. 

Sir  J.  Wrottesley, 

Bart. 
Lord  Cavendish. 
Mr.  Alderman  Wood. 
Mr.  Strutt. 
Mr.  BoNHAM  Carter, 
Mr.  E.  J.  Stanley. 
Mr.  Aid.  Thompson. 


72  THE    HISTORY    AND    PRINCIPLES 

On  the  11th  day  of  August  tlie  committee  delivered 
the  following  report :  — 

"  The  secret  committee,  appointed  to  inquire  into  the  expediency 
of  renewing  the  charter  of  the  Bank  of  England,  and  into  the  system 
on  which  banks  of  issue  in  England  and  Wales  are  conducted,  and 
to  whom  the  petition  of  certain  directors  of  joint-stock  banking 
companies  in  England  was  referred,  and  who  were  empowered  to 
report  the  minutes  of  evidence  taken  before  them,  have  agreed 
upon  the  following  report :  — 

"  Your  committee  have  applied  themselves  to  the  inquiry  which 
the  House  has  committed  to  them,  by  calling  for  all  the  accounts 
which  appeared  to  them  necessary  for  the  purpose  of  elucidating 
the  affairs  of  the  Bank  of  England,  and  have  examined  evidence  for 
the  purpose  of  ascertaining  the  principles  on  which  it  regulates  the 
issues  of  its  notes,  and  conducts  its  general  transactions.  They 
feel  bound  to  state  that  the  directors  of  the  Bank  of  England  have 
afforded  to  them  every  facility  in  their  power,  and  have  most 
readily  and  candidly  answered  every  question  which  has  been  put 
to  them,  and  produced  every  account  which  has  been  called  for. 
The  committee  have  also  examined  such  witnesses  as  appeared  to 
them,  from  their  practical  knowledge  and  experience,  most  likely 
to  afford  information  on  the  important  subjects  under  their  con- 
sideration, who  have  all  been  ready  to  give  the  committee  the  most 
ample  information. 

"  The  principal  points  to  which  they  have  directed  their  atten- 
tion are  — 

"  First. — Whether  the  paper  circulation  of  the  metropolis  should 
be  confined,  as  at  present,  to  the  issues  of  one  bank,  and  that  a 
commercial  company ;  or  whether  a  competition  of  different  banks 
of  issue,  each  consisting  of  an  unlimited  number  of  partners,  should 
be  permitted. 

"  Secondly.  —  If  it  should  be  deemed  expedient  that  the  paper 
circulation  of  the  metropolis  should  be  confined,  as  at  present,  to 
the  issues  of  one  bank,  how  far  the  whole  of  the  exclusive  privi- 
leges possessed  by  the  Bank  of  England  are  necessary  to  effect 
this  object. 

"  Thirdly.  —  What  checks  can  be  provided  to  secure  for  the 
public  a  proper  management  of  banks  of  issue,  and  especially 
whether  it  would  be  expedient  and  safe  to  compel  them  periodically 
to  publish  their  accounts. 

"  With  respect  to  the  circulation  of  paper  in  this  country,  the 
committee  have  examined, — First,  into  the  effect  produced  by  the 
establishment  of  tiie  branch  banks  of  the  Bank  of  England ;  and 
secondly,  into  the  expediency  of  encouraging  the  establishment  of 
joint-stock  banks  of  issue  in  the  country. 

"  On  all  these,  and  on  some  collateral  points,  more  or  less  in- 
formation will  be  found  in  the  minutes  of  evidence  ;  but  on  no  one 
of  them  is  it  so  complete  as  to  justify  the  committee  in  giving  a 
decided  opinion. 


OF    BANKING. 


/" 


'*  The  period  of  the  session  at  which  the  committee  commenced 
their  hxbours,  the  importance  and  extent  of  the  subjects,  and  the 
approaching  close  of  the  session,  will  sufficiently  account  to  the 
House  for  the  limited  progress  of  the  inquiry,  and  for  the  incom- 
pleteness of  the  materials  which  have  been  collected  for  the  pur- 
pose of  forming  an  opinion  ;  —  they  have  thought  it  better,  therefore, 
to  submit  the  whole  of  the  evidence  which  they  have  taken,  with  a 
very  few  exceptions,  to  the  consideration  of  the  House. 

"  In  their  opinion,  no  public  inconvenience  will  arise  from  this 
publication.  The  only  parts  of  the  evidence  which  they  have  thought 
it  necessary  to  suppress,  are  those  which  relate  merely  to  the  pri- 
vate interests  of  individuals. 

"  The  House  will  perceive  that  the  committee  have  presented, 
as  part  of  the  evidence  which  they  have  taken,  the  actual  amount 
of  bullion  at  different  times  in  the  hands  of  the  Bank  of  England. 
This  information  has  never  before  been  given  to  the  public ;  it  is, 
however,  very  essential  to  a  complete  knowledge  of  the  subject ; 
and  if  it  had  been  suppressed  by  the  committee,  many  parts  of  the 
evidence  would  have  been  unintelligible,  and  a  false  impression 
would  have  been  produced  in  the  minds  of  the  public,  that  the  bank 
were  not  so  well  provided  with  bullion  as  is  desirable,  which  might 
have  a  very  injurious  effect.  The  House  will,  however,  observe 
that  the  bank  is  amply  provided  with  bullion  at  the  present  time  ; 
and  it  does  not,  therefore,  appear  to  the  committee  that  this  inform- 
ation being  now  given  to  the  public,  can  be  productive  of  any  in- 
jurious consequences. 

"  The  committee,  however,  by  no  means  wish  it  to  be  understood, 
from  their  having  felt  themselves  called  upon  to  include  this  evi- 
dence in  their  report,  that  they  have  formed  any  opinion  as  to  the 
propriety  of  periodically  publishing  the  affairs  of  this  or  of  any 
other  bank  of  issue.  There  appears  to  be  a  difference  between  a 
publication  of  the  affairs  of  the  bank  when  an  inquiry  is  instituted 
for  the  purpose  of  deciding  whether  the  bank  charter  shall  be  re- 
newed or  not,  and  a  periodical  publication  during  the  course  of  its 
ordinary  transactions. 

"  Of  the  ample  means  of  the  Bank  of  England  to  meet  all  its  en- 
gagements, and  of  the  high  credit  which  it  has  always  possessed, 
and  which  it  continues  to  deserve,  no  man  who  reads  the  evidence 
taken  before  this  committee  can  for  a  moment  doubt ;  for  it  ap- 
pears that,  in  addition  to  the  surplus  rest  in  the  hands  of  the  bank 
itself,  amounting  to  2^880,000/.  the  capital,  on  which  interest  is 
paid  to  the  proprietors,  and  for  which  the  State  is  debtor  to  the  bank, 
amounts  to  14',553,000/.,  making  no  less  a  sum  than  17,433,000/. 
over  and  above  all  its  liabilities." 

From  the  information  laid  before  the  committee,  I 
have  selected  or  constructed  the  following  tables  :  — 


74 


THE    HISTORY    AND    PRINCIPLES 


TABLE  I. 
An  account  of  tlie  average  amounts  of  gold  and  silver 
bullion  held  by  the  baiik  in  tJie  followhig  years,  end- 
ing Feb.  ^8.  ;  —  distinguishing  gold  from  silver. 


Years, 

Gold. 

Silver. 

Total. 

1815 

1,938,265 

£ 

240,882 

2,179,147 

1816 

2,828,707 

570,-^07 

3,399,114 

1817 

6,64-3,100 

861,184 

7,504,284 

1818 

10,147,115 

962,266 

11,109,381 

1819 

6,066,603 

655,044 

6,721,647 

1820 

3,663,561 

305,967 

3,969,528 

1821 

6,291,44-6 

1,882,973 

8,174,419 

1822 

9,162,298 

2,468,792 

11,631,090 

1823 

8,135,629 

2,119,069 

10,254,698 

1824 

10,805,780 

1,801,183 

12,606,963 

1825 

10,213,247 

1,645,348 

11,858,595 

1826 

3,719,824 

601,878 

4,321,702 

1827 

5,880,811 

727,165 

6,607,976 

1828 

9,505,630 

695,623 

10,201,253 

1829 

8,749,920 

1,013,210 

9,763,130 

1830 

5,736,186 

1,519,586 

7,255,772 

1831 

8,235,162 

2,095,199 

10,330,361 

1832 

5,853,334 

551,924 

6,405,258 

TABLE  II. 
An  account  of  the  amount  of  the  notes  of  the  Bank  of 
England  in  circulation  —  the  amount  of  all  deposits 
—  the  amount  of  the  surplus  capital  —  the  amount 
of  all  securities  held  by  the  bank,  and  the  amount 
of  bullion  in  the  bank  on  the  last  day  of  February 
in  each  of  the  following  years. 


CAPITAL   RAISED, 


Year.   Circulation. 


1778 
1779 
178o! 
1781 
1782 
1783 
1784 
1785 
1786 
1787 
1788 
1789 
1790 
1791 
1792 


7,440,330 
9,012,610 
8,410,790 
7,092,450 
8,028,880 
7,675,090 
6,202,760 
5,92,3,090 
7,581,960 
8,329,840'| 
9,561,120| 
9,807,210 
10,040,540 
11,439,200 
11,307,380 


Deposits. 


Rest,  or  Sur- 
plus Capital 


4,662,1.50 
4,358,160 
4,723,890 
5,796,830 
6,1.30,300 
4,465,000 
3,903,920 
6,669,160 
6,151,660! 
5,902,080j 
5,177,050 
5,537,370] 
6,223,2701 
6,364,550, 
5,523,370 


1,128,730 

1,276,290 

1,347,410 

1,576,800 

1,792,750 

1,976,880 

2,168,380 

2,321,060 

2,598,710 

2,753,820 

2,869,780 

2,844,840 

2,701,31 

2,668,300 

2,705,870 


CAPITAL   INVESTED. 


Public 

Securities. 


7,898,292 
8,862,242 
9,145,659 
8,640,073 
10,346,055 
10,016,349 
7,789,291 
7,198,564 
6,836,459 
7,642,587 
7,83;5,857 
8,249,582 
8,347,387 
10,380,358 
9,938,799 


Private 

Securities. 


3,322,228 
2,073,668 
1, 75.5,371 
2,546,067 
3,448,015 
2,779,431 
3,829,929 
4,97.3,926 
3,516,781 
3,716,463 
4,030,653 
2,711,108 
1,984,733 
2,222,282 
3,129,761 


Dullion. 


2,010,690 
3,711,150 
3,581,060 
3,279,940 
2,157,860 
1,321,190 
655,840 
2,740,820 
5,979,090 
5,626,690 
5,743,440 
7,228,730 
8,63.3,000 
7,869,410 
6,468,060 


OF    BANKING. 


75 


CAPITAL    RAISED. 


CAPITAL    INVESTED. 


Year.  Circulation. 


Deposits. 


1793 

1794 

1795 

1796 

1797 

1798 

1799 

1800 

1801 

1802 

180.S 

1804 

1805 

1806 

1807 

1808 

1809 

1810 

1811 

1812 

1813 

1814 

1815 

1816 

1817 

1818 

1819 

1820 

1821 

1822 

1823 

1824 

1825 

1826 

1827 

1828 

1829 

1830 

1831 

1832 


Kest,  or  bur- 
pliis  Capital. 


11,888,910 
10,744,020 
14,017,510 
10,729,520 
9,674,780 
13,095,830 
12,959,800 
16,844,470 
16,213,280 
15,186,880 
15,319,930 
17,077,830 
17,871,170 
17,730,120 
16,950,680 
18,188,860 
18,542,860 
21,019,600 
23,360,220 
23,408,320 
23,210,930 
24,801,080 
27,261,650 
27,013,620 
27,397,900 
27,770,970 
25,126,700 
23,484,110 
23,884,920 
18,665,350 
18,392,240 
19,736,990 
20,753,760 
25,467,910 
21,890,610 
21,980,710 
19,870,850 
20,050,730 
19,600,140 
18,051,710 


5,346,450 
7,891,810 
5,973,020 
5,702,360 
4,891,530 
6,148,900 
8,131,820 
7,062,680 
10,745,840 
6,858,210 
8,050,240 
8,676,830 
12,083,620 
9,980,790 
1 1,829,320 
11,961,960 
9,982,950 
12,457,310 
11,445,650 
11,595,200 
11,268,180 
12,455,460 
11,702,250 
12,388,890 
10,825,610 
7,997,550 
6,413,370 
4,093,550 
5,622,890 
4,689,940 
7,181,100 
10,097,850 
10,168,780 
6,935,940 
8,801,660 
9,198,140 
9,553,960 
10,763,150 
11,213,530 
8,937,170 


Public 
Securities. 


2,780,570 

2,875,830 

2,948,530 

3,247,590 

3,357,610 

3,383,710 

3,511,310 

3,661,150 

4,105,730 

4,067,680 

4,321,480 

4,616,450 

4,590,400 

4,867,350 

4,771,300 

5,088,730 

5,081,090 

5,403,080 

5,667,420 

6,005,960 

6,336,340 

6,937,800 

7,631,510 

8,639,680 

5,736,090 

5,192,270 

4,099,550 

3,520,880 

3,158,360 

3,674,940 

3,130,620 

2,847,220 

2,807,890 

2,974,240 

2,996,280 

2,749,710 

2,794,960 

2,561,510 

2,612,360 

2,637,760 


Private 
Securities. 


9,549,209 
9,950,756 
13,164,172 
12,951,812 
11,714,431 
11,241,333 
11,510,677 
18,975,663 
15,958,011 
14,199,094 
9,417,887 
14,684,686 
16,889,501 
14,813,599 
13,452,871 
14,149,501 
14,743,425 
14,322,634 
17,201,800 
22,127,253 
25,036,626 
23,630,317 
27,512,804 
19,425,780 
25,538,808 
26,913,360 
22,355,115 
21,715,168 
16,010,990 
12,478,133 
13,658,829 
14,341,127 
19,447,588 
20,573,258 
18,685,015 
19,818,777 
19,736,665 
20,038,890 
19,927,572 
18,497,448 


Bullion. 


6,456,041 
4,573,794 
3,647,168 
4,188,028 
5,123,319 
5,558,167 
5,528,353 
7,448,387 
10,466,719 
7,760,726 
14,497,013 
12,314,284 
11,771,889 
11,777,471 
13,955,589 
13,234,579 
14,374,775 
21,055,946 
19,920,550 
15,899,037 
12,894,324 
18,359,593 
17,045,696 
23,975,530 
8,739,822 
3,991,970 
9,099,885 
4,472,322 
4,785,280 
3,494,947 
4,660,901 
4,530,873 
5,503,742j 
12,345,322 
4,844,515| 
3,762,493 
5,648,085' 
4,165,500| 
5,281,408 
5,836,042 


4,010,680 

6,987,110 

6,127,720 

2,539,630 

1,086,170 

5,828,940 

7,563,900 

6,144,250 

4,640,120 

4,152,950 

3,776,750 

3,372,140 

5,883,800 

5,987,190 

6,142,840 

7,855,470 

4,488,700 

3,501,410 

3,350,940 

2,983,190 

2,884,500 

2,204,430 

2,036,910 

4,640,880 

9,680,970 

10,055,460 

4,184,620 

4,911,050 

11,869,900 

11,057,150 

10,384,230 

13,810,060 

8,779,100 

2,459,510 

10,159,020 

10,347,290 

;  6,835,020 

9,171,000 

8,217,050 

5,293,150 


It  will  be  observed,  that  the  first  three  columns 
of  the  above  table,  added  together,  are  equal  in  amount 
to  the  last  three.  Thus  the  circulation,  the  deposits, 
and  the  rest,  are  equal  to  the  public  securities,  the 
private  securities,  and  the  bullion.  Take  for  example 
the  year  1832  :  — 

Circulation  ...  ^18,051,710  ||   Public  securities  ^18,497,448 

Deposits   8,937,170  i    Private  ditto  ...         5,836,042 

Rest 2,637,760      Bullion  5,293,150 


^29,626,640 


^29,626,640 


70 


THE    HISTORY    AND    PRINCIPLES 


Thus  the  total  capital  possessed  by  the  bank,  on  the 
last  day  of  February,  1832,  was  oc)/)QC),(HoL  :  of 
which  18,051,710/.  was  raised  by  the  circulation 
of  notes ;  8,937,170/.  was  raised  by  deposits  ;  and 
2,637,760/.  was  real  capital  belonging  to  the  bank, 
over  and  above  its  capital  of  14,686,800/.,  which  is 
lent  to  government  at  tliree  per  cent.  This  capital 
of  29,626,610/.  was  employed  as  denoted  in  the  last 
three  columns  of  the  tiible  :  18,497,448/.  was  invested 
in  government  securities  ;  5,836,042/.  in  private  se- 
curities ;  and  5,293,150/.  in  gold  and  silver  bullion, 
either  coined  or  uncoined. 

It  is  seen  by  the  third  and  fourth  columns  of  this 
table,  that  the  bank  employ  their  trading  capital  in 
public  and  private  securities.  The  public  securities 
consist  chiefly  of  government  stock  and  exchequer 
bills  ;  the  private  securities  are  chiefly  bills  of  ex- 
change. It  has  latterly  been  considered  by  the  bank 
desirable  that  one  third  of  their  capital  raised  by  notes 
and  deposits  should  be  invested  in  bvdlion,  and  the 
remaining  two  thirds  in  public  and  private  securities. 
If,  however,  an  amount  of  bills  is  presented  for  dis- 
count, which  would  exceed  this  proportion,  the  bank 
do  not  reject  the  bills,  but  they  sell  out  the  govern- 
ment securities. 

TABLE  III. 
The  following   table    exhibits  the  amount  of  notes 
under  5/.  in  circulation  on  the  last  day  of  February, 
from  1798  to  1832  inclusive. 


Year.     Circulation. 


1798 
1799 
1800 
1801 
1802 
180.'3 
1 8{)4- 
1805 
1806 


1,44.8,2'20 
1,465,650' 
1,4-71,540 
2,634,760 
2,612,020 
2,968,960 
4,5.31,270 
4,860,160 
4,458,600 


Year.     Circulation. 


Year. 


1807  4,109,890 

1808  4,095,170 
1809!4,.301,500 
18105,860,420^ 
1811,7,114,090 

1812  7,457,030 

1813  7,713,610 
18148,34.'5,.540 
1815  9,035,250 


1816{9,001,400i 
181718,1.36,270 
1818,7,400,680, 
1819  7,354,230 
,18206,689,130 
;i8216,437,.560l 
:  1822  1,374,850 
182.3J  68 1, .TOO 
1824    486,100, 


Year.     Circulation. 


1825 
1826 
1827 
1828 
1829 
18.30 
1831 
1832 


416,7.30 
1,375,250 
661,.390 
416,260 
356,8.30 
320,490 
306,870 
299,100 


OF    BANKING.  77 

TABLE  IV. 
A  Statement  of  the  affairs  of  the  bank,  Feb.  29.  1832. 


THE  BANK. 


Dr. 

To  bank  notes  outstand- ' 

ing--. : 

To  public  deposits,  viz. 


£18,051,710 


:} 


2,034,790 


550,550 


85,030 


38,360 


490,000 


Drawing 

counts 
Balance  of  au 

dit  roll J 

Life    annuities  "1 

unpaid J 

Annuities    for " 

terms  of  yrs 

unpaid 

Exchequer        1 

bills  depos^'-J" 
To  private  deposits,  viz. 
Drawing   accts.  5,683 
Various    other  "1 

debts )       ^** 

To  the  Bank  of  England  \ 

for  the  capital J 

To  balance  of  surplus 

favour  of  the  Bank 

England 


>•     3, 1 98,730 


J 


3,870  "j 

1,560  j 

ind\ 

3. 


£4,134,940 


5,738,430 


14,553,000 


2,637,760 


Cr, 

By  advances  on  government 
securities,  viz. 

Exchequer  bills  on  the  grow- 
ing produce  of  the  conso- 
lidated fund  ill  the  quarter 
ending 

5th  April,  1832,  3,428,340' 

5th  July,  ditto         697,000 

Exch.     bills    on"l 

r      loor     r     7,600 
supplies  1825    J 

Ditto    for  ~j 

£10,500,000      I     2,000 

for  1825    J 

By   the    advances    to    the 

trustees  appointed  by  the 

Act  S  Geo.  IV.  c.51.  to 

wards  the  purchase  of  an  ^   10,897,880 

annuity  of  £585,740  for 

44    years    from  the    5th 

April,   1823 

By  other  creditors,  viz. 


3- 


'  1 

ir-       1 2 


,700,000 


Exchequer 
bills  pur- 
chased 

"TLr:...]  '«.«<« 

City    bonds  ... 
Bills  and  notes  "| 
discounted. .  J 
Loans 


1 


500,000 
2,951,970 


>■     9,166,860 


on 

mortgages 
London   Dock  \ 

company....  J 
Advances      onT 

security    of    I 

various  ar-     | 

tides J 

By  cash  and   bullion 5,293,150 

By  the  permanent  debt  due  "1     ^  4  686,800 

from  government J 


1,452,100 


227,500 


570,690 


£44,179,630 


£44,179,630 


Rest,  or  surplus,  brouj 
down..  . 
ink  capi 
prietors. 


S'^U      2,637, 
down J 

Bank  capital  due  to  pro-T     14  cr 


760 
3,000 


£17,190,760 


Besides  the  rest,  or  surplus  capital,  the  bank  hold  dead  stock  to  a  considerable 
extent,  such  as  buildings,  &c. 


79  THE    HISTORY    AND    riUNClPLES 

TABLE  V. 
A  statement  of  the  receipts  and  expenses  for  the 
year  encUng  29tli  February,  1832. 


Dr. 

To    annual    expenses, 

forgeries,  losses,  and  ]■   £428,674: 

sundry  items , 
Stamp  duty  on  circula-  "1 

tion J 

Dividend  to  proprietors. . . 


S.1 


70,875 
1,164,235 


1,663,784 
Rest 2,637,760 


4,301,544 


Rest,  29th  Feb.  1832....   2,637,760 
Rest,  28th  Feb.  1831....   2,612,368 


Increase...     £^25,392 


Cii. 


Profit  and  loss,  rest £2,612,368 

By    interest    on    loans  T 

and  commercial  bills  J 
Government   securities i 

held   by  the  bank...  J 
Interest  of  capital  re- ") 

ceived  from  govern-  l 

ment J 

Allowance  received  fori 

the   management    of  J. 

the  public  debt. 
Profit  on  bullion,  rent, 

and  sundry  items. 


fit,  I 


248,321 
670,598 

446,502 

251,896 
71,859 


i?4,301,544 


The  receipts  of  the  bank  for  this  year  are  thus  clas- 
sified :  — 

Interest  on  commercial  bills .£130,695 

Interest  on  exchequer  bills 204,109 

Annuity  for  45  years  (tlie  dead-weight   account) 451,415 

Interest  on  capital   received  from  government 446,502 

Allowance  received  for  management  of  the  public  debt  251,896 

Interest  on  loans  on  mortgages 60,684 

Interest  on  stock  in  the  public  funds 15,075 

Interest  on  private  loans 56,941 

Profit  on  bullion,  commission,  rent,  receipts  on  dis-~j 

counted  bills  unpaid,  management  of  the  business  I  71  oco 

of  the   banks   of  Ireland,  of  Scotland,  and  royal  j  ' 

bank  of  Scotland,  and  sundry   items J 

£1,689,176 

In  the  total  amount  of  annual  expenses  are  included 
the  following  items  :  — 

The  expense  for  conducting  the  business  of  the  funded  "j  y, 

debt j^Att.4,14J 

The  expense  attending  the  circulation  of  promissory!      -tnc  a<iO 
notes  and  post  l)ills J  ' 

The  expense  of  the  banking  department,  of  which  theT 

proportion  for  the  public  accounts  maybe  estimated  1-       69,165 
at  £10,000 J 

Total  expense  in  the  year  ending  February  29th,  1832  £339,400 


OF    BANKING. 


79 


The  number  of  clerks  and  others  employed  in  the 
first  of  these  departments  is  405  ;  in  the  second,  2i^2  ; 
and  in  the  third,  173.  The  total  number  employed 
is  as  follows  :  — 

820  Clerks  and  porters "j 

38   Printers  and  engravers |- £211, 903   10  10 

82  Clerks  and  porters  at  the  branches J 

940  Average  salary  £225  each. 

Amount  of  pensions  paid  in  the  same  period. 

193  Pensioners,  average  jgl 61  each £31,243  18  11 

The  average  amount  of  loss  to  the  bank  from  for- 
geries in  the  public  funds  during  the  last  ten  years 
is  40,204/. 


TABLE  VI. 


An  account  of  the  annual  profits  of  the  bank,  ending 
the  last  day  of  February  in  each  of  the  following 
years. 


Years. 

Profits. 

Years. 

Profits. 

Years. 

Profits. 

1779 

£740,460 

1797 

£924,988 

1815 

£1,857,950 

1780 

664,020 

1798 

841,068 

1816 

2,172,410 

1781 

822,290 

1799 

942,568 

1817 

1,316,780 

1782 

862,750 

1800 

2,129,048 

1818 

911,480 

1783 

830,930 

1801 

1,259,548 

1819 

362,580 

1784 

890,044 

1802 

1,359,038 

1820 

876,630 

1785 

851,224 

1803 

1,359,828 

1821 

1,092,780 

1786 

976,194 

1804 

1,109,938 

1822 

1,971,880 

1787 

853,654 

1805 

1,371,038 

1823 

910,980 

1788 

814,504 

1806 

1,674,038 

1824 

880,840 

1789 

790,028 

1807 

1,301,038 

1825 

1,124,910 

1790 

671,438 

1808 

1,481,670 

1826 

1,330,590 

1791 

781,958 

1809 

1,156,600 

1827 

1,186,280 

1792 

852,538 

1810 

1,486,230 

1828 

917,670 

1793 

889,668 

1811 

1,428,580 

1829 

1,209,490 

1794 

910,228 

1812 

1,502,780 

1830 

930,790 

1795 

887,668 

1813 

1,494,620 

1831 

1,215,090 

1796 

1,114,028 

1814 

1,765,700 

1832 

1,189,640 

The  table  is  constructed  from  the  third  column  of 
the  second  table :  that  column  is  called  by  the  bank 


80  THE    HISTORY    AND    PRIXCIPLES 

*'  the  Rest."  It  is  the  balance  of  the  profit  and  loss 
account.  The  increase  of  this  balance,  in  any  one 
year,  shows  that  the  bank  has  during  that  year 
realised  as  profit  the  amount  of  such  increase,  in  ad- 
dition to  the  amount  distributed  as  dividends  and 
bonuses  to  the  proprietors.  It  will  be  perceived  that 
for  the  most  part  the  "  rest "  increased  gradually  every 
year.  The  year  I8I7  presents  a  great  diminution, 
but  that  w^as  in  consequence  of  2,910,600/.  being 
taken  from  the  surplus  and  added  to  the  fixed  capital. 
In  the  years  1801,  1802,  1804,  180.5,  and  I8O6, 
bonuses  were  given  to  the  proprietors,  and  hence  the 
*'  rest"  was  so  much  less  on  the  following  years. 

In  the  years  ending  February,  1790  and  1791,  the 
dividends  were  greater  than  the  profits.  Such  was  the 
case  also  in  the  years  1818,  1819,  1820,  and  1821,  as 
the  bank  continued  to  pay  a  dividend  of  ten  per  cent, 
upon  the  increased  capital  of  14,553,000/.  But  in 
1822,  the  dividend  was  reduced  to  eight  per  cent. 
Still  the  profits  declined  ;  and  in  1823,  1824,  1825, 
1828,  and  1830,  the  dividends  were  paid  in  part  out 
of  the  surplus  capital  which  had  acciunulated  from 
the  profits  of  preceding  years. 

From  the  above  table  it  appears  that  the  following 
years  were  remarkable  for  a  great  increase  in  the 
profits  of  the  bank  — 1786,  I796,  1800,  1805,  I8OC, 
1814,  1815,  1816,  1822.  By  referring  to  Table  II. 
we  shall  be  able  to  form  a  probable  opinion  as  to  the 
causes  of  this  increase. 

1786.  In  the  year  ending  February,  1786,  the  profits  were 
976,194-^. ;  being  an  increase  of'  124',970/.  over  that  of  tlie  preceding 
year,  and  122,540/.  over  the  following  3^ear.  By  referring  to  Tab.  II. 
we  find  that  between  the  last  day  of  February,  1785  and  1786, 
the  circulation  of  notes  had  increased  from  5,923,090/.  to  7,58 1,960/. : 
this  no  doubt  was  the  main  cause  of  the  profits  ;  for  the  deposits, 
the  pubhc  securities,  and  the  private  securities  had  all  decreased  ; 
and  what  was  also  unfavourable,  a  considerable  increase  had  taken 
place  in  the  stock  of  bullion.  It  seems  likely  that  this  increase  of 
bullion  did  not  occur  till  the  latter  end  of  the  year,  and  the  dimin- 


OF    BANKING.  81 

ution  of  profits  in  tlie  following  years  arose  from  keeping  up  this 
large  amount  of  bullion, 

1796.  This  year  the  profits  had  increased  from  887,668/.  to 
1,1 14',()28/.  A  great  reduction  had  taken  place  in  the  circulation 
in  the  course  of  this  year ;  but  this  decrease  had  probably  been 
gradual,  so  that  there  was  a  profit  for  a  good  part  of  the  year  on 
the  large  amount ;  and  on  the  other  hand,  there  was  an  increase  of 
above  500,000/.  in  the  private  securities  or  discounts  ;  and  a  much 
larger  decrease  in  the  stock  of  bullion.  The  diminution  in  the 
amount  of  bullion  was  about  the  same  amount  as  the  diminution  of 
the  circulation,  and  was  no  doubt  occasioned  by  a  demand  for  gold 
upon  the  bank,  in  consequence  of  the  unfavourable  state  of  the 
foreign  exchanges.  This  issue  of  gold,  while  confined  to  the 
amount  the  bank  had  previously  on  hand,  would  not  diminish  their 
profits.  The  gold  might  as  well  be  in  circulation  as  be  confined  in 
the  coffers  of  the  bank. 

1800.  This  year  the  profits  increased  from  912,5681.  to 
2,129,048/.  By  reference  to  Table  III.  we  find  there  was  a  great 
increase  in  the  circulation,— the  public  securities  and  the  private 
securities, —  and  a  diminution  in  the  amount  of  bullion.  All  these 
are  favourable  to  an  increase  ol"  profits. 

1805.  In  this  year  the  profits  were  much  larger  than  those  of  the 
preceding  year,  having  increased  from  1,109,938/.  to  1,371,038/. 
This  arose  from  a  great  increase  in  the  deposits,  and  also  in  the 
public  securities. 

1806.  The  profits  again  increased  from  1,371,038/.  to  1,674,038/. 
The  cause  of  this  is  not  very  evident.  The  circulation,  and  the 
private  securities,  and  the  amount  of  bullion,  are  about  the  same 
as  the  preceding  year.  A  reduction  of  2,000,000/.  has  also  taken 
place  in  the  public  securities.  We  should  imagine  there  would  be 
a  reduction  of  profit,  rather  than  an  increase.  Possibly,  however, 
the  public  securities,  which  were  parted  with,  were  sold  at  much 
higher  price  than  they  cost,  and  hence  might  arise  a  considerable 
profit. 

1814.  The  profits  advanced  from  1,494,620/.  to  1,765,700/., 
arising  from  an  increase  in  the  circulation,  an  increase  in  the  de- 
posits, and  a  considerable  increase  in  the  private  securities. 

1815.  An  increase  of  j)rofits,  arising  from  an  increase  in  the 
circulation  and  in  the  public  securities. 

1816.  An  increase  of  profit,  from  1,857,950/.  to  2,172,410/. 
This  profit  seems  to  have  risen  chiefiy  from  an  increase  in  the  pri- 
vate securities.  Possibly  some  profit  was  also  realised  from  the 
large  reduction  of  the  public  securities.  The  profit  on  the  increase 
in  the  deposits  was  not  equivalent  to  the  loss  upon  the  increase  of 
bullion. 

1S22.  Here  the  profits  rose  from  1,092,780/.  to  1,971,880/., 
while  every  source  of  profit  appears  diminished.  The  circulation, 
the  deposits,  the  public  and  the  private  securities,  were  all  consi- 
derably less  than  in  the  preceding  year :  and  the  average  stock  of 

G 


82  THE    HISTORY    AND    PRINCIPLES 

bullion,  as  appears  from  Table  I.,  much  increased.  The  only  way 
of  accounting  for  this  extraordinary  profit,  is  to  suppose  that  it 
was  reaHsed  by  the  sale  of  public  securities.  They  were  reduced 
from  16,010,990/.  to  1 2,1-78,133/. 

I  shall  now  notice  those  years  in  which  there  was 
a  diminution  of  profits. 

1790.  In  this  year,  the  profits  were  only  671,438/.;  and  this, 
with  an  increase  in  the  circulation,  the  deposits,  and  the  public 
securities.  But  on  the  other  hand  there  was  a  great  falling  off  in 
the  private  securities,  and  an  increase  in  the  amount  of  bullion. 

1798.  The  profits  were  only  84'1,068/.  while  the  preceding  year 
they  amounted  to  924,988/.,  and  the  following  year  to  942,568/., 
while  there  was  a  great  increase  in  the  circulation  and  the  deposits. 
But  there  was  also  a  great  increase  of  bullion  ;  from  1,086,170/.  it 
was  raised  to  5,828,940/.  This  year,  it  will  be  recollected,  was  the 
period  of  the  Bank  Restriction  Act  being  passed,  and  no  doubt  the 
bank  went  to  great  expense  in  order  to  obtain  gold. 

1804.  The  profits  fell  from  1,359,828/.  to  1,109,938/.,  notwith- 
standing an  increase  in  the  circulation,  the  deposits,  and  the  public 
securities.  There  was,  however,  a  diminution  in  the  private  se- 
curities. 

1809.  A  fall  in  the  profits  from  1,481,670/.  to  1,156,600/.;  in 
consequence,  it  would  appear,  of  a  fall  in  the  deposits. 

1817.  A  fiill  of  profit  from  2,172,410/.  to  1,316,780/.  in  conse- 
quence of  a  fall  in  the  deposits,  and  an  immense  fall  in  the  private 
securities.  There  was  also  an  increase  in  the  amount  of  bullion. 
This  was  the  first  year  after  the  termination  of  the  war. 

1818.  In  this  year  the  profits  fell  still  lower,  being  only  911,480/. 
There  was  a  further  fall  in  the  deposits,  and  a  still  greater  fall  in 
the  private  securities.  And  also  an  increase  in  the  average  stock 
of  bullion  as  appears  from  Table  I. 

1819.  The  profits  this  year  appear  to  be  only  362,580/.  not- 
withstanding a  considerable  increase  in  the  private  securities,  and 
a  great  reduction  in  the  stock  of  bullion.  The  bank  returns  are 
not  sufficiently  minute  to  enable  us  to  account  for  this  falling  off. 
It  may  have  been  occasioned  by  losses,  expenditure  on  bank  build- 
ings, &c.,  but  we  have  no  data  upon  which  to  form  any  conjecture 
on  the  subject. 

1 820.  The  profits,  though  still  below  the  average,  were  a  con- 
siderable advance  on  the  preceding  year,  notwithstanding  a  reduc- 
tion in  the  deposits,  and  in  the  private  securities.  It  appears, 
however,  by  Table  I.  that  there  was  a  considerable  reduction  in 
the  average  stock  of  bullion. 

1828.  The  profits  were  reduced  I'rom  1,186,280/.  to  917,670/. 
in  consequence  of  a  reduction  in  the  private  securities,  and  an  in- 
crease of  bullion. 

1830.  An  apparent  fall  of  profits  from  1,209,490/.  to  930,790/. 
This,  however,  is  only  apparent ;   as  a  portion  of  the  losses  by 


OF    BANKING.  S3 

Fauntleroy's  forgeries,  amounting  to  250,000/.  were  passed  to  the 
debit  of"  the  profit  and  loss  account  this  year. 

The  profits  of  the  bank  are  derived  from  the  fol- 
lowing sources  :  —  First,  the  interest  on  their  capital, 
which  is  lent  to  the  public  at  three  per  cent. 
Secondly,  the  use  of  the  rest,  or  surplus  capital. 
Thirdly,  the  use  of  the  capital,  raised  by  the  circu- 
lation and  the  deposits.  Fourthly,  the  allowance 
they  receive  as  agents  tor  transacting  the  business  of 
the  government.  There  is  another  source  of  profit, 
arising  from  the  accidental  destruction  of  notes  that 
are  in  circulation.  The  amoimt  cannot  be  ascertained ; 
but  it  may  be  presumed,  from  the  following  account, 
that  the  sum  is  not  inconsiderable. 


Table  VII. 
An  account  of  the  amoimt  of  bank  notes  in  circula- 
tion, of  dates  beyond  five,  ten,  fifteen,  and  twenty 
years  respectively. 
Bank  notes  of  5l.  and  upwards,  and  post  bills  out- 1  ^oqa  S80 

standing,  dated  prior  to  1st  Jan.  1812       -         -    J  ' 

Ditto,  dated  between  1st  Jan.  1812  and  1st  Jan.  1817  95,600 
Ditto,  dated  between  1st  Jan.  1817  and  1st  Jan.  1822  149,860 
Ditto,  dated  between  1st  Jan.  1822  and  1st  Jan.  1827     511,490 

Bank  notes  of  5/.  and  upwards,  and  post  bills     1,037,330 

The  bank  are  unable  to  state  what  amount  of  1/.  andl 

21.  notes  is  outstanding  of  the  dates  above  speci-  j-   297,000 
fied,  but  the  present  amount  is         -         -         -      J 


Table  VIII. 
An  account  of  all  distributions  made  by  the  Bank 
of  England  amongst  the  proprietors  of  bank  stock, 
whether  by  money  payments,  transfer  of  five  per 
cent,  annuities,  or  otherwise,  under  the  heads  of 
bonus,  increase  of  dividend,  and  increase  of  cai)ital, 
betwixt  the  25th  February,  1797,  and  31st  March, 
183f2,  in  addition  to  the  ordinary  dividend  of  seven 

G   2 


84  THE    HISTORY    AND    PRINCIPLES 

pounds  per  cent,  on  the  capital  stock  of  that  corpor- 
ation existing  in  1797  ;  including  therein  the  whole 
dividend  paid  since  June,  1816,  on  their  increased 
capital,  stating  the  period  when  such  distributions 
were  made,  and  the  aggregate  amount  of  the  whole  : 


In  June,  1799,    10/. 
11,642,400^  is. 


per  cent,  bonus  in  five  per  cents.  1797,  on"!  ^.  .     .  _ . 

May     1801,5/.         ilitto          Navy  five  per  cents,  ditto 582,120 

Nov.    1802,  2i/.       ditto                     ditto                   ditto 291,060 

Oct.     1804,  5^         ditto                    Cash                 ditto 582,120 

Oct.     1805,  51.         ditto                     ditto                   ditto 582,120 

Oct.     1806,  51.         ditto                     ditto                   ditto 582,120 

ncrease  of  dividend  at  the  rate  of  3/.  "| 

nt.  per  annum,  on  11,642,400/.  I  5,588,352 

ears J 

^          «      -,      ^^           /-»       f  Increase  of  dividend  at  the  rate  of  1/.  "> 
I'rom  Apri  ,  1823,  to  Uct.  I                  .                                i  ,  ^^^i  ^nr-.i    I      i  ^i-  m^ 
,„,',',.,'.            <     per  cent,  per  annum  on  11^642,400/.  V-     1,047,816 
1831,  both  inclusive        I     •    ^^  I 

'  [^    IS  9  years J 

In  June,  1816.     Increase  of  capital  at  25/.  per  cent,  is 2,910,600 

r  cent.  ~| 

creased  I     1,891,890 


UCt.      18Ut>,  i)(.  UlllO 

From  April,  1807,  to  Oct.  f  ^"H'^'^^, 

1822,  both  inclusive        |     f    ,_ 

L    IS  16  y( 


.,        r^.       f  Dividend  at  the  rate  of  10/.  per 

From  Oct.   18  6,  to   Oct.  I  orMr.rT„-v/  • 

„„^    .      ,    •     ,     ■  -{     per  annum  on  2,910,600/.  inc: 

1822,  both  inclusive  •.  .    •    ^t 

(_    capital,  is  Gt;  years 

1      -1    ^cr,n   .     r*  .    f  Dividcud  at  the  rate  ( 
UmtI,  1823, to  Oct.  I                                 ,i,>irv^ 
',',.,'.           -{     per  annum  on  2,910,( 
,  both  inclusive        I     '^     •»  i  •    r. 
'  J^    capital  IS  9  years 


From  April,  1823,  to  Oct.  I  ■^■'■"^■*"  ' Xi'-wX  ^/-v^/    •  i  i      r.^^^^00 

,',',.,'.  <     per  annum  on  2,910,600/.  increased  >■     2,095,632 


Aggregate  amount  of  the  whole 17,318,070 


Annual  dividend   payable  on  bank  stock  in  1797,  on  a  capital^ 
of  11,642,400/.  at  tlie  rate  of  7  per  cent,  per  annum J 


8 1  4,968 


Annual    dividend    payable    since   June,  1816,    on  a   capital  of 

14,553,000/.  to  October,   1822,  inclusive,  at  the  rate  of   10/.  }■     1,455,300 
per  cent  per  annum 


•1 


dividend  payal)]e  from  Ajjril,  182.3,  to  31st  March,  I832,"j 
inclusive,   on  a  capital  of  14,553,000/.  at  the  rate  of  I     l,l64,i 
cent,  per  annum J 


On  tlie  7th  May,  1832,  Lord  Lyndhiirst's  motion 
for  tlie  postponement  of  the  consideration  of  Sche- 
dule A.  in  the  Reform  Bill  was  carried  in  the  House  of 
Lords  ])y  a  majority  of  151  to  116.  —  This  led  the 
])iil)lic  to  sujipose  that  the  whole  bill  would  virtually 
i)e  rejected,  and  in  consequence  of  this  apprehension 
a  demand  for  gold  in  exchange  for  notes  was  made 
upon  the  Bank  of  England.  'I'he  amount  issued  was 
about  1,5()0,()0()/.  The  largest  sum  paid  in  one  day 
(May  1 1'th)  was  807,000/. 


or    BANKING.  85 

1833.  May  31.  A  meeting  of  the  proprietors  of 
bank  stock  was  held  at  tlie  Bank  ot  England,  to 
receive  a  communication  from  the  court  of  directors, 
of  the  result  of  the  negotiation  with  his  Majesty's 
government  respecting  the  renewal  of  the  bank 
charter.  The  following  letter  from  Lord  Althorp, 
the  chancellor  of  the  exchequer,  was  read  by  the  se- 
cretary. 

"  Downing  Street,  May  2,  1833. 
*'  Gentlemen, 

"  After  duly  considering  the  conversation  I  have  had  with  you,  the 
substance  of  which  I  have  reported  to  my  colleagues,  his  Majesty's 
government  have  directed  me  to  make  the  following  proposals  to 
you  for  the  purpose  of  renewing  the  bank  charter. 

"  1.  We  propose  to  renew  the  charter  for  twenty-one  years  ; 
subject,  however,  to  this  condition  :  —  that  if  at  the  end  of  ten 
years  the  then  existing  government  should  so  think  fit,  they  may 
give  a  twelvemonth's  notice  to  the  bank  that  the  charter  shall  ex- 
pire at  the  end  of  eleven  years. 

"  2.  That  no  banking  company  consisting  of  more  than  six  part- 
ners shall  issue  notes  payable  on  demand  within  the  metropolis,  or 
within  sixty-five  miles  from  the  metropolis.  Banking  companies, 
however,  consisting  of  any  number  of  partners  established  at  a 
greater  distance  from  the  metropolis  than  sixty-five  miles,  shall 
have  the  right  to  draw  bills  on  London  without  restriction  as  to 
their  amounts,  and  to  issue  notes  payable  in  London. 

"  3.  Bank  of  England  notes  shall  be  a  legal  tender,  except  at 
the  Bank  of  England,  or  at  any  of  its  branches. 

"  4.  Bills  not  having  more  than  three  months  to  run  before  they 
become  due,  shall  not  be  subject  to  the  usury  laws. 

"  5.  An  account,  similar  to  that  laid  before  the  bank  committee, 
of  the  amount  of  bullion,  and  securities  in  the  hands  of  the  bank, 
and  of  the  amount  of  notes  in  circulation,  and  of  the  deposits  in  the 
hands  of  the  bank,  shall  be  transmitted,  as  a  confidential  paper, 
weekly  to  the  chancellor  of  the  exchequer :  these  accounts  shall 
be  consolidated  at  the  end  of  each  quarter,  and  the  average  state 
of  the  bank  accounts  for  the  preceding  quarter  published  quarterly 
in  the  Gazette. 

"  A  bill  will  be  also  introduced  into  parliament,  with  the  view  of 
regulating  country  banks.  The  provisions  of  this  measure  will  be 
such  as  to  hold  out  an  inducement  to  the  establishment  of  joint- 
stock  banks  who  will  not  issue  their  own  notes. 

"  His  Majesty's  government  desire  me  to  call  your  attention  to 
the  advantages  which  these  different  propositions  are  likely  to  con- 
fer upon  the  bank.  Their  tendency  must  be  to  extend  the  cir- 
culation of  its  notes,  and  by  relieving  bills  at  short  dates  from  the 

G    3 


86  THE    HISTORY    AND    PRINCIPLES 

usury  lau's  to  Tacilitate  its  operations.  While,  on  the  other  ha«id, 
the  only  relaxation  in  its  exclusive  privileges  as  they  at  present 
exist,  v/hicli  is  required  —  is  the  permission  given  to  joint-stock 
banks,  established  at  a  greater  distance  than  sixty-five  miles  from 
the  metropolis,  to  draw  bills  and  to  issue  notes  payable  in  London. 
His  Majesty's  government,  therefore,  think  that  they  have  a  right 
to  expect  some  considerable  pecuniary  advantages  from  the  bank 
in  the  management  of  the  government  business.  They  consequently 
propose  that  government  should  repay  to  the  bank  twenty-five  per 
cent,  of  the  debts  of  li, 500,000/.  now  due,  and  that  the  bank 
should  deduct  from  the  payments  made  to  them  from  the  govern- 
ment for  the  transaction  of  the  government  business  the  annual 
sum  of  120,000/. 

"I  hope  that  this  proposal  will  be  satisflictory  to  the  bank  direc- 
tors, and  that  by  making  this  arrangement  an  end  may  be  speedily 
j)ut  to  the  suspense  now  existing. 

"  I  have  the  honour  to  be, 
"  Gentlemen, 
"  Your  most  obedient  humble  Servant, 
"  Althorp. 

"  To  the  Governor  and  Deputy- 1 
Governor  of  the  Bank  of  England."  J 

After  some  discussion,  the  further  consideration  of 
this  letter  was  adjourned  to  a  future  meeting. 

In  the  same  evening  Lord  Althorp  brought  forward 
the  subject  in  the  House  of  Commons.  Besides  the 
measures  that  were  connected  with  the  Bank  of 
England,  he  announced  the  measures  for  regulating 
country  banks.     These  were  — 

1.  That  government  should  have  the  power  of 
granting  charters  to  joint-stock  banks  issuing  notes 
beyond  sixty-five  miles  from  London,  and  to  joint- 
stock  banks  within  the  sixty-five  miles,  provided  they 
issued  only  the  notes  of  the  Bank  of  England. 

2.  That  the  joint-stock  banks  which  issued  notes 
should  be  required  to  ])ay  up  one  half  of  their  capital, 
and  all  the  shareholders  be  answerable  individually 
to  the  full  extent  of  their  property. 

3.  That  the  joint-stock  banks  which  did  not  issue 
their  own  notes  should  be  required  to  pay  up  only 
one  fourth  of  their  capital,  and  the  shareholders  be 
responsible  only  to  tlie  amounts  of  their  shares. 

4.  That  the  government  when  granting  the  charter 


OF    BANKING.  87 

should  have  the  power  to  decide  whether  the  amount 
of  capital  subscribed  was  a  sufficient  amount  for  the 
place  in  which  the  bank  w^as  situated. 

5.  That  each  private  bank  should  be  required  to 
send  a  statement  of  its  accounts  to  the  government  in 
London,  as  a  strictly  confidential  paper,  which  was 
not  to  be  published  in  a  separate  form,  but  the 
accounts  being  added  together,  the  total  result  should 
be  given  to  the  public  periodically. 

6.  That  to  enable  the  government  to  know  the 
total  amounts  of  notes  in  circulation,  each  private 
bank,  as  well  as  each  joint-stock  bank,  should  be 
compelled  to  compound  for  the  stamp  duties. 

The  Bank  of  England  proprietors  agreed,  at  a 
subsequent  meeting,  to  the  measures  which  had  a 
reference  to  them.  But  the  country  bankers  ex- 
pressed great  dissatisfaction  ;  and  on  the  12th  of  June, 
they  presented  a  memorial  to  Earl  Grey,  the  first  lord 
of  the  treasury,  and  to  Lord  Althorp,  the  chancellor 
of  the  exchequer,  upon  the  subject.  In  consequence 
of  the  opposition  of  the  country  bankers,  Lord 
Althorp  postponed  his  measures  for  the  regulation  of 
the  private  and  joint-stock  banks,  and  carried  forward 
his  plan  for  the  renewal  of  the  charter  of  the  Bank  of 
England.  The  following  bill  was  ultimately  passed 
into  a  law : 

An  Act  for  giving  to  the  corporation  of  the 
governor  and  company  of  the  Bank  of  England  certain 
privileges,  for  a  limited  period,  under  certain  con- 
ditions, Aug.  29.  1833. 

"  Whereas  an  Act  was  passed  in  the  S9th  and  40tli  years  of  the 
reign  of  his  Majesty  King  George  III.,  intituled  an  Act  for  esta- 
blishing an  agreement  with  the  governor  and  company  of  the  Bank 
of  England,  for  advancing  the  sum  of  3,000,000^.  towards  the  supply 
for  the  service  of  the  year  1800:  and  whereas  it  was  by  the  said 
recited  Act  declared  and  enacted,  that  the  said  governor  and  com- 
pany should  be  and  continue  a  corporation,  with  such  powers,  au- 
thorities, emoluments,  profits,  and  advantages,  and  such  privileges 
of  exclusive  banking  as  are  in  the  said  recited  Act  specified,  subject 
nevertheless  to  the  powers  and  conditions  of  redemption,  and  on  the 
terms  in  the  said  Act  mentioned ;  and  whereas  an  Act  passed  in  the 

G  4 


88  THE    IIISTOllY    Ax\U    PRINCIPLES 

7th  year  of  the  reign  of  his  late  Majesty  King  George  IV.  intituled 
an  Act  for  the  better  regulating  co-partnerships  of  certain  bankers 
in  England,  and  for  amending  so  much  of  an  Act  of  the  39th  and 
10th  years  of  the  reign  of  his  late  Majesty  King  George  III.  in- 
tituled an  Act  for  establishing  an  agreement  with  the  governor  and 
company  of  the  Bank  of  England  for  advancing  the  sum  of  3,000,000/. 
towards  the  supply  for  the  service  of  the  year  1800,  as  relates  to  the 
same  :  and  whereas  it  is  expedient  that  certain  privileges  of  ex- 
clusive banking  should  be  continued  to  the  said  governor  and  com- 
pany for  a  further  limited  period,  upon  certain  conditions ;  and 
whereas  the  said  governor  and  company  of  the  Bank  of  England  are 
willing  to  deduct  and  allow  to  the  public,  from  the  sums  now 
payable  to  the  said  governor  and  company  for  the  charges  of  man- 
agement of  the  ])ublic  unredeemed  debt,  the  annual  sum  hereinafter 
mentioned,  and  for  the  j^eriod  in  this  Act  specified,  provided  the 
privilege  of  exclusive  banking  specified  in  this  Act  is  continued  to 
the  said  governor  and  company  for  the  period  specified  in  this  Act." 

Bank  of  England  to  enjoy  an  exclusive  privilege  of 
banking  upon  certain  conditions  : 

"  May  it  therefore  please  your  Majesty,  that  it  may  be  enacted, 
and  be  it  enacted  by  the  King's  most  excellent  Majesty,  by  and  with 
the  advice  and  consent  of  the  lords  spiritual  and  temporal,  and 
commons,  in  this  present  parliament  assembled,  and  by  the  authority 
of  the  same,  that  the  said  governor  and  company  of  the  Bank  of 
England  shall  have  and  enjoy  such  exclusive  privilege  of  banking  as 
is  given  by  this  Act,  as  a  body  corporate  for  the  period  and  upon 
the  terms  and  conditions  hereinafter  mentioned,  and  subject  to 
termination  of  such  exclusive  privilege  at  the  time  and  in  the  man- 
ner in  this  Act  specified. 

During  such  privilege,  no  banking  company  of 
more  than  six  persons  to  issue  notes  payable  on 
demand,  within  London  or  sixty-five  miles  thereof: 

"  And  be  it  further  enacted,  that  during  the  continuance  of  the 
said  privilege,  no  body  politic  or  corporate,  and  no  society  or  com- 
pany, or  persons  united  or  to  be  imited  in  covenants  or  partnerships 
exceeding  six  persons,  shall  make  or  issue  in  London,  or  within 
sixty-five  miles  thereof,  any  bill  of  exchange  or  promissory  note,  or 
engagement  in  the  payment  of  money  on  demand,  or  upon  which 
any  person  holding  the  same  may  obtain  payment  on  demand,  pro- 
vided always,  that  nothing  herein  or  in  the  said  recited  Act  of  the 
7th  year  of  the  reign  of  his  late  Majesty  King  George  IV.  contained 
shall  be  construed  to  prevent  any  body  politic  or  corporate,  or  any 
society  or  company,  or  incorporated  company  or  corporation,  or  co- 
partnership, carrying  on  and  transacting  banking  business  at  any 
greater  distance  than  sixty-five  miles  ("rom  London,  and  not  having 


OF    BANKING.  89 

any  house  of  business  or  establislunent  as  bankers  in  London,  or 
within  sixty-five  miles  thereof  (except  as  hereinafter  mentioned)  to 
make  and  issue  their  bills  and  notes,  payable  on  demand  or  other- 
wise, at  the  place  at  which  the  same  shall  be  issued,  beins^  more 
than  sixty-five  miles  from  London,  and  also  in  London,  andto  have 
an  agent  or  agents  in  London,  or  at  any  other  place  at  which  such 
bills  or  notes  shall  be  made  payable  for  the  purpose  of  payment 
only,  but  no  such  bill  or  note  shall  be  for  any  sum  less  than  51.  or 
be  re-issued  in  London,  or  within  sixty-five  miles  thereof." 

Any  company  or  partnersliip  may  carry  on  the 
business  of  banking  in  London,  or  within  sixty-five 
miles  thereof,  upon  the  terms  herein  mentioned  : 

"  3.  And  whereas  the  intention  of  this  Act  is,  that  the  governor 
and  company  of  the  Bank  of  England  should,  during  the  period 
stated  in  this  Act,  (subject,  nevertheless  to  such  redemption  as  is 
described  in  this  Act,)  continue  to  hold  and  enjoy  all  the  exclusive 
privileges  of  banking  given  by  the  said  recited  Act  of  the  S9th  and 
'iOth  years  of  the  reign  of  his  Majesty  King  George  III.  aforesaid, 
as  regulated  by  the  said  recited  Act  of  the  7th  year  of  his  late 
Majesty  King  George  IV.,  or  any  prior  or  subsequent  Act  or  Acts 
of  parliament,  but  no  other  or  further  exclusive  privilege  of  banking: 
and  whereas  doubts  have  arisen  as  to  the  construction  of  the  said 
Acts,  and  as  to  the  extent  of  such  exclusive  privilege ;  and  it  is 
expedient  that  all  such  doubts  should  be  removed,  be  it  therefore 
declared  and  enacted,  that  any  body  politic  or  corporate,  or  society,  or 
company,  or  partnersliip,  cdthough  consisting  of  more  than  six  persons^ 
may  carry  on  the  trade  or  business  of  banking  in  London,  or  within 
sixty-five  miles  thereof  proi'ided  such  body  politic  or  corporate,  or 
society,  or  compaity,  or  partnership,  do  not  borrow,  owe,  or  take  nj) 
in  England,  any  sum  or  sums  of  money  on  their  bills  or  notes  payable 
on  demand,  or  at  any  less  time  than  six  moidhs  from  the  borroiving 
thereof  during  the  continuance  of  the  privileges  granted  by  this  Act  to 
the  said  governor  and  company  of  the  Bank  of  England.'' 

All  notes  of  the  Bank  of  England  payable  on  de- 
mand, which  shall  be  issued  out  of  London,  shall  be 
payable  at  the  place  where  issued,  &c. : 

"  4.  Provided  always,  and  be  it  further  enacted,  that  from  and 
after  the  1st  day  of  August,  ISS^,  all  promissory  notes  payable  on 
demand  of  the  governor  and  company  of  the  Bank  of  England, 
which  shall  be  issued  at  any  place  in  that  part  of  the  United  King- 
dom called  England,  out  of  London,  where  the  trade  and  business 
of  banking  shall  be  carried  on  for  and  on  behalf  of  the  said  governor 
and  con)pany  of  tlie  Bank  of  England,  shall  be  made  payable  at  the 
place  where  such  promissory  notes  shall  be  issued  ;  and  it  shall  not 


90  THE    HISTORY    AND    PRINCIPLES 

he  lawful  for  the  said  governor  and  company,  or  any  committee, 
agent,  cashier,  officer,  or  servant  of  the  said  governor  and  company, 
to  issue,  at  any  sucli  place  out  of  London,  any  promissory  note  pay- 
able on  demand  which  shall  not  be  made  payable  at  the  place  where 
the  same  shall  be  issued ;  any  thing  in  the  said  recited  Act  of  the 
seventh  year  aforesaid  to  the  contrary  notwithstanding." 

Exclusive  privileges  hereby  given,  to  end  upon  one 
year's  notice,  given  at  the  end  of  ten  years  after 
August,  1834 ;  and  what  shall  be  deemed  sufficient 
notice  : 

"  5.  And  be  it  further  enacted,  that  upon  one  year's  notice  given 
within  six  months  after  the  expiration  of  ten  years  from  the  first  day 
of  August,  1834-,  and  upon  repayment  l:)y  parliament  to  the  said 
governor  and  company,  or  their  successors,  of  all  principal  money, 
interest,  or  annuities,  which  may  be  due  from  the  public  to  the  said 
governor  and  company  at  the  time  of  the  expiration  of  such  notice, 
in  like  manner  as  is  hereinafter  stipulated  and  provided,  in  the  event 
of  such  notice  being  deferred  until  after  the  1st  day  of  August, 
1855,  the  said  exclusive  privileges  of  banking  granted  by  this  Act 
shall  cease  and  determine  at  the  expiration  of  such  year's  notice  ; 
and  any  vote  or  resolution  of  the  House  of  Commons,  signified  by 
the  speaker  of  the  said  house  in  writing,  and  delivered  at  the  pub- 
lic office  of  the  said  governor  and  company,  or  their  successors, 
shall  be  deemed  and  adjudged  to  be  a  sufficient  notice." 

Bank  notes  to  be  a  legal  tender,  except  at  the 
bank  and  branch  banks  : 

"  6.  And  be  it  further  enacted,  that  from  and  after  the  1st  day  of 
August,  1834,  unless  and  until  parliament  shall  otherwise  direct,  a 
tender  of  a  note  or  notes  of  the  governor  and  company  of  the  Bank 
of  England,  expressed  to  be  payable  to  bearer  on  demand,  shall  be 
a  legal  tender,  to  the  amount  expressed  in  such  note  or  notes,  and 
shall  be  taken  to  be  valid  as  a  tender  to  such  amount  for  all  sums 
above  51.  on  all  occasions  on  which  any  tender  of  money  may  be 
legally  made,  so  long  as  the  Bank  of  England  shall  continue  to  pay 
on  demand  their  said  notes  in  legal  coin  :  provided  always,  that  no 
such  note  or  notes  shall  be  deemed  a  legal  tender  of  payment  by  the 
governor  and  company  of  the  Bank  of  England,  or  any  branch  bank 
of  the  said  governor  and  company ;  but  the  said  governor  and  com- 
pany are  not  to  become  liable  or  be  required  to  pay  and  satisfy,  at 
any  branch  bank  of  the  said  governor  and  company,  any  note  or 
notes  of  the  said  governor  and  company  not  made  specially  payable 
at  such  branch  bank  ;  but  the  said  governor  and  company  shall  be 
liable  to  pay  and  satisfy  at  the  Bank  of  England  in  London  all  notes 
of  the  said  governor  and  company,  or  of  any  branch  thereof." 


OF    BANKING.  91 

Bills  not  having  more  than  three  months  to  run, 
not  to  be  subject  to  usury  laws  : 

"  7.  And  be  it  further  enacted,  that  no  bill  of  exchange  or  pro- 
missory note  made  payable  at  or  within  three  months  after  the  date 
thereof,  or  not  having  more  than  three  months  to  run,  shall,  by 
reason  of  any  interest  taken  thereon  or  secured  thereby,  or  any 
agreement  to  pay,  or  receive,  or  allow  interest  in  discounting,  nego- 
tiating, or  transferring  the  same,  be  void,  nor  shall  the  liability  of 
any  party  to  any  bill  of  exchange  or  promissory  note  be  affected  by 
reason  of  any  statute  or  law  in  force  for  the  prevention  of  usury, 
nor  shall  any  person  or  persons  drawing,  accepting,  indorsing,  or 
signing  any  such  bill  or  note,  or  lending  or  advancing  any  money, 
or  taking  more  than  the  present  rate  of  legal  interest  in  Great 
Britain  and  Ireland  respectively  for  the  loan  of  money  on  any  such 
bill  or  note,  be  subject  to  any  penalties  under  any  statute  or  law 
relating  to  usury,  or  any  other  penalty  or  forfeiture;  any  thing  in 
any  law  or  statute  relating  to  usury  in  any  part  of  the  United 
Kingdom  to  the  contrary  notwithstanding." 

Accounts  of  bullion,  &c.  and  of  notes  in  circulation, 
to  be  sent  weekly  to  the  chancellor  of  the  exche- 
quer, &c.  : 

"  8.  And  be  it  further  enacted,  that  an  account  of  the  amount 
of  bullion  and  securities  in  the  Bank  of  England  belonging  to  the 
said  governor  and  company,  and  of  notes  in  circulation,  and  of  de- 
posits in  the  said  bank,  shall  be  transmitted  weekly  to  the  chancellor 
of  the  exchequer  for  the  time  being,  and  such  accounts  shall  be 
consolidated  at  the  end  of  every  month,  and  an  average  state  of  the 
bank  accounts  of  the  preceding  three  months,  made  from  such  con- 
solidated accounts  as  aforesaid,  shall  be  published  every  month  in 
the  next  succeeding  London  Gazette." 

Public  to  pay  the  bank  one-fourth  part  of  the  debt 

of  14,686,800/. 

"  9.  And  be  it  further  enacted,  that  one-fourth  part  of  the  debt 
of  l^jBSGjSOO/.  now  due  from  the  public  to  the  governor  and  com- 
pany of  the  Bank  of  England,  shall  and  may  be  repaid  to  the  said 
governor  and  company." 

Capital  stock  of  the  bank  may  be  reduced  :  — 

"  10.  And  be  it  further  enacted,  that  a  general  court  of  proprie- 
tors of  the  said  governor  and  company  of  the  Bank  of  England  shall 
be  held  at  some  time  between  the  passing  of  this  Act  and  the  5th 
day  of  October,  183  1-,  to  determine  upon  the  propriet}'  of  dividing 
and  appropriating  the  sum  of  3,638,250/.,  out  of  or  by  means  of  the 
sum  to  be  repaid  to  the  said  governor  and  company  as  hereinbefore 
mentioned,  or  out  of  or  by  means  of  the  fund  to  be  provided  for  that 


<^2  THE    HISTORY    AND    PRINCIPLES 

purpose,  amongst  the  several  persons,  bodies  politic  or  corporate, 
who  may  be  proprietors  of  the  capital  stock  of  the  said  governor  and 
company  on  the  said  5th  da}'  of  October,  IS.'St,  and  upon  the  man- 
ner and  the  time  for  making  such  division  and  appropriation,  not 
inconsistent  with  the  j)rovisions  for  that  pur])ose  herein  contained  ; 
and  in  case  such  general  court,  or  any  adjourned  general  court,  shall 
determine  that  it  will  be  proper  to  make  such  division,  then,  but  not 
otherwise,  the  capital  stock  of  the  said  governor  and  company  shall 
be,  and  the  same  is  hereby  declared  to  be  reduced  from  the  sum 
of  1 4',553,000/.,  of  which  the  same  now  consists,  to  the  sum  of 
10,914', 750/.,  making  a  reduction  or  difference  of  3,638,250/.,  capi- 
tal stock,  and  such  reduction  shall  take  place  from  and  after  the 
said  5th  day  of  October,  1834-;  and  thereupon  out  of  or  by  means 
of  the  sum  to  be  repaid  to  the  said  governor  and  company  as  here- 
inbefore mentioned,  or  out  of  or  by  means  of  the  fund  to  be  provided 
for  that  purpose,  the  sum  of  3,638,250/.  sterling,  or  such  proportion 
of  the  said  fund  as  shall  represent  the  same,  shall  be  appropriated 
and  divided  amongst  the  several  persons,  bodies  politic  or  corporate, 
who  may  be  proprietors  of  the  said  sum  of  14,553,000/,  bank  stock 
on  the  said  5th  day  of  October,  1834,  at  the  rate  of '25/.  sterling  for 
every  100/.  of  bank  stock  which  such  persons,  bodies  politic  and 
corporate,  may  then  be  proprietors  of,  or  shall  have  standing  in  their 
respective  names  in  the  books  kept  by  the  said  governor  and  com- 
pany for  the  entry  and  transfer  of  such  stock,  and  so  in  proportion 
for  a  greater  or  lesser  sum." 

Governor,  deputy-goveror,  or  directors,  not  to  be 
disqualified  by  reduction  of  their  share  of  the  capital 
stock  : 

"  11.  Provided  always,  and  be  it  enacted,  that  the  reduction  of 
the  share  of  each  j)roprietor  of  and  in  the  capital  stock  of  the  said 
governor  and  company  of  the  Bank  of  ICngland,  by  the  repayment 
of  such  one-fourth  part  thereof,  shall  not  disqualify  the  present 
governor,  deputy-governor,  or  directors,  or  any  or  either  of  them,  or 
any  governor,  deputy-governor,  or  director,  who  may  be  chosen  in  the 
room  of  the  present  governor,  deputy-governor,  or  directors  at  any 
time  before  the  general  court  of  the  said  governor  and  company  to 
be  held  between  the  25th  day  of  March  and  the  25th  day  of  April, 
1835:  provided  that  at  the  said  general  court,  and  from  and  after 
the  same,  no  governor,  deputy-governor,  or  director  of  the  said 
corporation  shall  be  capable  of  being  chosen  such  governor,  deputy- 
governor,  or  director,  or  shall  continue  in  his  or  their  respective 
offices,  unless  he  or  they  respectively,  shall  at  the  time  of  such 
choice  have,  and  during  such  his  respective  office  continue  to  have, 
in  his  and  their  respective  name,  in  his  and  thfir  own  right,  and  for 
his  and  their  own  use,  the  respective  sums  or  shares  of  and  in  the 
capital  stock  of  the  said  corporation  in  and  by  the  charter  of  the  said 


OF    BANKING.  93 

governor  and  company  prescribed  as  the  qualification  of  governor, 
depiitj'-governor,  and  directors  respective!}'." 

Proprietors  not  to  be  disqualified  : 

"  12.  Provided  also,  and  be  it  enacted,  that  no  proprietor  shall 
be  disqualified  from  attending  and  voting  at  any  general  court  of"  the 
said  governor  and  company,  to  be  held  between  the  said  5th  day  of 
October,  18Si,  and  the  ^.jth  day  of  April,  IS35,  in  consequence  of 
the  share  of  such  proprietor  of  and  in  the  capital  stock  of  the  said 
governor  and  company  having  been  reduced  by  such  repayment  as 
aforesaid  below  the  sum  of  500/.  of  and  in  the  said  capital  stock; 
provided  such  proprietor  had  in  his  own  name  the  full  sum  of  500/. 
of  and  in  the  said  capital  stock  on  the  said  5th  day  of  October, 
ISS-i;  nor  shall  any  proprietor  be  required,  between  the  said  5th 
day  of  October,  1834,  and  the  25th  day  of  April,  1835,  to  take  the 
oath  of  qualification  in  the  said  charter." 

Bank  to  deduct  the  annual  sum  of  120,000/.  from 

sum  allowed  for  management  of  national  debt : 

"  13.  And  be  it  further  enacted,  that  from  and  after  the  said  1st 
day  of  August,  1 83 1,  the  said  governor  and  company,  in  consider-- 
ation  of  the  privileges  of  exclusive  banking  given  by  this  Act,  shall, 
during  the  continuance  of  such  privileges,  but  no  longer,  deduct 
from  the  sums  now  payable  to  the  said  governor  and  company,  for 
the  charges  of  management  of  the  public  unredeemed  debt,  the 
annual  sum  of  120,000/.,  any  thing  in  any  act  or  acts  of  parliament 
or  agreement  to  the  contrary  notwithstanding:  provided  always,  that 
such  deduction  shall  in  no  respect  prejudice  or  affect  the  right  of  the 
said  governor  and  company  to  be  paid  for  the  management  of  the 
public  debt,  at  the  rate  and  according  to  the  terms  provided  in  an 
Act  passed  in  the  48th  year  of  his  late  Majesty  King  George  III., 
intituled  'An  Act  to  authorize  the  advancing  for  the  public  service, 
upon  certain  conditions,  a  proportion  of  the  balance  remaining  in 
the  Bank  of  England,  for  payment  of  unclaimed  dividends,  annuities, 
and  lottery  prizes,  and  tor  regulating  the  allowances  to  be  made  lor 
the  management  of  the  national  debt.'  " 

Provisions  of  Act  39  and  40  Geo.  III.  to  remain 
in  force,  except  as  altered  by  this  Act  : 

"  14.  And  be  it  further  enacted,  that  all  the  powers,  authorities, 
franchises,  privileges,  and  advantages  given  or  recognized  by  the 
said  recited  Act  of  the  39th  and  40th  years  aforesaid,  as  belonging 
to  or  enjoyed  by  the  governor  and  company  of  the  Bank  of  England, 
or  by  any  subsequent  act  or  acts  of  parliament,  shall  be  and  the 
same  are  hereby  declared  to  be  in  full  force  and  continued  by  this 
Act,  except  so  far  as  the  same  are  altered  by  this  Act,  subject  never- 
theless to  such  redemption  upon  the  terms  and  conditions  following; 


94  THE    HISTORY    AND    PRINCIPLES 

(that  is  to  say,)  that  at  any  time,  upon  twelve  months'  notice,  to  be 
given  after  the  1st  day  of  August,  1855,  and  upon  re-payment  by 
parliament  to  the  said  governor  and  compan}-,  or  their  successors,  of 
the  sum  of  1 1,015,100/.,  being  the  debt  which  will  remain  due  from 
the  public  to  the  said  governor  and  company  after  the  payment  of 
the  one  fourth  of  the  debt  of  14',G86,800/.  as  hereinbefore  provided, 
without  any  deduction,  discount,  or  abatement  whatsoever,  and  upon 
payment  to  the  said  governor  and  company  and  their  successors  of 
all  arrears  of  the  sum  of  100,000/.  per  annum,  in  the  said  Act  of  the 
39th  and  40th  years  aforesaid  mentioned,  together  with  the  interest 
or  annuities  payable  upon  the  said  debt  or  in  respect  thereof,  and 
also  upon  re-payment  of  all  the  principal  and  interest  which  shall  be 
owing  unto  the  said  governor  and  company  and  their  successors, 
upon  all  such  tallies,  exchequer  orders,  exchequer  bills,  or  parlia- 
mentary funds  which  the  said  governor  and  company  or  their  suc- 
cessors shall  have  remaining  in  their  hands,  or  be  entitled  to  at  the 
time  of  such  notice  to  be  given  as  last  aforesaid,  then  and  in  such 
case,  and  not  till  then  (unless  under  the  proviso  hereinbefore  con- 
tained), the  said  exclusive  privileges  of  banking  granted  by  this 
Act  shall  cease  and  determine  at  the  expiration  of  such  notice  of 
twelve  months." 

Act  may  be  amended  this  session  : 

"  15.  And  be  it  further  enacted,  that  this  Act  may  be  altered, 
amended,  or  repealed  by  any  Act  to  be  passed  in  this  session  of 
parliament." 

1834-,  March.  At  a  meeting  of  the  proprietors  of 
bank  stock,  the  governor  stated,  "  the  East  India 
Company  had  so  very  large  a  bakmce  at  the  bank  that 
they  proposed  to  draw  it  in  order  to  employ  it.  On 
this,  an  arrangement  was  made  between  the  company 
and  the  bank,  by  which  the  bank  agreed  to  pay  an 
interest  of  two  per  cent,  for  the  sum  of  1,500,000/. 
which  it  lent  to  the  public  at  three  per  cent.  There 
was  a  farther  sum  taken  from  the  same  body  and  at 
the  same  rate  of  two  per  cent.  Of  this  sum  the  bank 
had  lent  300,000/.  at  2j  per  cent,  and  200,000/.  at 
24  per  cent."  This  was  the  first  instance  of  tlie  bank 
allowing  interest  on  deposits. 

May  7.  The  following  notice  relative  to  the  re- 
duction of  the  four  per  cents,  of  1826  was  this  day 
communicated  to  the  Bank  of  England  from  the 
Treasury,  and  immediately  afterwards  a  copy  was 
posted  in  the  Stock  Exchange. 


OF    BANKING.  95 


♦'REDUCTION  OF  FOUR  PER  CENT.  ANNUITIES,  182G. 

"  All  holders  of  four  per  cents.,  commonly  called  four  per  cent, 
annuities,  1826,  who  shall  not  signify  their  dissent,  shall  have  for 
every  100/.  of  the  said  four  per  cents.  100/.  of  new  three  and  a  half 
per  cent,  annuities,  the  dividend  upon  which  shall  be  payable  5th 
January  and  5th  July  in  each  year. 

"  The  said  new  three  and  a  half  per  cent,  annuities  shall  be  added 
to,  and  consolidated  with,  the  existing  new  three  and  a  half  per 
cent,  annuities,  and  shall  not  be  liable  to  redemption  until  5th 
January,  1840. 

"  The  holders  of  four  per  cent,  annuities,  1826,  to  receive  the 
half-year's  dividend  which  will  be  due  thereon  on  the  10th  October, 
ISSi;  and  the  first  dividend  —  namely,  one  quarter  of  a  year's 
dividend  to  be  payable  upon  the  said  new  three  and  a  half  per  cent, 
annuities,  on  the  5th  January,  1835. 

"  Books  will  be  opened  at  the  Bank  of  England  on  Thursday,  8th 
May,  to  Wednesday,  28th  May,  both  days  inclusive,  for  receiving 
notices,  by  themselves  or  their  agents,  of  those  persons  who  may  be 
desirous  of  dissenting. 

"  Persons  who  shall  be  out  of  the  United  Kingdom  during  the 
whole  of  such  period  shall  in  such  case  be  permitted  to  express  their 
dissent  at  any  time  before  6th  July,  1834;  and  any  person  who  may 
be  in  any  other  part  of  the  world  except  Europe,  to  be  permitted  to 
express  such  dissent  at  any  time  before  the  1st  March,  1835. 

"  Persons  not  signifying  their  dissent  within  the  periods  before 
mentioned  will  be  deemed  to  have  assented.  Persons  signifying 
their  dissent  within  these  periods  will  be  paid  off  in  such  order,  at 
such  time,  and  in  such  manner,  as  Parliament  may  direct. 

«'  Treasury  Chambers,  May  7.  1834." 

On  the  same  day,  May  7->  a  bill  authorising  the 
London  and  Westminster  bank  to  sue  and  be  sued  in 
the  name  of  their  public  officer  was  read  a  second 
time  in  the  House  of  Commons  by  a  majority  of  143 
to  3.5.  The  Bank  of  England  petitioned  to  be  heard 
by  counsel  against  tlie  bill  in  committee  :  this  was 
granted,  but  the  committee  decided  in  favour  of  the 
bill,  and  on  May  26.  it  was  read  a  third  time  in  the 
House  of  Commons  by  a  majority  of  137  to  76.  After 
being  read  a  first  time  in  the  House  of  Lords,  the 
Bank  of  England  were  heard  by  counsel  agamst  the 
bill  at  the  bar  of  that  House. 

July  31.  A  special  general  court  of  the  proprietors 
of  bank  stock  was  held  to  agree  to  the  terms  proposed 


96  THE    HISTORY    AND    PRINCIPLES 

by  the  government  for  j3aying  off  one  fourth  of  the 
bank  capital,  as  required  by  the  Bank-charter  Act. 
Upon  the  recommendation  of  the  directors,  the  fol- 
lowing resolutions  were  unanimously  passed  : 

1.  "  That  a  proposal  from  the  chancellor  of  the  exchequer  to 
transfer  to  the  bank  the  sum  of  4<,080jOOO/.  per  cent,  reduced  an- 
nuities, in  liquidation  of  a  fourth  part  of  the  permanent  debt  to  the 
bank,  which  will  become  due  on  the  first  of  August  next,  be  recom- 
mended to  the  court  of  proprietors  for  adoption  ;  provided  the 
transfer  be  made  so  soon  as  the  Act  of  Parliament  shall  have  passed 
authorizing  the  same,  and  the  interest  on  the  returned  capital  be 
paid  up  to  day  of  the  said  transfer. 

"  That  the  court  also  concur  in  opinion  with  the  court  of  di- 
rectors, that  it  will  be  of  advantage  to  the  future  management  of 
the  affairs  of  the  bank  to  retain  the  proportion  of  debt  when  repaid 
by  the  government ;  this  court  do,  therefore,  in  pursuance  of  the 
authority  for  that  purpose,  contained  in  the  Act  of  3d  and  tth  of 
William  IV.  cap.  98.  determine  not  to  divide  or  appropriate  the 
sum  of  3,638,250/.,  or  any  part  thereof,  amongst  the  several  persons, 
bodies  politic  or  corporate,  who  may  be  proprietors  of  the  capital 
stock  of  the  governor  and  company  of  the  Bank  of  England,  on  the 
5th  day  of  October  next." 

Aug.  14.  In  pursuance  of  the  above  agreement 
between  the  government  and  the  bank,  an  Act  was 
passed  (4th  and  5th  of  William  IV.  c.  80.)  entitled 
"  An  Act  to  provide  for  the  repayment  to  tlie  go- 
vernor and  company  of  tlte  Bank  of  England  one-foiu'th 
])art  of  the  debt  due  from  the  public  to  the  said  com- 
pany in  pursuance  of  an  Act  passed  in  the  last  session 
of  ])arliament."  It  is  enacted,  that  immediately  after 
tlie  passing  of  the  Act,  the  sum  of  4,080,000/.  re- 
duced three  per  cents,  should  be  placed  to  the  credit 
of  the  Bank  of  England,  and  sliould  form  part  of  the 
public  debt  of  the  United  Kingdom.  The  bank  was 
to  receive  interest  upon  the  3,671,700/.  from  the  1st 
of  August,  1834,  until  the  1,080,000/.  shall  be  written 
in  their  books,  and  to  continue  a  corporation  until 
the  said  sum  be  redeemed. 

Sept.  18.  At  a  meeting  of  bank  proprietors  the  go- 
vernor  stated  that  the  directors  had  invested  i31 2,783/. 
in  the  purchase  of  annuities  for  twenty-six  years.  The 


OF    BANKING. 


97 


usual  dividend  of  4  per  cent,  was  declared  upon  the 
half  year  ending  the  lOtli  of  October. 

Oct.  4.  The  rate  of  interest  upon  the  loans  granted 
during  the  time  the  funds  were  closed  was  fixed  at 
four  per  cent,  according  to  the  following  notice :  — 

"  The  governor  and  company  of  the  Bank  of  England  do  hereby 
give  notice,  that  on  and  after  the  4th  instant,  they  will  be  ready 
to  receive  applications  for  loans,  upon  the  deposit  of  bills  of  ex- 
change, exchequer  bills,  East  India  bonds,  or  other  approved 
securities  ;  such  loans  to  be  paid  on  or  before  the  15th  of  January 
next,  with  interest  at  the  rate  of  4/.  per  cent,  per  annum  and  to  be 
for  sums  of  not  less  than  2000/.  each." 

On  the  same  day  the  following  notice  was  issued  : — 

"  The  court  of  directors  of  the  governor  and  company  of  the  Bank 
of  England  give  notice,  that  with  a  view  to  afford  further  accom- 
modation to  the  public,  it  is  determined  that  henceforward  the 
undermentioned  days  only  will  be  observed  as  holidays  in  the  trans- 
fer offices,  viz.  Christmas,  Good  Friday,  1st  May,  1st  November.'' 

Oct.  7-  Richard  Mee  Raikes,  Esq.  the  governor 
of  the  Bank  of  England  was  gazetted  as  a  bankrupt. 
The  circumstance  of  a  bank  director  becoming  a 
bankrupt,  and  during  the  year  he  was  governor,  was 
so  remarkable  an  event  that  it  caused  a  considerable 
sensation. 

A  Table  of  the  Liabilities  and  Assets  of  the  Bank 
of  England  during  the  year  1834  :  — 


Dates,  being 
average  re- 
turn of   three 
months,  end- 
ing as  follows 


1834. 
Jan.  1.... 
Feb.  4.... 
March  4. 
April  1... 
May  6.... 
June  3... 
July  1.... 
July  29... 
Aug.  26.. 
Sept.  23.. 
Oct.  21... 
Nov.  18.. 
Dec.   16.. 


18,216,000 
18,377,000 
18,700,000 
19,097,000 
18,978,000 
18,922,000 
18,895,000 
19,110,000 
19,147,000 
19,126,000 
18,914,000 
1  8,694,000 
18,304,000 


Deposits. 


£ 

13,101, 
14,086; 
14,418, 
14,011, 
14,081, 
14,539, 
15,096, 
15,675, 
15,384, 
14,754, 
13,514, 
12,669, 
12,256, 


Total 
Liabilities. 


31, 
32, 
33, 
33, 
33, 
33, 
33, 
,000J34, 
,000  34, 
,000|33, 
,000  32, 
,000|31, 
,000  30, 


000 
000 
000 
000 
000 
,000 
,000 


£ 

317,000 
463,000 
118,000 
108,000 
059,000 
461,000 
991,000 
785,000 
531,000 
880,000 
,428,000 
,363,000 
,560,000 

H 


£ 

23,596,000 
24,762,000| 
25,547,000 
25,970,000 
26,691,000 
27,312,000 
27,593,000 
28,502,0001 
28,679,000: 
28,691,O0o! 
27,840,000j 
27,138,000 
26,362,000 


£ 
9,948,000 
9,954,000, 
9,829,000 
9, 4  31, 000 ' 
8,884,000 
8,645,000 
8,659,000 
8,598,000 
8,272,000 
7,695,000 
7,123,000 
6,781,000 
6,720,000 


£ 
33,524,000 
34,716,000 
3,5,376,000 
35,401,000 
35,575,000 
35,957,000 
36,252,000 
37,100,000 
36,951,000 
36,386,000 
34,963,000 
33,919,000 
33,082,000 


98  THE    HISTORY    AND    PRINCIPLES 

1835.  March  5.  The  bank  issued  the  following 
notice :  — 

"  The  governor  and  company  of  the  Bank  of  England  do  hereby 
give  notice,  that  on  and  after  the  5th  instant,  they  will  be  ready  to 
receive  applications  for  loans  upon  the  deposit  of  bills  of  exchange, 
exchequer  bills.  East  India  bonds,  or  other  approved  securities  ; 
such  loans  to  be  repaid  on  or  before  the  15th  of  April  next,  with 
interest  at  the  rate  of  4.1.  per  cent,  per  annum,  and  to  be  in  suras 
of  not  less  than  2000/.  each." 

March  19.  A  meeting  of  the  proprietors  of  bank 
stock.  The  governor  stated,  that  to  make  up  the 
dividend  of  four  per  cent,  for  the  half  year,  it  had 
been  necessary  to  take  10,000/.  from  the  rest. 

May  29.  The  bank  issued  the  following  notice :  — 

"  The  governor  and  company  of  the  Bank  of  England  do  hereby 
Tive  notice,  that  on  and  after  the  29th  instant,  they  will  be  ready 
0  receive  applications  for  loans  upon  the  deposit  of  bills  of  ex- 
change, exchequer  bills.  East  India  Bonds,  or  other  approved 
securities  :  such  loans  to  be  repaid  on  or  before  the  15th  of  July, 
with  interest  at  the  rate  of  4/.  per  cent,  per  annum,  and  to  be  for 
sums  of  not  less  than  2000/.  each." 

August  3.  The  West  India  loan  contracted.  This 
was  a  loan  to  government  of  15,000/.  raised  for  the 
purpose  of  giving  compensation  to  the  owners  of 
slaves  in  the  West  India  colonies.  The  contractor 
was  Mr.  N.  M.  Rothschild.  The  terms  were,  for 
every  100/.  in  money  the  contractor  to  receive, 


In  the  three  per  cent.  Consols 
In  the  three  per  cent,  reduced 
In  long  annuity 


/: 

s. 

d. 

75 

0 

0 

25 

0 

0 

13 

7 

a6*100        13       7 


This  is  at  about  the  rate  of  3/.  Js.  8d.  per  cent. 
Tlie  loan  was  payable  by  instalments,  and  interest  at 
four  per  cent,  allowed  for  prompt  payment. 


OF    BANKING. 


99 


The    bank     issued    the 


following 


August  5. 
notice :  — 

"  The  governor  and  company  of  the  Bank  of  England  do  hereby 
give  notice,  that  on  and  after  the  5th  instant,  they  will  be  ready  to 
receive  applications  for  loans  upon  the  deposit  of  bills  of  exchange, 
exchequer  bills.  East  India  bonds,  or  other  approved  securities ; 
such  loans  to  be  repaid  on  or  before  the  20th  of  October  next,  with 
interest  at  the  rate  of  3/.  10*.  per  cent,  per  annum,  and  to  be  for 
sums  of  not  less  than  2000/." 

These  advances  were  continued  by  subsequent  no- 
tices, to  the  15th  day  of  January,  1836. 

It  was  considered  remarkable  that  by  the  above 
notice,  the  bank  lent  money  at  S\  per  cent.,  w^hile 
the  government  allowed  a  discount  of  four  per  cent, 
upon  prompt  payment  on  the  West  India  Loan. 

September  24.  A  meeting  of  the  bank  proprietors. 
The  governor  stated,  that  to  make  up  the  dividend 
of  four  per  cent,  for  the  half  year,  the  sum  of  19,000/. 
had  been  taken  from  the  rest;  and  on  the  31st  of 
August,  the  rest  amounted  to  2,740,000/. 

In  the  latter  end  of  this  year,  the  directors  adopted 
the  resolution  to  refuse  to  discount  all  bills  drawn 
or  indorsed  by  joint  stock  banks  of  issue. 

A  Table  of  the  Liabilities  and  Assets  of  the  Bank 
of  England  during  the  year  1835  :  — 


LIABILITIES. 


Dates  being 

average 
returns  of 

three  months, 
ending 


Circulation. 


Deposits. 


Total 
Liabilities. 


1835. 

Jan.  15 

Feb,   10.... 
March  10.. 

April  7 

May  5 

Junes 

June  30.... 

July28 

Aug.  a5.... 
Sept.  22.... 

Oct.  20 

Nov.  17..,. 
Dec.  15 


£ 

18,012, 
18,099, 
18,311, 
18,591, 
18,5^12, 
18,460 
18,315 
18,322 
18,340 
1 8,240 
17,930 
17,549 
17,821 


,000 
,000 
,000 
,000 
,000 
,000 
,000 
,000 
,000 
,000 


,000|  1 4 
,000  16 
,000  17 


£ 

585,000 
535,000[ 
28 1,000 1 
289,000| 
72fi,000 
568,000' 
954,000l 
,561,000 
,308,000 
,230,000 
,227,000 
,180,000 
,729,000 


£ 

30,597,000 
30,634,000 
30,592,00d 
29,880,000 
29,268,000 


29,028,000  25, 
29,269,OOoj25, 
29,S83,OOo!26. 
30,648.000,26. 
31,470,000  27 
32,157,000*28 
33,729,000^30 
35,050,000|31 

^  H  2 


£ 

390,000 
482,000 
65  7,000| 
228,000 
764,000 
562,000 
678,000 
244,000 
964,000 
888,000 
,66  1 ,000 
,069,000 
,048,000; 


S3, 


£ 
6,741,000 
6,693,000  33, 
6,536,000J33, 
6,329,000132, 
6,197,000|3L 
6,150,000131, 
6,219,000[31, 
6,283,000|32, 
6,326,000|33! 
6,2'i  1,000  34! 
6,186,000  34 
6,305,000!36 
6,626,O00!37; 


£ 
131,000 
1 75,000 
1 93,000 
557,000 
,961,000 
7  1  2,000 
,897,000 
,527,000 
,290,000 
,149,000 
,847,000 
,374,000 
,674,000 


100  THE    HISTORY    AND    PillNCirLES 

1836.  March.  A  general  meeting  of  proprietors. 
The  following  summary  of  the  proceedings  is  taken 
from  the  Times  :  — 

"  The  meeting  of  bank  proprietors,  held  this  morning,  passed 
over  much  more  harmoniously  than  many  former  occasions  of  the 
same  kind.  The  blunder  of  Mr.  Spring  Rice  in  allowing  4/.  per 
cent,  discount  on  the  anticipated  payments  on  the  late  loan,  at 
the  time  when  the  bank  were  lending  money  on  the  same  security, 
at  3^/.  per  cent,  has  worked  admirably  well  for  the  proprietors,  as 
every  one  foresaw  who  had  paid  the  least  attention  to  the  subject 
must  necessarily  be  the  case.  The  profits  of  the  establishment 
have  been  so  considerable,  that,  in  instead  of  the  '  rest'  of  the  bank 
being  disturbed,  as  was  done  at  the  last  dividend,  to  make  up  the 
4/.  per  cent,  shared  among  the  proprietors  ;  there  has  occurred  in 
the  interval  an  addition  to  it  of  25,000/.,  after  providing  for  the 
present  dividend,  and  carrying  to  account  another  sum  of  15,000/., 
as  the  final  loss  sustained  by  the  bank  through  the  forgeries  of 
Fauntleroy.  The  only  facts  elicited  by  the  discussion  of  any 
interest  out  of  the  circle  of  bank  proprietors,  related  to  a  recent 
transfer  of  a  certain  portion  of  the  public  business  to  the  London 
and  Westminster  Bank.  An  impression  prevailed,  it  seems,  among 
the  proprietors,  that  this  business,  which  arose  under  the  manage- 
ment of  the  excise,  out  of  the  hop  duties  in  Surrey  and  Kent,  had 
previously  been  managed  by  the  Bank  of  England,  and  that  the 
change  had  led  to  a  diminution  of  the  balances  there.  It  appeared, 
however,  that  the  business  was  wholly  under  private  control,  and 
had  been  conducted  by  Mr.  Ward,  lately  a  member  of  the  court, 
but  who  did  not  keep  any  account  at  the  bank.  The  directors  were 
desirous,  as  the  governor  admitted,  on  the  change  that  took  place, 
to  appropriate  this  business  to  themselves,  and  addressed  a  letter 
to  the  chancellor  of  the  exchequer  on  the  subject,  pointing  out,  as 
an  inducement,  the  large  saving  that  might  thereby  be  effected ; 
but  they  were  informed  that  this  was  a  matter  over  which  the 
government  had  no  control,  and  that  it  rested  solely  with  the 
board  of  excise." 

June  2.  The  bank  issued  the  following  notice  :  — 

"  The  governor  and  company  of  the  Bank  of  England  do  hereby 
give  notice,  that  on  and  after  the  2nd  instant,  they  will  be  ready 
to  receive  applications  for  loans  upon  the  deposit  of  bills  of  ex- 
change, exchequer  bills,  East  India  bonds,  or  other  approved 
securities;  such  loans  to  be  repaid  on  or  before  the  15th  of  July 
next,  with  interest  at  the  rate  of  4/.  per  cent,  per  annum,  and  to 
be  for  sums  of  not  less  than  2000/.  each." 


OF    BANKING.  lOl 

July  21.  The  rate  of  interest  raised  to  four  and  a 
half  per  cent,  by  the  following  resolution  :  — 

At  a  court  of  directors  at  the  bank,  on  Thursday,  the  21st  of 
July  : 

Resolved,  —  that  the  interest  on  bills  of  exchange  and  notes 
discounted  by  the  bank  be  advanced  to  4-^/.  per  cent,  per  annum. 

Aug.  10.  The  House  of  Commons  voted  the  sum 
of  38,289/.  to  the  Bank  of  England,  to  defray  the  loss 
sustained  by  the  bank  in  1831  by  melting  into 
bullion  a  large  amount  of  silver  coin,  upon  which  the 
public  had  received  the  seignorage. 

Sept.  1 .  The  rate  of  interest  raised  to  five  per  cent, 
by  the  following  resolution  :  — 

At  a  court  of  directors  at  the  bank,  on  Thursday,  the  1st  of 
September,  1 836 : 

Resolved, —  That  the  interest  on  bills  of  exchange  and  notes 
discounted  by  the  bank  be  advanced  to  51.  per  cent,  per  annum. 

On  the    same  day  the  bank  issued  the  following 

notice :  — 

"  The  governor  and  company  of  the  Bank  of  England  do  hereby 
give  notice,  that  on  and  after  the  1st  instant,  they  will  be  ready  to 
receive  applications  for  loans  upon  the  deposit  of  bills  of  exchange, 
exchequer  bills.  East  India  bonds,  or  other  approved  securities  ; 
such  loans  to  be  repaid  on  or  before  the  20th  of  October  next,  with 
interest  at  the  rate  of  51.  per  cent,  per  annum,  and  to  be  for  sums 
of  not  less  than  2000/.  each." 

There  was  a  great  pressure  on  the  money  market, 
and  great  distress  among  the  commercial  classes  * 
during  the  remainder  of  the  year. 

Sept.  15.  The  bank  gave  notice  that  they  would 
advance  money  upon  the  certificates  of  exchequer 
bills. 

"  The  governor  and  company  of  the  Bank  of  England  do  hereby 
give  notice,  that  they  will  make  advances  on  the  security  of  the 
certificates  given  by  the  paymasters  of  exchequer  bills,  now  adver- 

*  See  an  inquiry  into  the  causes  of  the  recent  pressure  on  the 
money  market  in  my  History  of  Banking  in  America. 

H    S 


102  THE    HISTORY    AND    PRINCIPLES 

tised,  as  have  been  delivered  into  the  exchequer  bill  office  for  the 
purpose  of  being  exchanged  for  new  bills  ;  such  advances  to  be 
repaid  on  or  before  the  20th  of  October  next,  together  with 
interest  at  the  rate  of  5/.  per  cent,  per  annum." 

Sept.  29'  The  government  raised  the  rate  of 
interest  upon  exchequer  bills  issued  on  or  after  this 
date  from  l^d.  to  2d.  per  day. 

Nov.  19th.  The  rate  of  interest  upon  all  exchequer 
bills  raised  to  Sgr/.  per  diem,  according  to  the  follow- 
ing communication  :  — 

"  Treasury  Chambers,  November  \9th,  1836. 
"  Gentlemen, 
"  The  lords  commissioners  of  His  Majesty's  Treasury'  have  de- 
termined that  all  exchequer  bills,  outstanding,  shall  on  and  after 
Monday  next,  the  21st  instant,  bear  an  interest  of  l^d.  per  100/. 
per  day ;  I  am  commanded  by  their  lordships  to  request  that  you 
will  make  this  determination  known  at  the  Stock  Exchange,  and 
my  lords  will  forthwith  take  the  necessary  steps  for  carrying  it 
into  effect. 

"  I  am,  Gentlemen, 

"  Your  obedient  servant, 

<'  A.  Spearman." 
"  The  governor  and  deputy-    "I 
governor  of  the  Bank  of  England."  J 

This  advance  in  the  interest  of  exchequer  bills 
was  made  at  the  suggestion  of  the  bank  directors,  in 
order  that  the  bank  might  be  able  to  sell  their 
exchequer  bills  without  loss,  and  tlius,  by  contracting 
the  circulation,  to  render  the  foreign  exchanges 
favourable. 

The  following  is  a  table  of  the  different  rates 
of  interest  paid  on  exchequer  bills  since  the  year 
1824:  — 

Rate  of  interest  paid  on  exchequer  bills  : 

Dated  Uth  of  June,  182 1,     1^.  per  diem. 

From   19th  of  Dec.  1825,  2d.      ditto. 

Dated  30th  of  Sep.  1829,  Ifrf.    ditto. 

18th  of  Dec.  1829,   \\d.    ditto. 

29th   of  Sep.   18.'}r>,   'Id.      ditto.,  from  day 

of  date  ;  but   this  alteration  did  not  apply  to  bills 
dated  of  a  previous  date. 
21st   of  Nov.  1836,  2irf.  on  all  bills. 


OF    BANKING. 


103 


On  the  same  day  (Nov.  19th)  the  East  India 
Company  raised  the  interest  on  their  bonds  to  four 
per  cent. 

Nov.  19.  The  bank  issued  the  following  notice:  — 

"  The  governor  and  company  of  the  Bank  of  England  do  hereby 
give  notice,  that  on  and  after  the  21st  instant^,  they  will  be  ready  to 
receive  applications  for  loans  upon  the  deposit  of  bills  of  exchange, 
exchequer  bills,  East  India  bonds,  or  other  approved  securities ; 
such  loans  to  be  repaid  on  or  before  the  16th  of  January  next,  with 
interest  at  the  rate  of  5l.  per  cent,  per  annum,  and  to  be  for  sums 
of  not  less  than  2000/.  each.'' 

December.  In  the  beginning  of  this  month,  the 
bank  afforded  assistance  to  the  Northern  and  Central 
Bank  of  England  at  Manchester,  upon  condition  of 
their  winding  up  thirty-nine  out  of  their  forty 
branches.  And  afterwards  granted  further  assist- 
ance upon  condition  that  the  Northern  Bank  should 
discontinue  business  after  February  1.  1837,  until 
the  bank  should  be  repaid. 

A  Table  of  the  Liabihties  and  Assets  of  the  Bank 
of  England  during  the  year  1836  :  — 


LIABILITIES. 


Dates  being 

average 

returns   of 

three  months, 

ending 

6. 

Jan.  12 

Feb.  9 

March  8 

April  5 

May  3 

MaySl 

July  1 

July28 

Aug.  25 

Sept.  22 

Oct.  21 

Nov.  17 

Dec.    15 

1837. 

Jan.  14 

Feb.   12 

March  7 

April  6 

May  4 


Circulation. 

y 


£ 

7,262,000 
7,427,000 
7,739,000 
8,063,000 
8,154,000 
8,051,000 
7,899,000 
7,940,000 
8,061,000 
8,147,000 
7,936,000 
7,543,000 
7,361,000 

7,422,000 
7,868,000 
8,178,000 
8,432,000 
8,480,000 


Deposits 


£ 

169,000 
366,000 
966,000 
751,000 
74  7,000 
273,000 
810,000 
495,000 
796,000 
118,000 
324,OOo' 
682,000| 
330,000 


Total 
Liabilities. 


£ 

36,431,000 

:<5,793,000 

33,705,000 

32,814,000 

31,901,000 

31,324,000 

31,709,000 

32,435,00' 

32,857,000 

32,265,00( 

31,260,000 

30,025,000 

30,691,000 


14,354,000:31,776,000 
14,230,000'32,098,000 
13,260,000  31,438,000 
11,192,000,29,624,000 
10,472,000^28,952,000 

H    4 


£ 

31,954,000 
51,022,000 
29,806,000 
27,927,000 
27,042,000 
26,534,000 
27,153,000 
8,315,000 
9,345,000 
29,406,000 
28,845,000 
28,134,000 
28,971,0001 

30,565,000 
31,085,000 
30,579,000 
28.813,000 
28,017,000 


£ 

7,076 
7,471 

7,701; 

7,801 
7,782 
7,663: 
7,362; 
6,926; 
6,325; 

5,719; 

5,257, 
4,933, 
4,545; 


,000 
,000 
,000 
,000 
,000 
,000 
,000 
,000 
,000 
,000 
000 
000 
000 


4,287,000 
4,032,000 
4,048,000 
4,071,000 
4,190,000 


Total  .'Vssets 


£ 

030,000 
,493,000 
,507,000 
,728,000 
,824,000 
,197,000 
515,000 
241,000 
670,000 
1  25,000 
102,000 
067,000 
516,000 


34,652,000 
35,117,000 
34,627,000 
32,884,000 
32,207,000 


104  THE    HISTORY    AND    PRINCIPLES 

1837.  January  15.  The  London  banking-house 
of  Messrs.  Esdaile  and  Co.  received  assistance  from 
tlie  Bank  of  England  upon  condition  of  winding  up 
their  business. 

March  2.  The  bank  issued  the  following  notice :  — 

"  The  governor  and  company  of  the  Bank  of  England  do  hereby 
give  notice,  that  on  and  after  the  2nd  instant,  they  will  be  ready  to 
receive  applications  for  loans  upon  the  deposit  of  approved  bills  of 
exchange,  not  having  more  than  ninety-five  days  to  run  ;  such  loans 
to  be  repaid  on  or  before  the  15tli  of  April  next,  with  interest  at 
the  rate  of  5A  per  cent,  per  annum,  and  to  be  for  sums  of  not  less 
than  2000/.  each." 

It  may  be  observed,  that  in  this  instance  the 
advances  are  made  only  on  approved  bills  of  ex- 
change, and  not  as  on  former  occasions,  "  on  bills 
of  exchange,  exchequer  bills,  East  India  bonds,  or 
other  approved  securities." 

March  16.  A  general  meeting  of  proprietors. 
The  governor  stated,  that  after  paying  a  di\'idend  of 
four  per  cent,  for  the  half  year,  the  rest  would  be 
2,878,316/. 

The  following  are  the  names  of  the  lUrectors  of 
the  Bank  of  England  for  the  present  year  :  — 

TtMOTny  Abraham  Curtis,  Esq.  Governor. 
Sir  John  Rae  Reid,  Bart.  Deputy- Governor. 


DIRECTORS. 


Robert  Barclay,  Esq. 
John  Bowden,  Esq. 
William  Cotton,  Esq. 
Bouamy  Dobree,  Esq. 
Char.  Pascoe  (jrenfell,  Esq. 
Abel  Lewes  Gower,  Esq. 
John  Oliver  Hanson,  Esq, 
John  Benjamin  Heath,  Esq. 
James  Malcolinson,  Es(j. 
William  Mellish,  Esq. 
Humphrey  St,  John 

MlLDMAY,  Esq. 

Rowland  Mitchell,  Esq. 


James  Morris,  Esq. 
Sheffield  Neave,  Esq. 
John  Horsley  Palmer,  Esq. 
James  Pattison,  Esq. 
Christopher  Pearse,  Esq. 
John  Henry  Pelly,  Esq. 
Henry  James  Prescott,  Esq. 
Charles  Pole,  Esq. 
Henry  Pohcher,  Esq. 
William  R.  Robinson,  Esq. 
William  Thompson,  Esq. 

Alderman. 
Thomas  Warre,  Esq. 


OF    BANKING.  105 

The  government  of  the  bank  rests  entirely  with 
the  court  of  directors,  who  may,  if  they  please, 
change  the  whole  system  of  management.  The  only 
check  upon  their  proceedings  consists  in  the  pub- 
licity of  their  measures,  the  half-yearly  meetings  of 
their  proprietors,  and  the  communications  between 
the  court  and  the  government.  The  directors  are 
elected  by  the  proprietors  of  bank  stock,  at  a  general 
meeting.  Eight  directors  go  out  and  eight  come  in 
every  year.  The  eight  that  come  in  are  commended 
by  the  whole  court,  that  is,  a  "  house  list "  is  sanc- 
tioned by  the  court ;  and  though  the  proprietors  are 
not  required  to  vote  for  the  names  included  in  the 
list,  yet  these  persons  have  always  been  elected. 
The  qualification  for  governor  is  4000/.  bank-stock, 
deputy-governor  3000/.,  director  2000/.  The  di- 
rectors are  not  usually  large  holders  of  bank-stock  : 
none  of  them  hold  more  than  the  qualification.  The 
governor  and  deputy-governor  are  appointed  by  the 
directors,  and  usually  continue  in  office  for  a  year. 
The  senior  directors  of  the  bank,  who  have  passed 
the  chair,  form  a  select  committee  :  to  these  are 
added,  the  director  immediately  succeeding  by  rota- 
tion to  the  deputy  chair.  The  governor  and  the 
select  committee  have  the  management  of  the  bank 
in  the  intervals  between  the  sittings  of  the  court, 
but  nothing  of  consequence  is  done  without  the 
knowledge  and  concurrence  of  the  court  of  directors. 

At  the  weekly  meeting  of  the  court  of  directors 
there  is  a  statement  read  of  the  actual  position  of  the 
bank  in  every  department,  of  its  securities,  of  its 
bullion,  and  of  its  liabilities.  There  is  a  committee 
of  treasury,  who  may  suggest  any  measure  they  think 
fit  for  the  consideration  of  the  court.  The  daily 
transactions  of  the  bank  are  conducted  by  a  com- 
mittee of  three,  assisted  by  the  governor  or  deputy- 
governor  :  no  responsible  action  is  taken  by  the 
committee  without  reference  to  the  governor.    All 


106  THE    HISTORY    AND    PRINCIPLES 

bills  presented  for  discount  are  presented  before  that 
daily  committee,  and  they  determine  upon  the  bills 
to  be  discounted.  There  is  also  a  Wednesday's 
committee  for  London  notes,  which  consists  of  nine  or 
ten  directors  :  all  London  notes  pass  before  that 
committee  on  Wednesday.  The  bullion  is  purchased 
by  the  governor,  who  considers  that  he  has  no  power 
to  refuse  the  issue  of  notes  for  gold  bullion  brought  to 
him  at  the  bank.  The  purchasing  price  of  gold  hae 
been  fixed,  for  several  years,  at  Si.  I'Js.  9d.  pei 
ounce.  The  price  of  silver  is  regulated  by  the  cours* 
of  the  foreign  exchanges. 


SECTION  IV. 

THE    LONDON    BANKERS. 


After  the  establishment  of  the  Bank  of  England, 
the  goldsmiths  or  "new-fashioned  bankers"  con- 
tinued their  business  in  the  same  manner  as  before. 
In  the  year  1705  they  obtained  greater  facilities, 
from  an  alteration  in  the  laws  respecttng  promissory 
notes.  It  had  been  held  that  promissory  notes, 
whether  issued  by  bankers  or  others,  could  not  be 
legally  transferred  to  a  third  party,  and  that  no  action 
at  law  could  be  sustained  against  the  issuer,  unless 
brought  by  the  })erson  to  whom  the  note  was 
originally  granted.  But  by  3  and  4  Ann.  ch.  9, 
all  doubts  were  removed ;  and  it  was  enacted,  that 
after  the  1st  of  May,  1705,  all  notes  in  writing  made 
and  signed  by  any  person  or  persons,  bodies  politic 
or  corporate,  or  by  the  servant  or  agent  of  any  cor- 
poration, banker,  goldsiuith,  merchant,  or  trader, 
who  is  usually  entrusted  to  sign  such  j)romissory 
notes,  sliall  be  assignable  or  endorsable  over,  in  the 
same  manner  as  inland  bills  of  exchange. 


OF    BANKING.  107 

In  the  year  1714,  the  legal  interest  of  money  was 
reduced  from  six  to  tive  per  cent.  The  reduction  of 
the  rate  of  interest  was  probably  the  effect  of  the 
abundance  of  money  produced  by  the  issue  of  Bank 
of  England  notes,  and  the  increase  of  deposits  with 
the  private  bankers.  The  various  small  sums  of 
money  which  had  remained  idle  in  the  hands  of 
individuals  were  collected  into  large  deposits  in  the 
hands  of  the  bankers.  Hence  the  supply  of  capital 
was  increased,  and  the  rate  of  interest  consequently 
fell. 

About  the  year  1775,  the  London  bankers  who 
lived  in  the  city,  established  what  is  called  *'  the 
clearing-house,"  for  the  purpose  of  facilitating  their 
exchanges  with  each  other.  By  this  means  each 
banker  is  enabled  to  pay  the  cheques  drawn  upon 
himself  by  the  cheques  he  liolds  upon  other  bankers. 
And  hence  he  is  not  under  the  necessity  of  keeping 
so  large  an  amount  of  money  unemployed  in  his  till.* 

The  London  banks  have  long  ceased  to  be  banks 
of  circulation  :  they  are  now  banks  of  deposit,  banks 
of  discount,  and  banks  of  agency  to  country  bankers. 

The  oldest  banking  houses  in  London,  are  Messrs. 
Child  &  Co.  of  Temple  Bar ;  Messrs.  Hoares,  of 
Fleet  Street ;  and  Messrs.  Snow  &  Co.  of  the  Strand  ; 
these  were  established  previous  to  the  Bank  of  Eng- 
land. The  others  are  comparatively  of  recent  date, 
and  their  number  has  been  considerably  diminished 
within  the  last  twenty  years.  In  the  year  1810,  the 
number  of  banking  houses  who  settled  their  accounts 
with  each  other  at  the  clearing-house  was  forty-six, 
the  present  number  is  only  thirty. 


*  For  a  full  account  of  the  operation  of  clearing,  and  of  the 
London  bankers'  system  of  book- keeping,  see  my  "Practical  Trea- 
tise on  Banking." 


108 


THE    HISTORY    AND    PRINCIPLES 


The  following  is  the  list  of  London  bankers  inserted 
in  the  London  Post-office  Directory  of  1837  •  — 


Ashley  and  Son,  135,  Regent-st. 

Barclay  and  Co.  54,  Lombard-st. 

Barnard,  Dimsdale  and  Co.  50, 
Cornhill. 

Barnetts,  Hoare  &  Co.  62,  Lom- 
bard-street. 

Bosanquet  &  Co.  73,  Lombard-st. 

Bouverie  and  Co.  1 1 ,  Haymarket. 

Brown,  Janson  and  Co.  32,  Ab- 
church-lane. 

Call,  Marten  and  Co.  25,  Old 
Bond-street. 

Child  and  Co.  Temple  Bar. 

Cockburn  and  Co.  4,  Whitehall. 

Cocks  &  Biddulphs,  43,  Charing 
Cross. 

Coutts  and  Co.  59,  Strand. 

Cunliffes,  Brooks  and  Co.  24, 
Bucklersbury. 

Curries  and  Co.  29,  Cornhill. 

Denison  &  Co.  106,  Fenchurch- 
street. 

Dixon  and  Co.  Chancery-lane. 

Dorricn  and  Co.  22,  Finch-lane. 

Drewett  and  Fowler,  60,  Old- 
Broad-street. 

Drummond  and  Co.  49,  Charing 
Cross. 

Feltham  and  Co.  42,  Lombard- 
street. 

Fullers  and  Co.  84,  Cornhill. 

Glyn  and  Co.  67,  Lombard-st. 

Goslings  &  Sharpe,  19,  Fleet-st. 

Hammersleys  and  Co.  60,  Pall 
Mall. 

Hanburys  &  Co.  60,  Lombard-st. 

Hankeys  &  Co.  7,  Fenchurch-st. 

Herries  &  Co.  16,  St.  James's-st. 

Hoares,  37,  Fleet-street. 

Hopkinson  and  Co.  3,  Regent-st. 

Johnston  and  Co.  15,  Bush-lane. 

Jones,  Loyd  &  Co.  43,  Lothbury. 

Jones  and  Son,  41,  West  Smith- 
field. 


Keil,  L  2,  Biliter-square. 

King,  Charles  &  Co.  24,  Bolton- 
street,  Piccadilly. 

Kinloch,  G.  F.  and  Sons,  1,  New 
Broad-street. 

Ladbrokes  and  Co.  Bank  Build- 
ings, Cornhill. 

Lees,  Brassey  and  Co.  71,  Lom- 
bard-street. 

Lubbock  and  Co.  11,  Mansion 
House-street. 

Masterman  &  Co.  Nicholas-lane, 

Praedsand  Co.  189,  Fleet-street. 

Prescott&  Co.  62,  Threadneedle- 
street. 

Price  and  Co.  1,  Mansion  House- 
street. 

Puget  and  Co.  12,  St.  Paul's 
Church  Yard. 

Ransom  &  Co.  1 ,  Pall  Mall  East. 

Robarts  &  Co.  15,  Lombard-st. 

Rogers  and  Co.  29,  Clements- 
lane. 

Scott  &  Co.  1,  Cavendish-square. 

Smith,  Payne  and  Co.  Thread- 
needle- street. 

Snow  and  Co.  Temple  Bar  With- 
out. 

Spooner  &  Co.  27,  Gracechurch- 
street. 

Stevenson  &  Salt,  20,  Lombard- 
street. 

Stone  and  Co.  68,  Lombard-st. 

Twinings,  Devereux-crt.  Strand. 

Vere,  Sapte  &  Co.  77,  Lombard- 
street. 

Weston  &  Young,  37,  Borough. 

Whitmore  and  Co.  24,  Lombard- 
street. 

Williams,  Deacon  and  Co.  20, 
Birchin-lane. 

Willis  and  Co.  76,  Lombard-st. 

Wright  and  Co.  Henrictta-st. 
Covent  Garden. 


OF    BANKING. 


109 


111  the  course  of  the  last  five-and-twenty  years  the 
following  London  banking  houses  have  been  discon- 
tinued : 


Anderson,  J.  &  J.  1 7,  Philpot- 
lane. 

Austen,  Maude  &  Co.  10,  Hen- 
rietta-street. 

Birch,  Chambers  and  Co.  160, 
New  Bond-street. 

Bolderos  and  Lushington,  30, 
Cornhill. 

Bond,  Sons,  and  Patesall,  2, 
'Change  Alley. 

Brickwood  and  Co.  Lombard-st. 

Brown,  Cobb  and  Co.  66,  Lom- 
bard-street. 

Brown,  Langhorne  &  Co.  Buck- 
lersbury. 

Bruce  &  Co.  2,  Bartholomew-lane 

Cox,  Merle  &  Co.  2,  Cox's-crt. 
Little  Britain. 

Duckett,  Morland  &  Co.  Pall 
Mall. 

Esdaile  and  Co.  21,  Lombard-st. 

Everett  and  Co.  9,  Mansion 
House-street. 


Fry  and  Sons,  Mildred's-court, 
Poultry. 

Hodsoll  &  Stirling,  S^S,  Strand. 

Kensington  and  Co.  20,  Lom- 
bard-street. 

Lawson,  Newham  and  Co.  17, 
Buckler  sbury. 

Lees  &  Co.  72,  Lombard-street. 

Mainwaring  &  Co.  80,  Cornhill. 

Marsh,  Sibbald  and  Co.  6,  Ber- 
ner's-street,  Oxford-street. 

Sir  John  Perring  and  Co.  72, 
Cornhill. 

Sir  Peter  Pole  and  Co.  1,  Bar- 
tholomew-lane. 

Ramsbottom  and  Co.  11,  Lom- 
bard-street. 

Remington  and  Co.  69,  Lom- 
bard-street. 

Sansom  &  Co,  65,  Lombard-st. 

Sikes,  Sneath  &  Co.  5,  Mansion 
House-street. 

Whitehead  and  Co.  Cateaton-st. 


SECTION  V. 


COUNTRY      BANKS. 


We  have  no  autlientic  details  of  the  rise  and  progress 
of  country  banking.  It  is  generally  understood 
that  very  few  country  banks  existed  previous  to  the 
American  war  ;  that  they  rapidly  increased  after  the 
termination  of  that  war  ;  that  they  received  a  severe 
check  in  the  year  1793,  when  twenty- two  became 
bankrupt ;  and  that  they  increased  with  wonderful 
rapidity  after  the  passing  of  the  Bank  Restriction  Act. 


110 


THE    HISTORY    AND    PRINCIPLES 


Since  the  year  1808,  every  bank  that  issues  notes  has 
been  compelled  to  take  out  an  annual  licence.  But  the 
number  of  licences  does  not  correspond  exactly  with 
the  number  of  country  banks.  In  the  first  place,  banks 
that  do  not  issue  notes  do  not  take  out  a  licence  ;  and 
secondly,  a  bank  that  issues  notes  in  several  places, 
must  take  out  a  licence  for  each  place  ;  and  instances 
are  said  to  have  occurred  of  persons  taking  out  a 
licence  to  issue  notes,  and  not  carrying  on  any  other 
branch  of  banking.  Banks,  too,  that  carry  on  business 
at  more  than  four  places  are  required  to  take  out  only 
four  licences ;  all  the  places  beyond  four  being  in- 
cluded in  the  fourth  licence. 


TABLE  I. 


An  account  of  the  number  of  licences  issued  to 
country  bankers,  and  the  number  of  commissions  of 
bankruptcy  issued  against  country  banks,  in  each  of 
the  following  years  :  — 


Years. 

1809 

Licences. 

Bankrupts. 

Years. 

Licences. 

Bankrupts. 

Years. 

Licences. 

Bankrupts. 

702 

4 

1817 

752 

3 

1825 

797 

37 

1810 

782 

20 

1818 

765 

3 

1826 

809 

43 

1811 

789 

4 

1819 

787 

13 

1827 

668 

8 

1812 

825 

17 

1820 

769 

4 

1828 

672 

3 

1813 

922 

8 

1821 

781 

10 

1829 

677 

3 

1814 

940 

27 

1822 

776 

9 

1830 

671 

14 

1815 

916 

25 

1823 

779 

9 

1831 

641 

— 

1816 

831 

37 

1824 

788 

10 

1832 

636 

— 

TABLE  n.     {Opposite page.) 

An  account  of  the  number  of  country  banks  in 
England  and  Wales,  for  which  licenses  to  issue  promis- 
sory notes  have  been  taken  out  in  each  year,  from 
1811  to  1818,  distinguishing  the  number  in  each 
county,  and  the  number  of  partners  concerned  in  the 
banks  of  each  county. 


OF    BANKING. 


Ill 


1 

COUNTIES. 

1811—12.  1  1812—13. 

1813—14. 

1814-15. 

1815—16. 

1816—17. 

1817—18. 

1818-19.  1 

O  o 

•A  « 

P.( 

6  -S 

2i« 

o  £ 
65 

"SS 

.  c 

=  e 

6  5 

6  = 

o  o 

4 

Bedfordshire 

Berkshire 

7 
15 
3 
10 
6 
2 
6 

5 

24 

9 

S 

7 

48 

12 

9 

16 

2 

9 

39 

30 

8 

11 

6 



31 

5 

9 

22 

1 

6 

10 

4 

19 

13 

4 

13 

17 

6 

1 

4 

18 

47 

23 

20 

12 

22 

24 

5 

24 

17 

75 

739 

16 

54 
9 

22 

18 
6 

15 

12 
68 
32 
11 
22 

148 
33 
41 
50 
10 
30 

131 
85 
24 
25 
19 

93 

18 
27 
60 

2 
17 
42 

9 
67 
34 
17 
45 
56 
16 

2 

8 
58 
126 
52 
66 
37 
73 
65 
19 
79 
51 
257 

2277 

7 
19 
2 
8 
8 
2 
6 

7 
23 

8 

4 

9 
46 
15 
11 
15 

3 
10 
39 
34 

7 
13 

5 

39 

5 

10 

22 

1 

3 

7 

6 

18 

14 

5 

14 

17 

5 

3 
22 
47 
27 
17 
12 
24 
26 

3 
22 
18 
73 

761 

19 
69 

6 
18 
27 

6 
14 

17 

28 

7 

34 

140 
40 
59 
48 
10 
28 

130 
94 
2) 
27 
16 

120 
18 
29 
64 
2 
9 
26 
12 
Q5 
36 
26 
46 
5^ 
14 

7 

63 

129 

&rj 

59 
37 
80 
74 
11 
74 
52 
255 

2350 

7 
19 
4 
6 
8 
2 
8 

7 

22 

7 

4 

9 
44 
14 
11 
16 

2 
11 
40 
31 

9 
11 

6 

58 

4 

10 

23 

1 

2 

6 

4 

18 

12 

4 

13 

15 

5 

4 
22 
43 
22 
18 
13 
22 
24 

3 
22 
16 
71 

733 

19 
64 
10 
IS 
25 
6 
19 

17 
60 
25 
9 
34 

129 
39 
48 
49 
9 
33 

132 
85 
28 
23 
20 

111 
13 
29 
65 
2 
6 
18 
11 
60 
33 
20 
40 
43 
12 

10 
62 

127 
55 
61 
37 
76 
73 
11 
71 
51 

240 

7 
18 
3 
7 
7 
2 
4 

7 
21 

6 

4 

7 
44 
14 
11 
15 

2 
12 
39 
28 

7 
12 

5 

34 

6 

13 

14 

2 

2 

5 

3 

17 

13 

7 

13 

16 

5 

3 
22 
41 
24 
19 
13 
18 
24 

3 
19 
14 
67 

G99 

17 
59 

7 
16 
22 

6 
10 

16 
58 
22 
8 
28 

130 
36 
51 
49 
8 
37 

126 
80 
22 
30 
16 

95 

24 

41 

39 

4 

5 

15 

7 

55 

33 

30 

44 

50 

13 

8 
64 

124 
60 
59 
39 
64 
79 
11 
60 
45 

223 

6 

17 

3 

;i 

6 

4 

8 
21 

5 

5 

8 

40 

11 

10 

13 

2 

7 

38 

30 

7 

12 

6 

31 

6 

8 

12 

1 

2 

5 

2 

17 

12 

5 

13 

12 

3 

2 
21 
31 
22 
19 
14 
20 
23 

3 
17 
13 
68 

643 

16 

54 
7 
9 

21 

10 

20 
54 
17 
10 
28 

119 
26 
40 
41 
8 
22 

127 
83 
23 
30 
16 

87 
23 
24 
37 

2 

6 
15 

5 
54 
33 
20 
40 
35 

7 

5 
63 
89 
54 
62 
35 
72 
79 
11 
56 
41 
220 

1956 

6 
10 
2 
4 
7 
1 
4 

6 

19 

5 

4 

8 

36 

11 

6 

9 

2 

7 

38 

28 

6 

12 

6 

28 

5 

8 

9 

2 

2 

5 

2 

17 

10 

4 

11 

10 

3 

1 

1 

15 

30 

18 

20 

11 

16 

23 

4 

17 

14 

62 

17 
31 
6 
9 
23 
3 
9 

18 
52 
19 
7 
28 

108 
25 
26 
28 
8 
21 

127 
76 
17 
28 
20 

75 

18 

24 

30 

4 

5 

14 

7 

56 

28 

16 

33 

26 

7 

4 

2 

51 

89 

43 

66 

26 

56 

79 

15 

55 

44 

212 

6 

10 

2 

4 

7 
2 
3 

4 

20 

5 

5 

7 

37 

12 

8 

10 

2 

9 

31 

25 

6 

11 

5 

28 
4 
8 
9 
2 
2 
4 
2 

17 
9 
8 
9 

12 
3 

1 
15 
31 
20 
18 

8 
19 
23 

3 
16 
15 
59 

17 

29 

5 

9 

23 
5 

7 

12 
54 
19 
13 
26 
108 
28 
32 
33 
8 
27 
98 
67 
17 
27 
17 

71 
15 
24 
30 

4 

6 
11 

7 
58 
26 
30 
30 
32 

7 

2 
49 
93 
46 
61 
18 
65 
78 
9 
52 
47 
199 

6 
9 

2 
4 
7 
2 
3 

4 

22 

5 

4 

7 

38 

10 

7 

10 

2 

9 

33 

26 

7 

12 

5 

30 
5 
9 

12 
3 
2 
6 
2 

16 

12 
6 
9 

13 
2 

2 
15 
30 
17 
19 
10 
18 
23 

3 
16 
14 
59 

17 

27 
5 
9 

24 
5 
8 

12 

58 

19 

9 

26 

105 
25 
29 
32 
8 
25 

108 
67 
21 
27 
17 

75 
19 
26 
39 

7 

6 
16 

7 
56 
32 
27 
29 
32 

5 

4 
47 
95 
39 
67 
23 
61 
78 
10 
53 
41 
199 

Brecknockshire.. 
Buckinghamsh.. 
Cambridgeshire . 
Cardiganshire  ... 
Carmarthenshire 
Carnarvonshire. . 
Cheshire 

Cornwall 

Cumberland 

Denbighshire.... 

Derbyshire 

Devonshire 

Dorsetshire 

Essex 

Flintshire 

Glamorganshire. 
Gloucestershire.. 

Hampshire 

Herefordshire  ... 
Hertfordshire.... 
Huntingdonsh. . . 
Isle  of  Anglesey 
Kent 

Lancashire 

Leicestershire. ... 

Lincolnshire 

Merionethshire... 

Middlesex 

Monmouthshire. 
Montgomerysh.  . 
Norfolk 

Northamptonsh.. 
Northumberland 
Nottinghamshire 

Oxfordshire 

Pembrokeshire  .. 

Radnorshire 

Rutlandshire 

Shropshire 

Somersetshire.... 

Staffordshire 

Suffolk 

Sussex 

Warwickshire  ... 
Westmorland .... 
Wiltshire 

Worcestershire. .. 
Yorkshire 

Total 

2234 

2145 

585 

1791 

576 

1751 

587 

1776 

Stamp  Office,  Somerset  Place,  Mayl,  1819. 


TEESDALE  COCKELL,  Assistant  Distributor. 


112  THE    HISTORY    AND    PRINCIPLES 

According  to  the  Post-office  Directory  for  1834, 
the  number  of  private  country  banks,  and  branches 
of  private  banks  in  Engkuid  and  A\^ales  is  G38  ;  and 
the  number  of  joint- stock  banks  and  their  branches 
is  106. 

Tlie  country  banks  are  banks  of  deposits,  banks  of 
discount,  and  banks  of  remittance  ;  most  of  them  are 
also  banks  of  circulation. 

As  banks  of  deposit,  they  allow  interest  upon 
deposits ;  as  banks  of  discount,  they  discount  for 
parties  who  do  not  keep  with  them  a  current  ac- 
count ;  as  banks  of  remittance,  they  conduct  their 
business  through  the  agency  of  the  London  bankers  ; 
they  also  receive  through  the  London  agents  tlie 
dividends  on  the  public  funds,  on  account  of  parties 
in  their  neighbourhood.  The  holders  of  stock  grant 
in  the  first  instance  to  the  London  banker  a  power 
of  attorney  to  receive  the  dividends,  which,  when 
received,  are  placed  to  the  credit  of  the  country 
banker,  by  whom  they  are  paid  to  the  proprietors. 
This  facility  of  receiving  dividends  in  all  parts  of 
the  country,  has,  no  doubt,  induced  many  persons 
to  become  holders  of  government  securities,  and 
thus  the  country  banks  have  assisted  in  supporting 
public  credit. 

The  country  banker  pays  his  London  agent  either 
by  a  balance,  by  a  coynmission,  or  by  an  annual  fixed 
amount.  In  the  case  of  a  balance,  the  country 
banker  agrees  to  keep  in  the  liands  of  a  London 
banker  a  certain  sum,  for  which  he  is  to  receive  no 
interest.  The  amount  of  this  deposit  varies,  according 
to  the  extent  of  the  business.  If  the  country  banker 
keeps  less  than  the  stipulated  amount,  he  is  charged 
interest  for  the  deficiency,  as  upon  an  overdrawn 
account.  If  he  keeps  more  than  this  amount,  he  is 
usually  allowed  interest  at  a  rate  per  cent,  wliich  is 
agreed  upon  by  the  parties.  In  the  case  of  a  com- 
mission, the  country  banker  pays  at  the  end  of  each 


OF    BANKING. 


113 


year  a  certain  rate  of  commission  on  the  transactions 
of  the  year ;  the  charge  is  made  upon  the  amount  of 
the  debit  side  of  his  account.  Some  country  bankers, 
instead  of  a  commission,  prefer  paying  a  fixed  sum 
per  annum.  In  this  case  the  charge  does  not  vary 
with  the  amount  of  transactions  as  in  the  case  of  com- 
mission, but  whether  the  transactions  be  great  or  small 
the  payment  remains  the  same. 


TABLE  III. 


An  account  of  the  number  of  country  bank  notes, 
of  all  denominations,  stamped  in  each  year,  from  1820 
to  1831,  both  inclusive: 


Not 

Not 

Not 

Not 

Not 

Not 

Not 

Not 

Voarc 

exceeding 

exceeding 

exceeding 

exceeding 

exceeding 

exceeding 

exceeding 

exceeding 

Xcars. 

11.  Is. 

2/.  2i. 

5/.  5s. 

10/. 

20/. 

SO/. 

50/. 

100/. 

5rf. 

lOrf. 

U.  3d. 

Is.  9rf. 

2s. 

3s. 

5s. 

Ss.  6d. 

1820 

1,683,824 

22,181 

203,673 

49,280 

7,250 



71 

1060 

182] 

2,214,623 

20,180 

254,839 

51,226 

10,738 

50 

417 

1600 

1822 

1,888,959 

11,700 

267,213 

65,032 

13,756 

100 

206 

1060 

1823 

1,969,758 

25,110 

273,184 

74,232 

9,573 

199 

292 

1392 

1824 

2,501,849 

21,500 

442,112 

131,196 

22,189 

14 

528 

1861 

1825 

3,172,477 

39,511 

557,946 

158,233 

46,392 

12 

381 

1845 

1826 

248,117 

— 

141,603 

45,399 

1,971 

341 

12 

375 

1827 

291,377 

— 

245,91 1 

57,683 

6,933 

— 

95 

208 

1828 

155,199 

— 

382,311 

58,356 

12,697 

— 

560 

1100 

1829 

257,271 

— 

352,969 

57,758 

5,339 

215 

861 

400 

1830 

532,431 

4,500 

282,107 

50,975 

11,192 

215 

615 

40 

1831 

499,691 

— 

295,086 

47,156 

8,499 

300 

1800 

The  notes  of  a  less  value  than  5l.  stamped  in  Great 
Britain  since  the  3d  of  February  1826,  are  applicable 
to  Scotland  only.  The  above  account  does  not  in- 
clude the  notes  stamped  in  Ireland. 


114 


THE    HISTORY    AND    PRINCIPLES 


TABLE  IV. 


An  account  of  the  sums  received  for  stamp  duties, 
and  as  a  composition  of  the  duty  upon  country  bank 
notes,  in  the  years  1816  to  1832. 


Years. 

stamp  Duties. 

Composition. 

Years. 

Stamp  Duties. 

Composition. 

1816 

83,213     0  11 



1824 

93,277     1 

11              — 

1817 

139,632     2     9 



11825  114,916     1 

6         — 

1818148,314-     2     2 



:1826 

13,108     4< 

6         — 

1819   62,329     8     7 



1J827 

21,222     3 

0         - 

1820,  53,656  15     5 



1828 

30,443     8 

6   297     3     0 

J  821 

66,961     3     7 



1829 

26,602  12 

6  1966     6  11 

1822 

62,182     0     6 



[1830 

21,740  11 

33328     3     5 

I823J  65,054  15     1 



jl831 

23,600  11 

9  2414   14     4 

Henry  Burgess,  Esq.,  the  secretary  of  the  country 
bankers'  committee,  deUvered  to  the  parliamentary 
committee  of  1832,  returns  of  the  issues  of  122  coun- 
try bankers  in  England  and  Wales  from  the  year  1818 
to  the  year  1825,  taken  in  the  month  of  July  in  each 
year.  The  amount  of  issue  in  1818  was  represented 
by  the  number  100,  and  proportionate  numbers  were 
employed  to  represent  the  issues  of  the  subsequent 
years.     The  following  is  the  result  of  the  whole  ;  — 


TABLE  V. 


Numbers  repre- 

senting propor. 

tionate  issue. 

liiffcrence. 

1818     12,200 

— 

1819     11,991 

209 

being  a^  1   15 

0 

per 

ct.  decrease  from  1818.  | 

1820     11,487 

709 

5  16 

10^ 

do. 

do. 

1821      11,352 

848 

6  19 

0 

do. 

do. 

1822     10,778 

1422 

11    13 

U 

do. 

do. 

1823     10,748 

1452 

11   18 

oi 

do. 

do. 

1824     11,640 

560 

4  11 

9 

do. 

do. 

1825     12,478 

278 

2     5 

6| 

per  ct. 

increase  over  1818. 

OF    BANKING.  115 

The  circulation  of  country  bank  notes  appears  to 
have  been  the  lowest  in  the  year  1823,  and  the  high- 
est in  the  year  182.5,  the  increase  from  the  lowest  to 
the  highest  is  16/.  Is.  ijr/.  per  cent. 

By  3  and  4  William  IV.  c.  83.,  passed  in  1833, 
banks  issuing  promissory  notes  are  required  to  make 
returns  to  the  Stamp-office  of  the  average  amount  of 
notes  in  circulation  in  the  quarters  ending  the  first 
day  of  January,  April,  July,  and  October  in  each 
year.  The  quarterly  average  is  to  be  formed  from 
the  amount  in  circulation  at  the  end  of  each  week. 

In  the  memorial  presented  by  the  committee  of 
country  bankers  to  Earl  Grey  and  Lord  Althorp, 
June  12.  1833,  they  made  the  following  observations 
upon  the  circulation  of  the  country  banks  :  — 

"  Your  memorialists  are  prepared  to  prove  that  the  issues  of 
country  bankers  have  less  tendency  to  promote  fluctuations  in  the 
country  than  those  of  the  Bank  of  England  ;  and  that  their  effect 
in  throwing  the  exchanges  against  the  country  is  comparatively 
insignificant.  The  sHghtest  attention  to  facts  would  indicate  the 
truth  of  these  positions.  It  has  been  established  by  parHamentary 
evidence  that  the  issues  of  country  bankers  fluctuated  much  less 
between  the  years  1817  and  ]8'26  than  those  of  the  Bank  of 
England  ;  and  it  is  indisputable  that  adverse  exchanges,  which 
endanger  the  bank,  always  succeed  great  importations  of  foreign 
produce,  and  that  they  never  can  be  occasioned  by  large  export- 
ations  of  domestic  productions.  Now  it  is  notorious  that  the  cir- 
culation of  country  bankers  acts  ahnost  exclusively  in  promoting 
these  productions  :  and  that,  when  it  is  in  an  extended  state,  the 
direct  and  proper  influence  even  of  an  alleged  excess  of  that  circu- 
lation, would  be  to  provide  the  means  of  paying  for  the  importations 
of  foreign  produce  without  causing  so  great  an  export  of  gold  as  to 
derange  and  endanger  the  monetary  system  of  the  country.  This 
is  looking  at  the  separate  and  distinctive  character  of  the  issues  of 
country  bankers ;  if  regarded  as  a  part  of  a  whole,  any  excess 
in  which  must  bear  its  relative  proportion  of  effect  in  producing 
derangement,  that  proportion  can  never  exceed  one- tenth;  be- 
cause, assuming  that  all  paper  currency  has  an  equal  bearing 
upon  depreciation  and  appreciation,  the  issues  of  country  bankers 
never  amounted  to  one-tenth  part  of  that  which  is  used  for 
effecting  the  interchanges  of  commodities  and  property  in  the 
country.  All  experience  shows  that  great  fluctuations  have 
originated  in  the  speculations  of  influential  merchants,  and  never 

I  2 


116  THE    HISTORY    AND    rillNCIPLES 

originated  in  the  channels  to  which  the  issues  of  country  bankers 
are  confined  ;  their  source  is  in  great  mercantile  cities,  and  they 
are  promoted  by  the  issues  ot  the  Bank  of  England.  That 
this  is  the  invariable  course  which  fluctuations  resulting  in  excess 
and  derangement  take,  is  proved  by  the  evidence  of  Mr.  Ward 
and  others,  before  the  bank  charter  committee,  and  is  fully 
explained  by  the  speeches  of  the  King's  Ministers  in  the  year 
1826.  The  debts  of  a  few  speculative  merchants  who  failed  in  a 
single  year  in  the  town  of  Liverpool,  where  country  bankers'  notes 
never  circulated,  amounted  to  between  seven  and  eight  millions 
sterling,  and  their  bills  were  either  lodged  in  the  Bank  of  England 
for  loans,  or  were  current  in  all  parts  of  the  country,  stimulating 
circulation  and  promoting  excess. 

"  Then,  with  regard  to  the  alleged  tendency  of  many  sources  of 
issue  to  promote  fluctuation  —  the  rivalry  of  numerous  banks  of 
issue  was  set  up  by  the  government  of  1826  as  a  principle  which 
ensures  solidity  and  equability  to  the  circulation,  '  from  the  con- 
stant exchange  of  notes  between  the  different  banks,  by  which 
they  become  checks  upon  each  other,  and  by  which  any  over-issue 
is  subject  to  immediate  observation  and  detection.'  That  was  the 
report  of  the  lords'  committee,  after  full  and  complete  investi- 
gation. The  government  of  183S  is  proceeded  with  a  measure 
founded  on  the  principle  that  rival  banks  of  issue  promote  fluctu- 
ation ;  this,  however,  is  before  investigation.  Deposits  and  cash 
credits  were  declared  by  the  witnesses  from  Scotland  to  be  abso- 
lutely dependent  on  local  bank  issues,  and  the  government  of 
1826  admitted  the  validity  of  the  plea ;  the  government  of  1833 
concludes  that  the  system  of  deposits  and  cash  credits  may  be 
maintained  in  England  without  local  issues,  but  this  conclusion  is 
adopted  without  any  inquiry  into  the  case.  It  would  be  fruitless 
to  dwell  on  this  contradictory  conduct  in  two  administrations  pro- 
fessing to  be  guided,  in  dealing  with  the  currency,  by  the  same 
policy.  Admitting,  that  by  one  source  of  issue,  the  actual  amount 
of  notes  payable  on  demand  might  be  kept  more  equal  than  by 
many,  it  does  not  follow  that  their  distribution  would  not  be  in- 
finitely more  unequal —  every  man  possessed  of  practical  inform- 
ation who  understands  the  subject  knows  that  by  giving  the 
exclusive  circulation  of  notes  to  the  Bank  of  England  abundance 
will  be  created  in  the  money  market,  and  in  the  great  commercial 
emporiums  —  raising  the  price  of  public  securities,  and  stimulating 
the  produce  markets  —  while  unexampled  scarcity  will  be  the 
consequence  in  the  country,  producing  embarrassment  and  discon- 
tent among  the  cultivators  of  the  soil  of  all  who  are  dependent 
upon  them.  Therefore  the  real  practical  point  to  be  determined 
concerning  the  tendency  of  different  issues  is,  whether  2,000,000/., 
or  any  given  sum,  laid  out  in  purchasing  French  rentes  in  Paris, 
and  indigo  in  Calcutta,  or  in  replenishing  with  stock  the  exhausted 
corn  and  jiasture  fields  of  England,  have  the  most  effect  in  drawing 


OF    BANKING.  117 

gold  out  of  tJie  country.  It  is  hardly  possible  to  imagine  any 
measure  of  greater  danger  than  the  projected  plan  of  government. 
The  present  bank  directors  may  be  men  of  unimpeachable  in- 
tegrity ;  but  others  less  scrupulous  may  succeed  them ;  and  it  is 
within  the  range  of  possibility  for  a  man  of  influence  who  had 
obtained  a  seat  at  their  board,  to  make  a  speculation  by  purchasing 
indigo  in  Calcutta,  and  then  proceed  to  stimulate  the  market  for 
that  commodity  in  London,  just  before  the  sale  at  the  East  India 
house,  by  discounting  the  bills  of  favoured  connections ;  then,  at 
nearly  the  same  period,  he  might  cause  instructions  to  be  given  to 
the  manager  of  the  branch  bank  in  Manchester  to  contract  the 
customary  and  stipulated  discounts ;  which  would  have  the  effect 
of  depressing  the  market  for  cotton  twist  and  piece  goods,  which 
are  the  principal  commodities  transmitted  to  India  in  exchange  for 
the  produce  of  that  country.  By  this  double  operation  the  produce 
of  a  director's  capital  employed  in  Hindostan  might  be  temporarily 
raised  in  price  in  the  London  market,  and  the  produce  of  English 
capital  and  labour  sunk  to  favour  the  interests  of  one  bank  director 
or  of  several.  The  same  result  might  be  produced  by  the  importer 
of  Baltic  produce  :  indeed,  the  importation  of  corn  in  1831  pro- 
bably created  that  state  of  things  which  suggested  to  the  govern- 
ment the  plan  of  suppressing  all  local  issues  as  the  remedy  for  an 
alleged  evil  in  the  country  bank  system.  It  is  hardly  necessary 
to  disclaim  all  personal  imputation  in  this  illustration.  The  chan- 
cellor of  the  exchequer  has  taken  the  self-interest  of  country 
bankers  to  be  an  element  of  so  much  danger,  from  its  tendency  to 
induce  them  to  extend  their  issues^  as  to  adopt  it  as  a  principle  in 
framing  a  legislative  measure  of  the  most  hazardous  character.  Is 
the  danger  of  the  operation  of  the  same  principle  to  be  disregarded 
when  it  might  be  exercised,  not  in  a  manner  where  it  would  be 
open  to  '  immediate  operation  and  correction,'  but  in  secret, 
where  it  could  not  be  detected  and  challenged  ?  The  history  of 
national  banks  proves  that  their  funds  may  be  applied  by  their 
directors  to  far  more  daring  private  speculations  than  is  described 
by  this  supposititious  case. 

"If  all  bankers  should  be  compelled  to  supply  their  customers 
with  the  notes  of  the  Bank  of  England,  a  charge  of  7  per  cent, 
for  the  interest  of  loans  to  graziers,  farmers,  and  dealers  in  agri- 
cultural produce,  would  not  remunerate  the  country  bankers  so 
well  as  4  or  5  per  cent,  does  now  upon  the  present  system. 
The  contemplated  change  in  the  usury  laws,  which  if  intended  to 
afford  to  your  memorialists  some  advantage  for  that  which  it  is 
intended  to  deprive  them,  would  give  them  some  satisfactory  com- 
pensation, because  its  tendency  is  to  disorder  or  change  that 
system  upon  which  loans  are  made  by  country  bankers  with 
promptitude,  facility,  and  comparative  uniformity  and  cheapness  ; 
the  distinctive  characteristics  of  their  business  are  regularity  and 
the  absence  of  extortionary  charges — In  the  event  of  the  subver- 

I  3 


118  THE    HISTORY    AND    riUNCIPLES 

sion  of  that  system  it  wouid  be  impossible  for  a  great  corporation, 
forming  rules  of  conduct  in  London,  and  thence  directing  their 
application,  to  appoint  agents  competent  to  conduct  the  pecuniary 
affairs  of  the  productive  portion  of  the  community.  Those  affairs, 
as  far  as  banks  are  concerned  with  them,  always  demand  peculiar 
local  knowledge,  and  are  in  a  great  measure  based  on  the  confi- 
dential intercourse  of  fellowship  and  neighbourhood  ;  they  fre- 
quently require  personal  knowledge  of  the  circumstances  and 
character  of  individuals,  and  the  closest  sympathy  with  i'eelings 
arising  from  family  difficulties,  or  family  ex})ectations  and  pro- 
spects. The  governing  principles,  therefore,  for  conducting  those 
important  pecuniary  affairs  are  totally  incompatible  with  any  that 
can  govern  the  conduct  of  an  hired  agent  in  attempting  to  conduct 
the  same.  From  these  premises  it  results  that  the  free  ap|)lication 
of  labour  to  land  would  be  prevented,  the  costs  of  cultivation  en- 
lianced,  markets  and  the  sale  of  produce  impeded,  and  the  pursuits 
of  agriculture  deeply  injured. 

"  Then  with  respect  to  miners  and  manufacturers,  any  system 
which  would  bring  them  into  immediate  contact  with  the  operation 
of  the  bank  for  regulating  the  foreign  exchanges,  without  that  pro- 
tection and  defence  from  those  convulsive  changes,  which  the 
local  circulations  afford,  would  be  a  system  pregnant  with  inde- 
scribable hazard.  Many  of  the  bank  directors  are  connected  by 
friendship  or  commercial  dealings  with  the  great  speculators  in 
London  and  the  populous  towns,  whose  transactions  mainly  cause 
excess  of  circulation  and  an  adverse  state  of  the  exchanges.  In 
this  class  any  contraction  of  the  paper  currency  for  the  rectification 
of  derangement,  upon  the  present  system,  acts  ;  but  upon  the 
projected  plan,  parliamentary  evidence,  as  well  as  the  nature  of 
things,  shows  that  the  contracting  force  will  be  put  into  operation 
by  the  branch  bank  managers  at  a  distance  from  London,  and  pro- 
duce confusion  in  the  affairs  of  mining  and  nuauifacturing  industry, 
and  discontent  among  a  dense  and  excitable  population.  It  may, 
under  such  a  state  of  things,  be  rationally  a])preliended  that  occa- 
sions will  arise  when  workmen  will  be  sudilcnly  dismissed  for  the 
want  of  the  power  to  pay  them  their  wages,  sho])keepers  deprived 
of  their  weekly  receipts,  and  the  regular  custom  at  markets  for 
the  supply  of  agricultural  })roduce,  impaired." 

Ill  yv\)\y  to  the  question,  "  Wliat  effect  do  you 
sii])po,se  that  an  increase  or  decrease  of  London  bank 
notes  has  u])on  the  issue  of  country  bankers  ? "  J. 
H.  Palmer,  Esq.  replied  :  — 

"  A  material  increase  of  the  bank  in  London  tends,  in  the  first 
instance,  to  reduce  the  value  of  money,  and  consequently  the  rate 
of  interest,  upon  all  negotiable  securities.  That  abundance  of 
money  renders  it  difficult  for  the  country  bankers  to  find  beneficial 


OF    BANKING.  119 

investment  for  that  part  of  the  country  money  sent  up  to  the 
capital  for  employment,  consequently  they  are  forced  to  resort  to 
their  immediate  neighbourhoods  for  new  channels  for  investing 
their  surplus  money  ;  and  which  tends  to  create  additional  issues 
in  the  country  at  an  early  period  after  the  London  increase  has 
taken  place.  But  it  does  not  follow  that  a  diminution  of  issues  has 
an  equally  rapid  effect  in  reducing  the  issues  of  the  interior." 


SECTION  VI. 

JOINT-STOCK    BANKS. 


In  the  year  I7O8,  a  clause  was  inserted  in  the 
charter  of  the  Bank  of  England,  prohibiting  the 
establishment  of  any  other  bank  having  more  than 
six  partners.  This  clause  prevented  the  formation  of 
any  other  joint-stock  bank ;  and,  as  the  increasing 
wealth  and  commerce  of  the  nation  occasioned  a 
demand  for  banks  of  some  sort,  a  great  number  of 
banks,  each  having  no  more  than  six  partners,  rose 
into  existence,  as  they  were  successively  required  by 
the  wants  of  the  country.  The  charter  of  the  Bank 
of  England  had  no  reference  to  Scotland,  which  at 
that  period  was  a  separate  kingdom.  Hence,  with 
the  increasing  wealth  of  Scotland,  joint-stock  banking 
companies  were  formed  ;  and  at  present  they  conduct 
nearly  the  whole  of  the  banking  business  of  that 
country.  But,  with  every  renewal  of  the  charter  of 
the  Bank  of  England,  this  clause  was  retained,  and 
hence  has  arisen  the  difference  which  subsists  between 
the  Scotch  and  the  English  systems  of  banking.  In 
the  year  1826,  an  act  of  parliament  was  passed  to 
permit  the  formation  of  banks  having  more  than  six 
partners,  at  a  greater  distance  than  sixty-five  miles 
from  London ;  with  a  provision,  however,  that  such 
banks  should  not  make  their  notes  payable  in  London, 
nor  draw  bills  upon  London  for  a  less  amount  than 

I  4 


120  THE    HISTORY    AND    PRINCIPLES 

50/.  By  an  act  passed  in  1833,  tliesc  banks  have 
the  privilege  of  drawing  bills  on  their  London 
agents,  either  on  demand  or  otherwise,  and  for  a  less 
sum  than  50/. 

The  advocates  of  joint-stock  banks  allege  that  they 
possess  the  following  advantages  over  private  banks :  — 

1.  Joint-stock  banks  possess  greater  security  than 
private  banks. 

Security  is  of  the  first  importance  to  a  bank.  One 
branch  of  the  business  to  a  banker  is  to  take  charge 
of  money  committed  to  his  care.  But  who  will 
entrust  money  to  a  banker  who  is  not  known  to  be, 
or,  at  least,  supposed  to  be  rich  ?  And  if  a  banker 
be  rich,  but  afterwards,  by  mismanagement  or  mis- 
fortune, become  poor,  and  fail,  what  dreadful  misery 
is  inflicted  upon  those  who  have  money  in  his  hands. 
How  many  respectable  individuals  may  be  suddenly 
bereft  of  their  whole  dependance.  How  many  indus- 
trious tradesmen  may  become  bankrupts.  What 
distrust,  what  inconvenience,  what  interruption  of 
business  is  occasioned,  even  to  those  who  can  bear 
the  loss.  But  by  a  joint-stock  bank  all  these  evils 
are  avoided.  Anotlier  branch  of  the  business  of  a 
bank  is  to  remit  money  from  one  ])art  of  the  country 
to  another ;  but  who  will  trust  them  with  money  to 
remit  when  they  may  fail  before  they  have  executed 
their  trust  ?  Banks,  too,  issue  their  own  notes,  and 
thus  supply  tlie  circulating  mediimi  of  the  coimtry. 
Here  wealth  and  security  are  more  necessary  than 
ever.  In  the  former  cases,  the  creditors  of  tlie 
banker  may  hav^e  liad  some  opportunity  of  judging  of 
his  safety,  and  would  probably  make  previous  in- 
quiries upon  the  subject.  But  when  the  notes  of  a 
banker  have  become  the  circulating  medium  of  a 
neighbourhood,  they  are  readily  taken  witliout  any 
inquiries  about  his  solvency.  And,  indeed,  in  some 
cases,  if  the  notes  were  suspected,  they  could  not  be 
refused.      If  a  tradesman  will  not  deliver  goods  to 


OF    BANKING.  121 

his  customers  for  such  notes  as  they  offer  him,  tliey 
will  take  the  notes  to  some  other  tradesman.  Men 
who  receive  wages  must  receive  them  in  such  notes 
as  the  master  chooses  to  pay.  Since,  then,  each 
banker  supplies  the  circulating  medium  of  a  large 
district,  and  the  notes  are  thus  circulated  among  all 
classes,  some  of  whom  have  not  the  option  of  refusing 
them,  nor  the  ability  to  judge  of  their  value,  it  is  of 
the  utmost  importance  that  banks  should  be  establish- 
ed on  those  principles  which  will  prevent  their  failure. 

That  a  bank  having  a  great  number  of  partners 
should  be  more  secure  than  a  bank  consisting  of  only 
a  few  partners,  seems  a  very  obvious  proposition  ;  and 
it  has  received  abundant  confirmation  from  the  nu- 
merous failures  that  have  occurred  among  the  bankers 
in  England,  and  the  few  failures  that  have  occurred 
in  Scotland.  This  is  a  fact  that  demonstrates  the 
superior  security  of  joint-stock  banks.  If  a  bank  of 
this  kind  has  a  charter,  it  must  previously  possess  a 
large  fund,  which  forms  a  guarantee  for  the  punctual 
payment  of  its  notes  or  deposits.  If  the  bank  have  no 
charter,  then  every  individual  shareholder  is  answer- 
able for  all  the  debts  of  the  bank  to  the  whole  extent 
of  his  property,  as  fully  as  though  he  had  incurred 
those  debts  himself.  In  either  case  the  security  is 
greater  than  can  be  offered  by  any  one  individual,  or 
by  any  four  or  five  individuals,  however  respectable 
they  may  be. 

2.  A  joint-stock  bank  is  less  liable  to  runs. 

A  run  is  a  sudden  and  general  demand  for  the 
payment  of  notes,  or  deposits.  It  is  not  sufficient 
that  a  banker  be  safe  :  it  is  also  necessary  that  he 
should  be  believed  to  be  safe.  He  derives  the  larger 
portion  of  his  gains  from  the  confidence  which  is 
placed  in  him  by  others.  Confidence  is  money. 
However  wealthy  or  respectable  a  banker  may  be,  he 
may  not  always  be  believed  to  be  so.  The  mis- 
fortunes of  others  may  cause  him  to  be  suspected. 


122  THE    HISTORY    AND    PRINCIPLES 

But  no  banker  has  always  in  his  coffers  all  the  sums 
necessary  to  pay  all  the  claims  that  may  be  made 
upon  him.  If  lie  were  to  do  this,  from  what  quarter 
would  he  obtain  his  profits  ?  What,  then,  is  he  to 
do  in  case  of  a  run  ?  He  must  at  all  events  obtain 
money  to  meet  the  demands  made  upon  him  ;  for  if  he 
once  suspend  his  payments,  all  his  credit  is  destroyed 
and  his  business  is  broken  up.  Hence  he  may  be 
compelled  to  borrow  money  at  a  high  rate  of  interest, 
or  to  sell  stock  or  estates  below  their  value,  and  to 
incur  great  expense,  in  order  that  the  money  may 
arrive  in  time  to  meet  the  demand.  But  the  effects 
of  a  run  are  not  confined  to  the  banker  himself. 
One  run  is  over,  but  another  may  come.  He  will 
be  anxious  to  be  better  provided  next  time.  He  will 
be  more  cautious.  He  will  call  in  the  money  he 
has  lent.  He  will  lend  no  more.  He  will  discount 
fewer  bills.  Those  tradesmen  and  others  who  have 
been  accustomed  to  obtain  from  the  banker  facilities 
for  carrying  on  their  business,  can  obtain  them  no 
longer.  Some  have  depended  on  these  facilities,  and 
will  now  fail ;  others  will  circumscribe  their  business  ; 
labourers  will  be  thrown  out  of  work,  and  trade  will 
be  obstructed  and  depressed. 

Such  are  the  effects  of  a  run  when  the  banker  is 
solvent,  and  the  run  is  met  with  promptitude.  But 
the  banker  may  be  good,  and  yet  the  run  may  cause 
him  to  stop  payment.  In  this  case,  though  the 
banker  may  ultimately  pay  the  whole  of  his  debts, 
yet  this  sto})page  will  produce  for  a  while  the  same 
effects  as  though  lie  were  insolv^ent.  But  it  is  pos- 
sible that  he  might  have  been  solvent  before  the  run, 
and  have  been  rendered  insolvent  by  the  run.  The 
sacrifices  he  may  have  been  compelled  to  make  for 
the  purpose  of  raising  the  money  in  time  to  meet 
tlie  demand,  may  have  absorbed  the  whole  of  his 
property. 

Now,  what  is  it  that  causes  a  iiin ?     It  is  merely 


OF    BANKING.  123 

an  apprehension  that  the  banker  cannot  discharge  tlie 
whole  of  his  obHgations,  and  hence  each  creditor  tries 
to  be  first,  that  he  may  secure  the  full  amount  of  his 
own  claim.  But  no  apprehension  of  this  kind  can 
exist  in  reference  to  a  joint-stock  bank.  Every 
body  knows  that  all  the  partners  are  liable  for  the 
debts  of  the  bank  to  the  full  extent  of  their  property  ; 
and  each  creditor  feeling  assured  that  even  should 
the  bank  fail,  his  property  is  secure,  abstains  from 
engaging  in  a  run  whereby  he  can  gain  no  advantage. 

3.  Another  advantage  which  joint-stock  banks  are 
alleged  to  possess,  consists  in  the  prudence  of  their 
management. 

A  joint-stock  bank  is  managed  by  a  board  of  direc- 
tors, men  of  character  and  ability,  who  are  chosen  to 
fill  the  office  from  their  superior  knowledge  of  mer- 
cantile and  banking  business.  The  united  know- 
ledge and  wisdom  of  a  number  of  individuals  must 
be  greater  than  that  of  two  or  three  individuals. 
They  are  not  so  liable  to  be  imposed  upon  by  false 
representations,  to  be  deluded  by  false  reasonings, 
or  to  be  biassed  by  personal  attachments.  As 
among  many  persons  there  is  sure  to  be  a  difference 
of  opinion  on  almost  every  question  brought  before 
them,  it  is  certain  that  no  measure  will  be  adopted 
without  having  first  received  a  full  discussion. 

On  the  other  hand,  the  management  of  a  private 
bank  is  too  frequently  entrusted  to  one  or  two  of  the 
partners  ;  men  who  cannot  be  expected  to  act  with 
the  caution  and  prudence  of  an  elected  body,  answer- 
able for  their  conduct  to  the  great  body  of  proprie- 
tors :  men,  too,  who  have  their  prejudices  to  indulge, 
their  friends  to  please,  and  their  partialities  to  gratify. 
Not  so  with  the  directors  of  a  joint-stock  bank,  where 
the  follies  of  an  individual  would  be  checked,  and 
his  deficiencies  supplied  by  his  colleagues.  It  often 
happens,  too,  that  the  partners  of  a  private  bank  are 
engaged  in  some  branch   of  manufactures  or  com- 


124  THE    HISTORY    AND    PRINCIPLES 

merce ;  and  in  this  case  tlic  bank  will  be  made  sub- 
ordinate to  the  trading  concern.  The  banking 
merchant  or  manufacturer  will  extend  liis  business, 
or  engage  in  speculation,  under  the  consciousness  of 
behig  able  to  make  good  his  purchases.  The  trading 
concern  will  have  an  account  at  the  bank,  and  will 
always  be  overdrawn.  The  money  which  ought  to 
be  employed  by  the  bank  in  discounting  bills  for 
their  customers,  will  be  absorbed  by  the  trade  of  the 
partners.  If  the  trading  concern  fails,  the  bank  too 
must  fail :  the  one  involves  the  ruin  of  the  other. 
Perhaps,  indeed,  the  bank,  by  supplying  money  in 
the  first  instance  for  the  parties  to  specidate  with, 
may  have  been  the  cause  of  the  ruin.  Even  when 
the  partners  of  a  private  bank  are  not  themselves 
engaged  in  any  other  employment,  the  bank  often 
becomes  connected  with  some  large  manufacturing  or 
commercial  establishments.  Such  establishments  are 
useful  to  the  bank,  by  enabling  them  to  circulate  a 
considerable  amount  of  their  notes.  Hence  the  bank 
is  induced  to  make  large  advances  to  them.  After- 
wards a  further  advance  is  necessary.  A  run  upon 
the  bank  compels  them  to  call  in  the  money  they 
have  advanced.  The  money  cannot  suddenly  be 
replaced.  Hence  all  the  parties  become  bankrupts. 
From  all  these  evils  joint-stock  banks  are  alleged  to 
be  free. 

As  some  persons  abstain  from  becoming  partners 
in  joint-stock  banks,  from  an  ap})rehension  of  the 
danger  which  they  incur  in  consecpicnce  of  the  w^hole 
of  their  property  being  answerable  for  the  debts  of 
the  bank,  I  sliall  quote  those  sections  of  the  Act 
which  have  a  reference  to  this  subject:  — 

"  And  be  it  further  enacted,  that  all  actions  and  suits,  and  also 
all  petitions  to  found  any  commission  of  bankruptcy  against  any 
person  or  persons,  who  may  be  at  any  time  indebted  to  any  such 
copartnership  carrying  on  business  under  tlie  provisions  of  this 
Act,  and  all  proceedings  at  law,  or  in  equity,  under  any  commission 
pf  bankruptcy,  and  all  other  proceedings  at  law,  or  in  equity,  to  be 


OF    BANKING.  125 

commenced  or  instituted  for  or  on  behalf  of  any  such  copartner- 
ship, against  any  person  or  persons,  bodies  poUtic  or  corporate,  or 
others,  whether  members  of  such  copartnership  or  otherwise,  for 
recovering  any  debts,  or  enforcing  any  claims  or  demands  due  to 
such  copartnership,  or  for  any  other  matter  relating  to  the  concerns 
of  such  copartnership,  shall  and  lawfully  may,  from  and  after  the 
passing  of  this  Act,  be  commenced  or  instituted  and  prosecuted  in 
the  name  of  any  one  of  the  public  officers  nominated  as  aforesaid 
for  the  time  being  of  such  copartnership,  as  the  nominal  plaintiff  or 
petitioner  for  and  on  behalf  of  such  copartnership  ;  and  that  all 
actions  or  suits,  and  proceedings  at  law  or  in  equity,  to  be  com- 
menced or  instituted  by  any  person  or  persons,  bodies  politic  or 
corporate,  or  others,  whether  members  of  such  copartnership  or 
otherwise,  against  such  copartnership,  shall  and  lawfully  may  be 
commenced,  instituted,  and  prosecuted  against  any  one  or  more  of 
the  public  officers  nominated  as  aforesaid  for  the  time  being  of 
such  copartnership,  as  the  nominal  defendant  for  and  on  behalf  of 
such  copartnership. 

"  And  be  it  further  enacted,  that  no  person  or  persons,  or  body 
or  bodies  politic  or  corporate,  having  or  claiming  to  have  any  de- 
mand upon  or  against  any  such  corporation  or  copartnership,  shall 
bring  more  than  one  action  or  suit,  in  case  the  merits  shall  have 
been  tried  in  such  action  or  suit,  in  respect  of  such  demand ;  and 
the  proceedings  in  any  action  or  suit,  by  or  against  any  one  of  the 
public  officers,  nominated  as  aforesaid  for  the  time  being  of  any 
such  copartnership,  may  be  pleaded  in  bar  of  any  other  action  or 
actions,  suit  or  suits,  for  the  same  demand,  by  or  against  any  other 
of  the  public  officers  of  such  copartnership. 

"  And  be  it  further  enacted,  that  all  and  every  decree  or  decrees, 
order  or  orders,  made  or  pronounced  in  any  suit  or  proceeding  in 
any  court  of  equity  against  any  public  officer  of  any  such  copart- 
nership carrying  on  business  under  the  provisions  of  this  Act,  shall 
have  the  like  effect  and  operation  upon  and  against  the  property 
and  funds  of  such  copartnership,  and  upon  and  against  the  persons 
and  property  of  every  or  any  member  or  members  thereof,  as  if 
every  or  any  such  members  of  such  copartnership  were  parties 
members  before  the  court  to  and  in  any  such  suit  or  proceeding; 
and  that  it  shall  and  may  be  lawful  for  any  court  in  which  such 
order  or  decree  shall  have  been  made,  to  cause  such  order  and 
decree  to  be  enforced  against  every  or  any  member  of  such  co- 
partnership, in  like  manner  as  if  every  member  of  such  copartnership 
were  parties  before  such  court  to  and  in  such  suit  or  proceeding, 
and  although  all  such  members  are  not  before  the  court. 

"  And  be  it  further  enacted,  that  execution  upon  any  judgment 
in  any  action  obtained  against  any  public  officer  for  the  time  being 
of  any  such  corporation  or  copartnership  carrying  on  the  business 
of  banking  under  the  provisions  of  this  Act,  whether  as  plaintiff  or 
defendant,  may  be  issued  against  any  member  or  members  for  the 


126  THE    HISTORY    AND    PRINCIPLES 

time  being  of  such  corporation  or  copartnership  ;  and  that  in 
case  any  such  execution  against  any  member  or  members  tor  the 
time  being  of  any  such  corporation  or  copartnership,  shall  be  in- 
effectual for  obtaining  payment  and  satisfaction  of  the  amount  of 
such  judgment,  it  shall  be  lawful  for  the  party  or  parties  so  having 
obtained  judgment  against  such  public  officer  for  the  time  being, 
to  issue  execution  against  any  person  or  persons  who  was  or  were 
a  member  or  members  of  such  corporation  or  copartnership  at  the 
time  when  the  contract  or  contracts,  or  engagement  or  engage- 
ments in  which  such  judgment  may  have  been  obtained  was  or 
were  entered  into,  or  became  a  member  at  any  time  before  such 
contracts  or  engagements  were  executed,  or  was  a  member  at  the 
time  of  the  judgment  obtained  ;  provided  always,  that  no  such 
execution  as  last-mentioned  shall  be  issued  without  leave  first 
granted,  on  motion  in  open  court,  by  the  court  in  which  such 
judgment  shall  have  been  obtained;  and  when  motion  shall  be 
made  on  notice  to  the  person  or  persons  sought  to  be  charged,  nor 
after  the  expiration  of  three  years  next  after  any  such  person  or 
pei'sons  shall  have  ceased  to  be  a  member  or  members  of  such 
corporation  or  copartnership." 

From  the  above  extracts  it  appears  that  no  legal 
proceedings  can  be  taken  in  the  first  instance  against 
an  individual  shareholder,  but  must  be  directed 
against  the  public  officer,  whose  name  is  registered 
at  the  Stamp-office. — That  not  more  than  one  action 
can  be  brought  for  one  demand.— That  after  a  share- 
holder has  transferred  his  share,  he  is  not  liable  for 
any  debts  which  the  bank  may  subsequently  con- 
tract ;  nor  for  debts  contracted  at  the  time  he  made 
the  transfer,  unless  the  execution  issued  against  the 
fimds  of  the  bank,  and  against  the  existing  share- 
holders, should  be  "  ineffectual  for  obtaining  pay- 
ment and  satisfaction  of  the  amount ; "  and  in  this 
case  the  proceeding  must  first  be  by  motion  in  open 
court. — And  that  three  years  after  the  transfer,  the 
party  is  released  from  all  responsibility,  though  the 
funds  of  the  bank  should  be  annihilated,  and  every 
shareholder  become  bankrupt. 

This  responsibility,  whicli  even  legally  considered 
is  very  triffing,  may  be  still  farther  limited  by  the 
deed  of  settlement.  When  a  joint-stock  bank  is 
formed,   a   deed  of  ])artnershi})  is   pre])ared,    and   is 


OF    BANKING.  127 

signed  by  every  shareholder.  Tliis  instrument  is 
called  a  deed  of  settlement.  The  shareholders  have 
no  power  to  limit  their  responsibility  in  reference  to 
their  creditors,  but  they  may  do  so  in  reference  to 
each  other ;  and  may  guarantee  one  another  against 
any  claims  that  may  be  advanced  against  any  one  of 
their  number.  This  is  actually  done.  The  deed 
of  settlement  provides,  that  no  shareholder  shall  be 
answerable  for  the  debts  of  the  bank  to  a  greater 
extent  than  the  proportionate  amount  of  his  share  ; 
and  that  the  moment  he  has  transferred  his  shares 
to  another  party,  he  is  wholly  free  from  any  claims 
or  responsibility  whatever.  The  act  of  parliament 
says  to  every  shareholder,  "  You  are  responsible  to 
the  whole  extent  of  your  property  for  all  the  debts 
of  the  bank."  The  deed  of  settlement  says  to  him, 
"  If  any  claims  be  made  upon  you,  while  a  share- 
holder, by  the  creditors  of  the  bank,  we,  the  other 
shareholders,  engage  to  pay  our  proportion  of  the 
debt ;  and  if  you  have  ceased  to  be  a  shareholder, 
we  indemnify  you  against  any  claim  whatever."  It 
is  obvious,  then,  that  while  the  other  shareholders 
continue  in  a  state  of  solvency,  no  individual  share- 
holder runs  any  risk.  This  may  be  illustrated  by 
supposing  an  extreme  case.  I  will  suppose  that  I 
am  the  holder  of  five  shares  in  a  banking  com23any, 
whose  stock  is  divided  into  ten  thousand  shares  ;  and 
that  all  the  money  paid  up,  whatever  it  may  be,  is 
lost,  and  the  bank  is  20,000/.  in  debt.  The  propor- 
tion of  this  debt  which  I  ought  to  pay  is  10/.  The 
creditor  sues  the  public  officer  of  the  bank,  and  ob- 
tains judgment  against  him  ;  and  considering  me  to 
be  a  rich  man,  he  singles  me  out  as  the  shareholder 
against  whom  he  will  first  issue  execution.  The 
sheriff's  officers  seize  my  goods  and  chattels,  or  what- 
ever property  I  have,  to  the  extent  of  the  20,000/. 
This  is  law,  and  I  have  no  redress.  But  in  the  deed 
of  settlement  it  is  covenanted  and  agreed  that  no 


128  THE    HISTORY    AND    PRINCIPLES 

shareholder  sliall  be  answerable  for  the  debts  of  the 
company,  to  a  greater  extent  than  the  proportionate 
amomit  of  his  shares  ;  and  all  the  shareholders 
guarantee  every  one  of  their  number  against  any 
claim  beyond  this  proportion.  Now  then,  though  I 
have  no  redress  against  the  creditor,  I  have  a  redress 
against  the  other  shareholders,  and  I  will  sue  them 
upon  the  deed  of  settlement.  As  soon  as  I  have  ob- 
tained judgment,  I  will  issue  execution  against  their 
property,  until  I  have  repaid  myself  the  whole 
20,000/.,  excepting  the  10/.,  which  is  my  proportion 
of  the  loss.  I  hav^e  here  supposed  the  case  to  pro- 
ceed to  extremities  ;  but  it  is  highly  improbable  that 
the  affairs  of  any  bank  would  be  allowed  to  proceed 
to  this  extremity.  As  soon  as  the  state  of  its  affairs 
were  known,  a  meeting  of  the  proprietors  would  take 
place  ;  they  would  pay  down  the  2/.  per  share  which 
they  liad  lost ;  the  deed  of  settlement  would  be  put 
into  the  fire ;  and  there  would  be  an  end  of  the 
company. 

It  appears  then  tliat  the  enactment  which  renders 
the  whole  of  the  property  of  every  shareholder 
answerable  for  tlie  debts  of  the  bank,  is  very  just  and 
satisfactory.  It  is  satisfactory  to  the  public,  inas- 
much as  it  gives  them  the  most  ample  guarantee  for 
the  payment  of  the  debts  of  the  bank,  whether  those 
debts  arise  from  notes  or  deposits.  It  is  satisfactory 
to  the  shareholders ;  for  although  each  shareholder 
may  consider  tlie  whole  of  his  property  liable  for  all 
claims  upon  the  bank,  yet  he  knows  that  by  the 
deed  of  settlement  the  property  of  all  the  other 
shareholders  is  answerable  to  him  for  all  claims,  be- 
yond the  proportionate  amount  of  his  shares  ;  and 
hence  the  guarantee  to  him  is  just  as  ample  as  the 
guarantee  to  the  public. 

So  far  from  militating  against  the  interest  of  the 
shareholders,  this  enactment  has  the  effect  of  in- 
creasing their  ])rofi1s,  inasmuch   as   it  enables  them 


OF    BANKING.  129 

to  carry  on  business  with  a  less  amount  of  capital, 
and  hence  to  make  a  larger  dividend.  I  will  sup- 
pose that  a  banking  company  employs  a  capital  of 
200,000/.,  upon  which  there  is  an  annual  profit  of 
16,000/.,  or  8  per  cent.,  and  all  the  shareholders  are 
responsible  to  the  full  extent  of  their  property.  Let 
a  law  be  passed  abolishing  this  responsibility.  The 
public  will  now  look  with  greater  scrutiny  into  the 
affairs  of  the  bank  ;  they  will  calculate  whether  this 
capital  be  sufficient  to  sustain  any  heavy  loss,  and 
what  risk  they  may  run  in  receiving  their  notes  or 
making  deposits.  To  secure  public  confidence,  the 
directors  will  find  it  necessary  to  make  a  further  call 
upon  the  proprietors  for  200,000/.  But  as  this 
surplus  capital  cannot  be  employed  in  the  business, 
it  must  be  invested  in  government  securities,  which, 
at  the  utmost,  will  yield  but  4  per  cent.  Now  the 
shareholders,  instead  of  having  a  profit  of  16,000/. 
upon  a  capital  of  200,000/.,  will  have  a  profit  of 
24,000/.  upon  a  capital  of  400,000/.  Instead  of  re- 
ceiving 8  per  cent,  on  their  capital,  they  will  divide 
but  6  per  cent.  It  is  obviously  not  for  the  advan- 
tage of  a  bank  to  call  up  a  larger  portion  of  its  capital 
than  what  is  necessary  for  carrying  on  its  operations. 
All  the  surplus  capital  must  be  employed  in  a  manner 
less  productive,  and  the  average  profit  will  be  dimi- 
nished. And,  besides,  when  a  bank  has  immense 
sums  invested  in  the  public  securities,  there  is  danger 
that  the  directors  will  attempt  to  make  these  sums 
more  productive,  by  gambling  in  the  funds  ;  where- 
by the  capital  of  the  bank — the  sole  security  to  the 
public — may  be  placed  in  jeopardy. 

The  following  is  a  list  of  the  country  joint-stock 
banks  at  present  existing  in  England.  They  are 
arranged  alphabetically,  according  to  the  places  in 
which  the  head  offices  are  established. 


130 


THE    HISTORY    AND    PRINCIPLES 


» 


n 


m 


u 


6 


-a  -c  -s  13  s 
B  =  S  p  i? 

c^    rt    w    rt    c5 


>.  -a 


.!?  c 


a;  S  o  t;  „"   - 


o 

-5  TS 


o      -t;  o  _  . 
_^  c  o  ^  c 


o        S 
^  -a  cs 


«  ?i  3 


U 


J-  « 


OOOOOOOOOOOOOOOOOOOOOOODOOcjOWOOOOOCOOCOWXaoOOCCOCOXXCOQOXOOOO 


•  ■"    bo  >, 

S    &.  p  — 

►^  cc  ■<  l-s 


Q;        Qj        CC       Q^        Q> 

OQSQQ 


Ph;p;z;i 


;2;>^Q 


e  a      -rs 


<5cqSP 


c  ^  P-s 


^-^ 


>-  i;        to       „  ^ 


>>  lU 


2    2    >«n 


oo|^i5Soo^:5;i2S^2^§2:3^§:§^2^ 
QOpQWPqpqQQpquyQuunuunGqQQoQKQSKffiO 


a  6 


« 


bC 


-i^ 


u 

o 

-■c.S   c^^ 

ca  =  B"  ° 

c  j=  P5  o  --: 
"  tc  .  U  .2 


fq 


W 


fcO 


5  wo 


2cq  S 


S  £ 


2  c 

£    P    S    C    "    O 

^  i||pqo2 
fo'S.^'^-HO 

a!  .S  .=    O    K    b    b 

MP5fqmcqcqm 


es    3 
D.  O 

goi 

fcD 

•r:  c  ^  o 
(«  fco  E  — 


a, 

S 
o 


.5  « 


o  ^  « 

bo-s;^ 


u 

'  O  .b  ^  - 

i          J=     S  3-J<  fcf 

:  ^0  ^  =s  p  y  c 

I    c    ^    —  is 

I  02         ^  3  ^  "^ 

'         -3  ^  "S  O  0)  -^ 

O            w  ^-  C^  *j 

I    3  -d  >  3  -S  •£    o 


.    -  a.  cs 


-?,  o 


^    be  3 


.^U. 


o-r  ^  »«= 


n  "s  c: 


■n  3  3 


3pc/3 


5  g 


StS  5^ 


C'Sw- 


^  '^  ^  ^3  P  Q  _-K ; 

c,^  2    ca  ►-*    3  .-3  Q  ' 
O  tg    >,  >^2    3 

>.i:  i  i  bc  =«  P 


^  ^   ^   M  . ::    .-^  til 

•*       ^      QJ       ai    r3     ^     *-* 

3    0)    >.    >    I-    I-    ■" 
^_„_..     ..  OJ300«^v5^ 


bo 

3 

o   ts   3 

C  5?  ^  -3 
CD     '  ^    3 

rg   —    «      « 
t-      01     t-  '^ 

,0     >     0)  .-= 


;n 


>-.  U  13 

p  2  '^ 

-    o   ^  ffi 

J    «        -^  13 

r;     t,     I.     O  C 

rt    2    2^  <« 

t-,  a)    aJ   ><  >^ 

i>    o    o  ,gg  ^cd 


OF    BANKING. 


131 


n 


pq 


m 


o  s 
0"S 


"O  c3  'a 


c  c  c  !s 


o 
U 


«    "^     oi 


SB  —     C8 


cd    O    c^ 
'o  "^  ~ 


„s  s 


3  ^ 


r^  "r  rr;  rs   c    ? 


■TS  o  T3  "^  "^         ^^ 

CT3rj     H     C    S-Cra 

U5     «  "C     en    «  '  «     =*    rt 


m 


S  d  S  o  •  ° 

g  t3    ca  _0 


'qlll    =^1 


C    w    j3 


^    5    >»~    s    a'    5    5 


Ji*  o 


'6  .^  ■£  S  S  "  -2  .2 

oil Sj^S^ 


-a 

«^  g 

^    oS  O 

O)     e  ^ 

Ji  o  " 


Men— iCOlOlO'-T'*ilo;oa>  to  «lCr-iO>lOCO«5tDtO^O00dcr>T}<Tti;O^O^lO!MCO 
MWCOtNCOCOCOMMMO-I  CO  cooocoOTcncoMMcncnMC-ic^cocooococncoMM 
OOOOOOCOCOOOOOCOCOQOCO       00       OOCOOOCCCOOOCOOCCOCOOOOOOOOOOOCOCOOOOOOOOO 


12;  ^^  w  o  S  <i  ;z;  ^  iz;  h^  <5  S 


2        o  o 


^  -? 


2    aj    bCM 


oj      oj      d   a>   o 


in  ><  fcc!  ,Ji  H^l  H^l  ,^  Q  q  Q  ^..5 


oooooo'oyocooo 


;j  ;:3  a  Q  Q  Q  Q  S  Q  S  ^3 


H 

a 

o 

g  ^  _aj 

2  "w  "^ 

o  _3  ^  «> 

=3  .-ti  .-ii  .tj  .-S  .-S  .-S   !u  5  £ 

g  Q  Q  Q  Q  p  Q  ^  ;z;  ;zi 


a  -13 
hfl-3 

.S  3 
-^^ 

c  I-' 

'3  = 


Gc3 


CQ 


C3     >> 


o  c 


e  sp .;  u  o  *j 
rt.S-^  oO.-i 

tjo  g  pa  f^  s .  2 
§f5  c  c:i2 


o 

Ml 

c 

>.^ 

s  s 

a,  >.  a,p5 

i  «  i5 

bc-^  K^m  -2  «  '« 
c 

i-5  S-a^i-.^ 


3  J  «  W  I 
pq  o"^ 


m    :    • 


^  s^ 


c'2 


CD  ^ 


o  o 


S  2  £ 


0/  OS  ■;:  'S  !«  w 

tj  o  c  g  -a  .^ 

2  C    cS  Bi    0)    I; 

C  p3    dj  OJ    01    O 

tij  hJ  H^  |_1  H^l  >^ 


5i(UC«P'^3C'Corto 

==  -  ^  ^-grt  >c3-^fi;^ 

s-    -      .,•'5  C  "  ^ 

«  -a  M  Tf   !«  -^  "^ 

mo   s 


<U    01  ,^     H 
01    0)     a     S 

1-1  i^^-;  (In 


p-^ 


c  S  c 

^  pq  g-pq 

E^  f  „  >  13  S 

s  ©r:  s -= 

c  o  o  g  c 

--  gf^S 
§  SKI'S 
a  a,—  c  ° 

!-    i-    03    o  _i^ 

•>       >      O      rt*      S 


W 


O  CG    '^    01 

"d  O  =<  <«- 


^'  -d 


Opq 

bD« 
C    u 

^  "S 

>>pqP 
_  i^  S 

M    c   2  J= 

P5  Sec  b 

"so 

6C-S  — 


c!  t2 

P5l5- 


.2  i2 


CS 


-5  c 


35 


J3    0) 


55  .2   B   e   «  .-^  W  J 
h3  S^  o  2 


Spq, 


.3  .—   Bi  .s   c  .:;    o  .z,  .•::.   o   ca   «   «  o   S   « 

,_iK5Pah-5DHq:^i^i-irt:z;p5S;z;op 


2  ,2  o  o  o 


r~C0010'-iO-J!r3T}<ir5tDt~-COOlO>-<01CO'<t<'CCDt^ 


K    2 


132 


THE    HISTORY    AND    PRINCIPLES 


^% 


m 


pq 


^    6    O' 


rt    C    5 


*A   pq 


tO«3«OCO'<J<<OCO'-< 
COOOOOOOOOOOooOO 


3       3     ^  k2  i5    a^    ^^         <" 


London  and  Westmin 
Barclay  and  Co. 
Glyn  and  Co. 
London  and  Westmin 
Barclay  and  Co. 

d 

T3 

C 

a> 

C3 

Glyn  and  Co. 

London  and  Westmin 

Smith,  Payne,  and  Co 

Glyn  and  Co. 

Barclay  and  Co. 

Hanlniry  and  Co. 
Jones  and  Co. 
Barclay  and  Co. 
Jones,  Loyd,  and  Co. 
Smith,  Payne,  and  Co 
London  and  Westmins 
Jones,  Lloyd,  and  Co. 
Glyn  and  Co. 
Rogers  and  Co. 
Ladbroke  and 'Co. 
Robarts  and  Co. 
Price  and  Co; 
Williams  and  Co. 
Barclay  and  Co. 
Barnett  and  Co. 

o   3   c-  ra 


fill 


3  S  2  &  i;  2 


::5  * 


i     cc     CO    .^     ♦J     O     O     „ 


M  Hj 


:m.£ 


bCPQ 


i.s 


c  .t: 


1 .5  ^._ 


o 
bn 

c  .- 

E  « 


:3  CO 


wo;^ 


01  o   >»  «   s  •=  J^  '^  ,"> 


3    bc<^  o  o  w)  c  ^  §  z: 


^  -^  E  -^  rt 

•s  m  u  i  s 

-^    -     b£=-£ 
P5    Jr  15  W  P^ 

g  T3  ^     '^     « 

^  S222 

cj         a»    CD    o 

•^  r;2   0*   Qj   at 
rS  ;>  ,-5  rS  :5 


a  r-  o 


3  ~  — 

a,   0)   cj 

.«  "^  T3 


■S    C    g    !>^K! 

•  -   n.U  «  ^ 
^  I   «'p| 

.  rs  to  c  ^  -^3 

rr  is  ^  ?:;  "  ^ 
-H  "  cc  •-  «  ^ 

o  cu  Z:  ~  CQ  ,=« 
^  ^c^  -S  3  f? 

0;  ^ 


^:a 


b£CJ 
be 


O 
be 

s.  « 

01  E 


S.7    bC- 


3  r- 


I   E 


'  f^  ^  ^ 
■u^  E 


00O>  Oi-i(N«^lOtOt^ 

«o  <o        t»  t~  t^  I^  l^  t-  t-  l^ 


«  o  E  3[^  S 


C9   ^ 

P3    3 

o        o  y=  -«  P5 

.5  2  bc^"  m  s 
E^.S'g  c  3.! 

g    C     C     g"5     «    ! 

n   o   0)   C   3        c 

_^    >    >    C8    «   ^•- 

.ii  j=  43   >-   So 

i     0)    0)    S*  43 

C  .'S  .t:  .i   3  -^  .i 

~     ~     "     3  ,0    C 


OF    BANKING.  133 

SECTION  VII. 

BRANCH  BANKS. 

The  establishment  of  branch  banks  may  be  consi- 
dered as  the  effect  of  the  formation  of  joint-stock 
banks.  A  bank,  consisting  of  only  six  partners,  is 
seldom  sufficiently  well  known  over  a  great  extent 
of  country,  to  be  able  to  open  many  branches.  The 
credit  of  such  a  bank  would  be  liable  to  be  shaken, 
at  one  or  other  of  its  branches,  and  this  might  throw 
a  suspicion  on  the  whole  establishment.  But  a  joint- 
stock  bank,  possessing  undoubted  credit,  may  extend 
its  branches  with  confidence  wherever  adequate  busi- 
ness can  be  obtained.  The  comparative  merits  of  an 
independent  private  bank,  and  a  branch  of  a  joint- 
stock  bank,  and  the  effects  they  are  adapted  to  pro- 
duce in  any  town  in  which  they  may  be  introduced, 
form  a  useful  subject  of  inquiry. 

In  the  first  place,  the  branch  bank  may  be  sup- 
posed to  possess  greater  security.  The  branch,  how- 
ever small,  would  possess  all  the  security  that  be- 
longed to  the  whole  establishment.  The  notes  issued 
at  the  branch  would  be  as  valid  as  notes  issued  at 
the  head  office ;  and  deposits  made  at  the  branch 
would  be  recoverable  from  all  the  partners  in  the 
whole  bank.  In  case  a  run  were  upon  even  the 
smallest  branch,  the  directors  would  be  as  anxious 
to  meet  tlie  demand  as  though  the  run  were  directed 
against  the  largest.  A  small  private  bank,  on  the 
other  hand,  would  have  its  only  resource  within 
itself.  Its  own  capital  woidd  form  its  only  guaran- 
tee ;  and,  in  case  of  a  sudden  demand,  it  must  ex- 
pect but  little  assistance  from  its  neighbours. 

Secondly,  a  branch  bank  would  command  the  use 
of  greater  capital. 

K  3 


134  THE    HISTORY    AND    PRINCIPLES 

Every  joint-stock  bank  would  call  upon  its  share- 
holders, for  a  supply  of  capital  equal  to  the  carrying 
on  of  tlie  business.  This  capital  would  be  kept  in  a 
disposable  form,  and,  not  like  the  capital  of  some 
private  banks,  locked  up  in  loans  upon  inconvertible 
security.  The  confidence  the  bank  possessed  would 
create  more  banking  capital,  by  attracting  deposits 
and  facilitating  the  issue  of  notes.  Some  banks 
create  more  capital  than  they  can  employ :  such  is 
the  case  when  the  amount  of  notes  and  deposits  is 
gi'eater  than  that  of  the  loans  and  discounts.  Others 
employ  more  than  their  banking  capital ;  and  some 
banks  employ  more  at  one  season  of  the  year,  and 
less  at  another.  In  such  cases  a  branch  bank  would 
be  fed  with  capital  from  the  parent  bank,  as  its  wants 
might  demand.  If  it  yielded  more  capital  than  it 
required,  the  parent  bank  would  employ  it  elsewhere. 
If  it  wanted  capital,  tlie  parent  bank  would  grant  an 
arnple  supply.  But  in  these  cases  a  private  bank 
would  be  troubled  with  an  excess  of  capital  which  it 
might  not  be  able  to  employ  advantageously  for  a 
short  period ;  or  it  might  be  distressed  to  raise  capital 
to  meet  the  wants  of  its  customers. 

Thirdly,  a  branch  bank  would  probably  do  busi- 
ness with  the  public  on  lower  terms. 

"'A  bank  having  many  branches,  usually  charges 
the  same  rate  of  interest  at  all  the  branches.  The 
Bank  of  England  discounts  at  all  its  branches  on  the 
same  terms  as  in  London.  This  cheapness  of  dis- 
count occasioned  a  great  reduction  of  profits  to  the 
private  bankers.  A  branch  bank,  too,  conducted  on 
the  principle  of  allowing  interest  on  deposits,  will 
probably  allow  a  higher  rate,  because  tlie  money  can 
always  be  employed  at  some  one  or  other  of  the 
branches ;  and  it  will  return  the  deposits  at  a  shorter 
notice,  because  the  funds  of  the  whole  bank  are  ready 
to  meet  the  call.  In  the  transmission  of  money,  a 
system  of  branch  banks  has  a  decided  advantage,  be- 


OF    BANKING.  135 

cause  the  branches  draw  direct  upon  each  other,  and 
discount  bills,  payable  at  all  the  branches  respectively. 
In  a  system  of  independent  banks  the  transmission  of 
money  from  one  to  another  is  usually  effected  by  a 
bill  on  London  ;  and  bills  drawn  by  one  town  on 
another  are  obliged  to  be  made  payable  in  London. 

Branch  banks  are  enabled  to  charge  less  than 
private  bankers,  from  their  expenses  and  their  ex- 
pected profits  being  less.  If  a  country  bank,  having 
many  branches,  employs  a  London  agent,  the  charge 
for  agency  will  be  much  less  than  though  the  branches 
were  all  independent  banks.  A  branch  bank  is  not 
under  the  necessity  of  keeping  in  its  coffers  so  large 
a  stock  of  gold  as  though  it  were  an  independent 
bank,  because,  in  case  of  emergency,  it  is  sure  of  ob- 
taining supplies.  The  rate  of  profit,  too,  expected 
from  a  branch  bank  is  much  less  than  would  be  ex- 
pected by  a  private  banker.  A  banking  company 
would  be  induced  to  establish  a  branch,  could  they 
be  assured  of  obtaining  a  clear  profit  of  one  or  two 
per  cent,  on  their  capital  above  the  market  rate  of 
interest ;  but  a  private  banker,  who  may  be  sup- 
posed already  a  wealthy  man,  would  not  consider 
that  amount  a  sufficient  remuneration  for  his  own 
trouble  and  superintendence.  Hence,  his  charges 
must  be  higher,  to  meet  this  increased  rate  of  profit. 
Were  the  profits  of  a  private  banker,  in  proportion 
to  the  amount  of  capital  employed,  to  be  reduced  to 
the  average  rate  of  profit  of  joint-stock  banks,  he 
would  very  soon  think  of  retiring  from  business. 

A  branch  bank  may  thus  be  established  in  a  place 
where  a  private  bank  could  not  exist.  It  may  also 
be  opened  in  places  not  sufficiently  wealthy  to  furnish 
capital  for  a  joint-stock  bank,  and  where  the  people 
have  no  banking  facilities ;  branches  being  opened 
in  such  places,  prevent  the  formation  of  banks  with 
insufficient  capital.  For,  to  be  without  a  bank  is  felt 
to  be  so  great  an  inconvenience,  that,  if  a  good  bank 

K  4 


130  THE    HISTORY    AND    PRINCIPLES 

cannot  be  obtained,  a  bad  one  will,  for  a  while,  be 
supported.  Hence,  shop-keepers  and  others  have 
become  bankers ;  and,  having  but  a  small  capital, 
and  being  unacquainted  with  their  business,  they 
have,  ultimately,  involved  themselves  and  others  in 
irretrievable  ruin. 

I  have  hitherto,  too,  compared  a  branch  bank  with 
an  independent  private  bank.  I  will  now  compare 
it  with  an  independent  joint-stock  bank.  Several  of 
the  advantages  already  specified  will  apply  as  justly 
in  this  case  as  in  the  other.  The  branch  may,  in  this 
case,  also  be  supplied  with  a  greater  amount  of  capital 
if  it  could  be  profitably  employed,  or  it  may  have 
better  means  of  disposing  of  its  surplus  capital.  The 
charges  of  the  branch,  especially  for  the  transmission 
of  money  by  letters  of  credit,  or  by  discounting  bills, 
may  also  be  less  at  the  branch.  In  point  of  security, 
the  two  banks  may  be  considered  as  on  an  equality  ; 
though,  perhaps,  in  some  cases,  the  advantage  may 
be  in  favour  of  the  branch. 

The  expense  of  managing  a  branch  must  be  less 
than  that  of  managing  an  independent  bank,  as  a  less 
number  of  directors  would  be  necessary.  The  direc- 
tors or  managers  of  a  branch,  too,  acting  under  the 
direction  of  a  superior  board,  are  less  liable  to  be  in- 
volved by  indiscreet  advances  of  loans  from  personal 
friendship  or  imperfect  information.  The  transac- 
tions are  more  thoroughly  sifted,  and  no  important 
measure  adopted  without  full  discussion.  The  very 
circumstance  of  being  accountable  to  a  superior  board 
would  render  the  agents  at  the  branch  more  scrupu- 
lous and  cautious  tlian  they  might  otherwise  be  ; 
and  the  periodical  returns  made  to  the  head  office 
would  constantly  bring  all  the  business  of  the  branch 
under  the  notice  of  experienced  and  unbiassed  in- 
spectors. 

There  are,  however,  some  disadvantages  attend- 
ing a  branch  bank.     As  a  branch  bank  is  a  mere  co- 


OF    BANKING.  137 

lony,  the  agents  must  be  directed  by  the  commands 
they  receive  from  the  seat  of  government ;  and  the 
branch  may  be  directed,  in  some  cases,  to  adopt 
measures  more  adapted  to  promote  the  welfare  of  the 
whole  establishment  than  to  advance  the  interest  of 
that  individual  branch.  The  Bank  of  England,  for 
instance,  may  engage  to  lend,  on  advantageous  terms, 
a  certain  sum  of  money  to  the  government ;  and 
might  consequently  direct  their  agents  at  the  branches 
to  limit  their  discounts.  As  it  is  the  duty  of  the 
directors  to  consult  the  interest  of  the  whole  esta- 
blishment, they  might  consider  themselves  justified, 
as  commercial  men,  in  adopting  this  line  of  conduct. 
At  the  same  time,  it  would  be  a  great  inconvenience 
to  the  persons  resident  at  the  places  where  the 
branches  are  established  to  be  deprived  of  their  usual 
discounts.  So  any  other  joint-stock  bank  having 
branches  might  limit  their  discounts  at  those  branches 
in  consequence  of  having  more  profitable  ways  of  em- 
ploying their  capital  at  head  quarters. 

Another  possible  inconvenience  to  a  branch  arises 
from  the  circumstance,  that  most  cases  of  importance 
are  necessarily  referred  for  the  consideration  of  the 
head  office :  not  that  these  cases  are  more  difficult 
than  ordinary  cases,  but  because  they  are  deviations 
from  the  usual  course  of  business,  or  they  belong  to 
a  class  of  transactions  which  is  very  properly  reserved 
for  the  decision  of  the  highest  authority.  And  hence, 
persons  who  have  dealings  with  the  branch  may  be 
obliged  to  wait  the  return  of  post,  or  a  still  longer 
term,  before  they  can  obtain  answers  to  important 
inquiries.  This  inconvenience  may,  however,  be  con- 
siderably diminished  by  giving  to  the  managers  or 
agents  a  high  degree  of  discretionary  power,  and  re- 
serving as  few  cases  as  possible  for  the  decision  of  the 
supreme  board  of  directors. 

The  respective  claims  of  these  three  different  kinds 
of  banks,  as  far  as  regards  any  particular  place,  must 


138  THE    HISTORY    AND    PRINCIPLES 

depend  on  local  circumstances.  It  is  easy  to  imagine 
cases  wherein  a  private  bank  of  undoubted  wealth 
and  judicious  management  is  superior  to  either  a 
branch  bank  or  an  independent  joint-stock  bank. 
But  private  banks  depend  entirely  upon  the  persons 
by  whom  they  are  managed ;  and  these  persons, 
whatever  other  endowments  they  may  possess,  are 
not  endowed  with  immortality,  nor  with  the  power 
of  bequeathing  their  good  qualities  to  their  successors. 
Leaving  private  banks  out  of  the  question,  a  branch 
bank  seems  best  adapted  for  a  small  town ;  and  an 
independent  joint-stock  bank  for  a  large  one.  When 
banking  is  left  perfectly  free,  the  natural  force  of 
competition  will  soon  enable  each  town  to  provide 
itself  with  that  kind  of  bank  which  is  best  adapted  to 
its  own  wants  and  circumstances. 

The  Bank  of  England  has  established  twelve 
branches. 

The  business  of  the  branches  consists  in  discount- 
ing bills ;  in  receiving  deposits ;  in  issuing  bills  on 
the  London  bank,  at  twenty-one  days  after  date  ; 
and  in  the  transmission  of  money  to  and  from  Lon- 
don. Each  branch  issues  its  own  notes,  which  are 
payable  at  the  place  of  issue,  and  in  London.  The 
rate  of  discount  is  the  same  as  in  London  ;  no  in- 
terest is  allowed  on  deposits ;  no  charge  is  made  for 
a  twenty-one-day  bill  on  the  parent  establishment : 
but  if  money  be  lodged  at  the  branch,  to  be  received 
the  following  day  in  London  ;  or  lodged  in  London, 
to  be  received  at  the  branch ;  a  charge  is  made  for 
commission,  unless  the  parties  have  accounts  at  the 
branch. 


OF    BANKING. 


139 


O 


a 


o 

I— I        cj 

s  ^ 

o 

CO 

O) 
O 

a 

< 


^cc 

O 

o 

o 

o      o 

o 

c^  t-     O 

o 

o 

o      o 

o 

CT) 

ir 

o 

o 

Q, 

o      o 

CO 

Ijg 

CO 

CM 

o 

o 

C^ 

o      o 

CO 

■*-4 

r^ 

Ti^l>     CO 

o 

o 

CN         O 

tJ^ 

0) 

CM 

■<iH 

Oi       tr^ 

CO 

o 

C<" 

^H 

'^ 

«:> 

CO        vo 

l-H 

i-;^ 

l-H 

o 

C5        l-H 

I-H 

l-H 

CD 

d^ 

l-H 

-^  Oi    o 

o 

o 

o      o 

o 

TS 

<C    r-H       O 

o 

o 

o      o 

o 

'^ 

l-H 

*^ 

d 

CO 

^   o 

o 

Q 

o      o 

CO 

0) 

CO 

CM 

o 

o 

c^ 

o      o 

1- 

o 

1— ( 

n^  CO     C5 

CO 

u? 

o      o 

CO          CO 

o 

cr 

o 

'^ 

CO 

l-H            CO 

Oi 

o 

t- 

'^ 

t- 

CM 

l-H 

X 

•^ 

*\ 

CS 

^ 

t- 

l-H 

^ir 

o 

O 

o 

o      c 

o 

Cm 

0^  r-   o 

o 

o 

o      o 

o 

^ 

, 

0) 

CM 

<T 

o 

o 

o 

o      o 

l-H 

o 

CO 

C 

o 

o 

o 

^^            ^^ 

CO 

1— 1 

o 
d 

o^ 

cfT      co" 

lO 

c^ 

r- 

CO 

^ 

en      K) 

CO 

c3 

'^ 

o 

U5 

<1> 

»\ 

s 

GO 

-*" 

l-H 

^  VO     O 

O 

o 

o      o 

o 

t+H 

rt 

c^   IT 

o 

o 

o 

o      o 

o 

•^ 

CO 

G^ 

o 

o 

o 

o      o 

r- 

0) 

c 
o 

CO 

OC 

o 

o 

o 

o      o 

1— ( 

TtJ  t-T      r-T 

o 
d 

o 

o      o 

^     l-T 

1^ 

CO 

^ 

i^ 

Od 

CO 

K5 

CO 

C5        CM 

CO 

a 

CM 

CN 

CO 

l-H 

<u 

Q 

1-H 

l-H 

rH 

— — — 

• 

£S 

t                    J 

^ 

. 

O 

"*    ^^^^(^"^"^ 

c 

^^"^"^^ 

■w 

TS 

^ 

•    to      • 

a 

1 

.    a 

c 

c 

;   Qj     : 

x 

S-i 

.    s 

o 

CS 

.  x.    . 

o 

,    o 

^ 

Xi 

•  o    : 

a 
o 

Oh 

o 

V 

.2 

o 

c 
o 

gold 
0  bra 
silve 

a 
o 

Q. 

X. 
i, 
c 

c 

'13 
o 

0) 

c 

3 
O 

o 

O 
;-i 

'si 

■4-> 

a 
a 
X> 

c 
o 

c 
o 

o 

+-> 

CO 
V 

o 

!-i 
X5 

CO 
0) 

G    a: 

a  0. 

!-   • - 

c 

q. 

c 

X 

■4-> 
CO 

C 

S 

o 
■l-l 

c 

S 
O 

C 

J  2 

-w     S 

a 

"a 

r 

<u 

is  c 

en 

to 

a 

CO 

•S 

(U    o 

c 

> 

a 

a 

"c 

*o 

'o 

^ 

< 

U 

O 

U 

u 

U 

ca  ■ 


i2  .-  "^ 

3  i^     Oh 


03 


o 

CO    0,  /S  -tS 


"TS   "^J 


3   CO   t-  a> 

^        O       *H    ,0  > 

"S  .h     G     O  C 

.5i^'"  3 

3  "^  t;  'S  "^ 

O-^    "    3  5J 


.FH        j_^      *H 


^       fap    tjfl 


a  •-'  h  to 


1^      CO 

■3  -^ 

CO    o 
Oh 
HI 


CO    --° 

-.30 

o  *^ 


es    M    Sb'^ 


G 


"  OJ  'c3  C3 
<U  -C  -G 
^   ♦J    eg    o 

*->      .v*      . 

G  faia'"  CS 

•^     CS        •\ 

ace    S  "is 
0    0)° 

.tj      ►— -rH      gj 

•-    *j  OJ 

-TH      f^^-S   * 

.bl  "  ^    , 

^   X   o   ^ 


o    t^, 

s- 

G 
3 
o 


-  !s- 

2-5  2 


S   o 


c 
o 


Tj    CS 


-^  1-3  ■S 

G  I— I    G 


r^      G 


CS 


.■S         .tJ  ^    CO    a 

o)  Tj  "is  O  ^ 

<J    G  O    1^ 


140 


THE    HISTORY    AND    PRINCIPLES 


CO 
00 


u 

>^ 

*> 

•  I— I 

T3 


O 


sl 


o 


<1 


.S'UOJ 

oooooooooool 

lodged 
don  tob 
od  at  thi 
Iranch. 

oooooooc 

5     0     0     0 

oooocooocoo 

Si)l«ocfr^Qor-^od~c»cdci5'ofco 

''OCOCOCiCOOCO—i^ 

-.     10     CO 

-1      1—      CO      Tff      CO      r-i       ^ 

CO 

ooooooooooo 

2^     c 

ooooooooooo 

SZ:  S.2 

ooooooooooo 

rt  ^       *- 

r>i.\ 

=ui^^ 

^a-jr-or^ioot--t^t^ooo 

S?"^  S 

2S-°" 

t«H 

CO     CO     >— 1      !—( 

0)  o      'S 

>  a 

I— 1 

<%. 

o 

S 

'^ 

CD 

^- 

0 

0     CO 

3 

. 

1-H 

0 

Oi 

0   10 

M 

05 

l--i( 

,-H             1 

1-H      f-H 

J3 

C 

'^ 

Ci 

0 

00    10    1 

O 

^ 

^ 

CO 

CO        1 

0   10   1 

CO 

00 

1- 

- 

CD 

O 

^ 

GO 

G-f 

l-i 

CO 

a    - 

►^r-ir~-0«5<M— lOOOi-*"^ 

■§•3 

•  tOCOCOiOOOCJ^HO^OI^ 

.-  > 

«0 

r-( 

I— 1     I— (     I— 1 

1— r 

E-S 

=  S 

„CO-^i-Hi-HOf-HVOa5CDG^-< 

B  i- 

Qin  0   cor^t---iOGot^G<iioci5 

^00      ^O?00U500CMr-lr-^rt.-( 

U 

1— 1 

•a 

-^'^^^OCO-^O'^OOi'^CM 

p 

o 

.  05     t-     O' 

C0r-lt-W5r-lOO^| 

S 

'^l  1— 

I— ( 

r-c      i-^      I— (      1— 

O^Jt^-*t^CMOi-*00COCNi— 1 

w} 

„,C0CMC-i00O«O-^i0C0C0,-H 

h' 

^Oir-i    ocor-x^^cor-cooi 

OJ 

"u 

^^             •^ 

c 

cc 

t^    CO    •—<     1— 1     CO    »o 

r-^     CM      CO     1 

(>1    .-1 

c 

=  Si 

c 

ooooooooool 

E^  " 

c 

0   0   0   c 

000000 

«  5  a 

Qji)  ^ 

0   c 

R  c 

c 

_^  0^  0   0   0   0   1 

OJ^  g 

^  cT  -f 

'^ 

"   0"   CD    0 

"    CO     GC 

"  CO*"  c>f  r-^ 

22"^ 

1^    Oi     cc 

0^    c- 

c 

CM       r- 

CO    CO    00 

10    c^ 

f— 

l-H 

■< 

Ih 

E 

Si 

a 

a; 

01 

0) 

c 

C/2 

C3     ^ 
'bJO    c 

* 

.a 

u 

3 

0 

5 

c     0 

1  s 

a 

to        0) 

n3     ■*■* 

a 

CJ 

X 

0 
ll 

3 


T3 
C 
OS 


c 

C3 

t-i 

XH 

x; 

0) 

3 

X 

0 

S 

*\ 

>-. 

CO 

tx. 

CO 

'"' 

CS 

<u 

(m 

CI> 

G 

,a 

c» 

0 

# 

c 

03 

T3 

C 

CJ 

OF    BANKING.  141 


SECTION  VIII. 

BANKS    OF    DEPOSIT. 

Banking  is  a  kind  of  trade,  carried  on  for  the  pur- 
pose of  getting  money.  The  trade  of  a  banker 
differs  from  other  trades,  inasmuch  as  it  is  carried  on 
chiefly  from  the  money  of  other  people. 

The  trading  capital  of  a  bank  may  be  divided  into 
two  parts :  the  invested  capital,  and  the  banking 
capital.  The  invested  capital  is  the  money  paid 
down  by  the  partners  for  the  purpose  of  carrying  on 
tlie  business.  This  may  be  called  the  real  capital. 
The  banking  capital  is  that  portion  of  capital  which 
is  created  by  the  bank  itself  in  the  course  of  its 
business,  and  may  be  called  the  borrowed  capital. 

There  are  three  ways  of  raising  a  banking  or  bor- 
rowed capital :  first,  by  receiving  deposits  ;  secondly, 
by  the  issuing  of  notes  ;  thirdly,  by  the  drawing  of 
bills.  If  a  person  will  lend  me  100/.  for  nothing, 
and  I  lend  that  100/.  to  another  person  at  four  per 
cent,  interest,  then,  in  the  course  of  the  year,  I  shall 
gain  4/.  by  the  transaction.  Again,  if  a  person  will 
take  my  *'  promise  to  pay,"  and  bring  it  back  to  me 
at  the  end  of  the  year,  and  pay  me  four  per  cent,  for 
it,  just  the  same  as  though  I  had  lent  him  100  sove- 
reigns, then  I  shall  gain  4/.  by  that  transaction ;  and 
again,  if  a  person  in  a  country  town  brings  me  100/. 
on  condition  that,  twenty-one  days  afterwards,  I 
shall  pay  the  same  amount  to  a  person  in  London, 
then,  whatever  interest  I  can  make  of  the  money 
during  the  twenty-one  days,  will  be  my  profit.  This 
is  a  fair  representation  of  the  operations  of  banking, 
and  of  the  way  in  which  a  banking  capital  is  created 
by  means  of  deposits,  notes,  and  bills. 


142  THE    HISTORY    AND    PRINCIPLES 

The  profits  of  a  banker  are  generally  in  proportion 
to  the  amount  of  his  banking  or  borrowed  capital. 
If  a  banker  employ  only  his  real  or  invested 
capital,  it  is  impossible  he  should  ever,  in  the  ordi- 
nary course  of  business,  make  any  profits.  Bankers 
can  seldom  obtain  more  upon  their  advances  than  the 
market  rate  of  interest ;  and  that  may  be  obtained 
upon  real  capital,  without  the  expense  of  maintaining 
a  banking  establishment.  If,  after  deducting  the  ex- 
penses, the  profits  amount  to  nothing  more  than  the 
market  rate  of  interest  upon  the  invested  capital,  the 
bank  may  be  considered  to  have  made  no  profits  at 
all.  The  partners  have  received  no  higher  dividend 
upon  the  capital  invested  in  the  bank  than  they 
W' ould  have  received  if  the  same  money  had  been  laid 
out  in  government  securities.  To  ascertain  the  real 
profit  of  a  bank,  the  interest  upon  the  invested  capital 
should  be  deducted  from  the  gross  profit,  and  what 
remains  is  the  banking  profit. 

A  bank  that  receives  lodgments  of  money  is  called 
a  bank  of  deposit.  A  bank  that  issues  notes  is  called 
a  bank  of  circulation.  Each  bank  attempts  to  pro- 
cure a  banking  capital,  but  by  different  means.  When 
a  bank  of  deposit  is  opened,  all  the  people  in  the 
district,  who  have  money  lying  idle  in  their  hands, 
will  place  the  money  in  the  bank.  This  will  be 
done  by  the  merchants  and  tradesmen,  who  are  in  the 
habit  of  keeping  by  them  a  sufficient  sum  of  money 
to  answer  daily  demands  ;  by  the  gentry  and  others 
out  of  business,  who  receive  their  rents,  dividends,  or 
other  monies,  periodically,  and  disburse  them  as  they 
have  occasion.  The  various  small  sums  of  money 
which  were  lying  unproductive  in  the  hands  of  nu- 
mei'ous  individuals,  will  thus  be  collected  into  one 
sum  in  the  hands  of  the  banker.  The  banker  will 
retain  a  part  of  this  sum  in  his  till,  to  answer  the 
cheques  the  depositors  may  draw  upon  him  ;  and 
with  the  other  part  he  will  discount  bills,  or  otherwise 


OF    BANKING.  143 

employ  it  in  his  business.  But  if,  instead  of  a  bank 
of  deposit,  a  bank  of  circulation  only  be  established, 
then  the  several  small  sums  of  money  will  remain  un- 
productive, as  before,  in  the  hands  of  various  indi- 
viduals ;  and  the  banker,  in  discounting  bills,  will 
issue  his  own  promissory  notes. 

Now%  it  is  obvious  that  these  two  kinds  of  banking 
are  adapted  to  produce  precisely  the  same  effects. 
In  each  case  a  banking  capital  is  created,  and  each 
capital  is  employed  in  precisely  the  same  way ; 
namely,  in  the  discounting  of  bills.  To  the  parties 
who  have  their  bills  discounted,  it  matters  not  from 
wdiat  source  the  capital  is  raised — the  advantage  is 
the  same  to  them — the  mode  in  w^hich  they  employ 
the  money  is  the  same — and  the  effects  upon  trade 
and  commerce  will  be  the  same.  Let  us  suppose 
that  in  each  case  the  banking  capital  created  is 
50,000/.  Now,  the  bank  of  cu'culation  will  have 
increased  the  amount  of  money  in  the  country  by 
50,000/.  The  bank  of  deposit  will  not  have  increased 
at  all  the  amount  of  money  in  the  country,  but  it  will 
have  put  into  motion  50,000/.  that  would  otherwise 
have  been  idle.  Here,  then,  is  a  proof,  that  to  give 
increased  rapidity  to  the  circulation  of  money,  has 
precisely  the  same  effects  as  to  increase  the  amount. 
Here,  too,  is  a  proof  of  the  ignorance  of  banking,  on 
the  part  of  those  writers  who  consider  that  the  banks 
which  issue  notes  are  the  sole  cause  of  high  prices, 
over-trading,  and  speculation  ;  whereas  it  is  obvious, 
that  if  those  effects  are  to  be  attributed  to  banking  at 
all,  they  may  as  fairly  be  ascribed  to  banks  of  deposit 
as  to  banks  of  circulation. 

Even  those  bankers  who  do  not  issue  notes  create 
a  banking  capital  by  the  discounting  of  bills.  They 
render  their  discounts  subservient  to  the  increase  of 
their  deposits.  The  London  bankers  will  not  discount, 
except  for  those  persons  who  have  deposit  accounts 
with  them.     A  party  who  has  had  bills  discounted, 


I'i'i'  THE    HISTORY    AND    PRINCIPLES 

and  has  paid  interest  on  the  whole  amount,  must 
leave  some  portion  of  that  amount  in  tlie  hands  of  the 
banker,  without  interest.  By  this  means  the  banker 
obtains  more  than  the  current  rate  of  interest  on  the 
money  actually  advanced,  and  raises  a  banking  capital 
to  the  amount  of  the  balance  left  in  his  hands.  "  A 
good  account,"  in  the  language  of  the  London  bankers, 
is  an  account  on  which  there  is  a  large  deposit :  a  bad 
account  is  that  on  which  the  sum  deposited  is  small. 
A  person  who  keeps  a  good  account  may  have  his 
bills  discounted  readily ;  but  a  person  who  keeps  a 
bad  account  will  have  his  bills  more  severely  scrutin- 
ised. The  depositors  are  aware  of  this ;  and  there- 
fore they  endeavour  to  keep  a  fair  account  with  the 
banker,  that  they  may  at  all  times  be  able  to  obtain 
such  accommodation  in  the  way  of  discounts  as  they 
may  require.  This  mode  of  raising  a  banking  capital 
by  means  of  discounts,  without  allowing  interest  on 
the  deposits,  appears  to  be  less  advantageous  to  the 
borrower  than  by  means  of  notes.  In  the  one  case 
the  borrower  has  to  lodge  some  portion  of  his  money 
in  the  hands  of  the  banker,  but  in  the  other  case  he 
has  only  to  take  the  banker's  notes,  which  are  pro- 
bably as  serviceable  to  him  as  gold.  Hence,  such 
banks  appear  adapted  for  the  service  of  tlie  rich  rather 
than  the  poor.  A  young  tradesman,  who  is  commenc- 
ing business  with  a  slender  capital,  will  hardly  find 
it  worth  his  while  to  o])en  an  account  at  a  banker's, 
unless  he  has  always  by  him  a  certain  portion  of  his 
capital,  which  he  is  obliged  to  keep  imemployed. 

The  London  bankers  grant  no  interest  for  money 
placed  in  their  hands,  nor  cliarge  any  commission 
upon  the  amount  of  the  transactions.  Their  customers 
pay  them  for  the  trouble  of  conducting  their  accounts 
by  keeping  a  certain  balance  to  their  credit.  The 
amount  of  the  balance  is  never  definitely  fixed,  but 
is  regulated  very  much  by  the  good  sense  and  proper 
feeling  of  the  parties.     The  number  of  cheques  a 


OF    BANKING.  145 

party  draws — the  degree  of  accommodation  he  re- 
ceives by  discount  or  otherwise — these  and  other  cir- 
cumstances are  taken  into  consideration  ;  and  thougli 
the  amount  of  the  balance  is  not  expressly  stipulated, 
yet  few  people  of  business  habits  are  at  a  loss  to 
judge  whether  the  average  balance  of  their  account 
throughout  the  year  is  sufficient  to  remunerate  the 
banker. 

By  the  Scotch  banks,  deposit  accounts  are  divided 
into  two  classes:  "accounts  current,'*  and  "deposit 
receipts."  The  "accounts  current"  are  similar  to 
the  "  current  accounts"  kept  by  merchants,  traders, 
and  others  in  the  English  banks.  The  party  pays  his 
money  into  the  bank,  and  makes  all  his  payments  by 
cheques  upon  the  bank.  The  deposit  receipts  are 
similar  to  what  the  English  bankers  call  "  dead  ac- 
counts." The  depositor  pays  his  money  into  the 
bank,  and  there  it  lies  "  dead  "  until  he  has  occasion 
for  it,  and  then  he  produces  his  receipt  and  withdraws 
the  whole  amount,  or  takes  a  new  receipt  for  any 
part  he  wishes  to  leave.  The  deposit  receipts  are 
chiefly  for  the  use  of  those  who  lodge  their  money 
in  the  bank  merely  for  the  purpose  of  security  and 
interest.  The  accounts  current  are  for  those  who, 
in  addition  to  security  and  interest,  wish  to  make 
use  of  the  bank  as  a  means  of  facilitating  their  pecu- 
niary transactions.  As  far  as  regards  the  circulation 
of  the  banker's  notes,  each  kind  of  account  has  the 
same  effect ;  but  as  the  operations  on  the  current 
accounts  are  more  frequent,  they  put  into  circulation 
a  larger  amount. 

When  a  banker's  own  notes  are  lodged  on  a  deposit 
account,  they  do  not  diminish  the  amount  of  his  bank- 
ing capital.  The  banking  capital  raised  by  liis  notes 
is  diminished,  but  that  raised  by  his  deposits  is  in 
the  same  proportion  increased.  If,  however,  the 
interest  lie  allows  upon  the  deposits  is  greater  than 
the  expense  of  the  wear  and  tear  of  his  notes,  then 

L 


116  THE    HISTORY    AND    PRINCIPLES 

will  his  banking  capital  be  diminished  in  the  more 
])rofitable,  and  increased  in  a  less  profitable,  direction. 
But  when  a  deposit  consists  of  notes  of  other  banks, 
his  banking  capital  is  increased  by  that  amount. 
Hence,  if  a  banker  could  know  that  all  the  money 
deposited  in  his  hands  w^ould  consist  chiefly  of  his 
own  notes,  it  might  not  be  for  his  advantage  to  allow 
any  interest  on  deposits.  It  would  be  better  for  him 
that  his  notes  shoidd  remain  in  circulation. 

It  will  be  observed  that  the  amount  of  notes  issued 
on  deposit  accounts,  depends  not  on  the  banker  but 
upon  the  depositors  :  they  lodge  money  in  his  bank, 
and  draw  it  out  when  they  please.  The  deposit 
system,  therefore,  cannot  place  in  circulation  any 
additional  amount  of  money.  The  depositors  cannot 
draw  out  of  the  bank  more  money  than  they  had  de- 
posited. After  the  deposits  are  made,  the  amount  of 
money  in  existence  is  precisely  the  same  as  before :  the 
only  difference  is,  that  what  was  previously  in  the 
hands  of  many  individuals,  is  now  in  the  hands  of  the 
banker ;  and  until  he  has  made  use  of  this  money  in 
the  way  of  discounts  or  loans,  or  in  some  other  mode, 
no  effect  whatever  can  be  produced  upon  the  trade 
and  commerce  of  the  district.  All  the  advantage  the 
people  of  the  neighbourhood  obtain  by  the  deposit 
system,  considered  by  itself,  consists  in  having  a  place 
of  security  in  which  they  may  lodge  their  money, 
in  receiving  interest  for  the  sums  thus  deposited — 
and  in  the  saving  of  time  and  trouble  in  effecting 
their  pecuniary  transactions.  But  although  the  de- 
posit system  does  not  affect  the  amount  of  the  cur- 
rency, it  changes  its  character.  As  the  lodgments 
will  be  made  in  the  previously  existing  currency — 
whether  gold,  or  silver,  or  notes  of  other  banks — 
and  all  the  issues  will  be  in  the  banker's  own  notes, 
the  effect  will  be,  that  in  course  of  time  all  the 
previous  currency  will  have  passed  into  the  bank, 
and  all  the  existing  currency  wull  consist  exclusively 


OF    BANKING.  147 

of  the  banker's  own  notes ;  and  the  more  frequent 
and  heavy  are  the  operations  on  the  deposit  accounts, 
the  more  rapidly  will  this  effect  be  produced. 

Banks  of  deposit  serve  to  economise  the  use  of  the 
circulating  medium.  This  is  done  upon  the  principle 
of  transfer.  The  principle  of  transfer  was  one  of  the 
first  which  was  brought  into  operation  in  modern 
banking.  The  bank  of  Amsterdam  was  founded 
upon  this  principle.  Any  person  who  chose,  might 
lodge  money  in  the  bank,  and  might  then  transfer  it 
from  his  own  name  to  that  of  another  person.  All 
foreign  bills  of  exchange  were  required,  by  law,  to  be 
paid  by  such  transfers.  Although  the  money  might 
at  any  time  be  drawn  out,  either  by  the  original  de- 
positor or  by  the  party  into  whose  name  it  had  been 
transferred,  yet,  in  fact,  this  was  seldom  done,  be- 
cause the  bank  money  was  more  valuable  than  the 
money  in  common  use,  and  consequently  bore  a  pre- 
mium in  the  market.  The  transfer  of  lodgments  is  ex- 
tensively practised  in  our  own  times.  If  two  persons, 
who  have  an  account  in  the  same  bank,  have  business 
transactions  with  each  other,  the  debtor  will  pay  the 
creditor  by  a  cheque  upon  the  bank.  The  creditor 
will  have  this  cheque  placed  to  his  credit.  The 
amount  of  money  in  the  bank  remains  the  same ;  but 
a  certain  portion  is  transferred  into  a  different  name 
in  the  banker's  books.  The  cheque  given  by  the 
debtor  is  an  authority  from  the  debtor  to  the  banker 
to  make  this  transfer. 

Here  the  payment  between  the  creditor  and  debtor 
is  made  without  any  employment  of  money.  No 
money  passes  from  one  to  the  other :  no  money  is 
paid  out  or  received  by  the  banker.  Thus  it  is,  that 
banks  of  deposit  economise  the  use  of  the  circulating 
medium,  and  enable  a  large  amount  of  transactions 
to  be  settled  with  a  small  amount  of  money.  The 
money  thus  liberated,  is  employed  by  the  banker  in 
making  advances,  by  discount  or  otherwise,  to  his 

L  2 


148  THE    HISTORY    AXD    PRINCIPLES 

customers.  Hence  tlie  principle  of  transfer  gives  ad- 
ditional efficiency  to  tlie  deposit  system,  and  increases 
the  productive  capital  of  the  country.  It  matters  not 
whether  the  two  parties  who  have  dealings  with  each 
other  keep  their  accounts  with  the  same  banker  or 
with  different  bankers ;  for,  as  the  bankers  exchange 
their  cheques  with  each  other  at  the  clearing-house, 
tiie  effect,  as  regards  the  public,  is  the  same.  The 
deposit  system  might  thus,  by  means  of  transfers,  be 
carried  to  such  an  extent  as  wholly  to  supersede  the 
use  of  a  metallic  currency.  Were  every  man  to  keep 
a  deposit  account  at  a  bank,  and  make  all  his  pay- 
ments by  cheques,  money  might  be  superseded,  and 
cheques  become  the  sole  circulating  medium.  In  this 
case,  however,  it  must  be  supposed  that  the  banker 
has  the  money  in  his  hands,  or  the  cheques  would 
have  no  value. 

Since  1825,  the  following  facilities  have  been 
granted  by  the  bank  of  England  to  those  who  liave 
deposit  accounts ;  or,  as  they  are  called,  **  drawing 
accounts"  at  the  bank  : — 


1.  The  bank  receive  dividends,  by  power  of  attorney,  for  all 
persons  having  drawing  accounts  at  the  bank. 

2.  Dividend  warrants  are  received  at  the  drawing  office  for  ditto, 

3.  Exchequer  bills,  and  other  securities  are  received  for  ditto  — 
the  bills  exchanged,  the  interest  received,  and  the  amount  carried 
to  their  respective  accounts. 

4.  Clie(|ues  may  be  drawn  for  51.  and  upwards,  instead  of  10/., 
as  heretofore. 

.5.  Cash  boxes  taken  in,  contents  unknown,  for  such  parties  as 
keep  accounts  at  the  bank. 

6.  Bank  notes  are  paid  at  the  counter,  instead  of  drawing  tickets 
for  them  on  the  ])ay  clerks,  as  heretofore. 

7.  Cheques  on  city  bankers,  paid  in  by  three  o'clock,  may  be 
drawn  for  between  four  and  five ;  and  those  paid  in  before  four 
will  be  received  and  passed  to  account  the  same  evening. 

8.  Cheques  paid  in  after  four,  are  sent  out  at  nine  the  following 
morning,  received  and  passed  to  account,  and  may  be  drawn  for  as 
soon  as  received. 

9.  Dividend  warrants  taken  in  at  the  drawing  office  until  five  in 
the  afternoon,  instead  of  till  three  as  heretofore. 


OF    BANKING. 


149 


10.  Credits  paid  into  account  are  received  without  the  bank  book, 
and  are  afterwards  entered  therein  without  the  party  claiming  them. 

11.  Bills  of  exchange,  payable  at  the  bank,  are  paid  with  or 
without  advice  ;  heretofore  with  advice  only. 

12.  Notes  of  country  bankers,  payable  in  London,  are  sent  out 
the  same  day  for  payment. 

13.  Cheques  are  given  out  in  books,  and  not  in  sheets  as  here- 
tofore. 

The  following  is  an  account  of  the  average  annual 
amounts  of  the  public  and  private  deposits  in  the 
hands  of  the  bank,  from  the  year  1807  to  the  year 
1831.  Previous  to  the  year  1807,  the  public  and 
private  accounts  were  kept  in  the  same  office,  but 
then  they  were  separated  : — 


Years. 

Public  Deposits,  i  Private  Deposits. 

Years. 

Public  Deposits. 

Private  Deposits. 

£ 

£ 

£ 

£ 

1807 

12,64-7,5.51 

1,582,720 

1820 

3,713,442 

1,325,060 

1808 

11,761,448 

1,940,630 

1821 

3,920,157 

1,326,020 

1809 

11,093,648 

1,492,190 

1822 

4,107,853 

1,373,370 

1810 

11,950,047 

1,428,720 

1823 

5,526,635 

2,321,920 

1811 

10,191,854 

1,567,920 

1824 

7,222,187 

2,369,910 

1812 

10,390,130 

1,573,950 

1825 

5,347,314 

2,607,900 

1813 

10,393,404 

1,771,310 

1826 

4,214,271 

3,322,070 

1814 

12,158,227 

2,374,910 

1827 

4,223,867 

3,931,370 

1815 

11,736,436 

1,690,490 

1828 

3,821,697 

5,701,280 

1816 

10,807,660 

1,333,120 

1829 

3,862,656 

5,217,210 

1817 

8,699,133 

]  ,672,800 

1830 

4,761,952 

5,562,250 

1818 

7,066,887 

1,640,210 

1831 

3,948,102 

5,201,370 

1819 

4,538,373 

1,790,860 

In  consideration  of  having  so  large  an  amount  of 
public  deposits,  the  bank  advanced,  in  March  1808, 
3,000,000/.,  without  interest,  ibr  the  public  service ; 
this  advance  was  continued  until  April  1818.  The 
great  increase  in  the  amount  of  the  pri^^ate  deposits, 
since  the  year  1825,  has  arisen  from  the  increase  of 
accounts,  occasioned  partly  by  distrust  in  the  private 
bankers,  and  partly  by  the  additional  facilities  granted 
by  the  bank  to  the  depositors. 

L  3 


150  THE    HISTORY    AND    PRINCirLES 


SECTION  IX. 


BANKS    OF    REMITTANCE. 

In  the  infancy  of  commerce,  all  trade  was  carried 
on  with  ready  money.  Before  good  roads  are  formed, 
and  posts  are  established,  trade  between  distant  places 
is  carried  on  by  merchants,  who  associate  together 
in  considerable  numbers,  and  meet  at  fixed  times 
at  particular  places,  whence  they  commence  their 
journey  to  the  country  with  which  they  intend  to 
traffic.  When  arrived  at  the  place  where  the  market 
is  held,  they  dispose  of  their  goods  for  ready  money; 
they  then  lay  out  their  money  in  the  purchase  of 
other  goods,  with  which  they  return.  Such  was  the 
practice  with  the  merchants  of  the  East,  who  formed 
the  immense  caravans  that  formerly  traded  between 
Europe  and  India ;  and  such  is  the  practice  of  similar 
caravans  that  now  trade  between  Egypt  and  Mecca. 
In  such  cases  all  the  transactions  are  carried  on  with 
ready  money.  The  bankers,  if  such  they  may  be 
called,  are  mere  money  changers,  who  exchange  the 
money  of  the  country  in  which  they  live,  for  the 
money  of  other  countries. 

The  labour  of  carrying  money  from  one  country 
to  another,  was  considerably  diminished  by  the  in- 
vention of  bills  of  exchange  ;  but  the  same  mode  of 
remittance  was  continued  even  in  England,  until  a 
very  recent  period,  with  regard  to  the  transmission 
of  money  through  the  provinces.  When  a  country 
is  considerably  improved,  good  roads  are  established, 
and  places  hitherto  obscure  become  seats  of  manu- 
facturing and  agricultural  industry ;  an  interchange 
of  commodities  will  take  ])lacc  between  the  pro- 
vinces y    the  jHoduce  of  one  district  will  be  trans- 


OF    BANKING.  151 

ported  to  another  ;  hence  will  arise  the  necessity  of 
having  some  means  of  transmitting  money  in  })ay- 
ment  of  these  respective  commodities,  and  banks  will 
consequently  be  established.  It  is  not  the  banks 
that  give  rise  to  the  trade,  it  is  the  trade  that  gives 
rise  to  the  banks  ;  though,  after  trade  is  established, 
the  introduction  of  a  bank  extends  the  trade. 

Tlie  most  effectual  means  of  transmitting  money 
throughout  a  country  is  by  an  extensive  establish- 
ment of  banks ;  banks  transmit  money  by  means  of 
their  agencies,  by  means  of  their  branches,  and  by 
means  of  the  circulation  of  notes. 

First. — Banks  transmit  money  by  means  of  their 
agencies.  This  is  the  way  in  which  it  is  carried  on 
by  the  country  bankers.  Each  country  banker  em- 
ploys a  London  agent  to  pay  his  notes  or  bills,  and 
to  make  payments  in  London  ;  and,  on  the  other 
hand,  to  receive  sums  that  may  be  lodged  by  parties 
residing  in  London  for  the  use  of  parties  residing  in 
the  country.  As  each  country  bank  is  thus  con- 
nected with  London,  it  is  virtually  connected  with 
all  the  other  banks  in  the  country ;  as  far,  at  least, 
as  concerns  the  transmission  of  money. 

Money  is  remitted  from  London  to  a  country 
town,  by  being  paid  into  a  London  bank,  to  the 
credit  of  the  country  bank,  for  the  use  of  the  party 
who  resides  in  the  country.  Money  is  remitted  from 
a  country  town  to  London,  by  being  paid  into  a 
country  bank,  to  the  credit  of  their  London  agents, 
for  the  use  of  the  party  who  resides  in  London,  or 
by  remitting  to  the  party  a  bill  drawn  by  the  country 
upon  the  London  bank.  Money  is  remitted  from 
one  country  town  to  another  by  paying  the  money 
into  the  country  bank,  to  be  paid  by  their  London 
agents  to  the  London  agent  of  the  country  bank 
established  in  the  town  to  which  the  money  is  to  be 
remitted,  or  by  sending  direct  to  the  party  a  bill 
drawn  by  the  country  upon  the  London  bank,  which 

L   4 


152  THE    IIISTORV    AND    PRINCIPLES 

bill  will  be  discounted  by  tlie  bank  establislied  in  the 
place  to  which  the  bill  is  sent. 

Secondly. — Banks  remit  money  from  one  place  to 
another  by  means  of  their  branches.  Money  is  re- 
ceived at  the  head  office  for  the  credit  of  any  branch ; 
and  money  is  received  at  each  of  the  branches  for 
the  credit  of  the  head  office ;  and  letters  of  credit 
are  also  granted  at  every  branch  upon  all  the  other 
branches.  The  Bank  of  England  transmits  money 
from  London  to  a  branch  ;  and,  vice  ven-Oy  for  only 
the  charge  of  postage.  The  branches  also  draw  bills 
upon  the  parent  establishment  at  twenty-one  days 
date,  without  any  charge. 

Thirdly. — Banks  remit  money  from  one  place  to 
another  by  means  of  their  circulation.  Every  bank 
of  circulation  will  necessarily  become  a  bank  of  re- 
mittance, whether  it  carry  on  the  remitting  of  money 
as  a  branch  of  business  or  not.  Some  of  the  notes 
which  are  issued,  will  be  sent  as  payments  from  one 
place  to  another.  This  will  be  more  frequently  the 
case  if  the  notes  are  payable  at  any  place  besides  the 
place  of  issue,  or,  if  the  bank  that  issues  them  has 
credit  over  a  great  extent  of  coimtry  :  thus  Bank  of 
England  notes  serve  the  purpose  of  remittance  all 
over  the  kingdom.  They  are  usually  cut  in  halves 
and  sent  by  post,  one  half  being  retained  till  the 
receipt  of  the  first  is  acknowledged.  The  issue  of 
bank  })ost-bills,  })ayable  seven  days  after  sight,  and 
granted  in  favour  of  the  })arty  to  whom  the  })ayment 
is  made,  has  still  farther  increased  the  efficiency  of 
the  Bank  of  England  as  a  bank  of  remittance. 

The  extent  of  the  remittances  of  any  place  must 
depend  in  a  great  degree  upon  its  trade — that  is, 
uj)on  its  exports  and  its  imports.  Money  must  be 
sent  from  a  place  to  ])ay  for  its  imports,  and  money 
must  be  received  in  exchange  for  exports.  Both 
these  branches  of  remittance,  as  far  as  regards 
provincial   towns,   are  ellecled    through  the    banks. 


OF    BANKING.  153 

Exporters  and  importers,  residing  in  a  city  or  town, 
do  not  meet  together,  like  the  mercliants  engaged 
in  foreign  trade,  and  traffic  for  their  bills,  but  both 
parties  go  to  the  bank.  The  exporter  draws  bills, 
which  he  discounts  with  the  bank ;  the  importer 
obtains  from  the  bank,  bills  or  letters  of  credit,  which 
he  remits  in  payment  of  his  imports.  The  amount 
of  this  kind  of  business  must,  of  course,  depend  upon 
the  amount  of  the  trade.  Where  the  imports  are 
great,  there  will  be  demand  for  bills,  or  other  modes 
of  remittance,  upon  the  banker.  When  the  exports 
are  great,  bills  will  be  brought  to  him  for  discount, 
or  lodgments  will  be  made  to  his  credit  at  his  agent's. 
By  comparing  the  sums  which  are  thus  transmitted 
in  different  directions,  a  banker  can  merely,  by  a 
reference  to  his  own  books,  ascertain  the  balance  of 
trade  between  the  place  in  which  he  resides,  and  any 
other  place  with  which  it  may  have  commercial  in- 
tercourse. If  he  finds  his  exchanges  with  the  neigh- 
bouring bankers  are  unfavourable,  he  may  infer  that 
the  balance  of  trade  is  against  the  place  in  which  his 
bank  is  established :  and  if,  on  the  other  hand,  the 
exchanges  are  in  his  favour,  he  may  infer  the  balance 
of  trade  is  favourable.  It  will  generally  be  found, 
that  the  trade  between  sea-port  and  inland  towns  is 
always  in  favour  of  the  former.  Manufacturing  towns 
and  large  cities  have  usually  the  balance  in  their 
favour.  It  may  be  observed,  however,  that  the 
balance  of  remittances  will  not  always  show  the 
balance  of  trade.  With  regard  to  places  of  fashion- 
able resort  for  instance,  there  must  be  a  great  con- 
sumption of  commodities  imported  from  other  places, 
and  at  the  same  time  there  is  no  commodity  ex- 
ported :  here  the  balance  of  trade  is  unfavourable ; 
at  the  same  time  there  must  be  great  remittances  in 
money  to  the  parties  residing  there,  to  enable  them 
to  pay  for  tlie  commodities  they  consume.  Thus, 
too,  when  large  sums  are  remitted  from  England  to 


154f  THE    HISTORY    AND    TRINCIPLES 

absentee  landlords,  or  as  loans  to  foreign  powers,  the 
balance  of  remittance  may  be  against  England,  while 
the  balance  of  trade  may  be  in  her  favom". 

The  remitting  of  money  to  London  by  a  country 
bank,  diminishes  the  currency  to  that  amount  in  the 
j)lace  where  the  bank  is  established.  If  a  person  at 
Birmingham  takes  one  hundred  sovereigns  to  the 
branch  of  the  bank  of  England,  and  obtains  a  bill 
at  twenty-one  days  on  the  parent  establishment  in 
London,  then  is  there  a  banking  capital  created  for 
twenty-one  days.  If,  when  tlie  bill  becomes  due, 
the  Bank  of  England  pay  the  bill  in  gold,  the  bank- 
ing capital  is  destroyed.  The  currency  of  Birming- 
ham is  now  one  hundred  sovereigns  less,  and  that  of 
London  is  one  hundred  sovereigns  more.  During 
the  existence  of  the  bill  there  were  one  hundred 
sovereigns  less  in  circulation,  and  these  one  hundred 
sovereigns  were  represented  by  the  bill.  Some 
coimtry  bankers,  instead  of  drawing  bills  upon  their 
London  agents,  re-issue  the  bills  they  have  dis- 
counted. By  this  means  the  banker  saves  the  ex- 
pense of  remitting  the  discounted  bill  to  London, 
and  the  person  taking  it  saves  the  expense  of  the 
stam])  for  a  new  bill. 

Banks  of  remittance  encourage  the  trade  of  a  dis- 
trict in  two  ways :  First,  by  diminishing  the  prices 
of  commodities.  The  facility  of  conveying  money 
has  the  same  effect  upon  trade  as  a  facility  of  con- 
veying commodities.  The  opening  of  good  roads 
diminishes  the  expense  of  the  conveyance  of  goods. 
This  cheapness  in  the  conveyance  causes  the  com- 
modities to  be  sold  at  a  lower  price.  As  the  im- 
j)orts  into  the  town  are  sold  at  a  cheaper  rate,  and 
the  exports  are  also  sold  at  a  lower  price  at  the  place 
of  consumption,  the  increased  cheapness  in  both 
cases  increases  the  demand,  and  hence  trade  is 
advanced.  The  cheapness  of  conveying  money  ope- 
rates in  the  same  way  as  cheapness  in  the  convey- 


OF    BANKING.  155 

ance  of  goods.  After  the  goods  are  sold,  the  money 
must  be  transmitted.  The  expense  of  remittmg  the 
money,  Hke  the  expense  of  conveying  the  goods, 
must  be  regarded  as  an  item  in  the  cost  of  produc- 
tion, and  be  taken  into  account  in  fixing  the  price 
at  which  the  goods  must  be  sold.  Banks  remit 
money  at  a  less  expense  tlran  it  can  be  remitted  in 
any  other  way.  Hence  the  merchants  are  enabled 
to  sell  their  merchandise  at  a  lower  price,  and  there- 
by consumption  is  increased  and  trade  is  extended. 

The  second  way  in  which  banks  of  remittance 
promote  trade,  is  by  enabling  capital  to  revolve  more 
rapidly.  They  cause  money  to  be  remitted  in  a 
shorter  space  of  time.  For  instance,  an  Irish  but- 
ter merchant  may  purchase  of  a  farmer  a  quantity 
of  butter,  and  ship  it  for  London.  He  may,  on  the 
same  day,  draw  a  bill  for  the  value  of  the  butter,  and 
have  it  discounted  at  the  bank.  With  this  money  he 
may  purchase  a  farther  quantity  of  butter,  against 
which  he  may  draw  another  bill,  and  have  it  dis- 
counted. This  operation,  if  he  be  in  good  credit, 
may  be  repeated  as  often  as  he  pleases.  Now,  if 
there  be  no  bank  in  the  district,  he  could  not  get 
the  money  for  the  first  shipment  of  butter  until  the 
return  of  post  from  London,  and  then  he  would  re- 
ceive large  Bank  of  England  notes,  which  he  might 
not  easily  be  able  to  get  changed.  During  this  in- 
terval he  can  make  no  purchases  for  want  of  money, 
and  the  farmer  has  no  sale  for  his  butter  :  thus  the 
banks  enable  the  merchants'  capital  to  revolve  several 
times  more  rapidly  tlian  it  could  otherwise  do.  To 
increase  the  rapidity  of  the  returns  of  capital  has  the 
same  effect  as  to  increase  its  amount.  If  any  given 
amount  of  capital,  that  now  revolves  once  in  a  year, 
be  made  to  revolve  twice  in  a  year,  it  will  have  the 
same  effect  upon  trade  as  if  the  amount  of  capital 
were  doubled,  and  its  progress  remained  the  same. 

Banks  of  depo.sit  encourage  the  trade  and  wealth 


156  THE    HISTORY    AND    PRINCIPLES 

of  a  district,  by  collecting  together  the  various  small 
amounts  of  money,  that  previously  lay  idle  in  the 
hands  of  the  depositors,  and  employhig  this  sum  in 
adv^ances,  by  way  of  loan  or  discount,  to  the  produc- 
tive classes  of  the  community.  The  commodities 
thus  produced,  are  remitted  to  a  distant  })lace  for 
sale.  But  in  the  interval  between  the  transmission 
of  the  goods  and  the  return  of  the  money  for  which 
they  may  be  sold,  the  manufactiu'er  is  deprived  of 
the  use  of  this  amount  of  capital.  Banks  of  remit- 
tance guard  against  this  inconvenience,  and  advance 
immediately  to  the  manufacturer  the  value  of  the 
goods,  by  discounting  his  bill  upon  the  party  to 
whom  they  are  consigned.  By  this  means  he  has 
all  the  adv'antage  to  be  gained  from  the  higher  prices 
of  a  distant  sale,  in  connection  with  that  prompt  pay- 
ment he  would  obtain  from  a  home  market.  Thus 
it  is,  that  while  banks  of  de})osit  enable  the  capital 
of  any  district  to  revolve  more  rapidly  icithin  the 
difitrictf  banks  of  remittance  enable  it  to  revolve 
more  rapidly  with  reference  to  other  places.  Both 
produce  the  same  effect  as  that  positive  increase  of 
capital  which  is  introduced  by  banks  of  circulation. 


SECTION  X. 


BANKS    or    CIRCULATION. 


A  BANK  that  issues  notes,  is  called  a  bank  of  cir- 
culation. Tlie  amount  of  notes  that  any  bank  has 
in  circulation,  is  usually  called  by  bankers  "  the  cir- 
culation.'''' Banks  of  circulation,  both  in  England 
and  Scotland,  have  all  of  tliem  iiad  to  sustain  heavy 
accusations.     I  shall  notice  some  of  these  charges, 


OF    BANKING.  157 

not  with  a  view  of  rebutting  them  in  regard  to  any 
individual  bank,  but  in  order  to  discuss  the  general 
principles  by  which  we  should  be  guided,  in  judging 
of  the  effects  produced  by  banks  of  circulation. 

The  most  common  charge  against  banks  of  circu- 
lation is,  that  they  have  issued  an  excessive  amount 
of  their  notes ;  and  thus  have  encouraged  specula- 
tion, raised  the  price  of  commodities,  and  led  to 
commercial  convulsions  similar  to  that  of  December, 
1825. 

Before  entering  upon  the  consideration  of  these 
charges,  I  shall  point  out  the  checks  that  operate 
against  an  over-issue  of  notes. 

I  have  already  stated,  that  similar  accusations  may 
be  as  justly  advanced  against  banks  of  deposit  as 
against  banks  of  circulation  ;  for  to  give  increased 
motion  to  the  currency  has  the  same  effect  as  to 
increase  its  amount.  If  a  million  of  money  be  taken 
from  the  counting-houses  of  the  merchants,  and  the 
tills  of  the  shopkeepers,  and  lodged  in  the  hands  of 
a  London  banker,  for  him  to  employ  in  advancing 
loans  or  discounting  bills,  this  has  the  same  eftect  as 
though  he  issued  for  the  same  purposes  a  million  of 
his  own  promissory  notes.  There  is,  however,  one 
difference.  The  advances  of  a  London  banker  are 
limited  by  the  amount  of  his  lodgments.  If  the 
money  be  not  placed  in  his  hands,  he  cannot  issue 
it ;  and  hence  he  may  be  regarded  as  merely  an 
agent  regulating  the  distribution  of  the  previously 
existing  currency.  But  the  country  banker  having 
the  power  of  making  money,  the  amoimt  of  his 
advances  is  not  subject  to  this  restraint. 

But  the  amount  of  notes  issued  by  a  bank  must  be 
limited  by  the  demand  of  its  customers.  No  banker 
is  so  anxious  to  put  his  notes  into  circulation,  that 
he  gives  them  away.  He  advances  them  either  by 
way  of  loan  or  discount ;  and  he  always  believes  that 
the  security  on  which  he  makes  his  advances  is  sufH- 


158  THE    HISTORY    AND    TRINCirLES 

cicntly  arnj^lc.  He  expects  that  the  money  will  be 
repaid  with  interest.  It  is  true,  that  hke  other  com- 
mercial men,  he  is  sometimes  deceived  in  his  cus- 
tomers ;  and  by  placing  too  much  confidence  in 
them,  he  sustains  losses.  But  this  is  a  misfortune 
against  which  he  is  always  anxious  to  guard.  The 
issues  of  bankers  are  limited,  therefore ;  on  the  one 
hand  by  the  wants  of  the  public,  and  on  the  other 
by  the  bankers*  desire  to  protect  their  own  interests. 

A  further  check  upon  the  issues  of  banks  is,  that 
all  their  notes  are  payable  on  demand.  Although  a 
banker  has  the  power  of  issuing  his  notes  to  excess, 
either  by  advancing  them  as  dead  loans  or  on  slender 
security,  yet  he  has  not  the  power  of  keeping  them 
out :  their  remaining  in  circulation  depends  not  on 
him,  but  on  the  public ;  and  tlie  uncertainty,  as  to 
the  time  of  their  return  for  payment,  compels  him 
to  keep  at  all  times  a  sufficient  stock  of  money,  to 
meet  the  most  extensive  demand  that  is  likely  in  the 
ordinary  course  of  business  to  occur. 

Another  check  upon  an  excessive  issue  of  notes, 
is  the  system  of  exchanges  that  is  carried  on  between 
the  banks.  Every  banker  that  issues  notes,  has  an 
interest  in  withdrawing  from  circidation  the  notes  of 
every  other  banker,  in  order  to  make  more  room  for 
his  own.  When  a  banker  receives  the  notes  of 
another  banker,  he  never  re-issues  them.  If  the 
two  bankers  live  in  the  same  place,  they  meet  once 
or  twice  a  week,  as  they  may  find  convenient,  and 
excliange  their  notes.  The  balance  between  them, 
if  any,  is  paid  by  a  draft  on  London,  payable  on 
demand ;  or,  which  amounts  to  the  same  tiling,  the 
London  agent  of  the  one  party  is  directed  to  pay 
the  amount  to  the  London  agent  of  the  other  party. 
If  tlie  country  banker  Hves  at  a  distance  from  the 
banker  whose  notes  he  has  received,  he  sends  them 
to  his  London  agent  to  present  for  payment.  Hence 
it  is  that  country  notes  seldom  travel  far  from  the 


OF    BANKING.  159 

place  of  issue :  they  are  sure  to  be  intercepted  by 
some  of  the  rival  banks ;  and  in  a  country  where 
banks  are  so  numerous  as  in  England,  it  is  obvious 
that  the  notes  of  any  individual  bank  must  move  in 
a  very  limited  circle.  If  a  banker  attempts  to  force 
out  a  higher  amount  of  notes  than  the  wants  of  this 
circle  require,  he  will  soon  find  that  the  notes  will 
be  returned  to  him  in  the  exchanges  with  the  neigh- 
bouring bankers,  or  else  they  will  speedily  find  their 
way  for  payment  to  his  London  agent. 

Another  check  upon  an  over-issue  on  the  part  of 
the  banks  is,  their  practice  of  allowing  interest  upon 
money  lodged  in  their  hands.  No  man  will  keep 
money  lying  idle  in  his  hands  if  he  can  obtain 
interest  for  it,  and  have  it  returned  to  him  upon 
demand.  If  a  banker  attempts  to  force  out  a  large 
amount  of  notes,  they  will  get  into  the  hands  of 
somebody.  And  those  who  do  not  employ  them  in 
their  trade  will  take  them  back  to  the  bank  and 
lodge  them  to  their  credit,  for  the  purpose  of  receiv- 
ing the  interest.  Thus,  if  the  notes  of  a  banker  are 
put  in  motion  by  the  operations  of  commerce,  they 
are  soon  intercepted  by  rival  bankers ;  and  if  they 
attain  a  state  of  rest,  they  are  brought  back  and 
lodged  upon  interest ;  so  that  in  either  case  they  are 
withdrawn  from  circulation. 

Banks  of  circulation  have  also  been  accused  of  en- 
couraging a  spirit  of  speculation. 

To  obtain  clear  ideas  as  to  the  justice  of  this 
charge,  it  will  be  necessary  to  define  accurately  the 
nature  of  speculation,  and  to  view  the  circvmi stances 
by  which  it  is  governed. 

Between  the  producer  and  the  consumer  of  any 
commodity  there  are  generally  two  or  more  parties, 
who  are  merchants  or  dealers.  The  demand  for  any 
commodity  is  either  a  speculative  or  a  consumptive 
demand.  The  demand  by  the  consumers  who  pur- 
chase for  immediate  use,   is  always  a  consumptive 


IGO  THE    HISTORY    AND    PRINCIPLES 

demand.  13iit  if  the  commodity  purchased  be  not 
intended  for  innnediate  use,  but  is  purchased  at  any 
given  time,  merely  because  the  purchaser  a])})rehends 
that  its  price  will  advance,  then  is  that  demand  a 
speculative  demand.  So,  if  a  merchant  purchase  of 
a  manufacturer,  or  a  farmer,  such  a  quantity  of  com- 
modities as,  in  the  ordinary  course  of  his  trade,  he  is 
likely  to  require,  that  demand  may  be  considered  a 
consumptive  demand ;  but  if,  in  expectation  of  a 
rise  in  price,  he  iills  his  warehouses  with  goods  for 
which  he  has  no  immediate  sale,  then  is  that  demand 
a  speculative  demand.  A  speculation,  then,  is  that 
kind  of  traffic  in  which  the  dealer  expects  to  realize 
a  profit,  not  by  the  ordinary  course  of  trade,  but  by 
the  intervention  of  some  fortuitous  circumstance  that 
shall  change  the  price  of  the  commodity  in  which 
he  deals. 

A  speculation  in  any  commodity,  therefore,  is  oc- 
casioned by  some  opinion  that  may  be  formed  of  its 
future  price.  It  is  well  known  that  the  price  of 
commodities  is  governed  by  the  proportion  that  may 
exist  between  the  supply  and  the  demand.  Whatever 
increases  the  supply,  or  diminishes  the  demand,  will 
lower  the  price  ;  and,  on  the  contrary,  whatever 
diminishes  the  supply,  or  increases  the  demand,  will 
advance  the  price.  The  greater  part  of  our  food, 
and  the  materials  of  most  of  oiu'  clothing,  are  ])ro- 
duced  by  the  seasons ;  and  the  quantity  })roduced  in 
each  year  depends,  in  a  great  degree,  upon  the  most 
uncertahi  of  all  things, — the  weather.  Here,  then, 
is  a  wide  field  for  speculation.  If  our  food,  like  the 
manna  in  the  wilderness,  were  supplied  to  us  day 
by  day,  in  exactly  the  (juantity  that  each  individual 
required,  it  would  furnish  no  subject  for  speculation. 
But  as  long  as  the  seasons  are  variable  in  the 
quantity  of  their  })roductions,  so  long  will  specula- 
tion exist.  Many  commodities,  too,  besides  being 
influenced  by  the  seasons,  are  influenced  by  several 


OF    BANKING.  l6l 

other  circumstances,  —  as  a  state  of  peace  or  war, — 
the  opening  of  new  markets,  —  the  discovery  of 
cheaper  modes  of  production,  —  or  the  substitution  of 
a  rival  commodity  ;  all  these  circumstances  have  an 
effect  upon  price,  and  the  dealer  who  buys  or  sells 
any  commodity  in  expectation  that  an  alteration  in 
price  will  be  produced  by  such  causes,  is  a  speculator. 

Now,  it  is  obvious  that  no  system  of  banking  can 
prevent  speculation,  and  that  speculations  would  be 
formed,  even  were  there  no  bank  in  existence.  We 
learn  from  Holy  Writ,  that  the  owners  of  corn  some- 
times refused  to  sell,  in  expectation  of  an  advance  of 
price.  These  were  speculations,  though  Judea  had 
neither  banks  nor  paper  money.  If  it  be  said  that 
the  country  banks  are  the  cause  of  speculation,  I 
will  ask  how  it  is  that  speculations  exist  in  countries 
where  there  are  no  country  banks  ?  If  it  be  said 
that  the  issuing  of  country  notes  is  the  cause  of 
speculation,  I  will  ask  how  it  is  that  Liverpool  is  the 
most  speculative  place  in  England,  although  the 
Liverpool  bankers  do  not  issue  notes  ?  If  it  be  said 
that  the  speculations  of  1825  were  produced  by  the 
country  banks,  I  will  ask,  what  produced  similar 
speculations  in  I72O,  when  there  was  not  a  single 
country  bank  in  the  kingdom  ? 

It  must  not,  however,  be  denied,  that  all  banking 
gives  to  speculation  facilities  that  would  not  other- 
wise be  so  easily  supplied.  It  is  the  object  of  bank- 
ing to  give  facilities  to  trade,  and  whatever  gives 
facilities  to  trade  gives  facilities  to  speculation.  Trade 
and  speculation  are  in  some  cases  so  nearly  allied, 
that  it  is  impossible  to  say  at  what  precise  point 
trade  ends  and  speculation  begins.  When  a  banker 
discounts  a  bill,  he  does  not  usually  ask  the  party 
how  he  intends  to  employ  the  money ;  and,  for 
aught  he  knows,  it  may  be  employed  in  speculation. 
Wherever  there  are  banks,  capital  is  more  readily 
obtained,  and  at  a  cheaper  rate.     The  cheapness  of 

M 


162  THE    HISTORY    AND    PRINCIPLES 

capital  gives  facilities  to  speculation,  just  in  the  same 
way  as  the  cheapness  of  beef  and  of  beer  gives  facili- 
ties to  gluttony  and  drunkenness. 

The  legitimate  operations  of  banking,  however, 
are  such  as  to  place  speculation  under  some  degree 
of  restraint.  As  to  men  of  large  capital  and  im- 
mense wealth,  they  may  speculate  as  much  as  they 
please  ;  over  them  the  bankers  have  no  control.  But 
if  men  of  moderate  means  engage  in  speculation  be- 
yond their  capital,  it  is  not  the  interest  of  the  banker 
to  support  them.  For  such  persons  to  carry  specu- 
lation to  any  great  extent,  it  is  necessary  either  that 
they  raise  money  on  slender  security,  or  that  the 
money  be  advanced  for  a  considerable  length  of  time. 
It  is  not  the  interest  of  a  banker  to  meet  their  wishes 
in  either  of  these  respects.  It  is  not  his  interest  to 
advance  his  money  on  insufficient  security.  It  is  not 
his  interest  to  advance  money  as  a  dead  loan.  The 
security  a  banker  requires  ought  to  be  both  ample 
and  convertible.  It  is  contrary  to  all  sound  princi- 
ples of  banking  for  a  banker  to  advance  money  on 
dead  security.  In  the  first  place,  such  loans  do  not 
create  any  banking  capital ;  and,  in  tlie  second  place, 
they  cannot  be  suddenly  called  up,  in  case  any  con- 
traction of  the  banking  capital  should  render  it  ne- 
cessary. 

In  admitting  that  banking,  by  granting  facilities  to 
trade,  necessarily  grants  facilities,  to  a  certain  extent, 
to  speculation,  it  is  not  admitted  tliat  bankers  gene- 
rally have  granted  facilities  to  speculation  beyond 
the  fair  operations  of  their  trade.  All  speculation, 
by  increasing  tlie  number  and  amount  of  commercial 
transactions,  puts  into  motion  a  greater  quantity  of 
money.  This  money  is  supplied  by  the  bankers 
either  in  the  way  of  repayment  of  deposits,  or  of  dis- 
counting of  bills,  or  by  loans.  Now,  as  increased 
issues  on  the  part  of  the  banks  are  almost  simulta- 
neous with  a  spirit  of  speculation,  it  has  been  inferred 


OF    BANKING.  163 

that  the  issues  of  the  notes  have  excited  the  spirit  of 
speculation,  wliereas  it  has  been  the  spirit  of  specu- 
lation that  has  called  out  the  notes.  In  the  years 
1824  and  1825,  as  the  speculations  increased,  the 
issues  of  notes  increased  ;  and  when  the  speculations 
were  over,  the  notes  returned.  This  was  the  case 
not  merely  in  England,  but  also  in  Scotland,  though 
none  of  the  vScotch  banks  sustained  the  least  diminu- 
tion of  public  confidence. 

Another  charge  that  has  often  been  preferred 
against  banks  of  circulation  is,  that  by  an  increased 
issue  of  their  notes  they  have  caused  a  general  rise 
in  prices. 

In  investigating  this  charge,  it  will  be  proper  to 
inquire  what  are  the  cases  in  which  an  increased 
issue  of  notes  may  produce  a  rise  in  prices. 

It  cannot  be  denied  that  if  any  bank  have  the  pri- 
vilege of  issuing  notes,  not  convertible  into  gold  — 
that  is,  not  payable  in  gold  on  demand — the  notes 
may  be  issued  to  such  an  amount  as  to  cause  a  con- 
siderable advance  in  prices.  It  is  now  generally 
believed  that  the  issues  of  the  Bank  of  England 
during  the  operation  of  the  Restriction  Act,  did  pro- 
duce this  effect.  It  may  also  be  admitted  that  in  a 
country  where  there  is  one  chief  bank,  possessing  an 
immense  capital  and  unbounded  confidence,  the  notes 
of  such  a  bank,  even  if  payable  in  gold,  may  be 
issued  to  such  an  extent  as  to  cause  an  advance  of 
prices,  until  an  unfavourable  course  of  the  exchange 
shall  cause  payment  of  the  notes  to  be  demanded  in 
gold.  For  gold  will  not  be  demanded  until  the 
course  of  the  exchange  is  so  unfavourable  as  to  cause 
the  exportation  of  gold  to  be  attended  with  profit. 
Hence  the  issues  of  the  Bank  of  England  being  at 
present  under  no  other  restraint  than  liability  to  pay 
in  gold  on  demand,  may  for  a  time  cause  an  advance 
in  prices. 

In    cases  where  the  increased  issue   of  notes   is 

M  2 


iHi  tHE    HISTORY    AND    PRINCIPLES 

caused  by  the  increased  quantity  of  commodities 
brouglit  to  market,  the  additional  amount  of  notes 
put  into  circulation  does  not  cause  any  advance  of 
prices.  In  all  agricultural  districts  there  is  a  great 
demand  for  notes,  about  the  season  of  harvest,  to 
pay  for  the  produce  then  brought  to  market.  In  the 
south  of  Ireland  the  amount  of  notes  in  circulation 
is  much  greater  in  the  winter,  when  corn  and  bacon 
are  being  exported,  than  in  the  summer  months. 
Almost  every  trade  and  every  kind  of  manufacture 
is  carried  on  with  more  acti\ity  at  some  periods  of 
the  year  than  at  others ;  and  during  the  active 
seasons  when  money  is  in  demand,  more  notes  are 
in  circulation.  These  notes  are  at  such  periods 
drawn  out  of  the  banks,  either  as  repayments  of 
money  lodged,  or  by  discount  of  the  bills  drawn 
against  the  exported  commodities. 

An  increased  issue  of  notes  often  causes  the  pro- 
duction of  an  additional  quantity  of  commodities, 
and  in  this  case  does  not  produce  an  advance  of 
prices.  The  issue  of  notes  will  be  either  in  the 
form  of  discounts,  or  loans,  or  the  repayment  of 
deposits.  In  either  case  the  parties  receiving  the 
money  will  spend  it,  and  a  demand  will  thus  be  oc- 
casioned for  a  certain  class  of  commodities.  If  this 
demand  should  not  exceed  the  quantity  that  can  be 
readily  supplied,  tliere  will  no  advance  of  price. 
The  parties  who  receive  the  money  from  the  banker 
may  give  it  to  the  dealer  in  exchange  for  the  articles 
they  purcliase.  The  dealer  wishes  to  replace  the 
goods  he  has  sold,  and  passes  the  money  for  more 
goods  to  the  manufacturer.  Tlie  manufacturer  con- 
sequently buys  more  raw  material  and  employs  more 
labourers.  An  increased  quantity  of  goods  is  thus 
produced,  and  exchanged  against  the  increased  quan- 
tity of  money.  But  while  the  supply  can  keep  pace 
witli  the  demand,  the  price  will  remain  the  same  ;  it 
is  only  when  the   demand  exceeds  the  supply,  and 


OF    BANKING.  "  l65 

the    commodities    are    consequently    comparatively 
scarce,  that  the  price  will  advance. 

In  many  cases,  an  increased  issue  of  notes-  is  not 
the  cause  but  the  effect  of  an  advance  of  prices.  If 
a  Yorkshire  clothier  sells  a  thousand  pounds'  worth 
of  goods  to  a  London  merchant,  he  will  draw  a  bill 
for  a  thousand  pounds,  and  take  it  for  discount  to  a 
country  banker,  whose  notes  for  a  thousand  pounds 
may  thus  be  put  into  circulation  ;  but  if,  in  conse- 
quence of  a  scarcity  of  wool,  or  from  any  other  cause, 
the  goods  that  were  sold  for  a  thousand  pounds  are 
now  worth  two  thousand  pounds,  then  will  the 
banker  discount  a  bill  for  two  thousand  pounds,  and 
put  into  circulation  two  thousand  pounds  of  his 
notes.  In  this  case  it  is  obvious  that  the  issue  of 
notes  is  not  the  cause  of  the  high  price  of  wool ;  but 
that  the  high  price  of  wool  is  the  cause  of  the  in- 
creased issue  of  notes.  Such  is  often  the  case  with 
many  other  commodities  ;  a  real  or  apprehended 
scarcity  causes  an  advance  in  price.  The  same  com- 
modity exchanges  for  a  greater  quantity  of  money. 
The  bills  are  drawn  for  higher  sums,  and  the  bankers 
who  discount  these  bills  issue,  of  course,  a  greater 
amount  of  notes.  The  rise  in  price,  too,  renders 
more  capital  necessary  to  carry  on  the  same  extent 
of  business.  Many  persons  who  had  money  in  the 
bank  on  interest  will  now  draw  it  out,  to  employ  it 
in  their  trade,  and  these  operations  will  occasion  a 
still  farther  issue  of  notes.  A  rise  in  the  price  of 
one  commodity  will  sometimes  advance  the  price  of 
other  commodities,  and  hence  similar  banking  ope- 
rations are  effected  by  persons  engaged  in  other 
branches  of  trade.  The  process  by  which  high 
prices  cause  an  increase  in  the  amount  of  notes  in 
circulation,  can  thus  be  easily  and  obviously  traced. 

In  cases  where  an  increased  issue  of  notes  does 
cause  an  advance  of  price,  the  advance  can  be  but 
temporary,    and    this    advance    may    generally    be 

M  S 


iGf)  THE    HISTORY    AND    PRINCIPLES 

ascribed  to  a  spirit  of  speculation  on  the  part  of  the 
dealers,  and  not  to  an  excessive  issue  on  the  part  of 
the  banks.  As  the  prices  of  all  commodities  are  re- 
gulated by  tlie  proportion  that  may  exist  between  the 
demand  and  the  supply,  whenever  an  increased  issue 
of  notes  raises  prices,  it  must  be  either  by  increasing 
the  demand  for  commodities,  or  diminishing  the  sup- 
ply. The  cases  in  which  an  increased  issue  of  notes 
may  cause  an  advance  of  prices,  are  chiefly  those  in 
which  the  money  is  employed  in  purchasing  such 
commodities  as  cannot  be  readily  produced  by  human 
labour.  Thus,  if  a  banker  lend  money  to  a  corn 
merchant  to  purchase  a  stock  of  corn,  he  increases 
the  demand  for  corn.  If  he  lend  money  to  a  farmer 
to  enable  him  to  pay  his  rent  without  selling  his  corn, 
he  diminishes  the  supply.  In  both  cases  he  may 
cause  an  advance  in  price.  But  even  in  this  case, 
the  most  unpopular  that  can  well  be  imagined,  the 
effect  on  price  will  be  but  temporary  :  for  these 
speculations  do  not  diminish  the  quantity  of  corn  in 
the  country.  The  supplies  now  withheld  must  ulti- 
mately be  sold,  and  in  proportion  as  they  advance 
the  price  when  withheld,  will  they  lower  the  price 
when  brought  to  market.  A  degree  of  speculation 
in  some  commodity  or  other  is  always  on  foot,  and 
occasions  fluctuations  in  the  price.  The  banks  have 
no  control  over  tliese  speculations,  and  ought  not  to 
be  deemed  answerable  for  the  changes  they  occasion. 
To  suppose  tliat  tiie  banks  can  so  regulate  tiieir  issues 
as  to  maintain  permanent  prices,  is  to  ascribe  to  them 
a  power  which  they  do  not  possess,  and  which,  if  they 
dkc  possess,  they  ought  never  to  use. 

There  are  various  cases  wherein  an  increased  issue 
of  notes  causes  a  reduction  of  prices.  The  specula- 
tions which  advance  prices  are  chiefly  those  carried 
on  by  dealers.  The  speculations  of  producen-  who 
invest  their  capital  in  new  undertakings,  with  the 
view  of  producing  any  given  commodities  at  a  less 


OF    BANKING.  1 67 

cost,  will,  if  successful,  reduce  the  price  to  the  con- 
sumer, and  so  far  as  such  speculations  are  assisted  by 
the  banks,  the  issue  of  notes  thus  occasioned  tends  to 
the  reduction  of  prices.  An  advance  of  money  which 
enables  a  farmer  to  bestow  a  higher  degree  of  culti- 
vation on  his  land — or  which  enables  a  manufacturer 
to  extend  his  business  —  has  the  effect  of  increasing 
the  quantity  of  commodities  offered  for  sale,  and,  con- 
sequently, to  reduce  the  price.  The  banks,  too,  by 
advancing  capital  on  lower  terms  than  it  could  be 
otherwise  obtained,  diminish  the  cost  of  production, 
and  consequently,  the  price.  The  banks  still  farther 
reduce  prices  by  destroying  monopoly.  In  towns 
where  there  are  no  banks,  a  few  monied  men  have 
all  the  trade  in  their  own  hands  ;  but  when  a  bank 
is  established,  other  persons  of  character  are  enabled 
to  borrow  capital  of  the  bankers.  Thus  monopoly  is 
destroyed,  competition  is  produced,  and  prices  fall. 
Hence  it  is  obvious,  that  in  the  ordinary  course  of 
business  the  issues  of  the  banks  tend  not  to  advance 
but  to  lower  prices. 

The  effect  which  the  amount  of  notes  in  circulation 
has  upon  the  foreign  exchanges  has  been  the  subject 
of  much  discussion.  One  party  contended,  that  as 
the  amount  of  notes  increases,  the  exchange  must 
become  unfavourable.  Another  party  maintained, 
that  the  exchanges  were  not  at  all  affected  by  the 
issue  of  notes,  but  by  the  state  of  foreign  trade.  The 
authors  of  the  Report  of  the  Bullion  Committee  ex- 
pressed the  former  opinion,  some  of  the  Bank  Direc- 
tors maintained  the  latter.* 

It  is  obvious  that  the  exchanges  are  regulated  by 
the  amount  of  gold  that  is  required  to  be  sent  abroad, 
either  to  pay  the  balance  of  trade,  or  to  pay  our 
armies,  or  to  subsidize  foreign  powers,  or  as  rents  to 
absentees,   or  for  some  other  purpose.     Now  it  is 

*  See  page  49. 
M    4 


168  THE    HISTORY    AND    PRINCIPLES 

clear  that  an  increased  or  diminislied  issue  of  notes 
will  in  no  way  diminisli  the  amount  of  gold  that  is  to 
be  sent  abroad,  and  therefore  can  have  no  direct 
effect  u})on  the  exchanges.  If  we  owe  the  gold,  we 
must  pay  it.  We  may  diminish  our  issues  of  notes, 
but  that  will  not  pay  our  debts.  If,  then,  the  issues 
of  notes  have  any  effect  upon  the  exchanges,  it  must 
be  in  an  indirect  way. 

I  have  already  stated  that  an  increased  issue  of 
notes  can  liave  no  effect  upon  the  prices  of  com- 
modities at  home,  but  by  influencing  either  the  sup- 
ply or  the  demand.  If  the  increased  quantity  of 
money  raises  the  demand  for  commodities  beyond  a 
certain  point,  it  will  advance  the  price.  And  if  it 
increases  the  supply,  it  will  lower  the  price  ;  but  in 
no  way  can  the  quantity  of  money  in  circulation 
affect  the  price  of  commodities  but  through  the 
channels  of  supply  and  demand.  Just  so  with  the 
foreign  exchanges.  An  unfavoiu'able  course  of  ex- 
change arises  generally  from  our  owing  a  sum  of 
money  which  we  have  to  pay  in  consequence  of  our 
imports  having  exceeded  our  exports.  An  increased 
quantity  of  money,  therefore,  to  affect  the  exchanges 
must  diminish  the  amount  of  our  foreign  debt,  and  it 
can  do  this  only  by  either  increasing  our  exports  or 
diminishing  our  imports.  When  money  is  abundant 
our  merchants  can  import  more  than  formerly.  This 
increases  our  debt.  The  importers  are  disposed  to 
lay  in  stocks  of  goods,  and  the  competition  between 
the  importers  raises  the  price  they  give  to  the 
foreimier.  Hence  there  are  hea\'v  sums  to  be  sent 
abroad.  It  is  true  that  when  money  is  abundant  our 
manufacturers  and  exporters  can  also  export  more 
goods,  but  tlie  competition  among  cx})orters  dimi- 
nishes tlic  price  to  the  foreigner,  and  hence  we  have 
a  less  pro])ortionate  sum  to  receive.  The  exporter, 
too,  liaviug  abundance  of  money,  gives  the  foreigner 
long  credit,  and  hence  tlie  money  is  not  received  in 


OF    BANKING.  IGQ 

England  for  a  considerable  time  after  the  goods  have 
been  shipped.  In  the  mean  time  the  exchanges  be- 
come unfavourable,  and  gold  must  be  sent  abroad. 
Now  suppose  in  this  state  of  things  the  bank  contract 
their  issues ;  money  becomes  scarce  —  bills  cannot 
be  discounted,  and  trade  is  dull.  Now,  then,  the 
importer  having  already  a  heavy  stock  of  goods,  will 
buy  no  more  ;  he  is  anxious  to  sell,  for  he  has  not  now 
sufficient  capital  to  keep  so  large  a  stock.  A  general 
desire  of  selling  will  cause  a  fall  of  price.  Fewer 
commodities  will  now  be  imported,  and  these  ob- 
tained at  a  less  price,  hence  there  is  less  money 
due  to  the  foreigner.  The  exporters,  on  the  other 
hand,  deprived  also  of  their  usual  accommodation, 
cannot  carry  on  business  to  the  same  extent  ■ —  the 
supply  will  be  reduced  —  the  competition  is  less,  and 
prices  rise  to  the  foreigner.  The  exporters,  too, 
cannot  now  give  such  long  credit  as  formerly  ;  they 
will  call  in  the  sums  due  to  them,  and  hence  more 
money  must  come  in  from  abroad.  As,  then,  we 
have  to  pay  other  nations  a  less  amount  of  money  for 
our  imports,  and  they  have  to  pay  us  a  greater 
amount  for  our  exports,  the  exchanges  will  become 
favourable.  It  is  obvious  that  this  operation  will 
cause  great  embarrassment  in  trade  ;  in  fact  it  is  only 
by  producing  embarrassment  that  a  contraction  of  the 
currency  can  affect  the  exchanges. 

The  amount  of  notes  in  circulation  affects  the 
foreign  exchanges  in  another  way.  When  an  in- 
creased issue  takes  place,  money  becomes  more 
abundant ;  the  lenders  are  more  numerous,  and  the 
supply  of  capital  is  increased.  Hence  the  price  given 
for  the  loan  of  money,  that  is,  the  rate  of  interest, 
falls.  Persons  who  have  money  to  employ  will  find 
they  cannot  obtain  the  same  interest  as  formerly, 
hence  they  will  be  disposed  to  invest  it  in  the  foreign 
funds,  where  it  can  be  employed  to  greater  advantage. 
In   order  to  remit  this   money  they  will   purchase 


170  THE    HISTORY    AND    PRINCIPLES 

foreign  bills ;  this  demand  for  foreign  bills  will  ad- 
vance their  price,  and  the  exchanges  will  conse- 
quently be  initavourable.  On  the  other  hand,  when 
the  circulation  is  considerably  reduced,  money  be- 
comes scarce,  a  higher  price  will  be  given  for  the  use 
of  it,  the  rate  of  interest  rises  ;  persons  who  hav^e 
property  abroad  will  be  disposed  to  bring  it  home, 
where  it  can  be  more  profitably  invested ;  they  will 
draw  bills  against  it  and  sell  them  in  the  market. 
This  new  supply  of  bills  will  lower  the  pnce,  and 
make  the  exchanges  favourable. 

It  should  always  be  recollected  that  the  transmis- 
sion of  money  as  subsidies,  loans,  or  for  investment 
in  the  foreign  funds,  will  have  the  same  effect  upon 
the  exchanges  as  though  it  were  transmitted  in  pay- 
ment of  commodities  imported.  Whenever,  there- 
fore, the  issue  of  notes  shall,  directly  or  indirectly, 
cause  a  transmission  of  money  from  one  country  to 
another,  the  exchanges  will  be  affected.  But  when 
this  shall  not  be  the  case,  the  expansion  or  contraction 
of  the  currency  will  have  no  effect  upon  the  foreign 
exchange. 


SECTION  XL 


BANKS    OF    DISCOUNT. 


A  CONSIDERABLE  braucli  of  the  business  of  modern 
banking  consists  in  discounting  bills  of  exchange. 
As  they  have  only  a  short  time  to  run  before  they 
fall  due,  the  capital  advanced  soon  returns  ;  and  being 
transferable,  they  can,  if  necessary,  be  re-discounted. 
Hence  they  are  admirably  adapted  for  the  purposes 
of  the  bankers  :  for,  as  the  advances  of  bankers  to 
their  customers  are  made  with  other  people's  money, 


OF    BANKING.  I7I 

and  tliat  money  may  at  any  time  be  withdrawn,  it 
becomes  necessary  that  the  securities  on  which  those 
advances  are  made  should  rapidly  revolve  and  be  at 
all  times  convertible.  By  means  of  bills  of  exchange 
bankers  can  easily  extend  or  diminish  their  advances 
in  proportion  to  the  capital  the}'  may  have  to  employ. 
If  they  find  that  the  amount  of  their  deposits  or  the 
amount  of  their  circulation  is  diminishing,  they  will 
diminish  their  discounts.  If  these  increase,  they  may 
increase  their  discounts. 

I.  Nature  and  Origin  of  Bills  of  Exchange, — 
Bills  of  exchange  are  first  mentioned  in  the  reign  of 
Henry  II.,  Anno,  II60 ;  but  they  were  not  used  in 
England  until  1307,  the  first  year  of  Edward  II.  In 
the  fifth  year  of  Richard  II.  they  were  the  only 
mode  allowed  by  law  for  sending  money  out  of  the 
kingdom.  They  are  said  to  have  been  invented  by 
the  Jews  or  the  Lombards,  for  the  purpose  of  with- 
drawing their  property  from  the  countries  from  which 
they  were  expelled.  The  drawer  and  the  accepter 
of  a  bill  were  two  persons,  residing  at  two  distant 
places,  and  the  bill  was  probably  nothing  more  than 
a  written  order  delivered  to  a  third  person,  who  was 
going  to  visit  the  place  where  the  debtor  resided,  and 
who  would  return  with  the  money  to  the  drawer. 
But  it  might  happen  that  this  person  was  not  going 
to  return ;  in  this  case  he  might  advance  to  the 
creditor  the  amount  of  the  order,  and  receive  the 
money  again  from  the  debtor  when  he  arrived  at  his 
journey's  end.  But  this  third  person  might  not  be 
going  to  the  place  where  the  debtor  resided,  he  might 
be  going  only  a  part  of  the  way,  and  he  might  then 
fall  in  with  some  other  person  who  was  going  the 
other  part ;  he  would  then  request  this  other  person 
to  advance  him  the  money  in  exchange  for  the  order 
he  had  received  from  the  creditor,  and  the  order 
would  then  be  transferred.      It  would  thus  be  dis- 


172  THE    HISTORY    AND    PRINCIPLES 

covered  that  as  a  creditor  might  give  an  order  upon 
his  debtor  to  a  tliird  person,  this  third  person  might 
transfer  the  order  to  a  fourth,  the  fourth  to  a  fifth, 
and  so  on.  To  effect  these  transactions  it  would  be 
necessary  that  each  person  receiving  tlie  order  or  bill, 
had  confidence  in  the  drawer  or  some  of  the  indorsers, 
and  also  that  each  person  receiving  it  should  have 
some  compensation  for  the  trouble  it  occasioned  him. 
If  the  order  were  not  payable  on  demand,  but  at 
some  months  after  date,  the  compensation  would  be 
increased  by  the  amount  of  interest  for  the  time  the 
order  had  to  run  before  it  would  be  payable. 

Such  is  at  present  the  case.  The  drawer  of  a  bill 
on  a  person  residing  in  the  country  sells  it  on  the  ex- 
change. Foreign  bills  are  never  said  to  be  discounted, 
but  to  be  sold  ;  for  the  person  who  gives  the  drawer 
the  amount,  is  supposed  to  deduct  not  only  the  in- 
terest on  the  bill,  but  also  the  expense  of  its  trans- 
mission. The  buyer  of  a  bill  is  a  person  who  owes  a 
sum  of  money  to  a  person  in  another  country  (say 
in  France),  and  who  wants  a  bill  to  remit  thither  to 
pay  his  debt.  The  seller  of  a  bill  is  a  person  who 
has  exported  a  quantity  of  goods  to  France,  and  who 
draws  a  bill  for  the  amount :  it  will  be  for  the  con- 
venience of  these  two  people  to  deal  together  :  the 
buyer  will  give  his  money  in  exchange  for  the  bill, 
which  lie  Avill  send  to  his  creditor  in  France,  and  the 
seller  will  give  liis  bill  in  exchange  for  the  buyer's 
money,  by  which  he  is  paid  for  the  goods  he  has  ex- 
ported. If  this  money  is  equal  to  the  amount  of  the 
bill,  minus  only  wliat  may  be  deemed  equal  to  the 
discount  and  the  expense  of  transmission,  the  ex- 
cliange  is  said  to  be  at  par ;  but  there  are  various 
circumstances  which  may  cause  the  exchange  to  be 
either  above  or  below  par,  and  the  price  given  for 
bills  of  exchange  will  vary  accordingly. 

Wlien  two  nations  excliange  their  commodities 
with   each   other  to   exactly  the  same  amount,  the 


OF    BANKING.  173 

buyers  will  be  just  as  numerous  as  the  sellers.     The 
demand  for  bills  and  the  supply  of  bills  will  be  equal ; 
the  exchange  will  now  be  at  par  ;  but  it  rarely  or 
never  happens  that  the  exports  and  imports  between 
any  two   countries  are   precisely  the  same ;  and  as 
gold  is  the  medium  of  traffic  between  nations  as  well 
as  between  individuals,  the  balance  or  difference  be- 
tween the  purchases  and  the  sales  must  be  remitted 
in  that  metal.     Now  the  expense  in  freight  and  in- 
surance   of  sending   a   quantity    of  gold   from    one 
country  to  another  will  not  be  inconsiderable.     If, 
then,  I  owe  a  sum  of  money  to  a  merchant  in  France, 
I  would  be  willing  to  give  something  more  than  that 
sum  for  a  bill  rather  tlian  submit  to  the  expense  and 
trouble  of  remitting  gold.     But  if  the  bill  would  cost 
more  than  the  expense  at  which  I  could  send  the 
gold,  why,  then  the  gold  should  go.     It  is  evident, 
then,  that  in  that  nation  which  is  in  debt  to  another 
nation,  and  which,  consequently,  has  to  send  gold  to 
pay  its  debts,  the  demand  for  bills  of  exchange  will 
be  greater  than  the  supply.     These  bills  will  be  sold 
for  more  than  the  amount  of  the  money  for  which 
they  are  drawn  ;  they  are  then  at  a  premium,   but 
this  premium  never  can  rise  higher  than  the  expense 
of  remitting  an  equal  amount  in  gold  :   for  if  it  were 
cheaper  to  remit  gold,  the  gold  would  be  remitted. 

The  price  of  bills  in  the  market  is  usually  called 
the  rate  of  exchcUige  ;  and  when  the  balance  of  trade 
is  against  a  country,  and  gold  must  be  remitted  to  pay 
that  balance,  and,  consequently,  the  price  of  foreign 
bills  rises  beyond  their  real  value  or  par,  then  the 
course' of  exchange  is  said  to  be  against  that  country  : 
thus,  for  instance,  if  in  London  I  can  sell  a  bill  on 
Paris  for  more  than  the  amount  for  which  it  is  drawn, 
then  the  course  of  exchange  is  said  to  be  against 
England  and  in  favour  of  France  ;  but  if  I  am  obliged 
to  sell  my  bill  for  less  than  the  amount,  then  the  ex- 
change is  against  France  and  in  favour  of  England. 


174  THE    HISTORY    AND    PRINCIPLES 

The  price  of  bills  is  regulated  entirely  by  the  propor- 
tion that  may  exist  between  the  demand  and  the 
supply,  and  the  demand  and  the  supply  are  regulated 
chiefly  by  the  state  of  trade  between  the  respective 
countries. 

The  trafficking  in  bills  of  exchange  is  now  a  dis- 
tinct branch  of  business.  When  bills,  say  on  France, 
are  at  a  high  premium  in  our  market,  a  house  in  Lon- 
don will  draw  bills  upon  a  house  in  Paris,  and  the 
bills  will  be  sold  at  a  good  price.  On  the  other  hand, 
when  bills  on  England  are  at  a  high  premimn  in  the 
Paris  markets,  a  house  in  Paris  will  draw  upon  a 
house  in  London  and  sell  the  bill  in  the  Paris  market. 
This  seems  to  be  a  very  honourable  kind  of  business  ; 
but  it  is  said  that  some  inferior  persons  engaged  in 
this  traffick,  sometimes  have  recourse  to  unjustifiable 
means  of  raising  or  lowering  the  price  of  bills,  in  the 
same  way  as  stock  jobbers  are  said  to  do  to  affect  the 
value  of  the  public  funds. 

Not  only  are  bills  employed  as  the  means  of  trans- 
mitting money  from  one  country  to  another,  but  also 
as  the  means  of  making  remittances  from  one  town 
to  another.  If  a  person  in  a  country  town  wishes  to 
send  money  to  London,  he  can  go  to  the  bank  and 
procure  a  bill  upon  a  banker  in  London.  If  he  wants 
to  receive  money  from  London,  he  will  draw  a  bill 
upon  his  debtor  and  get  the  money  for  it  at  the  bank. 
If  he  wish  to  send  money  from  one  provincial  town 
to  another,  he  will  get  from  the  bank  a  bill  upon  a 
London  banker  and  send  it  to  his  correspondent  by 
post.  When  the  country  banker  discounts,  or,  as  it 
would  be  called  in  the  foreign  market,  hutj.s  a  bill,  he 
usually  charges,  in  addition  to  the  discount,  a  com- 
mission to  pay  the  ex})ense  of  its  transmission  and 
collection.  And  when  he  issues  or  sells  a  bill,  he 
usually  gives  in  exchange  for  cash  a  bill  at  a  certain 
number  of  days  after  date.  Hence  the  number  of 
days  at  which  a  provincial  banker  is  in  the  habit  of 


OF    BANKING.  175 

drawing  upon  his  London  agent  is  usually  called  the 
par  of  exchange  between  that  place  and  London. 

II.  Advantages  of  Bills.  —  Besides  their  utility 
as  a  means  of  transferring  money  from  one  place  to 
another,  bills  have  the  following  advantages. 

1.  Bills  are  a  means  of  transferring  debts  from 
one  person  to  another.  If  I  owe  a  man  100/.  and 
another  man  owes  me  100/.,  I  will  draw  a  bill  for 
that  amount  on  my  debtor  and  give  it  to  my  creditor. 
I  have  thus  transferred  the  debt  from  my  debtor  to 
my  creditor,  and  my  own  debt  is  liquidated.  My 
debtor,  instead  of  paying  me  the  money  he  owed  me, 
will  pay  it  to  the  holder  of  the  bill.  My  creditor 
will  now  look  for  payment  to  my  debtor,  and  consider 
me  simply  as  a  guarantee  for  the  payment  of  the  bill. 
If  he  wishes  to  make  use  of  the  bill  he  will  again 
transfer  the  debt  to  another  party,  placing  his  own 
name  on  the  bill  as  an  additional  guarantee.  The 
bill  may  thus  pass  through  a  variety  of  hands,  and 
liquidate  a  great  number  of  debts,  before  it  becomes 
due.  When  due,  it  will  be  paid  by  the  accepter, 
who  was  the  original  debtor,  and  all  these  inter- 
mediate transactions  will  be  closed.  Hence,  in 
Lancashire,  bills  of  exchange  serve  the  purpose  of  a 
circulating  medium,  in  tlie  same  way  as  bank  notes. 
The  only  difference  is,  that  in  transferring  a  bank 
note  you  are  not  responsible  for  its  ultimate  pay- 
ment ;  but  in  passing  a  bill  of  exchange  you  place 
your  name  on  it  as  a  guarantee.  A  bill  of  exchange, 
too,  cannot  always  be  passed  for  its  full  amount ;  but 
you  will  have  to  pay  a  discount  according  to  the  time 
it  has  to  run  before  it  will  fall  due. 

2.  Bills  fix  the  period  for  the  payment  of  debts, 
and  in  case  of  litigation  they  afford  an  easy  proof  of 
the  debt.  A  person  will  have  little  scruple  in  putting 
off  a  tradesman  to  whom  he  owes  money,  and  the 
creditor  dares  not  be  urgent  lest  the  debtor  should 


176  THE    HISTORY    AND    nilNCIPLES 

no  longer  deal  witli  him,  hence  the  time  of  payment 
can  never  be  calculated  upon  with  certainty.  But 
if  tlie  customer  has  given  a  bill  for  the  amount  he 
owes,  that  bill  will  circulate  into  the  hands  of  other 
persons  who  will  be  more  peremptory  in  demanding 
payment,  and  whose  applications  cannot  be  disregarded 
with  impunity.  Besides,  if  a  man  dishonour  his 
acceptance,  his  character  is  stamped  at  once  in  the 
commercial  world  as  being  either  very  poor,  very 
negligent,  or  very  unprincipled,  and  at  no  future 
time  will  he  be  able  to  raise  money  upon  the  credit 
of  his  name.  Hence  many  persons  who  are  very 
tardy  in  paying  a  book  debt,  are  very  punctual  in 
paying  their  bills.  In  case,  too,  a  tradesman  is  under 
the  necessity  of  bringing  an  action  at  law  against  his 
customer,  he  will  have  to  prove  the  actual  delivery 
of  every  article  mentioned  in  his  account.  This,  at 
a  distance  of  time,  is  often  difficult  to  do ;  but  if  a 
bill  has  been  accepted  for  the  amount,  it  is  only  ne- 
cessary to  prove  that  the  acceptance  is  in  the  de- 
fendant's hand-writing. 

3.  Bills  enable  a  tradesman  to  carry  on  a  more 
extensive  business  with  tlie  same  amount  of  capital. 
If,  by  the  custom  of  trade,  a  dealer  give  his  cus- 
tomers three  months'  credit,  he  can,  during  that 
period,  make  no  use  of  that  portion  of  his  capital 
which  is  invested  in  the  commodities  they  have 
purchased  ;  but  if  tliey  accept  his  bills,  drawn  at 
three  months  after  date,  he  can,  if  in  good  credit, 
get  those  bills  discounted  at  the  bank  in  his  town, 
and  then  employ  this  money  in  the  farther  extension 
of  his  business.  He  will  thus,  while  selling  on  credit, 
obtain  nearly  the  same  advantages  as  though  he  sold 
for  ready  money.  Should  he,  instead  of  having  these 
])ills  discounted,  pay  them  to  the  manufacturer  or 
wholesale-house  of  whom  he  makes  his  pin'chases,  it 
will  amount  to  nearly  the  same  thing.  The  whole  of 
his  capital  is  thus  kept  in  motion,  and  is  not  dimi- 


OF    BANKING.  177 

nished  by  any  amount  of  out-standing  debts.  To  give 
credit  without  drawing  bills  requires  that  a  tradesman 
should  have  a  large  capital.  To  give  no  credit  will 
restrict  his  business.  By  means  of  bills  he  is  enabled 
to  give  credit  and  to  extend  his  business,  without 
requiring  any  addition  to  his  capital. 

4.  Bills  afford  an  easy  way  of  giving  a  guarantee. 
A  person  may  wish  to  borrow  money  of  me,  and  I 
may  be  unwilling  to  lend  it  to  him  unless  he  procure 
a  more  wealthy  person  to  guarantee  the  re-payment 
at  a  given  time.  If  he  has  a  friend  that  will  do  this, 
the  most  easy  way  of  effecting  the  guarantee  is  by 
means  of  a  bill  drawn  by  the  borrower  upon  his 
friend.  This,  in  point  of  security,  is  the  same  thing 
as  a  letter  of  guarantee  ;  but  it  has  also  this  additional 
advantage,  that  if  I  should  want  the  money  before 
the  time  fixed  for  its  re-payment,  I  can  get  this  bill 
discounted  and  reimburse  myself  the  money  I  have 
advanced.  Bills  of  this  description  are  called  ac- 
commodation-biUs,  or  wind-bills,  or  kites.  When 
employed  only  as  a  means  of  affording  occasional 
assistance  to  a  needy  friend,  or  for  raising  a  sum  of 
money  for  a  short  time,  to  meet  an  unexpected  call, 
they  do  not  appear  to  be  very  objectionable.  But 
when  systematically  pursued  for  the  purpose  of  raising 
a  fictitious  capital  whereon  to  trade,  they  uniformly 
indicate  the  folly  and  effect  the  ruin  of  all  the  parties 
concerned. 

5.  Bills  are  the  means  of  facilitating  the  removal 
of  capital  from  one  branch  of  trade  to  another  as 
circumstances  may  require.  When  the  demand  for 
any  commodity  increases,  the  price  advances,  and 
more  capital  is  put  into  requisition  to  increase  the 
supply.  When  the  demand  for  any  commodity 
declines,  the  price  falls,  the  trade  is  bad,  and  capital 
will  be  withdrawn  to  be  invested  in  a  more  profitable 
employment.  Every  branch  of  trade  is  liable  to 
fluctuations  from  an  alteration  in  the  proportion  be- 

N 


178  THE    HISTORY    AND    PRINCIPLES 

tween  the  demand  and  the  supply,  and  lience  capital 
is  continually  undergoing  a  transfer  fi'om  the  pro- 
duction of  those  articles  for  which  there  is  a  less 
demand  to  the  production  of  those  articles  for  which 
there  is  a  greater  demand.  But  in  what  way  is  this 
transfer  effected  ?  Is  it  by  a  manufacturer  leaving 
one  employment  for  another  ?  No.  The  manufac- 
turer in  the  declining  trade  will  reduce  his  capital, 
while  the  manufacturer  in  the  prosperous  trade  will 
augment  his  capital ;  and  the  transfer  of  capital  from 
one  trade  to  the  other  is  effected  chiefly  by  bills  of 
exchange.  The  manufacturer  who  has  sold  a  less 
quantity  of  commodities,  will  have  fewer  bills  for  his 
banker  to  discount ;  the  other,  having  sold  a  greater 
quantity  of  commodities,  has  more  bills  for  discount. 
The  banker's  capital,  which  he  employs  chiefly  in 
the  discount  of  bills,  is  thus  easily  transferred  from 
one  branch  of  manufacture  to  another,  in  exact  pro- 
portion to  the  circumstance  of  the  respective  parties. 
On  this  subject  I  quote  Mr.  Ricardo  :  — 

'*  In  all  rich  countries  there  is  a  number  of  men 
foi'ming  what  is  called  a  monied  class.  These  men 
are  engaged  in  no  trade,  but  live  on  the  interest  of 
their  money,  which  is  employed  in  discounting  bills, 
or  in  loans  to  the  more  industrious  part  of  the  com- 
munity. The  bankers,  too,  employ  a  large  capital  on 
the  same  objects.  The  capital  so  employed  forms  a 
circulating  capital  of  a  large  amount,  and  is  employed 
in  larger  or  smaller  proportions  by  all  the  diflferent 
trades  of  a  country.  There  is,  perhaps,  no  manufac- 
turer, however  rich,  who  limits  his  business  to  the 
extent  that  his  own  funds  alone  will  allow,  he  has 
always  some  portion  of  tliis  floating  capital  increasing 
or  diminishing  according  to  the  activity  of  the  de- 
mand for  his  commodities.  When  the  demand  for 
silks  increases,  and  that  for  cloth  diminishes,  tlie 
clotliier  does  not  remove  \vith  his  cai)ital  to  tJie  silk 
trade,  but  he  dismisses  some  of  his  workmen,  and  he 


OF    BANKING.  179 

discontinues  his  demand  for  the  loan  from  bankers 
and  monied  men.  While  the  case  of  the  silk  manu- 
facturer is  the  reverse  :  he  wishes  to  employ  more 
workmen,  and  thus  his  motive  for  borrowing  is  in- 
creased ;  he  borrows  more,  and  thus  capital  is  trans- 
ferred from  one  employment  to  another  without  the 
necessity  of  a  manufacturer  discontinuing  his  usual 
occupation."  * 

III.  Classes  of  Bills.  —  The  bills  presented  to  a 
bank  for  discount  may  generally  be  divided  into  the 
following  classes  :  — 

1.  Bills  drawn  by  producers  or  manufacturers  upon 
wholesale  dealers. 

2.  Bills  di'awn  by  wholesale  dealers  upon  retail 
dealers. 

3.  Bills  drawn  by  retail  dealers  upon  consumers. 

4.  Bills  not  arising  out  of  trade,  but  yet  drawn 
against  value,  as  rents,  &g. 

5.  Kites,  or  accommodation  bills. 

The  first  two  classes  of  bills  are  the  best,  and  are 
fair  legitimate  bills  for  bankers  to  discount. 

The  third  class  ought  not  to  be  too  much  encou- 
raged. They  are  for  comparatively  small  amounts, 
and  are  drawn  by  shopkeepers  and  tradesmen  upon 
their  customers.  To  discount  these  bills  freely 
would  encourage  extravagance  in  the  accepters ; 
and-  ultimately,  prove  injurious  to-  the  drawers. 
When  a  man  accepts  bills  to  his  butcher,  baker, 
tailor,  upholsterer,  &c.,  he  may  fairly  be  suspected 
of  living  beyond  his  income.  Solvent  and  regular 
people  pay  their  tradesmen's  accounts  with  ready 
money. 

The  fourth  class  of  bills,  though  sometimes  proper, 
ought  not  to  be  too  much  encouraged.  Persons,  out 
of  trade  have  no  business  with  bills.. 

*  Ricardo's  Principles  of  Political  Economy,  page  84. 

N    2 


180  THE    HISTORY    AND    PRINCIPLES 

The  last  class  of  bills  should  almost  always  be  re- 
jected. To  an  experienced  banker,  wlio  knows  the 
parties,  the  discovery  of  accommodation  bills  is  by 
no  means  difficult.  They  are  usually  drawn  for  even 
amounts,  for  the  largest  sum  that  the  stamp  will  bear, 
and  for  the  longest  term  that  the  bank  will  discount, 
and  are  presented  for  discount  soon  after  they  are 
drawn.  The  parties  are  often  relations,  friends,  or 
parties  who,  from  their  avocations,  can  have  no  deal- 
ings with  each  other. 

Not  only  the  parties  and  the  amounts  of  bills  are 
matters  of  consideration  to  a  banker,  but  also  the 
time  they  have  to  run  before  they  fall  due.  A  bill 
drawn  for  a  long  term  after  date,  is  usually  styled, 
not  perhaps  very  properly  a  long-dated  hill.  A  bill 
drawn  at  a  short  term,  is  styled  a  short-dated  bill. 

Query,  —  Is  it  most  for  the  interest  of  a  bank  to 
discount  long-dated  bills  or  short-dated  bills  ? 

Short  Bills  versus  Long  Bills.  —  First,  There  is 
more  safety  in  discounting  short  bills,  because  the 
parties  may  fail  before  the  long  ones  become  due. 
Secondly,  If  any  given  amount  of  capital  be  em- 
ployed in  discounting  bills,  it  will  accumulate  more 
rapidly  by  discounting  short  bills  than  long  bills, 
operating  in  the  same  way  as  money  placed  at  com- 
pound interest,  which  increases  the  faster,  as  the 
times  of  paying  the  interest  are  more  frequent. 
Thirdly,  If  a  bank  charges  commission  on-  the 
amount  of  the  bills  discounted,  the  commission  will 
be  more  in  the  course  of  a  year  upon  any  given 
amount  of  capital  employed  in  discounting  short  bills 
than  employed  in  discounting  long  bills.  Fourthly, 
If  a  bank  issue  notes,  a  greater  amount  of  notes  will 
be  issued  in  discounting  a  succession  of  short  bills, 
than  by  discounting  long  bills.  Thus  if  I  discount  a 
bill  for  1000/.  drawn  at  twelve  months  after  date,  I 
issue  only  1000/.  of  notes  ;  but  if  I  discount  in  suc- 
cession four  bills,  each  having  only  three  months  to 


OF    BANKING.  181 

run,  I  issue,  in  the  course  of  the  year,  4000/.  of 
notes.  Fifthly,  Long-dated  bills  lock  up  the  funds 
of  a  bank  so  that  they  cannot  be  discounted  with 
safety  but  from  the  bank's  own  capital ;  for  if  a  bank 
employs  its  deposits  or  its  circulation  in  discounting 
long-dated  bills,  and  payment  of  the  notes  or  de- 
posits should  be  demanded,  the  long-dated  bills 
could  not  be  re-discounted,  and  the  bank  must  stop. 
Sixthly,  Long  bills  may  encourage  speculation.  Per- 
sons may  purchase  large  quantities  of  commodities 
in  the  expectation  that  the  price  will  advance  before 
the  long  bills  which  he  accepts  in  payment  shall  fall 
due.  But  if  the  bills  are  of  short  date,  the  speculation 
will  be  prevented. 

Long  Bills  versus  Short  Bills.  —  First,  The  amount 
of  discount  is  greater  on  a  long  bill  than  on  a  short 
bill.  If,  therefore,  a  gentleman  out  of  business  wants 
a  temporary  advance,  and  proposes  to  draw  a  bill  on 
his  friend,  it  is  better  to  advise  him  to  draw  a  long 
bill  than  a  short  one.  Secondly,  Long  Bills  will 
employ  a  larger  amount  of  capital.  If  a  banker  dis- 
counts any  given  amount  per  week,  he  will  always 
have  twice  the  amount  of  bills  current,  if  they  are 
drawn  at  four  months'  date,  than  he  will  have  if  they 
are  drawn  at  two  months.  And,  as  bankers  wish  to 
employ  their  capital,  it  will  be  more  for  their  advan- 
tage to  discount  such  bills  as  will  employ  the  largest 
amount.  Thirdly,  The  discounting  of  long-dated 
bills,  being  a  more  permanent  advance  of  capital,  is 
more  beneficial  to  the  commercial  and  agricultural 
classes  in  the  district.  If  a  retail  dealer  can  get  long 
bills  discounted,  he  can  afford  to  give  longer  credit, 
and  this  will  induce  his  customers  to  buy  more  goods 
of  him,  and  he  will  do  more  business.  If  a  manu- 
facturer or  wholesale  dealer  can  get  his  long  bills 
discounted,  he  also  can  give  longer  credit,  and  will 
sell  more  goods.  If  a  landlord  can  get  a  long  bill  on 
his  tenant  discounted,  he  need  not  urge  him  for  rent, 

N   3 


182        THE  HISTOHY  AND  PRINCIPLES 

and  the  money  may,  in  the  interim,  be  employed  in 
improving  the  land.  The  discounting  of  long  bills 
is  similar  to  a  permanent  advance  of  capital.  The 
money  may  be  profitably  employed,  and  be  repro- 
duced before  the  long  bill  may  become  due ;  but  if 
the  bill  be  short,  this  cannot  be  done. 

IV.  Notaries  Public.  —  "A  notary  was  anciently  a 
scribe  that  only  took  notes  or  minutes,  and  made 
short  drafts  of  writings  and  other  instruments,  both 
public  and  private.  But,  at  this  day,  we  call  him  a 
notary  public,  who  confirms  and  attests  the  truth  of 
any  deeds  or  writings,  in  order  to  render  the  same 
authentic."  *  This  part  of  the  business  of  a  public 
notary  must  have  been  very  necessary  before  the  dis- 
covery of  the  art  of  printing,  and  when  many  of  the 
first  men  in  the  state  were  unable  to  read  or  write. 
We  find  that  some  public  documents  have  been  at- 
tested by  notaries  in  the  following  form  :  — "  As  my 
Lord  Bishop  is  unable  to  write,  I  do  hereby  certify, 
that  the  above  is  his  mark."  These  notaries  were 
appointed  by  the  archbishop  of  Canterbury,  and  took 
an  oath  of  fidelity  on  receiving  their  appointment. 
All  instruments  made  by  them  were  considered 
public  instruments,  and  were  received  as  evidence  in 
the  courts  of  law. 

The  business  of  a  notary  in  the  present  day  in- 
cludes the  making  of  wills,  drawing  up  powers  of 
attorney,  bonds  of  arbitration,  bills  of  sale,  charter 
parties,  and  attestations.  The  drawing  of  instru- 
ments of  this  description,  constitutes  almost  the  sole 
employment  of  some  notaries,  while  the  chief  busi- 
ness of  others  consists  in  nothig  and  protesting  bills 
of  exchange.  Some  notaries  are  translators  of  lan- 
guages, but  more  frequently  they  employ  a  foreigner 
for  this  purpose. 

*  Burns'  Ecclesiastical  Law,  vol.  iii.  page  1. 


OF    BANKING.  183 

The  difference  between  the  noting  and  the  pro- 
testing of  a  bill  of  exchange  for  non-payment»  is  this  : 
— In  noting,  the  notary,  after  having  presented  the  bill 
at  the  proper  place,  and  demanded  payment,  attaches 
to  it  a  small  piece  of  paper,  on  which  he  writes  the 
amount  of  his  charge,  and  the  reason  why  the  bill  is 
not  paid  —  such  as  "  no  effects,"  "  no  advice,"  "  out, 
no  orders,"  "  will  be  paid  to-morrow,"  &c.  This 
piece  of  paper  is  called  "  the  notaiy's  ticket,"  and 
the  writing  on  it  is  called  "  the  notary's  answer." 
Some  notaries  have  their  names  and  address  printed 
on  their  tickets.  The  notary  also  places  on  the 
bottom  part  of  the  bill,  in  front,  the  initials  of  his 
name,  the  amount  of  his  fee,  and  the  date  of  the 
noting.  The  same  form  is  used  in  noting  a  bill  for 
non-acceptance. 

The  practice  of  noting  bills  of  exchange  is  not 
recognised  by  the  laws  of  England.  It  is  said  to 
have  taken  its  rise  from  the  following  circumstance  :  — 
After  the  modern  system  of  banking  was  established 
and  bills  of  exchange  became  numerous,  it  was  cus- 
tomary for  one  of  the  clerks  of  the  banking-house 
to  act  as  a  notary.  If  tlie  bill  had  been  presented 
in  the  morning  and  was  not  paid,  he  called  in  the 
evening  to  ask  the  reason  of  its  non-payment,  and  he 
charged  a  small  fee  for  this  additional  trouble.  By 
degrees  this  practice  became  established,  and,  ulti- 
mately, a  notary  public  was  employed  for  the  purpose. 

A  protest  is  a  legal  instrument,  drawn  on  stamped 
paper,  generally  according  to  the  following  form  :  — 


On  this  day,  Wednesday,  i\\e  first  day  o^  Jamiary,  one  thousand 
eight  hundred  and  t\\'\xty -four,  I,  A.B.,  Public  Notary,  by  legal 
authority  admitted  and  sworn,   dwelling  in  the   city  of  , 

did  present  ^or  jmyment  the  original  bill  (a  true  copy  whereof  is 
within  written)  to  a  woman  at  ,  who  replied,  that 

said  hill  could  not  then  he  paid. 

Wherefore,  I,  the  said  notary,  do  solemnly  protest  against  the 
drawer  and  endorsers  of  the  said  bill,  and  all  others  therein  con- 

N    4 


184  THE    HISTORY    AND    PRINCIPLES 

cerned,  for  all  exchange,  re-exchange,  losses,  costs,  interests,  and 
damages,  suffered  and  to  be  suffered,  for  want  of  payment  of  said 
bill.     Thus  done  in  my  office,  the  day  and  year  aforesaid. 

Which  I  attest, 

A.  B.  Not.  Pub. 

If  a  bill  has  been  protested  for  non-acceptance,  it 
must,  when  due,  be  again  protested  for  non-payment. 
The  holder  of  a  protested  bill  should  immediately 
send  the  protest  to  the  party  of  whom  the  bill  had 
been  received.  If  the  bill  was  only  noted,  the  party 
should  receive  due  notice. 

If  an  action  be  brought  upon  a  bill  which  has  been 
only  noted,  it  will  be  necessary  to  produce  a  witness 
in  court,  to  prove  that  the  bill  was  duly  and  properly 
presented  for  payment :  but  if  the  bill  has  been  pro- 
tested, the  production  of  the  protest  will  be  sufficient 
evidence.  No  action  can  be  brought  upon  a  foreign 
bill  unless  it  has  been  protested.  But  if  the  bill  has 
been  duly  noted,  a  protest  may  be  drawn  up  at  any 
time  previous  to  the  commencement  of  a  suit,  with- 
out a  second  presentation  of  the  bill  at  the  place 
where  it  was  payable. 

An  inland  bill  may  be  protested  for  non-acceptance 
if  it  be  above  5/.,  if  drawn  after  date,  and  if  the  value 
is  stated  therein  to  be  received.  Inland  bills,  in  such 
cases,  may  also  be  protested  for  non-payment,  if  they 
'  have  been  accepted.  No  other  inland  bills  can 
legally  be  protested.  This  excludes  bills  drawn  after 
sight,  or  for  a  less  sum  than  o/.* 

Although  every  foreign  bill  must  be  protested,  yet 
it  is  not  considered  absolutely  necessary  that  an 
inland  bill  should  be  either  noted  or  protested,  in 
order  to  sustain  an  action  for  the  amount. 

A  bill  is  usually  noted  or  })rotested  for  non-payment 
after  bank  hours,  on  the  evening  of  the  day  on  which 
it  falls  due.     But  if  not  done  then,  it  may  be  noted 

•  See  Bayloy  on  Bills  of  Exchange,  p.  262. 


OF    BANKING.  185 

or  protested  at  any  subsequent  time.  The  omission 
of  the  noting  or  protesting  by  the  holder  does  not 
nulUfy  his  claims  upon  any  of  the  antecedent  parties, 
provided  they  received  due  notice  of  the  dishonour. 
Foreign  bills  should  be  noted  on  the  day  that  accept- 
ance or  payment  was  refused.  Inland  bills  may  also 
be  noted  on  that  day,  but  a  protest  for  non-payment 
of  an  inland  bill  cannot  be  made  out  until  the  day 
after  it  is  due. 

If  a  bill  be  refused  acceptance  by  the  drawee,  and 
another  party  accept  it  for  honour  of  the  drawer  or 
of  an  indorser,  it  must  again  be  protested  for  non- 
payment by  the  drawee  before  an  action  can  be 
sustained  against  the  accepter. 

In  London  it  is  not  the  custom  to  protest  inland 
bills  at  all.  And  in  case  of  non-acceptance,  they  are 
not  even  noted,  unless  drawn  after  sight.  It  is  then 
necessary  that  they  should  be  noted,  in  order  to  fix 
the  time  on  which  they  fall  due.  Inland  bills  are 
always  noted  for  non-payment.  Foreign  bills  are 
protested  both  for  non-acceptance  and  for  non-pay- 
ment. Bills  drawn  from  Ireland  or  from  Scotland 
are  regarded  as  foreign  bills.  The  notary's  charge 
for  noting  a  bill  within  the  site  of  the  ancient  walls 
of  the  city  of  London  is  1.9.  6d.  Beyond  those 
limits  the  charges  are  2,y.  6</.,  3*.  Qd.,  5s..,  and  6s.  6d.y 
according  to  the  distance.  The  charges  for  protest- 
ing a  bill  under  20/.  is  Js.  6r/.,— from  20/.  to  100/.  it 
is  8.S-.  6d.  —  100/.  to  500/.  it  is  10.9.  6d.  —  500/.  and 
upwards  it  is  17*.  Gd.  The  charges  of  notaries  in 
London  are  not  fixed  by  law  ;  but  are  regulated  by  a 
society  which  they  have  established  themselves,  and 
which  issues  printed  rules,  a  copy  of  which  is  given 
to  each  notary.  Mr.  Justice  Bayley  has  stated  posi- 
tively, that  if  a  bill  be  paid  when  presented  by  the 
notary,  the  accepter  is  not  bound  to  pay  the  expense 
of  noting.  But  this  is  contrary  to  the  usual  practice. 
In  such  cases,  the  notaries  always  refuse  to  take  the 


186  THE    HISTORY    AND    PRINCIPLES 

money  for  the  bill,  unless  they  are  paid  the  noting 
fees  at  the  same  time. 

It  is  customary  for  the  country  bankers  to  re-issue 
the  London  bills  they  have  discounted.  In  this  case, 
they  always  indorse  the  bills,  and  place  on  them  a 
"  case  of  need."  A  case  of  need  is  a  reference  for 
payment  to  a  merchant  or  banker  in  London,  if  the 
jbill  should  not  be  paid  by  the  party  on  whom  it  is 
drawn.  This  reference  is  made  by  writing  on  the 
back  of  the  bill  at  bottom —  "  In  case  of  need  apply 
to  Messrs.  A.  B.  &  Co."  If,  then,  the  bill  should 
not  be  paid,  Messrs.  A.  B.  &  Co.,  will  pay  it  for 
honour  of  the  indorser.  The  advantage  of  placing 
a  case  of  need  upon  a  bill  is,  that  the  party  indorsing 
it  receives  it  back  sooner  in  case  of  non-payment. 
It  also  makes  the  bill  more  respectable,  and  secures 
its  circulation.  The  notaries  always  observe  these 
"  cases  of  need,"  and  after  having  noted  the  bill 
apply  to  the  referee. 

In  the  year  1801,  an  Act  of  parliament  was  passed, 
for  the  better  regulation  of  f)ublic  notaries  in  Eng- 
land. It  enacts,  that  from  and  after  the  first  day  of 
August,  1801,  no  person  shall  be  admitted  as  a 
notary,  unless  he  shall  have  served  as  an  apprentice 
for  seven  years  to  a  public  notary,  or  to  a  scrivener, 
being  also  a  public  notary.  Within  three  months 
after  the  date  of  the  indenture  of  apprenticeship,  one 
of  the  subscribini*'  witnesses  must  make  an  affidavit 
of  the  fact  before  the  master  of  the  Faculties  of  his 
grace  the  lord  archbishop  of  Canterbury,  in  London, 
his  surrogate,  or  commissioner.  This  affida\'it  is  to 
be  entered  in  a  book,  for  which  the  clerk  may  charge 
the  sum  of  5s.,  and  this  book  may  be  searched  by 
any  person  on  paying  the  sum  of  Is.  for  each  search. 
Every  person,  previous  to  being  enrolled  as  a  notary, 
must  also  make  an  affidavit  that  he  has  served  an  ap- 
prenticeshi])  of  seven  years,  and  that  during  the 
whole  of  that  time  he  has  been  actually  employed  in 


OF    BANKING.  IS7 

the  business.  No  public  notary  can  have  an  appren- 
tice but  while  he  actually  practises.  Persons  apply- 
ing for  a  faculty  to  become  notaries  within  the 
jurisdiction  of  the  company  of  scriveners,  must  pre- 
viously take  their  freedom  of  that  company.  Any 
person  doing  any  thing  belonging  to  the  office  of 
the  notary,  without  being  enrolled,  shall  forfeit  the 
sum  of  50/. 

In  the  year  1833,  an  Act  was  passed  to  alter  and 
amend  the  Act  of  1801,  for  the  better  regulation  of 
pubhc  notaries  in  England.  It  limits  the  operation 
of  the  former  Act  to  the  city  of  London  and  liberties 
of  Westminster,  the  borough  of  Southwark,  and  the 
circuit  often  miles  from  the  Royal  Exchange,  in  the 
said  city  of  London.  Beyond  those  limits  the  arch- 
bishop of  Canterbury  may  authorise  attorneys,  soli- 
citors, and  proctors,  to  practise  as  notaries  within 
any  district  in  which  it  shall  be  made  to  appear  to 
the  master  of  the  court  of  Faculties,  that  there  is  not 
(or  shall  not  hereafter  be)  a  sufficient  number  of  such 
notaries  public.     (3  &  4  W.  IV.  c.  70.) 

In  default  of  a  notary  public,  a  bill  may  be  pro- 
tested for  non-acceptance  or  non-payment  by  any 
other  substantial  person  of  the  city,  town,  or  place 
where  such  bill  or  note  shall  be  so  dishonoured,  in  the 
presence  of  two  or  more  credible  witnesses,  which 
protest  shall  be  made  and  written  under  a  fair  written 
copy  of  such  bill  or  note. 

V.  The  rate  of  Discount.  —  During  the  middle 
ages  it  was  believed  that  all  interest  taken  for  the  loan 
of  money  was  unjust  and  unscriptural,  and  the  lender 
was  stigmatised  as  a  usurer. 

Though  this  notion  has  been  altogether  discarded 
in  modern  times,  it  may  not  have  been  either  per- 
nicious or  absurd  at  the  time  it  was  introduced.  It 
originated  when  the  population  was  purely  agri- 
cultural.    That  a  man  who  borrows  money  with  a 


188  THE    HISTORY    AND    PRINCIPLES 

view  of  making  a  profit  by  it,  should  giv^e  some  por- 
tion of  his  profit  to  the  lender,  is  a  self-evident 
principle  of  natiu'al  justice.  A  man  makes  a  profit 
usually  by  means  of  traffic.  But  in  a  country 
purely  agricultural,  and  under  such  a  government  as 
was  the  feudal  system,  there  can  be  but  little  traffic, 
and  hence  but  little  profit.  Besides,  in  an  agricultural 
country  a  person  seldom  wants  to  borrow  money 
except  he  be  reduced  to  poverty  or  distress  by  mis- 
fortune. Now,  for  a  rich  man  who  has  money  which 
he  cannot  profitably  employ,  to  charge  interest  for  a 
loan  to  a  man  in  distress,  appears  to  be  consistent 
with  neither  justice  nor  benevolence. 

Erroneous  views  are  often  entertained  of  the  Mosaic 
laws,  from  neglecting  to  consider  the  state  of  the 
people  to  whom  those  laws  were  given.  It  was  the 
object  of  the  Jewish  legislator  to  make  the  Jews  a 
purely  agricultural  people.  The  promotion  of  agri- 
culture was,  as  Montesquieu  would  say,  the  spirit 
of  his  laws.  Hence  he  prohibited  the  taking  of 
interest  for  the  loan  of  money.  By  this  means  he 
interdicted  commerce.  His  design  was  to  prevent 
the  Israelites  associating  with  the  surrounding  na- 
tions, and  learning  their  idolatrous  practices.  But 
even  Moses  permitted  the  Jews  to  take  interest  for 
money  lent  to  strangers  ;  a  circumstance  which 
proves  that  the  prohibition  was  only  a  political  and 
not  a  moral  precept.  If  the  taking  of  interest  for 
money  were  morally  wrong,  it  would  have  been  for- 
bidden in  all  cases.  But  in  the  middle  ages  the 
political  and  the  moral  laws  of  Moses  were  confound- 
ed together,  and  all  of  them  were  supposed  to  be  of 
perpetual  obligation  upon  all  nations.  These  opi- 
nions, which  might  have  been  useful  in  a  purely 
agricultural  state,  were  still  indulged  when  a  change 
of  manners  required  that  this  country  should  become 
conimercial.  If  we  admitted  the  unlawfulness  of 
taking  interest  for   money,   we  might  on  the  same 


OF    BANKING.  189 

principle  condemn  all  kinds  of  commerce,  and  even 
all  profitable  investment  of  capital.  Where  is  the 
difference  between  taking  money  for  the  use  of 
money,  and  taking  money  for  the  use  of  commodities 
that  are  purchased  with  money?  If  I  lay  out  100/. 
in  the  purchase  of  a  house,  I  am  allowed  to  take 
rent  for  the  use  of  that  house.  Why,  then,  if  I  lend 
to  a  friend  the  100/.  with  which  he  purchases  a  house, 
am  I  to  receive  no  remuneration  ?  If  we  are  not 
allowed  to  receive  any  money  for  the  loan  of  money, 
why  are  we  allowed  to  receive  money  for  the  loan  of 
a  house  or  a  coach,  or  any  other  article  ?  An  ex- 
orbitant charge  for  interest  is  certainly  unjust,  but 
so  is  an  exorbitant  charge  for  any  thing  else. 

After  it  had  been  admitted  that  it  was  lawful  to 
take  interest  for  the  loan  of  money,  the  government 
thought  proper  to  limit  the  amount.  In  the  reign  of 
Henry  VIII.  interest  was  limited  to  10  per  cent. 
James  I.  reduced  it  to  8  per  cent. ;  at  which  rate  it 
remained  till  the  reign  of  Charles  II.,  when  it  was 
reduced  to  6  per  cent. ;  and  finally,  in  the  reign  of 
queen  Anne,  it  was  reduced  to  5  per  cent.  But,  in 
Ireland,  the  legal  rate  of  interest  is  still  6  per  cent. 
However  inapplicable  these  laws  may  be  to  our  own 
times,  they  were  probably  beneficial  at  the  time  they 
were  enacted.  In  our  time  capital  has  accumulated, 
money  is  abundant,  the  lenders  are  numerous,  hence 
competition  is  sure  to  take  place,  and  the  value  of 
money  will  be  regulated  in  the  same  way  as  that  of 
any  other  commodity  in  the  market.  But,  in  those 
times,  the  lenders  were  few,  and  might  easily  com- 
bine to  fix  the  rate  of  interest  as  they  pleased.  They 
had,  in  fact,  though  not  a  legal,  yet  an  actual  mono- 
poly ;  and  hence  it  was  necessary  that  they,  like  other 
monopolists,  should  be  placed  under  restraint.  In 
our  times,  it  is  the  rate  of  profit  which  regulates  the 
rate  of  interest.  In  those  times,  it  was  the  rate  of 
interest  which  regulated  the  rate  of  profit.     If  the 


190  THE    HISTORY    AND    PRINCIPLES 

money-lender  charged  a  high  rate  of  mterest  to  the 
merchant,  the  merchant  must  have  charged  a  higher 
rate  of  profit  on  his  goods.  Hence,  a  large  sum  of 
money  would  be  taken  from  the  pockets  of  the  pur- 
chasers to  be  put  into  the  pockets  of  the  money- 
lenders. Tliis  additional  price,  too,  put  upon  the 
goods,  would  render  the  public  less  able  and  less  in- 
clined to  purchase  them.  The  laws,  therefore,  which 
restricted  the  rate  of  interest  were,  probably,  in  those 
times,  friendly  to  trade. 

Sir  Josiah  Child,  in  his  excellent  Essay  on  Trade, 
accuses  the  "new-fashioned  bankers,"  of  being  *'the 
main  cause  of  keeping  the  interest  of  money  at  least 
two  per  cent,  higher  than  otherwise  it  would  be  ;  for, 
by  allowing  their  creditors  six  per  cent.,  they  make 
moneyed  men  sit  down  lazily  with  so  high  an  interest, 
and  not  push  into  commerce  with  their  money,  as 
they  certainly  would  do,  were  it  at  four  or  three  per 
cent.,  as  in  Holland.  This  high  interest  also  keeps 
the  price  of  land  at  so  low  as  fifteen  years'  piu"chase. 
It  also  makes  money  scarce  in  tlie  country,  seeing  that 
the  trade  of  bankers  being  only  in  London,  it  very 
much  di'ains  the  ready  money  from  all  other  parts  of 
the  kingdom." 

That  we  may  be  able  to  judge  of  the  truth  of  these 
accusations,  it  will  be  necessary  to  make  some  observ- 
ations upon  those  circumstances  Avhich  influence  the 
rate  of  interest. 

It  has  been  the  opinion  of  most  of  our  political 
economists,  that  the  rate  of  interest  is  regulated  by 
the  rate  of  profit.  This  sentiment  lias,  however,  been 
attacked.  It  has  been  contended,  that  the  rate  of 
interest  is  not  influenced  by  the  average  rate  of  profit, 
but  by  the  quantity  of  moneyed  capital  in  the  market, 
compared  with  the  wants  of  the  borrowers.  In  other 
words,  that  the  price  of  money  is  influenced  by  the 
pro])ortion  between  the  demand  and  the  supply. 

Tliis  sentiment  is  undoubtedly  right ;  but  it  does 


OF    BANKING.  IQl 

not  overthrow  the  proposition  against  which  it  is 
advanced.  The  price  of  money,  or  of  the  loan  of 
money,  is  no  doubt,  Uke  the  price  of  every  other 
commodity,  regulated  at  any  particular  time  by  the 
proportion  between  the  supply  and  the  demand ;  but 
does  not  the  rate  of  profit  regulate  the  supply  and 
the  demand  ?  Will  any  commercial  man  borrow 
money  w^hen  he  must  give  a  higher  interest  for  it 
than  he  can  make  profit  by  its  use  ?  Or  will  any 
man  lend  money  at  a  very  low  interest,  when,  by 
engaging  in  business,  lie  can  make  a  very  high  profit? 
It  is  true,  that  on  particular  occasions,  and  under 
particular  circumstances,  some  individuals  may  do 
this,  but  not  permanently  and  universally.  It  is 
obvious  then,  that  a  high  rate  of  interest,  in  propor- 
tion to  profits,  increases  the  supply  of  money,  and 
diminishes  the  demand ;  and  a  low  rate  of  interest, 
in  proportion  to  profits,  increases  the  demand  for  the 
loan  of  money,  and  diminishes  the  supply.  The  rate 
of  interest,  therefore,  is  ultimately  regulated  by  the 
rate  of  profits. 

When  we  say  the  price  of  cotton  is  regulated  by 
the  cost  of  production,  we  do  not  mean  to  deny  tliat 
the  market  price  of  cotton  is  fixed  by  the  proportion 
between  the  demand  and  the  supply.  On  the  con- 
trary, this  is  admitted ;  but  then  it  is  contended,  that 
the  supply  itself  is  regulated  by  the  cost  of  produc- 
tion. If  the  market  price  of  cotton  were  so  low  as 
not  to  furnish  to  the  grower  a  fair  average  of  profit 
on  the  capital  employed,  then  would  capital  be  re- 
moved, after  a  while,  from  the  cultivation  of  cotton 
to  some  other  employment.  And  if  the  price  of 
cotton  were  so  high  as  to  furnish  more  than  the  fair 
average  of  profit,  then,  after  a  while,  more  capital 
would  find  its  way  into  that  employment,  the  supply 
would  be  increased,  and  the  prices  would  fall ;  but 
it  is  only  by  influencing  the  supply  that  the  cost 
of  production  has  any  effect  upon  the  price.     Thus, 


192  THE    HISTORY    AND    PRINCIPLES 

although  the  cost  of  production  may  be  the  same  for 
a  number  of  years,  the  price  may  be  perpetually 
varying.  The  price  may,  from  a  variety  of  causes, 
be  in  a  state  of  constant  vibration ;  but  it  cannot 
permanently  deviate  on  one  side  or  the  other  much 
beyond  the  line  marked  out  by  the  cost  of  pro- 
duction. 

It  is  the  same  with  the  interest  of  money.  It  is 
subject  to  perpetual  fluctuation,  from  the  proportion 
between  the  demand  and  the  supply :  but  it  will  not 
deviate  far  from  the  line  marked  out  by  the  rate  of 
profit ;  for  the  rate  of  profit  not  only  influences 
the  supply  (as  with  cotton)  but  also  influences  the 
demand. 

The  above  reasoning  is  founded  on  the  supposition 
that  those  who  borrow  money,  borrow  it  for  the  pur- 
pose of  investing  it  in  trade,  or  of  making  a  profit  by 
its  use.  But  this  is  not  always  the  case  ;  and  is  never 
the  case  with  the  government  of  a  country,  who 
always  borrow  for  the  purpose  of  spending.  Now  we 
can  form  a  judgment  as  to  what  portion  of  his  profits 
a  merchant  is  willing  to  give  for  the  loan  of  a  sum  of 
money,  but  we  can  form  no  judgment  as  to  the  con- 
duct of  a  profligate  rake  who  wants  money  to  spend 
on  his  follies.  A  king  or  a  government  is  in  the 
same  state.  They  will  borrow  money  as  cheap  as 
they  can ;  but,  at  all  events,  money  they  will  have. 
We  cannot,  therefore,  infer  that,  because  Charles  II. 
gave,  at  times,  to  the  new-fashioned  bankers,  thirty 
per  cent,  for  money,  that  the  average  rate  of  profit 
exceeded  thirty  per  cent.  May  not,  then,  these 
advances  to  the  king  have  had  the  effect  of  raising 
the  interest  of  money,  and  thus  justify  the  accusations 
of  Sir  Josiali  CJiild  ? 

When  a  number  of  commercial  men  borrow  money 
of  one  another,  the  permanent  regulator  of  the  rate 
of  interest  is  the  rate  of  profit ;  and  the  immediate 
regulator  is  the  proportion  between  the  demand  and 


OF    BANKING.  193 

the  supply.  But  when  a  new  party  comes  into  the 
market,  who  has  no  common  interest  with  them,  who 
does  not  borrow  money  to  trade  with,  but  to  spend, 
the  permanent  regulator  (the  rate  of  profit)  loses  its 
influence,  and  the  sole  regulator  is  then  the  propor- 
tion between  the  demand  and  the  supply.  The 
loans  to  the  king  created  a  much  greater  demand  for 
money,  and  the  rate  of  interest  consequently  rose. 
These  demands  were  to  so  great  an  amount,  and 
were  so  frequently  repeated,  that  the  rate  of  interest 
became  permanently  high.  Many  individuals  would, 
no  doubt,  (as  Sir  Josiah  Child  states  they  did)  with- 
draw their  capitals  from  trade,  and  live  upon  the 
interest  of  their  money.  And  others,  who  were  in 
business,  would  employ  their  superfluous  capitiil  in 
lending  it  at  interest,  rather  than  in  extending  their 
business.  Those  commercial  men  who  now  wanted 
to  borrow  money  must  give  a  higher  interest  for  it 
than  they  did  before.  To  enable  themselves  to  do 
this,  they  must  charge  a  higher  profit  on  their  goods. 
Thus,  then,  in  this  artificial  state  of  the  money 
market,  it  appears  reasonable  to  suppose  that  the 
rate  of  interest  may  have  regulated  the  rate  of  profits, 
instead  of  the  rate  of  profits  regulating  the  rate  of 
interest,  which  is  the  natural  state. 

As  the  rate  of  interest  is  regulated  by  the  propor- 
tion between  the  demand  and  the  supply  of  money, 
it  will  vary,  not  only  in  different  countries,  but  in 
diflTerent  provinces  of  the  same  country,  according 
to  the  proportions  found  to  exist.  In  the  London 
money  market  the  rate  of  interest  is  usually  much 
less  than  in  the  country.  The  price  of  any  com- 
modity when  purchased  in  large  quantities  at  a 
wholesale  warehouse,  is  always  less  than  that  at 
which  it  is  retailed  to  the  consumer.  So  the  price 
of  the  loan  of  money  at  the  Stock  Exchange,  where 
it  is  advanced,  in  large  masses  upon  government 
security,  will  always  be  less  than  when  advanced  in 

o 


194  THE    HISTORY    AND    PRINCIPLES 

small  sums  upon  individual  security.  A  low  rate  of 
interest  in  London,  however,  will,  after  a  while, 
have  the  eifect  of  lowering  the  rate  of  interest  in  the 
country  upon  those  securities  which  are  negotiable 
in  London.  For  if  tlie  country  banker  insists  on  a 
higher  rate  of  discount  for  bills  drawn  upon  good 
London  houses,  the  drawer  will  send  them  to  a  bill 
broker  in  London,  who  will  get  them  discounted, 
and  remit  the  money  to  the  drawer.  But  with  re- 
gard to  those  bills  which  are  not  payable  in  London, 
a  higher  rate  of  discount  may  be  obtained.  At  this 
moment  the  Bank  of  Ireland  are  discounting  bills  on 
London,  at  four  per  cent.,  while  live  per  cent,  is 
charged  upon  bills  payable  in  Ireland. 

The  cheapness  of  money  in  London  has  the  effect 
of  diminishing  the  number  of  bills  drawn  upon  Lon- 
don. A  London  merchant  who  sends  an  order  for 
goods  to  a  country  manufacturer,  instead  of  saying, 
"  draw  upon  me  at  two  months,"  will  say,  '*  allow 
me  the  discount,  and  I  will  send  you  the  cash."  If 
he  can  get  an  allowance  of  four  per  cent,  discount, 
and  borrow  the  money  in  London  at  two  per  cent., 
he  will  make  an  additional  profit  on  the  transaction. 
As  the  surplus  quantity  of  money  in  London  thus 
becomes  diffused  throughout  the  country,  the  rate  of 
discount  will  gradually  advance  in  London  and  fall 
in  the  country. 

Although  a  low  rate  of  interest  indicates  the  abun- 
dance of  capital,  and  hence  may  be  considered  as 
a  favourable  circimistance  in  the  condition  of  any 
nation,  yet  it  produces  some  injurious  effects  :  it  oc- 
casions the  removal  of  ca})ital  to  foreign  countries  ; 
it  weakens  the  inducements  to  frugality  and  accu- 
mulation ;  and  it  encourages  speculative  and  hazard- 
ous undertakings.  Persons  who  can  obtain  but  a 
low  rate  of  interest  for  their  money,  are  often  in- 
duced to  engage  in  speculations  which  promise  to 
yield  a  more  profitable  return.  All  seasons  of  specu- 
lation have  been  preceded  by  a  low  rate  of  interest. 


OF    BANKING.  195 

In  the  year  1818,  a  select  committee  of  the  House 
of  Commons  was  appointed  to  consider  of  the  effects 
of  the  laws  which  regulate  or  restrain  the  interest  of 
money,  and  to  report  their  opinion  thereupon  to  the 
house.  After  examining  twenty-one  witnesses  upon 
the  subject,  the  committee  delivered  the  following 
report :  — 

*'  1.  Resolved, —  That  it  is  the  opinion  of  this  committee,  that 
the  laws  regulating  or  restraining  the  rate  of  interest  have  been 
extensively  evaded,  and  have  failed  of  the  effect  of  imposing  a 
maximum  on  such  rate ;  and  that  of  late  years,  from  the  constant 
excess  of  the  market  rate  of  interest  above  the  rate  limited  bylaw, 
they  have  added  to  the  expense  incurred  by  borrowers  on  real  se- 
curity; and  that  such  borrowers  have  been  compelled  to  resort  to 
the  mode  of  granting  annuities  on  lives, —  a  mode  which  has  been 
made  a  cover  for  obtaining  higher  interest  than  the  rate  limited  by 
law,  and  has  further  subjected  the  borrowers  to  enormous  charges, 
or  forced  them  to  make  very  disadvantageous  sales  of  their  estates. 

"  2.  Resolved, — That  it  is  the  opinion  of  this  committee,  that  the 
construction  of  such  laws,  as  applicable  to  the  transactions  of  com- 
merce as  at  present  carried  on,  have  been  attended  with  much 
uncertainty  as  to  the  legality  of  many  transactions  of  frequent 
occurrence ;  and  consequently  been  productive  of  much  embar- 
rassment and  litigation. 

"  3.  Resolved, — That  it  is  the  opinion  of  this  committee,  that  the 
present  period,  when  the  market  rate  of  interest  is  below  the  legal 
rate,  affords  an  opportunity  peculiarly  proper  for  the  repeal  of  the 
said  laws." 

In  the  Bill  passed  in  1833  for  the  renewal  of  the 
charter  of  the  Bank  of  England,  a  clause  was  intro- 
duced which  exempted  bills,  not  having  more  than 
three  months  to  run,  from  the  operation  of  the  laws 
against  usury. 

There  are  some  cases  in  which  bankers  receive 
more  than  the  legal  interest  without  being  chargeable 
with  usury.  First,  In  discounting  bills  they  always 
charge  five  per  cent,  interest  upon  tlie  whole  amoimt 
of  the  bill  instead  of  the  amount  which  they  advance. 
"Were  the  bills  drawn  twelve  months  after  date,  this 
would  make  5j  per  cent. ;  but  it  is  not  usury.  If, 
however,  it  be  not  a  commercial  bill,  nor  discounted 
in  the  course  of  trade,  this  way  of  charging  discount 

o  2 


190  THE    HISTORY    AND    PRINCIPLES 

might  be  deemed  usurious.  Secondly,  Bankers  and 
others  may,  besides  tlie  interest,  charge  a  certain 
sum  for  commission  or  brokerage  on  the  bills  they 
discount.  This  additional  sum  is  understood  to  be 
only  a  reasonable  charge  for  the  trouble  of  getting 
the  bills  discounted,  and  hence  it  is  not  usury. 
Thirdly,  A  banker  may  discount  for  a  party,  and 
agree  that  a  certain  portion  of  the  sum  advanced 
should  be  left  in  his  hands  :  but  this  portion  must 
not  be  larger  than  would  be  sufficient  to  give  the 
banker  a  reasonable  remuneration  for  the  expense 
and  trouble  of  conducting  his  customer's  account. 
Fourthly,  When  bankers  are  in  the  habit  of  balanc- 
ing their  books  quarterly  or  half-yearly,  they  may 
debit  their  customers'  over-drawn  accounts  for  in- 
terest due  at  each  of  their  periodical  balancings  : 
and  although  the  banker  thus  obtains  interest  upon 
interest,  he  is  not  chargeable  with  usury.  Fifthly, 
In  the  case  of  foreign  bills,  that  are  not  paid  when 
due,  a  banker  may  lawfully  charge  the  rate  of  interest 
which  is  legal  in  the  country  where  the  party  resides. 
Thus  six  per  cent,  interest  may  be  charged  upon  a  bill 
that  is  returned  protested  to  Ireland:  and  "a  bill 
payable  in  India,  and  returned  to  England  protested 
for  non-payment,  may  law^fully  bear  twelve  per  cent., 
the  interest  allowed  in  India.  But  if  an  action  were 
brought  upon  such  bill  in  England,  and  the  plaintiff 
should  have  judgment  in  his  favour,  he  would  be  al- 
lowed Indian  interest  to  the  signing  of  the  judgment, 
and  afterwards  being  considered  principal  he  would 
only  be  entitled  to  the  English  rate  or  five  per  cent, 
from  the  liquidation  of  the  debt  by  the  judgment."* 

VI.  Effect  of  Discount  on  the  Circulation.  —  The 
discounting  of  bills,  by  banks  of  circulation,  will 
have  the  same  effect  in  changing  the  currency  as  the 
deposit  accounts,   but  will  not   operate  so  rapidly, 

*  See  Kelly's  Summary  of  the  History  and  Law  of  Usury. 


OF    BANKING.  197 

When  a  bill  is  discounted,  the  banker  issues  his  own 
notes  to  that  amount ;  and  when  the  bill  is  paid, 
he  receives  a  part  of  the  amount  in  gold,  silver,  or 
in  notes  of  other  banks.  If,  however,  the  bill  be 
not  a  local  bill,  that  is,  if  it  be  not  payable  in  the 
place  in  which  the  bank  is  established,  it  will  be  paid 
m  the  currency  of  the  place  where  it  is  made  payable, 
and  its  payment  will  not  have  the  effect  of  diminish- 
ing the  local  currency. 

While  the  issue  of  notes  upon  the  deposit  accounts 
depends  altogether  upon  the  depositors,  the  issues  in 
the  way  of  discount  depend  altogether  upon  the 
banker  ;  he  may  discount  or  not  discount,  as  he 
pleases.  If  he  discounts  with  real  capital,  he  does 
not  thereby  increase  the  amount  of  the  currency  ; 
for  that  capital  must,  in  some  way  or  other,  have 
been  previously  employed.  If  he  discounts  with 
that  portion  of  his  banking  capital  which  is  raised  by 
deposits,  he  does  not  increase  the  amount  of  the 
currency,  but  gives  it  increased  rapidity.  If  he  dis- 
counts with  that  portion  of  his  banking  capital  which 
is  raised  by  notes,  he  increases  the  amount  of  the 
currency.  As  banks  of  circulation  always  issue  their 
own  notes,  it  would  seem  that  their  discounting 
business  was  carried  on  exclusively  with  this  last 
description  of  capital,  but  it  is  not  so.  It  is  very 
possible  for  a  banker  to  issue  his  own  notes  for  all  the 
bills  he  discounts,  and  yet  nine-tenths  of  the  bills  in 
his  possession  shall  represent  real  capital :  for  al- 
though in  the  first  instance  the  banker*s  notes  are 
given  for  the  bill,  yet  these  notes  may  not  stay  in 
circulation  until  the  bill  becomes  due  ;  the  bill  may 
have  three  months  to  run,  the  notes  may  return  in 
three  days.  If  the  notes  given  in  exchange  for  the 
bills  remain  in  circulation  until  the  bills  become  due, 
then  do  the  discounts  create  a  banking  capital  equal 
to  their  own  amount :  but  if  the  bills  have  three 
months  to  rini,  and  the  notes  remain  out  only  one 

o  3 


198 


THE    HISTORY    AND    PRINCIPLES 


month,  then  they  create  a  capital  to  only  one-third  of 
their  amount,  and  the  other  two-thirds  must  consist 
of  capitid  derived  from  otlier  sources.  If  the  notes 
remain  out  beyond  the  time  the  bills  fall  due,  then 
do  the  discounts  create  a  banking  capitid  beyond 
their  own  amount. 

It  may  be  observed,  that  in  order  to  trace  the  ef- 
fects of  banking,  it  is  necessary  to  mark  particularly 
the  way  in  which  bankers  employ  their  money.  It  is 
not  the  creation  of  a  banking  capital,  but  the  way  in 
which  that  capital  is  applied,  that  the  greatest  effects 
are  produced  upon  the  currency,  and  upon  the  trade 
and  commerce  of  a  country.  Money  employed  in 
discounting  bills  drawn  for  value,  will  encourage 
trade  —  if  employed  in  discounting  accommodation 
bills,  it  will  promote  speculation  —  if  advanced  as 
dead  loans  to  persons  out  of  trade,  it  may  lead  to  ex- 
travagance —  if  invested  in  the  funds,  it  wdll  raise 
their  price  and  reduce  the  market  rate  of  interest  — 
if  kept  in  the  till,  it  will  yield  no  profit  to  the  banker, 
and  be  of  no  advantage  to  the  community. 

The  following  is  an  Account  of  the  annual  average 
amount  of  commercial  paper  under  discount  at  the 
bank  of  England  in  London,  in  each  year  from  the 
year  1795  :  — 


Years. 

Amount 
under  Discount. 

Years 

Amount 
under  Discount. 

1 

Years. 

Amount 
under  Discount. 

£ 

£ 

£ 

1795 

2,94-6,500 

1808 

12,950,100 

1821 

2,676,700 

1796 

3,505,000 

1809 

15,475,700 

1822 

3,366,700 

1797 

5,350,000 

1810 

20,070,600 

1823 

3,123,800  1 

1798 

4,490,600 

1811 

14,355,400 

1824 

2,369,800 

1799 

5,403,900 

1812 

14,291,600 

1825 

4,941,500 

1800 

6,401,900 

1813 

12,330,200 

1826 

4,908,300 

1801 

7,905,100 

1814 

13,285,800 

1827 

1,240,400 

1802 

7,523,300 

1815 

14,947,100 

1828 

1,167,400 

1803 

10,747,600 

1816 

11,416,400 

1829 

2,250,700 

1804. 

9,982,400 

1817 

3,960,600 

1830 

91 9,900 

1805 

11,366,500 

1818 

4,325,200 

1831 

1,533,600 

1806 

12,380,100 

1819 

6,515,000 

— 

— 

1807 

1 3,484,600 

1820 

3,883,600 

I 

— 

OF    BANKING.  199 

The  amiLial  average  loss  by  bad  debts  on  the  dis- 
counts of  the  bank  m  London,  from  the  year  1795  to 
1831,  both  inclusive,  is  31,696/.,  which  is  less  than 
8s.  6d.  per  cent,  upon  the  yearly  average  amount  of 
bills  under  discount.  Supposing  the  bills,  one  with 
another,  to  have  two  months  to  run,  the  loss  will 
be  about  Is.  5d.  per  cent,  upon  the  amount  of  bills 
discounted. 


SECTION  XII. 

CASH     CREDIT     BANKS. 

A  CASH  credit,  is  an  understanding  on  the  part  of 
the  bank,  to  advance  to  an  individual  such  sums  of 
money  as  he  may  from  time  to  time  require,  not  ex- 
ceeding in  the  whole  a  certain  definite  amount ;  the 
individual  to  whom  the  credit  is  given  entering  into 
a  bond,  with  securities,  generally  two  in  number,  for 
the  repayment,  on  demand,  of  the  sums  actually 
advanced,  with  interest  upon  each  issue  from  the 
day  upon  which  it  is  made. 

A  cash  credit  is,  in  fact,  the  same  thing  as  an  over- 
drawn current  account,  except  that  in  a  current 
account  the  party  overdraws  on  his  own  individual 
security,  and  in  the  cash  credit  he  finds  two  securities 
who  are  responsible  for  him.  Another  difference  is, 
that  a  person  cannot  overdraw  his  current  account 
without  asking  permission  each  time  from  the  bank, 
whereas  the  overdrawing  of  a  cash  credit  account  is 
a  regular  matter  of  business  ;  it  is,  in  fact,  the  pur- 
pose for  which  the  cash  credit  has  been  granted. 

The  following  considerations  will  show  that  a 
person  who  has  occasion  for  temporary  advances  of 
money,  Avill  find  it  more  advantageous  to  raise  these 
sums  by  a  cash  credit  tliaii  In  havhig  bills  discounted. 

o  i 


200  THE    HISTORY    AND    PRINCIPLES 

First.  In  a  cash  credit  the  party  pays  interest  only 
for  the  money  he  actually  employs. 

If  a  person  wants  to  make  use  of  100/.  and  has  a 
bill  for  150/.  he  will  get  the  bill  discounted,  and 
thus  pays  interest  for  50/.  for  which  he  has  no  use. 
But  if  he  has  a  cash  credit,  he  draws  only  100/.  and 
pays  interest  for  that  amount. 

Secondly.  In  a  cash  credit  he  can  repay  any  part 
of  the  sum  drawn  whenever  he  pleases. 

If  a  trader  has  a  bill  for  150/.  discounted  to-day, 
and  should  unexpectedly  receive  150/.  to-morrow,  he 
cannot  re-discount  the  bill,  but  has  actually  paid 
interest  for  money  he  does  not  want.  But  if  he 
draws  150/.  upon  his  cash  credit  account  to-day,  and 
to-morrow  receives  150/.,  he  takes  this  money  to  the 
bank,  and  will  ha\^e  to  pay  the  interest  upon  150/.  for 
only  one  day. 

Thirdly.  In  a  cash  credit  he  has  the  power  of 
drawing,  whenever  he  pleases,  to  the  full  amount  of 
his  credit ;  but  in  the  case  of  discounting  bills,  he  must 
make  a  fresh  application  to  the  bank  to  discount  each 
bill,  and  if  the  bank  have  at  any  time  more  profitable 
ways  of  employing  their  money,  or  if  they  suspect 
the  credit  of  the  applicant,  they  may  refuse  to  dis- 
count ;  but  this  would  not  be  the  case  if  he  had  a 
cash  credit. 

Fourthly.  In  a  cash  credit  the  party  does  not  pay 
the  interest  until  the  end  of  the  year ;  whereas  in 
the  other  case  he  pays  the  interest  at  the  time  the 
bill  is  discounted. 

Cash  credits  are  granted  not  only  upon  personal 
security,  but  also  upon  the  security  of  the  Public 
Funds. 

This  furnishes  great  facilities  of  raising  money  to 
those  who  possess  property  which  they  are  not  dis- 
posed to  sell.  A  ])erson  who  is  a  holder  of  govern- 
ment stock  may  sell  out  a  portion  to  su])ply  his  tem- 
porary necessities  ;  and  when  he  wishes  to  replace  it. 


OF    BANKING.  i^Ol 

lie  finds  the  price  of  stock  lias  risen,  and  it  will  cost 
him  more  money  to  repurchase  than  he  received  when 
he  sold.  But  if  he  transfers  the  stock  to  a  bank  as  a 
security  for  a  cash  credit,  he  may  repay  the  money 
whenever  he  pleases ;  and  if,  in  the  mean  time,  the 
value  of  the  security  should  have  risen,  all  the  ad- 
vantages will  be  his  own. 

The  effects  of  cash  credits  are  thus  described  by 
Adam  Smith :  — 

"  The  commerce  of  Scotland,  which  at  present  is  not  very  great, 
was  still  more  inconsiderable  when  the  two  first  banking  companies 
were  established,  and  those  companies  would  have  had  but  little 
trade  had  they  confined  their  business  to  the  discounting  of  bills  of 
exchange.  They  invented,  therefore,  another  method  of  issuing 
their  promissory  notes,  by  granting  what  they  called  cash  accounts, 
that  is,  by  giving  credit  to  the  extent  of  a  certain  sum  (two  or  three 
thousand  pounds  for  example)  to  any  individual  who  could  procure 
two  persons  of  undoubted  credit  and  good  landed  estate  to  become 
surety  for  him,  that  whatever  money  should  be  advanced  to  him 
within  the  sum  for  which  the  credit  had  been  given,  should  be  re- 
paid upon  demand,  together  with  the  legal  interest.  Credits  of  this 
kind  are,  I  believe,  commonly  granted  by  banks  and  bankers  in  all 
different  parts  of  the  world.  But  the  easy  terms  upon  which  the 
Scotch  banking  companies  accept  of  repayment  are,  so  far  as  I 
know,  peculiar  to  them,  and  have  perhaps  been  the  principal  cause 
both  of  the  great  trade  of  those  companies,  and  of  the  benefits 
which  the  country  has  received  from  it. 

"  Whoever  has  a  credit  of  this  kind  with  one  of  those  companies, 
and  borrows  a  thousand  pounds  upon  it  for  example,  may  repay 
this  sum  piecemeal,  by  twenty  and  thirty  pounds  at  a  time,  the 
company  discounting  a  proportional  part  of  the  interest  of  the 
great  sum,  from  the  day  on  which  each  of  those  small  sums  is  paid 
in,  till  the  whole  be  in  this  manner  repaid.  All  merchants,  there- 
fore, and  almost  all  men  of  business,  find  it  convenient  to  keep 
such  cash  accounts  with  them,  and  are  thereby  interested  to  pro- 
mote the  trade  of  those  companies  by  readily  receiving  their  notes 
in  all  payments,  and  by  encouraging  all  those  with  whom  they  have 
any  influence  to  do  the  same.  The  banks,  when  their  customers 
apply  to  them  for  money,  generally  advance  it  to  them  on  their 
own  promissory  notes.  These  the  merchants  pay  away  to  the 
manufacturers  for  goods ;  the  manufacturers  to  the  farmers,  for 
materials  and  provision-s ;  the  farmers  to  their  landlords  for  rent; 
the  landlords  repay  them  to  the  merchants  for  the  conveniences 
and  luxuries  with  which  they  supply  them  ;  and  the  merchants 
again  return  them  to  the  banks,  in  order  to  balance  their  cash  ac- 


t20'2  THE    HISTORY    AND    PRINCIPLES 

counts,  or  to  replace  what  tliey  may  have  borrowed  of  them :  and 
thus  almost  the  whole  money  business  of  the  country  is  transacted 
by  means  of  them.     Hence  the  great  trade  of  those  companies. 

"  By  means  of  those  cash  accounts  every  merchant  can,  without 
imprudence,  carry  on  a  greater  trade  than  he  otherwise  could  do. 
If  there  are  two  merchants, —  one  in  London,  and  the  other  in 
Edinburgh,  who  employ  equal  stocks  in  the  same  branch  of  trade, 
the  Edinburgh  merchant  can,  without  imprudence,  carry  on  a 
greater  trade  and  give  employment  to  a  greater  number  of  people 
than  the  London  merchant.  The  London  merchant  must  always 
keep  by  him  a  considerable  sum  of  money,  either  in  his  own  coffers 
or  in  those  of  his  banker,  who  gives  him  no  interest  for  it,  in  order 
to  answer  the  demands  continually  coming  upon  him  for  payment 
of  the  goods  he  purchases  upon  credit.  Let  the  ordinary  amount 
of  this  sum  be  supposed  five  hundred  pounds.  The  value  of  the 
goods  in  his  warehouse  must  always  be  less  by  five  hundred  pounds, 
than  it  would  have  been  had  he  not  been  obliged  to  keep  such  a 
sum  unemployed.  Let  us  suppose  that  he  generally  disposes  of  his 
whole  stock  upon  hand,  or  of  goods  to  the  value  of  his  whole  stock 
upon  hand,  once  in  the  year.  By  being  obliged  to  keep  so  great  a 
sum  unemployed,  he  must  sell  in  a  year  five  hundred  pounds  worth 
less  goods  than  he  might  otherwise  have  done.  His  annual  profits 
must  be  less  by  all  that  he  could  have  made  by  the  sale  of  five 
hundred  j)ounds  worth  more  goods,  and  the  number  of  people 
employed  in  preparing  his  goods  for  market  must  be  less  by  all 
those  that  five  hundred  pounds  more  stock  would  have  employed. 
The  merchant  in  Edinburgh,  on  the  other  hand,  keeps  no  money 
unemployed  for  answering  such  occasional  demands.  When  they 
actually  come  upon  him  he  satisfies  them  from  his  cash  account 
with  the  bank,  and  gradually  replaces  the  sum  borrowed  with  the 
money  or  paper  which  comes  in  from  the  occasional  sales  of  his 
goods.  With  the  same  stock,  therefore,  he  can,  without  imprudence, 
have  at  all  times  in  his  warehouse,  a  larger  quantity  of  goods  than 
the  London  merchant,  and  can  thereby  both  make  a  greater  profit 
liimself.  and  give  constant  employment  to  a  greater  number  of  in- 
dustrious people  who  prepare  those  goods  for  the  market.  Hence, 
the  great  benefit  which  the  country  has  derived  from  this  trade. 

"  The  facility  of  discounting  bills  of  exchange,  it  may  be  thought 
indeed  gives  the  English  merchants  a  convenience  equivalent  to  the 
cash  accounts  of  the  Scotch  merchants.  But  the  Scotch  merchants, 
it  must  be  remembered,  can  discount  their  bills  of  exchange  as 
easily  as  the  English  merchants,  and  have  besides  the  additional 
convenience  of  their  cash  accounts."* 

Wealth  of  Nations,  Book  ii.  chap.  2. 

*  For  a  further  account  of  the  system  of  cash  credits, —  see  my 
Practical  Treatise  on  Banking. 


OF    BANKING.  '203 

Query.  —  Is  it  better  for  a  bank  to  make  advances 
of  money  on  cash  credits,  or  by  discounting  bills  of 
exchange  ? 

Bills  of  Exchange  Yersus  Cash  Credits. — 1.  Cash 
credits,  when  once  granted,  cannot  be  called  up,  but 
bills  of  exchange  soon  fall  due,  and  you  can  refuse  to 
discoinit  again. 

2.  If  you  discount  bills  of  exchange  they  can  be 
re-discounted  to  supply  the  bank  with  funds,  if 
necessary,  but  advances  on  cash  credits  cannot  be 
replaced. 

3.  In  case  of  a  panic  or  a  run  upon  the  bank,  the 
persons  having  cash  credits  might  have  occasion  to 
draw  upon  the  bank,  and  the  notes  would  immediately 
be  returned  upon  the  bank,  for  payment  in  gold ;  but 
you  could  refuse  to  discount  bills  of  exchange  until 
the  run  was  over. 

Cash  Credits  versus  Bills  of  Exchange.  —  1 .  A 
higher  interest  is  charged  upon  cash  credits  than 
upon  bills  of  exchange. 

2.  Cash  credits,  being  of  the  nature  of  a  perma- 
nent advance,  are  more  beneficial  to  the  parties ; 
hence  trade  is  more  promoted,  and  the  benefit  to 
the  bank  must  ultimately  be  greater. 

3.  Parties  having  cash  credits  are  more  closely 
connected  with  the  bank,  and  hence,  would  use 
their  influence  to  prevent  any  run  upon  the  bank, 
and  to  promote  the  prosperity  of  the  bank. 

4.  The  mode  of  recovering  an  advance  upon  a  cash 
credit  is  more  summary  and  certain,  as  the  bond  can 
be  put  into  execution  immediately  ;  but  an  action 
for  the  recovery  of  an  unpaid  bill  is  tedious,  and  may 
be  frustrated  by  informaUty,  &c. 

A  cash  credit  operates  much  in  the  same  way  as  a 
discount  account  and  a  current  account  combined. 
It   resembles  a  discount  account  inasmuch  as  the 


*204<  THi^    HISTORY    AND    PRINCIPLES 

banker  is  usually  in  advance  to  his  customer.  It 
resembles  a  current  account,  as  it  is  required  that 
there  be  frequent  operations  upon  it ;  that  is,  that 
there  be  perpetual  payings  in  and  drawings  out  of 
money.  The  bankers  expect  that  a  cash  credit  shall 
maintain  a  banking  capital  equal  to  its  own  amount. 
As  the  banker  is  usually  in  advance,  a  cash  credit 
can  create  no  banking  capital  by  means  of  deposits  ; 
it  can  be  done  only  by  means  of  the  notes.  If  then 
the  operations  on  a  cash  credit  are  sufficient  to  keep 
in  circulation  an  amount  of  notes  equal  to  the  amount 
of  the  credit,  then  it  giv^es  satisfaction  to  the  banker; 
but  not  otherwise.  Previous  to  granting  a  cash 
credit,  the  banks  always  make  inquiries  to  ascertain 
if  this  is  likely  to  be  the  case ;  and  even  after  it  is 
granted,  it  is  liable  to  be  called  up,  if  it  has  not 
accomplished  this  object.  Hence,  cash  credits  are 
denied  to  persons  who  have  no  means  of  circulating 
the  banker's  notes,  or  who  wish  to  employ  the  money 
as  a  dead  loan.  And  in  all  cases  they  are  limited  to 
such  an  amount  as  the  party  is  supposed  to  be  capa- 
ble of  employing  with  advantage  to  the  bank. 


SECTION  XIII. 

LOAN    BANKS. 


Loan  banks,  are  banks  formed  for  the  purpose  of' 
advancing  loans  upon  articles  of  mercliandise.  Some 
are  carried  on  for  the  purposes  of  gain,  others  from 
motives  of  charity. 

The  Bank  of  England  was  empowered  by  its 
charter,  to  carry  on  the  business  of  a  loan  bank. 
The  following   is    the    twenty-sixth    section   of  the 


OF    BANKING.  S05 

Act:  "  Provided  that  nothing  herein  contained  shall 
in  any  wise  be  construed  to  hinder  the  said  corpora- 
tion from  dealing  in  bills  of  exchange,  or  in  buying 
or  selling  bullion,  gold  or  silver,  or  in  selling  any 
goods,  wares,  or  merchandise  whatever,  which  shall 
really  and  bond  fide  he  left  or  deposited  with  the  said 
corporation  for  money  lent  or  advanced  thereon^  and 
which  shall  not  be  redeemed  at  the  time  agreed  on, 
or  within  three  months  after,  or  from  selling  such 
goods  as  shall  or  may  be  the  produce  of  lands  pur- 
chased by  said  corporation."  In  pursuance  of  the 
privilege  granted  by  this  clause,  the  directors  gave 
public  notice  that  they  would  lend  money  at  four 
per  cent.,  on  "  plate,  lead,  tin,  copper,  steel,  and 
iron." 

The  Bank  of  Scotland  was  also  authorised  to  act 
as  a  loan  bank.  The  following  is  one  clause  of  the 
Act  by  which  it  was  established  in  1795  :  —  "  And  it 
is  further  hereby  statute  and  ordained,  that  it  shall 
be  lawful  for  the  said  governor  and  company  to  lend, 
upon  real  or  personal  security,  any  sum  or  sums,  and 
to  receive  annual  rent  for  the  same  at  six  per  cent., 
as  shall  be  ordinary  for  the  time  :  as  also,  that  if  the 
person  borrowing,  as  said  is,  shall  not  make  payment 
at  the  term  agreed  upon  with  the  company,  that  it 
shall  be  lawful  for  the  governor  and  company  to  sell 
and  dispose  of  tJie  security  or  pledge  by  a  public 
roup,  for  the  most  that  can  be  got,  for  payment  to 
them  of  the  principal,  annual  rents,  and  reasonable 
charges,  and  returning  the  overplus  to  the  person 
who  gave  the  said  security  or  pledge." 

The  Royal  Bank  of  Scotland  were  also  empowered 
by  their  charter,  "  to  lend  to  any  person  or  persons, 
bodies  politic  or  corporate,  such  sum  and  sums  of 
money  as  they  should  think  fit,  at  any  interest  not 
exceeding  lawful  interest,  on  real  or  personal  se- 
curity, and  particularly  on  pledges  of  any  kind  what- 
soever^ of  any  goods,  wares,  7)iercha?idises,  or  other 


206  THE    HISTORY    AND    PRINCIPLES 

effects  whatsoever,  in  siicli  way  and  manner  as  to  the 
said  company  sliould  seem  proper  and  convenient." 

*'  The  Hibernian  Joint-stock  Loan  Company," 
usually  called,  the  Hibernian  Bank,  was  formed  in 
Dublin  in  1824  :  —  "  For  the  purpose  of  purchasing 
and  selling  annuities,  and  all  public  and  other  se- 
curities, real  and  personal,  in  Ireland,  and  to  advance 
money  and  make  loans  thereof^  on  the  security  of 
such  real  and  personal  secia'ity,  at  legal  interest,  and 
on  the  security  of  merchandise  and  manufactured 
goods."  This  company,  however,  lias  never  carried 
on  the  business  of  a  loan  bank,  but  has  confined  its 
transactions  to  the  business  of  a  commercial  bank. 
It  has  not  the  power  of  issuing  notes,  but  it  is  a  bank 
of  discount  and  of  deposit. 

In  the  same  year  a  society  was  formed  in  London, 
called  "  The  Equitable  Loan  Bank  ; "  but,  failing  to 
obtain  an  act  of  parliament,  they  never  came  into 
operation.  Thus  a  company  that  might  have  been 
useful  to  the  public,  was  crushed  at  its  commence- 
ment through  the  pernicious  absurdities  in  our  law  of 
partnership. 

Capital  advanced,  by  way  of  loan,  on  the  security 
of  merchandise,  would  produce  tlie  same  effects  as 
if  advanced  in  the  discounting  of  bills.  If  a  party 
borrows  100/.  on  the  security  of  liis  merchandise,  it 
is  the  same  as  though  he  had  sold  liis  mercliandise 
for  a  100/.  bill,  and  got  it  discounted  with  the  banker. 
By  obtaining  this  advance  he  is  enabled  to  hold  over 
this  merchandise  for  a  better  market,  and  avoids  a 
sacrifice  whicli  otherwise  he  miglit  be  induced  to 
make,  in  order  to  raise  the  money  for  urgent  pur- 
poses. 

Every  advance  of  money  by  a  banker,  let  it  be 
made  in  what  way  soever,  is  in  fact  a  loan.  To  dis- 
count a  100/.  bill  that  has  three  months  to  run,  is 
much  the  same  as  to  lend  that  amount  for  three 
months.     The  difference  is,  that  the  banker  has  two 


OF    BANKING.  ^07 

or  more  securities  instead  of  one  ;  the  time  of  re- 
payment is  fixed,  and  the  interest  on  the  whole  smu 
is  paid  at  the  time  it  is  advanced.  But  let  one 
trader  draw  bills  upon  his  customers,  and  take  them 
to  the  bank  for  discount ;  let  another  trader  give  his 
customers  three  months'  credit  without  drawing  bills, 
and  borrow  of  the  banker  the  amount  of  the  goods 
sold ;  it  is  obvious  that  in  eacli  case  the  traders  re- 
ceive the  same  accommodation,  and  the  effect  on 
commerce  will  be  the  same.  The  bill  is  merely  a 
transfer  of  the  debt  from  the  drawer  to  the  banker, 
with  the  drawer's  guarantee.  Cash  credits  are  loans  ; 
the  amount  of  the  loan  varies  every  day,  but  the 
maximum  is  fixed.  If  a  trader  who  has  a  cash  credit 
for  500/.  has  always  300/.  drawn  out,  it  is  nearly  the 
same  thing  as  though  he  had  a  loan  for  300/.  :  the 
advantage  to  him  is,  that  he  can  draw  exactly  such  a 
sum  as  he  may  need — that  he  can  replace  it  when- 
ever he  pleases,  and  in  such  portions  as  he  may  find 
convenient ;  and  he  pays  interest  only  for  the  sum 
drawn  out.  It  is  unnecessary  to  say  that  over-drawn 
accounts,  mortgages,  and  all  advances  of  money  on 
pledges  or  securities  of  any  kind,  are  loans. 

It  is  contrary  to  all  sound  principles  of  banking  for 
a  banker  to  advance  money  in  the  form  of  permanent 
loans,  or  as  they  are  called,  dead  loans.  In  the  first 
place,  those  dead  loans  do  not  create  any  banking 
capital ;  and,  secondly,  they  cannot  be  suddenly 
called  up.  For  a  banker  to  lend  out  his  banking 
capital  in  the  way  of  permanent  loan  is  obviously 
imprudent,  as  he  knows  not  how  soon  that  capital 
may  be  taken  out  of  his  hands  ;  and  it  is  almost 
equally  imprudent  to  advance  his  real  capital  in  that 
way,  as  the  real  capital  ought  to  be  kept  in  a  dis- 
posable form,  so  that  it  may  be  rendered  available 
in  case  of  any  sudden  contraction  of  the  banking 
capital.  The  investing  of  money  in  the  public  funds 
is  not  strictly  an  operation  of  banking  j    it  does  not 


208  THE    HISTORY    AND    PRINCIPLES 

increase  the  banking  capital.  Yet  it  is  necessary 
that  a  banker  should  lay  out  some  portion  of  his 
capital  in  this  way,  because  he  can  so  easily  realize 
the  money  in  case  a  run  should  be  made  upon  his 
bank.  The  portion  thus  invested  is  })robably  less 
productive  than  any  other  part  of  his  capital,  except 
the  sums  kept  in  his  till  to  meet  occasional  demands. 
Sometimes,  however,  a  rise  in  the  funds  will  be  the 
means  of  affording  him  a  considerable  profit. 

The  second  class  of  loan  banks  arose  from  motives 
of  charity :  — 

These  institutions  were  first  established  in  the  fif- 
teenth century,  for  the  purpose  of  checking  the  extor- 
tions of  usurers,  by  lending  money  to  the  poor  upon 
pledges,  and  without  charging  interest.*  They  were 
originally  supported  by  voluntary  contributions  ;  but 
as  these  were  found  insufficient  to  support  the  neces- 
sary expenses,  it  became  necessary  that  the  borrowers 
should  be  charged  interest  for  the  loans.  These 
banks  were  at  first  distinguished  by  being  called 
monies  pietates.  It  appears  that  the  word  mont 
or  mount,  was  at  an  early  period  applied  to  any 
pecimiary  fund,  and  it  is  probable  that  the  pro- 
moters of  this  system  added  "  pietatis  "  to  give  it  an 
air  of  religion,  and  thus  to  procure  larger  subscrip- 
tions. A  bank  of  this  kind  is  formed  at  Perugia  in 
the  year  1464 ;  another  at  Rome  in  1539  ;  one  at 
Naples,  which  was  considered  the  greatest  in  Europe, 
in  the  following  year,  and  it  took  the  name  of  hdiico 
die  poverie  —  the  bank  of  the  poor.  These  institu- 
tions were  opposed  in  France.  An  attempt  was 
made  to  introduce  them  under  Louis  XIII.  in  1626, 
but  the  managers  were  threatened  with  punishment, 
and  the  undertaking  was  relinquished.  The  present 
Mont  de  Piete,  at  Paris,  was  established  in  the  year 
1777  ;  and  so  largely  has  the  public  taken  advantage 

*  See  Beckinann's  History  of  Ancient  Institutions. 


OF    BANKING.  209 

of  tlic  accommodation  thus  afforded,  that  it  has  been 
known  to  have  in  its  possession  forty  casks  filled  with 
gold  watches. 

These  banks  were  not  only  called  Mounts  of  Piety, 
but  they  are  also  called  Lombards,  from  the  name 
of  the  original  bankers,  or  money  lenders.  A  loan 
bank,  or  a  Lombard,  w^as  established  in  Russia  in 
177-  *j  to  prevent  the  usury  and  the  oppression  to 
which  the  poor  w^ere  exposed,  and  the  profit  was 
given  to  the  foundling  hospital  of  8t.  Petersburg. 
The  "  Lombard "  lent  on  gold  and  silver  three 
fourths  of  the  value,  and  on  other  metals  it  lent  one 
half  the  value,  and  on  jewels  as  much  as  the  circum- 
stances of  the  times  would  allow,  the  estimate  being 
made  by  sworn  appraisers.  The  rate  of  interest  was 
established  throughout  the  empire  in  17  86,  at  five  per 
cent.  At  the  Lombard,  one  year's  interest,  is  taken 
in  advance.  Pledges  that  are  forfeited  are  publicly 
sold  ;  and  if  they  produce  more  than  the  loan,  the 
interest  and  the  charges,  the  overplus  is  given  to  the 
owners. 

In  169'^,  Sir  Francis  Brewster  published  his  Essay 
on  Trade  and  Navigation,  "  printed  for  T.  Cockerell, 
at  the  Three  Legs,  in  the  Poultry,  over  against  the 
Stocks-market."  t  He  has  a  section  upon  '*  Banks 
and  Lumbers."  He  recommends  that  in  every  shire 
a  bank  should  be  erected  by  act  of  parliament ;  and 
he  states  that  it  would  be  *'  the  most  effectual  way 
for  suppressing  highwaymen  ;  for  that  no  man  need 
travel  with  more  than  pocket  money  for  his  expenses, 
when  he  may  have  bank  tickets  to  any  part  of  the 

*  Ockly,  on  European  Commerce. 

f  "  Stocks-market,"  so  called  from  the  public  stocks  being 
placed  there  for  the  punishment  of  ottenders,  was  held  on  the  site 
of  the  present  Mansion-house  :  previous  to  the  building  of  the 
Mansion-house  the  market  was  removed  to  the  Fleet  Ditch,  and 
called  the  Fleet  Market ;  it  has  been  again  removed,  and  is  now 
called  Farringdon  Market. 

P 


210  THE    HISTORY    AND    PRINCIPLES 

kingdom  where  he  goes."  He  afterwards  observes, 
"  that  hinibers  for  poor  artizans  and  others  is  an 
appendix  to  banks,  and  may  by  funds  out  of  them  in 
each  county  be  suppUed  so  as  that  the  poor  men 
have  money  to  carry  on  their  trade  and  employment 
on  the  pawns  that  may  be  so  easy,  and  with  the  ad- 
vantage of  seUing  in  pubUc  sales  what  they  leave  in 
pledge.  And  that  what  they  borrow  should  be  of 
more  advantage  and  easy  to  them  than  if  the  money 
were  lent  them  gratis,  and  may  be  of  great  use  in 
the  employment  and  encouraging  the  manufactures 
of  the  nation,  which  are  much  discouraged  by  the  ne- 
cessities and  hardships  that  are  put  upon  the  poor." 

Loan  banks,  for  charitable  purposes,  have,  for  a 
considerable  time  past,  existed  in  Ireland.  A  volun- 
tary association  of  this  kind  was  established  in  the 
year  1756.  This  society  was  incorporated  in  I78O, 
under  the  title  of  "  Charitable  Musical  Society." 
They  had  their  meetings  at  St.  Ann's  vestiy-room, 
Dublin,  on  the  first  and  second  Tuesday  in  every 
month,  for  the  purpose  of  lending  money,  interest 
free,  to  indigent  tradesmen,  in  sums  of  not  less  than 
two  pounds  to  any  one  person  at  one  time,  which 
sums  are  to  be  repaid  at  sixpence  in  the  pound, 
weekly.  From  the  1st  of  Dec.  1830,  to  the  1st  of 
Dec.  1831,  sixty-nine  borrowers,  whose  families 
consisted  of  366  individuals,  received  loans  amount- 
ing to  258/.  ;  and  since  its  establishment  in  I78O, 
4975  borrowers,  whose  families  consisted  of  24,494 
individuals,  received  loans  amounting  to  18,983/. 

The  Meath  charitable  loan  society  was  established 
in  I8O7.  The  committee  of  managers  meet  every 
second  Tuesday,  for  the  purpose  of  lending  sums, 
not  under  five,  and  not  exceeding  twenty  })ounds, 
free  of  interest,  to  be  repaid  by  weekly  instalments 
of  1.9.  6rl.  for  5/.,  3s.  for  10/.,  6s.  for  20/.  Do- 
nations of  10/.  and  upwards  are  either  vested  in 
government  securities,  the  interest  only  to  be  appli- 


OF    BANKING.  "^ll 

cable  to  tlie  fund,  or  tlirown  into  the  floating  capital, 
at  the  option  of  the  donor. 

In  the  year  1823,  an  act  of  parliament  was  passed 
for  the  amendment  of  the  laws  respecting  loan  so- 
cieties in  Ireland.* 

This  act  authorises  the  formation  of  societies  for 
granting  charitable  loans,  or  for  providing  implements 
of  labour  by  way  of  loan  for  the  industrious  classes  in 
Ireland,  or  for  providing  implements  of  labour  and 
receivhig  back  payments  of  the  same  by  instalments. 
A  copy  of  the  rules  of  such  institutions  must  be  en- 
tered in  a  book,  and  deposited  with  the  clerk  of  the 
peace.  The  rules  and  regulations  thus  deposited 
shall  be  binding  upon  all  the  officers  and  members  of 
the  institution.  The  officers  are  not  to  receive  any 
benefit  except  such  salaries  as  shall  be  appointed  by 
the  regulations.  No  treasurer,  cUrector,  or  manager 
of  the  institution  can  receive  any  salary,  allowance, 
profit,  or  benefit  whatsoever.  No  loan  to  any  indi- 
vidual can  exceed  the  sum  of  10/.  in  twelve  months. 
But  loans  of  100/.  may  be  made  to  committees,  con- 
sisting of  three  or  more  persons,  to  be  paid  in  twelve 
months,  with  interest.  No  note  or  other  security 
for  the  repayment  of  any  loan,  or  for  the  payment  of 
the  price  of  any  implements  of  industry,  is  chargeable 
with  stamp  duty.  The  notes  may  be  made  payable 
to  the  treasurer  or  clerk  of  the  society,  and  may  be 
sued  for  in  his  name,  before  the  assistant  barrister 
at  quarter  sessions,  or  before  the  justices  at  petty 
sessions,  provided  such  notes  do  not  exceed  the 
value  of  10/.  Any  treasurer  or  other  officer  who  is 
required  by  the  regulations  to  give  security,  may 
give  such  security  by  bond  to  the  clerk  of  the  peace, 
who  in  case  of  forfeiture  may  recover  the  amount,  for 
the  benefit  of  the  institution.  Such  bond  is  not  to 
be  cliargeable  with  stamp  duty.     All  looms  or  other 

*  4  Geo.  IV.  c.  32. 
p  2 


^IQ  THE    HISTORY    AND    PRINCIPLES 

implements  of  industry,  fm-nished  by  the  society, 
must  be  marked,  and  they  cannot  then  be  distrained 
for  rent,  nor  seized  under  an  execution  by  the  sheriff, 
unless  at  the  suit  of  the  society. 

The  following  extracts  from  Mr.  Trench's  valuable 
and  useful  pamphlet*,  will  show  the  principles  on 
which  loan  societies  are  conducted  in  Ireland. 

"  A  parent  is  often  prevented  from  apprenticing  a  child  to  an 
advantageous  trade  from  the  want  of  assistance  towards  the  re- 
quisite premium  and  outfit. 

"  In  the  repairs  of  dwelling-houses,  and  other  similar  instances, 
the  poor  often  require  to  hire  the  labour  of  others,  at  a  time  when 
a  small  portion  of  such  labour  would  save  much  ultimate  expense, 
if  they  had  the  means  of  commanding  it. 

"  The  artizan  frequently  is  compelled  to  remain  idle  from  being 
unable  to  obtain  the  price  of  tools,  and  the  raw  materials  of  work, 
and  is  thus  disabled  from  pursuing  his  branch  of  trade. 

"  Wliere  any  portion  of  land  is  lield,  the  labourer  frequently  ex- 
periences much  difficulty  in  obtaining  seed  for  his  ground,  in  pur- 
chasing a  cow,  pigs,  or  other  profitable  stock,  and  in  effecting  any 
improvement,  or  commencing  operations  on  his  small  allotments. 

"  One  member  of  a  family  becomes  incapacitated  from  work  by 
sickness  or  accident.  To  supply  comforts  and  necessary  relief 
much  immediate  expenditure  is  requisite,  the  funds  for  which 
cannot  be  obtained,  notwithstanding  the  comparative  certainty 
that  if  a  small  sum  could  be  borrowed  for  such  an  excellent  pur- 
pose, the  other  members  of  the  family,  or  the  sick  man  on  his 
recovery,  would  repay  the  money  by  weekly  instalments. 

"  Individuals  of  established  good  character  are  frequently  placed 
in  unavoidable  difficulties  of  a  momentary  nature,  through  the 
fault  of  others,  as  well  as  from  a  sudden  and  unexpected  failure  in 
the  demand  for  labour,  or  of  markets  for  their  provisions. 

"  Fishermen  and  boatmen  are  sometimes  entirely  precluded  from 
earning  their  livelihood  by  the  want  of  boats  or  nets,  at  seasons 
when  they  could  derive  great  profit  from  the  exercise  of  their 
calling. 

"  In  all  these  instances,  and  numerous  others  which  might  be 
ascertained,  the  well-timed  application  of  a  small  sum  of  money  by 
way  of  loan  will   often  improve  a  deserving  man's  condition,  and 

*  "  Remarks  on  the  Advantages  of  Loan  Funds  for  the  Benefit  of 
the  Poor  and  Industrious,  with  Directions  for  their  Establishment. 
By  Francis  Trench." 


OF    BANKING.  ^13 

often  rescue  the  unfortunate  from  pkinging  detper  in  distress, 
without  loss  to  any  individual  whatsoever.  It  must,  however,  he 
strictly  remembered,  that  tlie  plan  reconmiended  in  these  pages  is 
not  intended  as  a  resource  in  the  last  extremity  of  want  merely  as 
such.  By  no  means.  Two  other  circumstances  must  be  taken 
into  consideration,  or  the  object  of  the  design  will  be  entirely  de- 
feated ;  namely,  good  character  on  the  part  of  the  borrower,  and  a 
rational  expectation  of  his  being  able  to  secure  the  means  of 
weekly  repayment  by  instalments. 

"  On  application  being  made  for  a  loan  the  first  point  will  be  to 
ascertain  diligently  the  condition  of  the  applicant,  and  the  object 
on  which  the  money  is  to  be  expended.  None  should  be  allowed 
to  borrow  who  are  not  so  circumstanced  in  pecuniary  affairs  as  to 
render  them  fit  objects  of  such  assistance,  the  funds  not  being  in- 
tended to  advance  the  condition  of  those  already  well  off,  but  to 
prevent  persons  falling  into  extreme  distress,  and  to  give  facility 
for  the  exertion  of  industry.  The  same  principle  is  to  be  held  in 
view  whether  the  money  is  applied  altogether  gratuitously,  or 
whether  a  small  interest  is  charged  —  gain  for  themselves  in  neither 
case  being  obtained  or  desired  by  the  friends  and  supporters  of  the 
institution, 

"  Neither  should  loans  be  made  to  those  whose  object  is  merely 
to  deal  or  sell  again,  without  their  being  able  to  prove  themselves 
under  particular  circumstances  of  destitution.  Indifference  to  this 
point  would  encourage  idle  speculation,  and  deprive  the  unassisted 
trader  of  his  fair  profits. 

"  Nor  should  any  one  obtain  assistance  whose  habits  are  marked 
by  idleness,  drunkenness,  dishonesty,  or  any  other  notorious  faults  ; 
for  three  reasons  —  first,  because  this  way  of  expending  the  money 
would  deprive  the  poor  and  industrious  of  that  which  was  intended 
for  their  special  use  :  —  secondly,  because  it  would  defeat  one  of 
the  chief  objects  of  the  fund,  viz.  the  encouragement  of  good  con- 
duct :  and  thirdly,  because  the  interest  of  the  securities  should  not 
be  overlooked,  even  though  they  may  be  regardless  of  it  themselves, 
and  none  should  obtain  relief  who  very  probably  would  become  de- 
faulters. 

"Strict  inquiries  should  also  be  made  from  the  applicant  as  to 
his  means  of  future  weekly  repayment  —  fair  warning  should  be 
given  against  borrowing  without  these  means,  and  the  necessity  of 
punctuality  strongly  enforced.  It  should  also  be  fairly  pointed  out 
to  him  that  he  will  lose  character  by  any  omission,  and  probably 
forfeit  the  friendship  and  goodwill  of  his  security. 

"  Those  who  offer  themselves  as  securities  should  be  questioned 
as  to  their  condition  in  life,  cautioned  against  hastiness  or  over- 
confidence  in  the  borrower,  and  imprest  with  the  certainty  of  being 
called  upon  for  repayment  in  case  of  any  defalcation.  A  kind  of 
organised  and  graduated  division  of  charitable  labour  is  thus  main- 
tained.   The  managers  would  have  several  hundreds  to  superintend 

r  3 


Sl-i  THE    HISTORY    AND    PRINCIPLES 

while  each  security  has  but  perhaps  one,  two,  or  three.  Should 
the  persons  who  oHer  themselves  as  securities  appear  in  a  solvent 
condition,  ready  to  f'uHil  the  agreement,  even  should  it  come 
against  them,  and  able  to  pay  the  borrowed  sum  without  distress 
or  embarrassment,  they  may  be  received,  and  the  requisite  sum 
supplied  to  the  borrower." 

RULES. 

•'  1.  The  loan  fund  is  to  be  conducted  by  three  managers,  to  be 
periodically  chosen  from  and  by  the  subscribers,  vvho  shall  have  the 
care  of  the  fund  for  the  space  of  months,  and  be  answerable 

for  all  deficiencies  during  their  management  of  which  they  cannot 
assign  a  just  cause. 

"2.  No  money  to  be  lent  without  the  borrower  obtaining  the 
security  of  a  solvent  person,  who  shall  undertake  to  repay  any  sum 
that  may  remain  unpaid  at  any  time  that  the  borrower  passes  over 
one  single  day,  in  vv'hich  his  weekly  repayment  should  be  made. 

"  3.  All  money  to  be  repaid  every  ,  between  the  hours  of 

and         ,  at  the  rate  of  one  shilling  in  the  pound  each  time. 

"  4.  No  borrower  to  receive  a  second  loan  till  the  whole  of  his 
former  loan  shall  have  been  repaid. 

"  5.  The  managers  have  the  power  of  lending  any  sum  they 
please  not  exceeding  five  pounds. 

"  6.  In  cases  of  non-payment  on  any  ,  the  managers  are  to 

apply  to  the  security  instantly,  and  enforce  payment  from  him,  if 
necessary." 

It  seems  higlily  desirable  that  in  England  also 
charitable  loan  banks  should  be  taken  under  the  pro- 
tection of  the  legislature.  These  institutions  might 
be  organised  in  the  same  manner  as  savings'  banks. 
In  most  }3arts  of  England  there  are  probably  some 
persons  of  affluence,  who  would  become  personally 
l30und  for  the  repayment  of  such  siuns  as  the  govern- 
ment might  be  disposed  to  advance  ;  or,  in  other 
j)arts,  the  necessary  funds  might  be  raised  by  private 
donations.  The  fimds  might  be  em])loyed  in  such 
a  way  as  the  committee  might  deem  best  adapted  to 
promote  the  object  of  the  institution.  The  loans 
might  be  made  either  in  money,  in  raw  produce,  or 
in  implements  of  labour.  These  might  be  recovered, 
if  necessary,  by  summary  ])rocess.  The  state  would 
thus  become  the  Bank  of  the  Poor.  It  would  sustain 
the  yame  relation  to  the  humbler  classes  which  ordi- 


OF    BANKING.  ^215 

nary  banks  sustain  to  the  commercial  classes.  It 
would  be  an  intermediate  party  between  the  bor- 
rowers and  the  lenders.  It  would  borrow,  by  means 
of  savings'  banks,  from  those  who  had  money  to  lend ; 
and  lend,  by  means  of  loan  banks,  to  those  who 
wished  to  borrow. 

Since  the  above  was  written  an  act  of  parliament 
has  passed  *'  For  the  Establishment  of  Loan  Societies 
in  England  and  Wales,  and  to  extend  the  provisions 
of  Friendly  Societies'  Acts  to  the  Isles  of  Guernsey, 
Jersey,  and  Man."  (5  k  6  William  IV.  c.  23.  Aug. 
21.  1835.)  By  this  act,  persons  forming  themselves 
into  loan  societies,  and  desirous  of  having  the 
benefit  of  the  act,  must  cause  their  rules  to  be  en- 
rolled at  quarter  sessions  in  the  same  manner  as  the 
rules  of  friendly  societies.  The  rules  must  be  entered 
in  a  book,  and  kept  by  the  officer  of  the  society. 
The  property  of  the  society  to  be  invested  in  trustees, 
and  the  treasurer  to  give  security  if  required.  No 
loan  to  any  one  individual  at  one  time  to  exceed  the 
sum  of  fifteen  pounds.  No  note,  security,  receipt,  or 
other  document  to  be  liable  to  the  stamp  duty.  All 
notes  or  securities  for  the  repayment  of  loans  to  be 
made  payable  to  the  treasurer  or  clerk  for  the  time 
being  of  the  society,  who  may  summons  the  party 
seven  days  after  demand  before  any  justice  of  the 
peace,  who  may  cause  it  to  be  levied  by  distress  or 
sale,  with  a  sum  not  exceeding  ten  shillings  as  costs. 
The  society  may  receive  interest  at  the  rate  of  five 
per  cent,  at  the  time  of  granting  the  loan^  without 
being  subject  to  the  penalties  of  usury. 

Some  societies  have  been  formed  under  this  act. 
One,  called  "The  Friendly  Loan  Society,"  established 
at  No.  50.  Leicester  Square,  has  recently  made  its 
first  annual  report.  It  contains  much  interesting 
matter  that  may  be  useful  to  those  engaged  in  the 
formation  of  similar  institutions. 


p  4 


2l6  THE    HISTORY    AND    PRINXIPLKS 

rirst  lleport,  read  at  a  Special  General  Meeting  held  at  the  Office 
of  the  Society,  No.  50.  Leicester  Square,  Jst  March,  1837. 

This  Special  General  Meeting  of  the  suhscrihers  and  benefactors 
to  the  Fkiendly  Loan  Society  has  been  summoned,  principally 
for  the  purpose  of  revising  the  enrolled  rules  in  some  particulars, 
which  experience  has  shown  to  require  alteration. 

The  propriety  of  the  changes  which  will  be  recommended  was 
first  discussed  at  a  meeting  of  managers,  by  whom  the  rules  were 
referred  to  a  special  committee,  with  instructions  to  revise  them 
in  conformity  with  certain  resolutions  which  were  then  agreed  to. 
The  report  of  the  committee  was  subsequently  taken  into  con- 
sideration, and,  with  some  alterations,  was  adopted  by  the  managers. 

'I'he  revised  rules  thus  prepared  will  be  read  to  this  meeting. 

The  managers  take  this  opportunity  of  giving  a  sunmiary  of  the 
proceedings  of  the  society  since  its  establishment;  and  they  have 
great  pleasure  in  being  able  to  report  that  the  expectations  of  its 
friends  and  patrons  have  not  been  disappointed. 

Wherever  lean  societies  have  been  established  hitherto,  they 
have  been  in  the  highest  degree  beneficial;  but,  notwithstanding 
the  concurrence  of  testimony  in  their  favour,  many  persons,  who 
were  ready  to  admit  their  general  utility,  were  doubtful  of  the 
success  of  such  an  institution  in  the  metropolis,  where  its  risks 
from  fraud  and  misrepresentation  may  be  supposed  greater  than  in 
any  other  situation.  Even  the  most  sanguine  among  the  sup- 
j)orters  of  the  Friendly  Loan  Society  were  not  entirely  free  from 
apprehension  :  they  considered  that  its  establishment  must  be 
viewed  partly  in  the  light  of  a  new  experiment,  in  which,  while 
tliey  expected  success,  the}'  v\  ere  not  unmindful  of  the  possibility 
of  failure.  It  is  therefore  with  peculiar  satisfiiction  that  the 
managers  feel  themselves  justified  in  reporting  their  opinion,  that 
London  has  not  proved  an  exception  to  the  general  rule ;  and  that, 
with  a  reasonable  exercise  of  caution,  and  a  steady  adherence  to 
a  few  simple  principles,  the  system  may  be  relied  upon  for  pro- 
ducing the  same  beneficial  results  in  the  metropolis  which  have 
shown  themselves  elsewhere. 

The  transactions  of  the  society  during  the  first  year  have  not 
been  altogether  without  loss,  but  the  comparative  amount  is  small ; 
and  the  managers  believe  that  they  may  confidently  refer  even 
that  small  loss  to  causes  which  may  be  removed,  and  chiefly  to  the 
want  of  a  sufficiently  clear  i)erception  of  the  importance  of  those 
principles  which  it  is  the  object  of  tlie  revised  rules  to  enforce. 
At  first,  it  was  difficult  to  convince  those  to  whom  the  plan  of  such 
a  society  was  new,  that,  notwithstanding  its  benevolent  object,  it 
ought  to  be  conducted  on  dilferent  principles  from  those  of  eleemo- 
synary societies,  and  tliat  the  utmost  strictness  in  enforcing  regu- 
larity in  the  repayments  is  essential  to  its  character  and  prosperity. 
'l"he  efTccls  of  the  gradual  conviction   oi'  all   the   managers   on 


OF    BANKING.  217 

this  point,  and  the  results  of  exj)erience  in  the  management,  have 
shown  themselves  in  the  gratifying  circumstance  that  the  principal 
loss  incurred  has  been  on  account  of  some  of  the  earliest  loans 
granted. 

There  are  two  principal  alterations  proposed  in  the  rules :  the 
first  is  one  of  great  practical  importance  connected  with  the 
management.  It  is  proposed  to  establish  a  board  of  directors, 
distinct  from  the  managers  by  whom  the  weekly  loans  are  granted  : 
this  board  is  to  consist  of  the  trustees,  and  of  two  of  the  managers. 
To  the  board  so  constituted  will  be  confided  exclusively  the  power 
of  appointing  and  dismissing  the  officers  of  the  society,  and  of 
regulating  the  details  of  their  duties.  The  experience  of  the  past 
year  affords  good  ground  for  anticipating  that  the  business  of  this 
society  will  soon  be  of  great  extent  and  impurtance,  and  the 
managers  vvho  dispense  its  funds  will  be  placed  in  a  situation  of 
great  trust  and  responsibility.  It  is  believed  that  rrany  persons 
well  qualified  for  the  discharge  of  these  benevolent  duties  would 
hesitate  to  undertake  them,  unless  their  proper  line  of  conduct 
should  be  distinctly  traced  out.  By  these  means  also  a  desirable 
uniformity  will  be  secured  in  the  system  of  the  society's  pro- 
ceedings. 

The  other  alteration  relates  to  the  securities  taken  for  repaj'ment 
of  the  loans.  Much  incovenience  and  some  loss  to  the  society 
have  been  caused  by  the  form  in  which  the  promissory  notes  have 
hitherto  been  drawn,  by  means  of  which  note  alone  payment  can 
be  enforced,  in  the  manner  prescribed  by  the  act.  The  engage- 
ment which  the  sureties  have  hitherto  required  to  sign  bound  them 
merely  to  the  repayment  of  the  arrears  as  they  became  due ;  and 
repeated  legal  proceedings  became  necessary,  in  bad  cases,  to  re- 
cover one  weekly  instalment  after  another.  It  it  proposed  to 
remedy  this  error  in  the  form  of  note,  which  will  be  adopted  in 
future. 

The  accounts  have  been  audited  to  the  end  of  the  year,  and  an 
abstract  will  be  laid  before  the  meeting.  As  soon  as  the  managers 
determined  upon  recommending  a  revision  of  the  rules,  the  grants 
of  loans  were  suspended,  in  order  that  they  might  be  recommenced 
under  the  improved  system :  accordingly,  none  have  been  issued 
since  the  commencement  of  this  year. 

The  total  number  of  loans  granted  from  the  first  establishment 
of  the  society  in  January,  1836,  is  798,  making  together  a  sum  of 
5600/. ;  showing  an  average  amount  of  11.  Qs.  4^rf.  for  each  loan. 
By  the  plan  of  the  societ}-,  this  large  sum  has  been  put  in  circu- 
lation by  means  of  a  capital  of  only  1895/.  The  arrear  still  un- 
paid, out  of  4I4  expired  loans,  is  only  77/.  11*.,  which  is  due  upon 
sixteen  loans,  originally  granted  for  126/.  Of  this  sum  of  77/.  Ms. 
the  sum  of  32/.  9s.  is  due  on  six  loans,  granted  in  January  and  Fe- 
bruary, 1886,  for  17/.  This  leaves  25/.  2s.  due  on  ten  loans,  granted 
in  the  four  following  months,  for  79/. 


'218 


THE    HISTORY    AND    PRINCIPLES 


The  loans  of  the  past  year  have  been  granted  in  the  following 
anoounts:  — 


5 
29 
.'i9 
31 

37 


of  £1 

o 

—  3 

—  4 


£5 

58 

117 

124 

5      1410 

6      222 


56 

of   £1 

49 

—        8 

41 

—       9 

is;i 

—      10 

3 

—      12 

43 

—     15 

£392 

392 

36  9 

1830 

S6 

645 


798 — averaging   £7  Os.  4^d. — i;5600 

The  loans  granted  in  each  month  are  shown  in  the  following 
table  :  — 


A^o.  Amount. 

January 32      £287 


February 80 

March 43 

April 52 

IMay 68 

June 74 


572 
292 
335 
449 
517 


July 

August (il 

September...  69 

October 74 

November  ...  56 

December....  93 


No.  Amount. 

96  i.'695 


420 
467 
524 
427 
615 


The   following  table  contains  a  classification  of  the  borrowers 
according  to  their  trades  and  occupations  :  — 


Trade.  No. 

Bakers 8 

Beadles  and  Policemen 5 

Booksellers  and  Stationers 35 

Bricklayers 15 

Brokers 1 1 

Brushmakers 7 

Butchers 20 

Carpenters 40 

Carvers  and  Gilders 7 

Cheesemongers 5 

China  and  Glass  Dealers 4 

Clerks  and  Book-keepers 25 

Coachmakers 8 

Coriidealcrs 2 

Cutlers 3 

Dress  and  Bonnet  Makers 44 

Dyers  and  Scourers 6 

Eating  House  Keepers 10 

Engravers 6 

Fishmongers 12 

Gardeners 3 

Greengrocers 31 

Gunmakers 3 

Haberdashers 7 

Hairdressers 14 

Hatters 16 

Laundresses 15 


Trade.  No. 

Lodging  House  Keepers 13 

Masons 3 

Messengers  and  Porters 15 

Milkmen 7 

IMusical  Instrument  Makers 6 

Nurses 6 

Painters  and  Glaziers 15 

Postmen 9 

Printers 24 

Saddlers  and  Harness  Makers 4 

Schoolkeepers 23 

Servants 7 

Shoemakers 1 04 

Shopkeepers  (General) 9 

Smiths 18 

Stablekeepers 5 

Tailors 60 

Tea  Dealers 14 


Tobacconists 

Trimming  Makers  , 

Trunk  makers , 

Umbrella  Makers.., 
Miscellaneous 


7 

6 

2 

2 

48 

Not  stated 14 


Total. 


798 


The  following  tabic  contains  an  attempt  at  classification  of  the 
several  purposes  for  which  the  loans  have  been  wanted.    Sufficient 


OF    BANKING, 


^219 


Strictness  in  requiring  the  precise  object  of  the  loan  to  be  stated 
on  the  application  has  not  been  hitherto  observed  :  this  is  a  point 
that  is  considered  of  great  importance,  and  will  be  more  carefully 
attended  to  in  future  loans.  It  will  be  seen  that  many  of  these 
classes  are  exceedingly  vague  and  general. 


For  what  purpose  wanted.  A'b. 

To  assist  in  Business 246 

To  purchase  Stock 168 

To  pay  Rent  and  Taxes 82 

To    pay    Debts    occasioned    by 

Death  or  Sickness 39 

To  pay  other  Debts 36 

To  purchase  Furniture 38 

To  commence  Business 38 

To  purchase  Clothing 32 


For  what  jnirpose  wanted.  JVo. 

To  assist  other  Members  of  Family  27 

To  redeem  Pledged  Property 21 

To  purchase  Tools , 16 

To  take  Lease  of  Houses,  &c 14 

To  Apprentice  Children 8 

Miscellaneous 23 

No  return lo 

Total 798 


It  deserves  to  be  noticed  that  the  smallest  loans  have  been  most 
regularly  repaid.  The  number  of  loans  of  51.  and  under  has  been 
386,  amounting  to  171 4/.;  while  the  loans  exceeding  5/.  have  been 
412,  amounting  to  3886/.  Among  the  expired  accounts  is  only 
one  defaulter  of  the  former  class,  which  was  a  loan  of  3/.,  on  which 
21.  5s,  are  still  due,  while  of  the  latter  class  there  are 

2  loans  of  ^6,  on  which  £6  12s.  are  due; 

4     7 16     3         — 

3     8         19     0         — 

1     9         8  11         — 

5     10         25     0         — 

Making  a  total  of  fifteen  loans  exceeding  51.,  on  which  751.  6s.  are 
due ;  showing  more  default  in  respect  of  loans  above  51.,  in  the 
proportion  of  fourteen  to  one  in  an  equal  number  of  borrowers,  and 
of  little  less  than  fifteen  to  one  in  an  equal  amount  of  money  bor- 
rowed. Out  of  the  414  expired  loans,  229  have  never  omitted  a 
single  weekly  payment. 

A  question  of  great  importance  in  considering  the  practical 
working  of  this  system  is,  the  proportion  in  which  the  loans  have 
been  repaid  by  the  borrowers  themselves,  or  by  their  sureties.  It 
is  by  this  comparison  alone  that  it  is  possible  to  ascertain  whether 
the  borrowers  have  really  profited  by  the  money  lent  to  them,  or 
whether  the  society  has  been  merely  a  circuitous  channel,  through 
which  eleemosynary  assistance  has  been  afforded  to  them  under 
the  mere  pretext  of  a  loan.  The  result  of  this  comparison  is  most 
satisfactory.  It  appears  that  the  proportion  of  cases  in  which  the 
sureties  have  been  resorted  to  for  payment  is  one  in  fourteen,  and 
that  the  proportional  amount  which  they  have  paid  is  only  one  in 
thirty.  The  idea  of  examining  this  proportion  was  suggested  to 
the  managers  from  documents  in  their  possession  showing  the 
practice  of  a  similar  society  in  Hamburgh,  which  was  established 


2^0  THE    HISTORY    AND    PRIXCIPLES 

in  the  year  1831.  In  that  society,  wliich  is  still  in  operation  u'itii 
continually  increasing  success,  the  proportional  amount  paid  by 
the  sureties  was,  in  the  first  year,  one  in  seven,  anil  in  the  four 
following  years  diminished  to  one  in  thirteen,  one  in  fifteen,  and 
lastly  one  in  seventeen.  The  managers  of  the  Friendly  Loan 
Society  consider  therefore  that  they  may  refer  to  the  proportion 
of  one  in  thirty,  shown  by  their  own  transactions  in  the  metropolis, 
as  in  a  high  degree  encouraging,  and  honourable  to  the  character 
of  the  borrowers. 

The  patrons  and  benefactors  of  the  society  are  earnestly  re- 
quested to  make  known  its  proceedings  as  widely  as  possible,  and 
to  endeavour  to  procure  for  it  the  support  of  their  friends;  in 
furtherance  of  which,  copies  of  this  report,  and  of  the  rules  of  the 
society,  may  be  had  for  distribution,  by  applying  at  the  Office  of 
the  Society,  No.  50.  Leicester  Square. 


SECTION  XIV. 

savings'  banks. 


Savings'  banks  are  banks  formed  to  promote  saving. 
—  They  are  purely  banks  of  deposit;  they  diti'er, 
however,  from  other  banks  of  de})osit,  in  the  follow- 
ing particulars  : — First,  Veiy  small  sums  are  received 
as  deposits.  —  Secondly,  All  the  money  deposited  is 
lent,  upon  interest,  to  tlie  government.  —  Thirdly, 
The  depositors  are  restricted  as  to  the  amount  of 
their  lodgments ;  these  restrictions  are  designed  to 
exclude  from  the  bank  all  except  the  humbler  classes 
of  the  commimity. 

Loan  banks,  or  institutions  for  lending  money  to 
the  poor,  are  of  ancient  date  ;  but  savings'  banks,  or 
institutions  for  borrowing  money  of  the  poor,  are 
entirely  of  modern  invention.  They  were  first  urged 
upon  the  attention  of  the  pLd)lic  and  the  legislature 
of  this  country,  in  the  years  1815  and  ISlG,  by  the 
late  Right  Hon.  (jeorge  Rose.  In  his  pamphlet 
upon  this  subject,  he  thus  traces  the  origin  of  these 
establishments  :  — 


OF    BANKING.  '2'21 

"The  idea  was  first  suggested  by  the  Society  for  Betterhig  tlie 
Condition  of  the  Poor,  of  which  I  have  long  been  a  member;  and  it 
has  been  acted  upon  in  Edinburgh  and  Bath  with  such  a  degree  of 
talent,  zeal,  and  perseverance,  as  to  manifest  the  great  advantage 
of  it. 

"In  other  parts  of  Great  Britain,  however,  the  principle  has  been 
acted  upon  on  a  small  scale,  especially  in  Scotland,  where  the  paro- 
chial institutions  for  savings  are  called  Meneges :  so  full  an  ac- 
count of  these  is  given  by  Mr.  Duncan,  the  early  promoter  of  them, 
as  to  render  it  quite  unnecessary  to  enter  on  any  particulars  re- 
specting them  here.  But  however  well  intended  they  are,  there 
are  strong  objections  to  them.  In  any  event,  extended  establish- 
ments are  infinitely  more  to  be  desired,  on  account  of  the  prefer- 
able management  of  them,  as  well  as  for  the  safe  custody  of  the 
money.  By  a  large  district  being  included,  gentlemen  of  property 
are  found  to  become  trustees  and  managers  ;  and  a  fund  is  easily 
furnished  by  small  voluntary  subscriptions  at  first,  and  by  the  sur- 
plus of  the  interest  allowed  to  the  depositors  afterwards,  to  meet 
all  the  expenses  of  the  institution. 

"  Since  the  first  publication  of  these  observations,  a  controversy 
has  arisen,  by  Mr.  Duncan,  the  promoter  of  the  parochial  banks, 
insisting  upon  his  having  (by  the  establishment  of  the  one  at 
Ruthwell)  been  the  first  to  bring  the  banks  for  savings  into  notice, 
in  an  address  to  Mr.  Forbes,  a  gentleman  of  the  highest  respect- 
ability in  Edinburgh,  who  was  a  zealous   promoter   of  the  banks 

there The  truth  is,  that  the  two  establishments  are  perfectly 

dissimilar,  as  above  stated,  which  will  appear  more  manifestly  to 
whomsoever  will  take  the  trouble  of  reading  the  pamphlet  of  Mr. 
Duncan  and  the  answer  of  Mr.  Forbes  to  it.  As  far  as  respects 
Scotland,  it  would  seem  that  the  Edinburgh  plan  has  the  merit  of 
priority, /or  general  advantage  ;  but  it  may  be  hoped  that  in  future 
there  may  be  no  contention,  except  how  the  public  can  be  most 
benefited — it  is  of  very  little  importance  from  whence  the  sug- 
gestion originated." 

Mr.  Rose  then  proceeds  to  explain  in  detail  the 
nature  of  these  institutions,  and  points  out  the  ad- 
vantages they  may  be  expected  to  confer  upon  dif- 
ferent classes  of  the  community  :  — 

"  Apprentices,  on  first  coming  out  of  their  time,  who  now  too 
frequently  spend  all  their  earnings,  may  be  induced  to  lay  by  five 
shillings  to  ten  shillings  a  week,  and  sometimes  more,  as  in  many 
trades  they  earn  from  twenty-four  shillings  to  fifty  and  sixty  shil- 
lings a  week. 

"  The  same  observation  applies,  though  somewhat  less  forcibly, 
to  journeymen  in  most  trades  (whose  earnings  are  very  consider- 


222  THE    HISTORY    AKD    PRINCIPLES 

able)  from  not  beginning  so  carl}',  and  to  workmen  in  several 
branches.  With  respect  to  these  it  has  been  made  evident  to  me, 
and  to  many  members  who  attended  the  mendicity  committee  in  a 
former  session  of  parliament,  that  in  numerous  instances  when  the 
gains  have  been  as  large  as  above  stated,  the  parties  have  been  so 
improvident  as  to  have  nothing  in  hand  for  the  support  of  them- 
selves and  families  when  visited  with  sickness,  and  have  conse- 
quently with  their  families  fallen  immediately  upon  the  parish. 
In  some  instances  the  tools  and  implements  of  their  trade  have 
been  carried  to  the  pawnbroker  during  illness,  whereby  difficulties 
were  thrown  in  the  way  of  their  labour  being  resumed  on  the 
restoration  of  health. 

"  Domestic  servants,  whose  wages  are  frequently  more  than 
sufficient  for  their  necessary  expenses. 

"  Carmen,  porters,  servants  in  lower  conditions,  and  others  may, 
very  generally,  be  able  to  make  small  deposits,  without  finding  the 
slightest  inconvenience  from  the  diminution  of  their  income  occa- 
sioned thereby. 

"  With  respect  to  day  labourers,  the  full  advantage  cannot  be 
expected  to  be  derived  at  first,  as  far  as  relates  to  married  men 
with  families  ;  it  too  frequently  happens  that  when  there  are  two 
or  three  children,  it  is  all  that  the  father  can  do  to  support  himself 
and  those  dependent  upon  him,  with  his  utmost  earnings;  but  the 
single  man,  whose  wages  are  the  same  as  those  of  his  married  fel- 
low-labourers, may  certainly  spare  a  small  weekly  sum,  by  doing 
which  he  would,  in  a  reasonable  time,  have  saved  enough  to  enable 
him  to  marry  with  a  hope  of  never  allowing  any  one  belonging  to 
him  to  become  a  burthen  to  the  parish. 

"  Nothing  is  so  likely  as  a  plan  of  this  sort  to  prevent  early  and 
improvident  marriages,  which  are  the  cause,  more  than  any  others, 
of  the  heavy  burthen  of  the  poor  rates.  When  a  young  single  man 
shall  acquire  the  habit  of  saving,  he  will  be  likely  to  go  on  till  he 
shall  get  together  as  much  as  will  enable  him  to  make  some  pro- 
vision towards  the  support  of  a  family,  before  he  thinks  of  marrying. 

"  The  welfare  of  the  lower  classes  of  society  cannot  be  a  matter 
of  indifference  to  any,  nor  can  it  be  doubted  that  their  situation 
will  be  ameliorated  by  the  adoption  and  promotion  of  these  banks. 
The  industry,  sobriety,  and  economy,  among  the  lower  orders  of 
the  people,  will  thus  be  promoted  by  their  being  encouraged  to 
make  little  savings  for  a  provision  against  want  and  distress ;  and 
their  moral  improvement  will  be  advanced,  while  their  social  com- 
fort is  augmented.  By  the  plan  which  I  here  recommend,  this 
beneficent  and  most  important  object  will  be  obtained  at  no  ex^ 
pense  to  the  higher  orders,  or  at  so  trifling  a  one  as  to  be  utterly 
unworthy  of  notice. 

"This  plan  has  in  it  the  germ  of  valuable  moral  principle  ;  and  if 
it  can  be  fairly  brought  into  action  will  tend  more  than  any  thing 
to  lessen  the  enormous  and  increasing  burthen  on  the  middle  and 


OF    BANKING.  233 

higher  classes,  and  at  the  same  time  to  infuse  into  the  minds  of 
the  lower  order  a  legitimate  spirit  of  independence.  Its  merits  are 
so  well  expressed  where  its  advantages  were  early  experienced, 
that  I  cannot  do  so  well  as  to  quote  a  few  words  from  one  of  the 
Edinburgh  reports  — '  It  secures  independence  without  inducing 
pride ;  it  removes  those  painful  misgivings  which  render  the  ap- 
proaches of  poverty  so  appalling,  and  often  paralyse  the  exertions 
that  might  ward  off  the  blow.  It  leads  to  temperance  and  the 
restraint  of  all  disorderly  passions,  which  a  wasteful  expenditure  of 
money  nourishes.  It  produces  that  sobriety  of  mind  and  steadiness 
of  conduct  which  afford  the  best  foundation  for  the  domestic 
virtues  in  humble  life.  The  effects  of  such  an  institution  as  this 
upon  the  character  of  the  people;  were  it  to  become  universal,  would 
he  almost  inappreciable' " 

In  the  year  I8I7,  Mr.  Rose  obtained  an  act  of 
parliament,  entitled  "An  Act  to  Encourage  the  Esta- 
blishment of  Banks  for  Savings  in  England."  *  This 
act  authorises  the  formation  of  savings'  banks,  under 
the  following  regulations  :  —  Rules  of  the  institution 
to  be  entered  in  a  book,  and  a  copy  deposited  with 
the  clerk  of  the  peace.  These  rules  are  to  be  bind- 
ing on  the  members  and  officers  of  such  institution. 
Officers  not  to  have  any  benefit  in  the  institution. 
Savings  of  minors  may  be  invested,  and  on  repayment 
the  receipt  of  a  minor  shall  be  a  sufficient  discharge. 
Friendly  societies  7nay  subscribe  any  portion  of  their 
funds  into  the  funds  of  a  saving  bank.  Treasurers, 
&c.  to  give  security,  if  required  by  the  general  rules. 
Effects  of  institution  to  be  vested  in  trustees  for  the 
time  being,  without  fresh  assignment,  except  as  re- 
gards the  transfer  of  stocks  and  securities  in  the 
public  funds  of  Great  Britain.  The  trustees  may 
bring  and  defend  actions,  criininal  as  well  as  civil, 
either  in  law  or  in  equity.  Money  not  to  be  placed 
out  on  personal  security.  Bank  of  England,  on  re- 
ceiving 50/.  from  savings'  bank,  on  account  of  the 
commissioners  for  the  reduction  of  the  national  debt, 
to  open  an  account  called  "  The  Fund  for  the  Banks 
for  Savings."     Previous  to  such  payments  an  order 

*  57  Geo.  III.  c.  130. 


224  THE    HISTORY    AND    PRINX'IPLES 

sliall  be  produced,  and  a  certificate  granted ;  after- 
wards the  commissioners  for  tlie  national  debt  shall 
issue  debentures  in  favour  of  such  savings'  banks, 
bearing  interest  at  threepence  per  cent,  per  diem. 
Trustees  may  demand  payment  of  the  principal  and 
interest  secured  by  debenture,  any  day  except  the 
.^th  of  April.  New  debentures  may  be  granted  in- 
stead of  the  previous  ones,  if  the  trustees  so  require. 
Moneys  paid  in  on  savings'  bank  account  to  be  in- 
vested in  bank  annuities.  Debentures  not  trans- 
ferable not  liable  to  stamp  duty,  and  may  be  renewed 
if  lost.  If  a  debenture  be  obtained  on  a  false  declar- 
ation, the  money  shall  be  forfeited.  Accounts  of 
all  moneys  received  by  the  commissioners  for  the 
national  debt  from  the  trustees  of  institution,  to 
be  laid  before  parliament.  No  one  person  shall  de- 
j)Osit  in  a  savings'  bank  more  ihan  one  huitdred pounds 
the  first  year,  and  fifty  pounds  in  each  subsequent 
year.  Trustees  and  treasurers  to  account  and  deliver 
up  effects  when  required.  Members  of  friendly  so- 
cieties not  liable  to  forfeiture  by  subscribing  to  any 
institution  under  this  act.  When  property  is  under 
the  value  of  fifty  pounds,  no  stamp  duty  to  be  paid 
in  cases  of  administration.  When  the  effects  of  a 
person  dying  intestate  shall  he  under  twenty  pou7ids, 
the  same  may  be  divided  according  to  the  rules  of 
the  institution  in  such  case  made  and  provided ;  and 
if  there  be  no  such  rules,  the  money  to  be  divided 
according  to  the  Statute  of  Distributions.  Payments 
under  probates  of  wills,  or  letters  of  administration 
afterwards  repealed,  shall  be  valid.  Powers  of  at- 
torney given  by  trustees  or  depositors  not  liable  to 
stamp  duty.  Where  rules  direct  an  arbitration,  the 
award  to  be  final. 

About  the  same  time  an  act  was  passed,  entitled 
*'  An  Act  to  Encoiu'age  the  Establishment  of  Banks 
for  Savings  in  Ireland;'*  the  provisions  of  which 
were  similar  to  the  preceding. 


OF    BANKING.  225 

In  the  year  1818,  an  act  was  passed  to  amend  tlie 
first  of  the  preceding  acts.  The  amendments  refer 
chiefly  to  the  mode  of  issuing  the  debentures.  It  is 
also  enacted  that  anonymous  depositors  shall  not  place 
more  than  ten  pounds  in  a  bank  in  each  year.  Jus- 
tices at  sessions  may  reject  any  rules  of  the  institu- 
tions sent  to  the  clerk  of  the  peace.  No  arbitration 
or  other  bond  to  be  liable  to  stamp  duty. 

In  the  year  1820,  an  act*  was  made  to  amend  the 
two  former  acts.  The  provisions  of  this  act  had  a 
reference  chiefly  to  the  regulation  of  the  debentures, 
and  the  mode  of  keeping  the  accounts  between  the 
trustees  and  the  commissioners. 

In  the  session  of  1824,  an  act  was  obtained  to 
amend  all  the  former  acts.  Among  other  enactments 
are  the  following  :  —  No  application  of  any  surplus 
funds  of  any  savings'  banks  in  England  or  Ireland 
shall  be  made  until  after  ten  yearn  from  the  com- 
mencement of  the  institution,  and  an  interval  of  ten 
years  must  elapse  between  each  subsequent  distribu- 
tion. One  half  of  such  surplus  shall  be  always  re- 
served to  answer  deficiencies,  and  tliirty  days'  notice 
shall  be  given  of  such  distribution.  No  anonymous 
subscriptions  permitted  in  future.  Deposits  of  any 
one  depositor  shall  not  exceed  50/.  in  the  first  year^ 
after  Nov.  20.  1824;  nor  SOL  in  any  year  afterwards^ 
nor  beyond  200/.  in  the  whole.  Depositors  having 
made  their  full  deposit  in  any  year,  may  withdraw  the 
sums  and  again  subscribe  to  the  same  amount.  Per- 
sons (not  being  depositors)  allowed  to  subscribe  as 
trustees  on  behalf  of  others.  The  provisions  of 
former  acts,  authorising  friendly  and  charitable  soci- 
eties to  subscribe  their  funds  into  savings'  banks,  are 
now  repealed.  Subscribers  to  one  savings^  hank 
.shall  not  subscribe  to  any  other,  and  a  declaration  to 
this  effect  must  be  made  by  the  depositor  at  the  time 

*  1  Geo.  IV.  c.  83. 
Q 


226  THE    HISTORY    AND    PRINCIPLES 

of  subscription.  If  tliis  declaration  should  not  be 
true,  the  money  in  each  bank  is  to  be  forfeited  to  the 
commissioners  for  the  reduction  of  the  national  debt. 
Deposits  may  be  withdrawn  from  one  savings'  bank  to 
be  placed  in  another.  Trustees  of  savings'  banks  shall 
invest  all  money  in  the  Bank  of  England  or  Ireland 
only,  and  not  in  any  other  security.  Depositors  not 
to  be  restricted  from  withdrawing  their  money  from 
savings  banks.  Every  officer  of  savings'  banks,  who  is 
entrusted  with  money  and  receives  a  salary,  shall  give 
security  by  a  bond  to  the  clerk  of  the  peace.  Savings 
banks  shall  make  up  annual  accounts  of  their  progi-ess, 
stating  the  balance,  and  in  whose  hands,  and  transmit 
such  accounts  to  the  commissioners  for  the  reduction 
of  the  national  debt.  If  trustees  of  savings'  banks 
neglect  to  deliver  such  account,  or  to  obey  orders  of 
commissioners,  commissioners  may  close  their  ac- 
count. A  duplicate  of  such  account  shall  be  affixed 
in  the  office  of  the  savings'  bank.  Savings'  banks  sliall 
compute  interest  to  the  20th  of  May  and  20th  of 
November,  half-yearly  or  yearly.  Accounts  shall  be 
annually  laid  before  parliament  by  the  commissioners 
for  the  reduction  of  the  national  debt.  Treasury  may 
issue  exchequer  bills,  on  application  of  commissioners, 
for  payments  to  savings'  banks.  Banks  may  make  ad- 
vances to  the  commissioners  upon  such  exchequer 
bills.  Draft  drawn  by  trustees  upon  the  commis- 
sioners for  5000/.  or  uj^wards,  not  to  be  paid  until 
after  twenty-one  days. 

In  the  session  of  1828,  an  act  was  passed  to  con- 
solidate and  amend  tlie  laws  relating  to  savings' 
banks.*  The  amendments  comprise  the  following 
enactments :  —  Banks  not  to  be  formed  unless  ap- 
proved by  justices  at  sessions  and  tlie  commissioners 
of  national  debt.  The  rules  and  regulations,  before 
being  deposited  with  the  clerk  of  the  peace,  must  be 

*  9  Geo.  IV.  c.  92. 


OF    BANKING.  227 

submitted  to  a  barrister  for  the  purpose  of  ascertain- 
ing whether  tliey  are  in  conformity  to  law.  On  pay- 
ment of  money  into  the  bank  to  the  account  of 
national  debt  commissioners,  their  officer  shall  give  a 
receipt  for  the  same,  carrying  interest  at  two-j)ence 
half-penny  per  cent,  per  diem.  The  interest  payable 
to  the  depositors  is  not  to  exceed  two-pence  farthing 
per  cent,  per  diem.  Charitable  societies  may  invest 
sums  not  exceeding  100/.  per  annum,  nor  300/.  in  the 
whole.  Friendly  societies,  formed  previous  to  the 
passing  of  this  act,  may  subscribe  any  portion  of 
their  funds  into  a  savings'  bank ;  but  societies  formed 
subsequently,  shall  not  deposit  any  more  than  the 
sum  of  300/.  Trustees  are  not  to  receive  from  any 
one  depositor  more  than  30/.  in  any  one  yeai\  nor 
more  than  150/.  in  the  whole.  JVhen  deposit  and 
interest  shall  amount  to  150/.  no  further  deposit  shall 
he  received ;  and  when  the  deposits  and  interest 
amount  to  2001.  the  interest  shall  cease.  The  surplus 
that  may  remain  in  any  savings*  bank,  after  paying 
the  interest  on  the  deposit  and  the  current  expenses, 
is  to  be  paid  every  year  to  the  commissioners  for  the 
reduction  of  the  national  debt.  Where  the  effects  of 
a  person  dying  intestate  shall  not  exceed  50/.  the 
same  may  be  divided  according  to  the  rules  of  the 
institution ;  and  if  there  be  no  such  rules,  then  ac- 
cording to  the  Statute  of  Distributions.  When  dis- 
putes arise,  the  subject  to  be  referred  to  arbitrators ; 
and  in  case  of  their  not  agreeing,  to  be  settled  by  a 
barrister,  whose  award  shall  be  final,  without  appeal. 
This  act  came  into  operation  on  Nov.  20.  1828. 

In  order  to  establish  a  savings*  bank  it  will  be  ne- 
cessary, in  the  first  place,  that  the  persons  friendly  to 
the  undertaking  meet  together  and  appoint  trustees. 
Some  of  the  trustees  should  be  gentlemen  of  known 
influence  and  respectability  in  the  district :  others 
should  be  persons  likely  to  attend  and  take  an  active 
part  in  the  management.     The  trustees  should  agree 

Q  2 


228  THE    HISTORY    AND    PRINCIPLES 

to  a  code  of  laws,  a  co])y  of  whicli  should  be  trans- 
mitted to  Jolm  Tidd  Pratt,  Esq.,  4.  Elm  Court, 
Temple,  for  his  ap])roval.  After  being  returned,  with 
his  certificate,  that  they  contain  nothing  contrary  to 
law,  they  must  be  sent  to  the  clerk  of  the  peace,  to  be 
enrolled  at  the  next  quarter  sessions.  The  bank  is 
then  virtually  formed,  and  the  trustees  may  a])point 
a  treasurer  and  a  secretary,  and  proceed  to  receive 
deposits.  The  sums  received  must  be  remitted  to 
the  commissioners  for  the  reduction  of  the  national 
debt. 

The  constitution  of  a  savings'  bank  will  be  easily 
known,  from  the  rules  of  the  Mary-le-bone  bank 
for  savings,  held  at  14.  Henrietta-street,  Cavendish- 
square. 

RULES. 

1.  Management.  —  Pursuant  to  9  Geo.  IV.  c.  92.,  this  institution 
shall  be  under  the  direction  and  control  of  not  less  than  twenty-six 
managers,  exclusive  of  a  patron,  twenty  trustees,  and  a  treasurer, 
who  shall  be  managers  by  virtue  of  their  respective  offices. 

2.  No  emoluments. — No  person  being  a  manager  or  trustee,  or  a 
treasurer  of  this  institution,  or  having  any  control  in  the  manage- 
ment thereof,  shall  derive  any  benefit  from  any  deposit  made  in  the 
bank,  or  receive  any  emolument,  allowance,  or  salary,  profit,  or 
benefit  whatsoever,  directl}^  or  indirectly,  from  the  institution, 
beyond  their  actual  expenses  for  the  purposes  of  the  institution. 

3.  Securities.  —  The  treasurer,  the  secretary,  and  actuary  or 
cashier,  who  shall  be  intrusted  with  the  receipt  or  custody  of  the 
money  of  the  institution,  and  every  officer  receiving  any  salary  or 
allowance  for  his  services,  shall  give  such  good  and  siifi^cient 
security  to  the  clerk  of  the  peace,  for  the  just  and  faithful  execu- 
tion of  such  office  or  trust,  as  shall  be  approved  of  by  not  less  than 
two  trustees  and  three  managers  of  this  savings'  bank. 

4.  Liahilitij  of  trustees  or  managers. —  No  trustee  or  manager 
shall  be  i)crsonally  liable,  except  for  his  own  acts  and  deeds ;  nor 
for  any  thing  done  by  him  in  virtue  of  his  office,  except  in  cases 
where  lie  shall  be  guilty  of  wilful  neglect  or  default. 

5.  Meetings  of  managers  and  trustees. — The  trustees  and  mana- 
gers shall  meet  at  such  times  as  they  shall  decide  upon  at  any 
future  meeting  ;  and  adjourn  from  time  to  time  as  they  may  think 
proper;  notice  of  such  adjourned  meeting  being  given. 

6.  Annual  general  meetings.  —  An  annual  general  meeting  of  the 
patron,  trustees,  and  managers,  shall  be  held  on  the  second  Tuesdaij 
in  the  month  of  luhruarg  in  every  year ;  and  a  special  general 
meeting  may  be  called  at  any  time,  on  requisition,  specifying  the 


OF    BANKING.  229 

object  of  the  meeting,  from  any  three  trustees,  or  any  ten  mana- 
gers, delivered  in  writing,  either  to  the  manager  in  attendance  at 
the  bank,  or  to  the  secretary :  of  which  meeting  not  less  than 
seven  days'  notice  shall  be  given. 

7.  Regulation  of  meetings.  —  In  all  meetings  for  transacting  the 
business  of  this  institution,  any  three  managers  or  trustees,  duly 
assembled,  shall  constitute  a  quorum,  and  be  fully  competent  to 
transact  such  business  :  but  no  proceedings  shall  be  valid  or  have 
force,  unless  entered,  together  with  the  names  of  the  managers 
and  trustees  present,  in  a  book  to  be  kept  for  this  purpose,  and 
signed  by  the  chairman  of  the  meeting. 

8.  Attendance  and  secretary.  —  One  or  more  of  the  managers, 
with  the  secretary  and  actuary,  shall  attend  for  the  purpose  of  re- 
ceiving and  repaying  deposits  at  the  savings'  bank  once  in  every 
week  at  least;  and,  in  the  absence  of  the  secretary  and  actuary, 
he  shall  provide  the  attendance  of  a  manager  in  his  stead  ;  and  the 
institution  will  not  be  answerable  for  any  deposits,  unless  such  as 
are  made  at  the  times  and  places  appointed  by  the  trustees  or 
managers,  and  made  known  by  notice  to  be  affixed  upon  the  pre- 
mises occupied  for  carrying  on  the  business  of  the  bank. 

9.  Deposits  and  rate  of  interest Deposits   amounting  to  one 

shilling,  or  to  any  number  of  shillings  not  exceeding  the  sum  pre- 
scribed by  law,  will  be  received,  but  they  will  not  bear  interest  until 
they  amount  to  five  shillings.  Interest  at  the  rate  of  tJiree  pounds 
eight  shillings  and  jive-pence  one  farthing  per  cent,  per  annum  will 
then  be  allowed  and  paid  upon  that  sum,  excluding  fractions  of  a 
penny,  and  upon  every  additional  sum  of  five  shillings.  It  will  be 
calculated  by  the  month,  from  the  twentieth  day  of  every  month  to 
the  twentieth  day  of  the  month  next  following ;  but  no  interest  will 
be  allowed  for  a  less  period  than  one  month,  nor  upon  any  sum 
deposited  which  may  be  withdrawn  within  one  month  of  being  so 
deposited. 

10.  Limitation  of  deposits. — No  person  shall  be  allowed  to  deposit 
in  any  one  year,  ending  on  the  20th  of  November,  more  than  thirty 
pounds,  nor  be  allowed  to  make  any  further  depcsit  when  the  sum 
which  such  depositor  shall  be  entitled  to  shall  exceed  the  sum  of 
one  hundred  and  fifty  pounds  in  the  whole  ;  and  whenever  the  sum 
or  sums  standing  in  the  name  of  any  one  depositor  shall  amount  to 
the  sum  of  two  hundred  pounds,  principal  and  interest  included, 
no  interest  shall  thenceforth  be  payable  on  any  such  deposit,  so 
long  as  it  shall  continue  to  amount  to  the  said  sum  of  two  hundred 
pounds. 

11.  Compound  interest.  —  The  interest  payable  on  deposits  will, 
at  the  conclusion  of  every  year,  ending  on  the  20th  day  of  Novem- 
ber, either  be  added  to  the  principal,  and  will,  from  time  to  time, 
become  principal,  or  will  be  paid  to  those  applying  for  the  same  on 
the^r5^  and  following  Monday  in  the  month  of  December  in  every 
year. 

Q  3 


230  THE    HISTORY    AND    PRINCIPLES 

12.  Minors.  —  Minors  may  deposit  money  in  their  own  names, 
and  withdraw  the  same,  togetlier  with  any  interest  that  may  accrue 
thereon. 

1 3.  3Iarried  women. — Any  married  woman  may  be  paid  any  sum 
of  money  in  respect  of  any  deposit  made  by  her  vv^ithout  notice  of 
her  being  married,  unless  the  husband  of  such  woman,  or  his  repre- 
sentatives, shall  give  to  the  trustees  notice,  in  writing,  of  his  mar- 
riage, and  shall  require  payment  to  be  made  to  him  or  them. 

14.  Charitable  funds. — The  trustees  or  treasurers  of  any  chari- 
table society  or  charitable  donation,  or  bequest  for  the  maintenance, 
education,  or  benefit  of  the  poor,  may  deposit  any  part  of  their 
funds  into  this  institution,  to  the  amount  of  one  hundred  pounds 
per  annum,  provided  such  deposits  shall  not  exceed  the  sum  of 
three  hundred  pounds  in  the  whole,  exclusive  of  interest. 

15.  Friemlhj  societies.  —  Friendly  societies,  legally  established 
before  the  28th  day  of  July,  1828,  may  deposit  in  this  bank  the 
whole  or  any  part  of  their  funds ;  but  no  friendly  society  formed  and 
enrolled  after  that  day  shall  invest  more  than  the  sum  of  three  hun- 
dred pounds,  principal  and  interest  included.  Whenever  such  de- 
posits and  interest  belonging  to  any  such  last-mentioned  society, 
shall  amount  to  or  continue  at  the  said  sum  of  three  hundred  pounds 
or  upwards,  no  interest  on  the  same  shall  be  paid. 

16.  Members  of  friendly  societies.  —  Members  of  friendly  or  chari- 
table societies  making  deposits  on  their  own  account,  or  as  the  trus- 
tees of  others,  shall  not  be  considered  as  subject  to  any  penalty  or 
forfeiture  declared  in  the  rules  of  any  such  societies. 

17.  No  anonymous  depositor.  —  No  person  shall  be  allowed  to 
make  any  deposit  by  ticket  or  number,  without  disclosing  his  or 
her  name,  together  with  his  or  her  profession,  business,  occupation, 
calling,  and  residence,  to  the  managers. 

18.  Deposits  bij  trustees. —  Deposits  may  be  made  by  any  person 
acting  as  trustee  on  behalf  of  another,  notwithstanding  such  person 
is  himself  a  depositor,  subject  to  the  same  regulations  as  are  re- 
quired in  the  case  of  a  depositor  on  his  own  account ;  and  the 
receipt  of  such  trustee,  at  the  discretion  of  the  managers,  with  or 
without  the  receipt  of  the  person  on  whose  account  tlie  sum  may 
have  been  deposited,  shall  be  a  sufficient  discharge. 

]  9.  Depositors  signature.  —  All  deposits  are  required  to  be  made 
at  the  proper  office,  and  within  the  regular  office  hours ;  and  every 
depositor,  on  making  the  first  deposit,  may  be  required  to  sign  a 
book,  containing  the  rules  and  regulations  of  the  institution,  and  is 
to  sign  a  declaration  of  his  consent  thereto,  which  signature  shall 
be  witnessed  by  a  manager,  by  the  secretary  and  actuary,  or,  in 
his  absence,  by  an  officer  of  the  bank. 

20.  Depositor  s  declaration. — Every  person  desirous  of  becoming 
a  depositor  into  this  bank  shall,  at  the  time  of  making  the  first 
deposit,  and  at  such  other  time  as  such  persons  shall  be  required 
so  to  do  by  the  managers,  sign,  either  by  themselves,  or  in  case  of 
infants  under  the  age  of  seven  years,  by  some  person  to  be  ap- 


OF    BANKING.  231 

proved  by  the  managers,  or  such  other  persons  as  they  shall  appoint, 
a  declaration  that  he  or  she  is  not  entitled  to  any  deposit  in,  or 
any  benefit  from,  the  funds  of  any  other  savings'  bank  whatever, 
nor  to  any  sum  or  sums  standing  in  the  name  or  names  of  any 
other  persons  in  the  books  of  this  savings'  bank ;  and  in  case  such 
declaration  shall  not  be  true,  or  if  any  depositor  into  this  bank 
shall  at  any  time  have  or  hold,  or  be  possessed  of  any  deposit  or 
funds  in  any  other  savings'  bank,  every  such  person  will  forfeit  and 
lose  all  right  and  title  to  any  deposit  in  this  savings'  bank,  and  the 
accounts  of  such  person  will  be  closed,  and  the  amount  so  for- 
feited, together  with  all  interest  accrued  thereon,  will  be  paid  over 
to  the  commissioners  for  the  reduction  of  the  national  debt,  agree- 
ably to  act  of  parliament  in  that  case  made. 

21.  Deposit  book.  —  All  deposits  shall  be  entered  in  the  books  of 
the  institution  at  the  time  when  they  are  made,  and  the  depositor 
shall  receive  a  book  with  a  correspondent  copy  of  his  or  her  account 
therein,  which  deposit  account  book  must  be  produced  at  the  bank, 
and  signed  by  a  manager,  whenever  any  further  sum  is  deposited 
or  drawn  out.  And  in  case  any  depositor  should  lose  this  book, 
immediate  notice  thereof  is  to  be  given  at  the  bank,  when,  upon 
a  satisfactory  explanation  of  the  cause,  and  a  payment  of  one  shil- 
ling, a  duplicate  book  will  be  furnished  within  fourteen  days. 

22.  Return  and  refusal  of  deposits.  —  The  managers  shall  be  at 
liberty  to  return  to  any  one,  or  all  of  the  depositors,  at  any  time, 
the  whole  amount  of  his,  or  her,  or  their  deposits,  upon  giving  him, 
her,  or  them  one  month's  notice  of  their  intention  so  to  do,  such 
notice  being  previously  approved  at  a  board  of  managers  and 
trustees ;  such  notice  to  be  signed  by  two  managers,  and  the  in- 
terest due  to  such  depositor  or  depositor  to  be  calculated,  accord- 
ing to  the  rules  of  this  institution,  up  to  the  expiration  of  the 
notice,  beyond  which  time  no  interest  will  be  allowed.  The  managers 
shall  also  be  at  liberty  to  refuse  any  deposit  which  may  be  offered. 

23.  Withdraiviiig  deposits.  —  Depositors  being  desirous  of  with- 
drawing their  deposits,  or  any  part  thereof,  must  give  notice  of 
their  intentions  on  some  one  day  in  every  week,  appointed  by  the 
managers  for  that  purpose ;  of  which  day,  so  appointed,  notice 
shall  from  time  to  time  be  affixed  upon  some  conspicuous  part  of 
the  premises  where  the  business  of  the  bank  is  conducted ;  and 
the  sum  applied  for  will  be  paid  at  such  meeting  for  the  repay- 
ment of  de})Osits  within  fifteen  days  from  such  notice,  as  may  be 
appointed  by  the  managers,  together  with  the  interest,  if  any  be 
due  thereon,  up  to  the  period  of  such  notice  being  given,  unless  the 
managers  present  at  the  meeting  when  such  deposits  shall  be  ap- 
plied for  shall  think  proper  then  to  repay  the  same  ;  but  if  not 
applied  for  at  such  meeting  for  repayment,  a  fresh  notice  will  be 
required  before  the  payment  can  be  made.  Such  payments  can 
only  be  made  to  the  depositor  personally,  and  on  his  or  lier  receipt, 
except  under  power  of  attorney. 

Q,  4 


2^2  THE    HISTORY    AND    PRINCIPLES 

24.  Power  of  (dtorney.  —  Money  deposited  in  this  bank  can  be 
repaid  only  to  the  depositor  personally,  or  to  the  bearer  of  a  power 
of  attorney,  under  his  or  her  hand,  signed  by  the  depositor,  and 
witnessed  by  a  manager  or  officer  of  this  bank,  or  by  the  minister, 
or  one  of  the  churchwardens  of  the  parish  wherein  the  depositor 
resides,  according  to  a  form,  which  shall  not  be  subject  to  any 
stamp,  and  may  be  obtained  by  applying  at  this  bank,  during  the 
hours  of  business. 

25.  Withdrawing  and  re-depositing. —  Depositors  may  withdraw 
any  sum  or  sums  of  money  out  of  this  savings'  bank,  and  re-deposit 
therein  an}'^  sum  or  sums  of  money,  at  any  time  or  times  appointed 
for  receiving  deposits  within  any  one  year  ending  the  20th  day  of 
November;  provided  such  sum  or  sums  re-deposited,  and  any  pre- 
vious deposit  or  deposits  which  shall  have  been  made  in  the  course 
of  the  year,  taken  together,  shall  not  exceed  at  any  one  time  in 
such  year  the  sum  of  thirty  pounds  additional  principal  money,  or 
one  hundred  and  fifty  pounds  in  the  whole, 

26.  Transfer  of  deposits.  —  Any  depositor  in  this  savings'  bank 
changing  his  or  her  place  of  residence,  may  withdraw  the  whole 
amount  of  his  or  her  deposit,  and  interest  thereon  (but  not  in  parts 
or  shares),  for  the  purpose  of  investing  the  same  in  any  other 
savings'  bank  ;  and  the  managers  will  grant  to  such  person  a  certi- 
ficate, stating  the  amount  to  be  withdrawn  for  that  purpose,  v/hicli 
will  be  an  authority  for  the  savings'  bank  to  which  it  is  addressed 
t3  receive  the  sum  therein  stated  from  such  person,  agreeably  to 
the  act  of  parliament ;  and  any  depositor  in  any  other  savings' 
bank  wishing  to  remove  his  or  her  deposit  to  this  savings  bank 
may  do  so  in  like  manner,  upon  producing  a  certificate  from  the 
manager  of  such  other  savings'  bank,  agreeably  to  the  form  directed 
by  the  commissioners  for  the  reduction  of  the  national  debt ;  pro- 
vided that  previous  to  such  investment,  a  like  declaration  shall  be 
made  by  the  person  applying  to  make  such  deposit  as  is  required 
iu  other  cases  of  making  deposits,  and  such  person  shall  be  con- 
sidered in  all  respects  as  an  original  subscriber,  and  shall  be  liable 
to  all  the  rules  and  regulations  of  this  savings'  bank. 

27.  Depositors  unable  to  attend.  —  Forms  for  signature  may  be 
had  at  the  bank,  enabling  persons  who  are  unable  to  attend  to 
become  depositors  ;  and  those  persons  who  are  already  depositors 
may  send  additional  sums  to  be  deposited  by  any  other  person  on 
their  behalf,  together  with  their  deposit  book. 

28.  Depositors  becoming  insane  or  otherwise  incapacitated  to  act. — 
In  case  any  depositor  in  this  institution  shall  become  insane,  or 
otherwise  incapacitated  to  act,  whether  from  illness  or  other 
cause ;  and  if  the  same  shall  be  proved  to  the  satisfaction  of  the 
managers,  at  one  of  their  meetings,  by  the  certificate  of  a  medical 
attendaivt  in  cases  of  insanity,  or  by  the  certificate  of  a  medical 
altendiuit,  or  otherwise,  in  cases  of  illness  or  other  bodily  infirmity  ; 
and  if  the  managers  shall  be  satisfied  of  the  necessity  of  tlie  case, 
they  shaU  authorise  the  treasurer  of  this  institution  to  pay  weekly, 


OF    BANKING.  233 

or  otherwise,  such  sum,  for  the  care,  maintenance,  and  medical 
attendance  of  such  depositor,  as  they  shall  think  fair  and  reason- 
able ;  and  they  may  also  authorise  the  treasurer  to  make  such 
other  payments  on  account  of  such  depositor  as  the  urgency  of  the 
case  may  require  ;  all  which  weekly  or  other  payments  shall  be 
made  out  of  the  monies  standing  in  the  name  of,  or  belonging  to, 
such  depositor,  on  the  receipt  of  the  parties  to  whom  such  pay- 
ments shall  be  made. 

29.  Deposits  fraiidulentlij  withdrawn The  managers,  and  the 

secretary  and  actuary,  will  diligently  endeavour  to  prevent  fraud, 
and  identify  every  depositor  transacting  business  at  this  bank  ;  but 
in  case  any  person  presenting  a  deposit  book  (the  depositor  not 
having  given  previous  notice  to  the  bank  of  his  book  being  lost  or 
stolen^,  and  stating  himself  or  herself  to  be  the  depositor  named 
therein,  shall  unlawfully  obtain  any  deposit  or  sum  of  money 
from  any  manager,  or  from  the  secretary  and  actuary  of  this 
savings'  bank,  they  will  not  be  responsible  for  the  loss  so  sustained 
by  any  depositor,  neither  will  they  or  this  institution  be  liable  to 
make  good  the  same,  provided  that  such  payment  has  been  entered 
in  the  book  of  the  depositor  at  the  time  when  made. 

30.  Investment.  —  AH  monies  belonging  to  this  institution  shall 
be  invested  in  the  Bank  of  England,  in  the  names  of  the  com- 
missioners for  the  reduction  of  the  national  debt,  except  such 
sums  of  money  as  from  time  to  time  shall  necessarily  remain  in 
the  hands  of  the  treasurer,  to  answer  the  exigencies  thereof. 

3 1 .  Probate  of  will  for  effects  umler  fifty  pounds  exempt  from 
stamp  duty.  —  In  case  any  depositor  shall  die,  leaving  a  sum  of 
money  in  the  funds  of  this  institution,  which,  with  the  interest  due 
thereon,  shall  exceed  in  the  whole  the  sum  of  fifty  pounds,  the 
same  shall  not  be  paid  to  any  other  person  or  persons,  as  repre- 
sentative or  representatives  of  such  depositor,  but  upon  production 
of  the  probate  of  the  will  of  the  deceased  depositor,  or  letters  of 
administration  of  his  or  her  estate  and  effects.  And  in  case  the 
w^hole  estate  and  effects  of  such  depositor,  for  or  in  respect  of 
which  any  probate  or  letters  of  administration  shall  be  granted, 
shall  not  exceed  the  value  of  fifty  pounds,  a  certificate  of  the 
amount  and  value  of  the  share  and  interest  which  the  deceased 
depositor  had  in  the  funds  of  this  institution  shall  be  given,  under 
the  hands  of  one  manager,  and  countersigned  by  the  secretary  or 
other  officer,  by  virtue  of  which  certificate  no  stamp  duty  will  be 
chargeable  on  such  probate  or  letters  of  administration. 

Form  of  Certificate. 
"  St.  Mary-le-boxe  Bank  for  Savings. 
"It  is  hereby  certified,  to  all  whom  it  may  concern,  that  the  whole 
of  the  deposits,  together  with  all  interest  thereon,  due  to 

of  in  the  county  of 

from  the  funds  of  this  institution,  on  the  day  of 

18         amounted  to  the  sum  of 
Witness  our  hands,  this  day  of  18     ." 


^34  THE    HISTORY    AND    PRINCIPLES 

32.  Administration  bonds,  ivhcre  deceased  depositor's  whole  estate 
aiid  effects  are  under  Jifty  poimds,  exempt  from  stamp  duty.  —  In 
case  the  whole  estate  and  effects  of  any  depositor,  for  or  in  respect 
of  which  letters  of  administration  shall  be  granted,  shall  not  exceed 
the  value  of  fifty  pounds,  no  stamp  duty  is  chargeable  upon  the 
bond  required  to  be  given  by  the  administrator  for  the  due  admi- 
nistration of  the  effects  of  such  deceased  depositor,  nor  upon  any 
affidavit  or  document  leading  to  or  connected  with  such  adminis- 
tration ;  but  every  such  bond  and  affidavit  are,  by  act  of  parlia- 
ment, exempt  from  stamp  duty. 

33.  Payments  under  fifty  pounds,  in  case  of  death  and  non- 
administration. — In  case  any  depositor  shall  die,  leaving  a  sum  of 
money  in  the  funds  of  this  institution,  which,  with  the  interest  due 
thereon,  shall  not  exceed  in  the  whole  the  sum  of  fifty  pounds,  it 
shall  be  lawful  for  the  managers,  if  they  shall  be  satisfied  that  no 
will  has  been  made  and  left  by  such  deceased  depositor,  and  that 
no  letters  of  administration  will  be  taken  out  of  the  goods  and 
chattels  of  such  depositor,  to  pay  the  same  to  such  person  or 
persons  as  shall  appear  to  the  managers  to  be  the  lawful  represent- 
ative of  the  deceased ;  provided  that  the  claim  be  made  within 
two  years  from  the  death  of  the  depositor. 

34.  Auditors. — The  accounts  shall  be  examined  from  time  to 
time  by  such  person  or  persons  as  the  board  of  managers  may  at 
any  of  their  meetings  appoint ;  and  at  the  annual  general  meeting 
a  report,  containing  a  statement  of  the  accounts,  shall  be  sub- 
mitted, with  the  observations  of  the  managers  thereon,  if  any 
occur  to  them. 

35.  Annual  statement.  —  A  duplicate  of  the  annual  statement  of 
this  savings'  bank,  prepared  up  to  the  20th  day  of  November  in 
every  year,  and  forwarded  to  the  commissioners  for  the  reduction 
of  the  national  debt,  accompanied  by  a  list  of  the  trustees  and 
managers  of  this  institution  for  the  time  being,  shall  be  affixed  and 
exhibited  in  some  conspicuous  part  of  the  office  or  place  where 
the  deposits  are  usually  received.  A  printed  copy  of  such  annual 
statement  every  depositor  shall  be  entitled  to,  on  payment  of  one 
penny. 

36.  Arbitration. —  Any  matter  in  dispute  between  this  institu- 
tion, or  any  person  acting  under  the  same,  and  any  depositor 
therein,  or  any  person  claiming  to  be  executor,  administrator,  next 
of  kin,  or  creditor  of  any  deceased  depositor,  shall  be  referred  to 
the  arbitration  of  two  persons,  one  to  be  named  by  the  managers, 
and  the  other  by  the  claimant ;  and  in  case  the  arbitrators  so 
appointed  shall  not  agree,  then  such  matter  in  dispute  shall  be 
referred,  in  writing,  to  the  barrister-at-la\v  appointed  by  the  com- 
missioners for  the  reduction  of  the  national  debt,  and  the  decision 
or  award  of  such  arbitrators  or  barrister  shall  be  final  and  decisive, 
to  all  intents  and  j)urposes,  without  any  appeal. 

37.  Supcrinlcndiny  committee.  —  A  connnittee  shall  be  annually 
chosen  from  among  the  managers,  by  ballot,  at  the  annual  meeting 


OF    BANKING. 


Q35 


of  the  patron,  trustees,  and  managers  of  this  institution ;  which 
committee  are  empowered  to  superintend  and  conduct  the  general 
business  of  the  bank,  and  to  fill  up  and  add  to  the  number  of  the 
managers  during  the  year.  This  committee  shall  consist  of  nine- 
teen members,  the  trustees  being  ex-officio  members  of  this  com- 
mittee, three  to  form  a  quorum  ;  and  not  less  than  five  members 
of  the  committee  must  be  present  to  authorise  any  expenditure 
which  shall  exceed  the  sum  of  twenty-five  pounds  for  any  one 
object ;  and  this  committee  are  empowered  to  appoint  sub-com- 
mittees from  their  members.  The  committee  shall  report  their 
proceedings  to  the  general  annual  meeting. 

38.  Cheques  on  treasurer.  —  No  cheques  shall  be  drawn  upon  the 
treasurer,  but  on  the  signature  of  two  managers;  and  counter- 
signed by  the  secretary  or  actuary,  or  his  assistant. 

39.  Begidations. — The  managers  shall  be  empowered  to  make 
such  further  regulations,  or  alterations  of  those  already  made,  as 
they  may  from  time  to  time  deem  necessary  for  the  benefit  of  the 
institution ;  provided  such  be  not  contrary  to  the  spirit  of  these 
regulations,  and  are  approved  by  a  general  meeting,  and  duly 
enrolled  at  the  sessions.  The  bank  may  be  closed  for  three  weeks 
immediately  following  the  20th  day  of  November,  in  each  year, 
or  for  as  much  less  time  as  the  managers  may  direct,  in  order  to 
enable  the  actuary  to  make  up  the  interest  and  other  accounts 
required  by  act  of  parHament. 

40.  Donatio7is,  8^c.  —  Donations  and  legacies  will  be  received 
from  those  desirous  of  promoting  the  object  of  the  institution, 
which  shall  be  considered  an  auxiliary  fund,  to  meet  any  ex- 
penditure which  may  occur  beyond  what  the  usual  funds  of  the 
institution  may  at  first  be  enabled  to  support ;  or  to  be  otherwise 
disposed  of,  as  may  be  determined  by  the  trustees  and  managers. 

Table  showing  the  produce  of  weekly  savings  of  one  shilling,  for 
various  periods,  distinguishing  the  amount  paid  in  from  the 
interest  accruing  thereon,  by  which  it  will  be  seen  that  the 
interest  added  is  nearly  equal  to  the  money  paid  in  at  the  end 
of  the  period  ;  the  interest  amounting  to  66/.  2s,  5d.  upon 
83/.  10^.  paid  in. 


Number  of 
Years. 

Amount  paid  in. 

Amount  of 
Interest  thereon. 

Total  Produce. 

£  s.    d. 

£   s.     d. 

£     S.        d. 

3 

7  17     0 

0    7     8 

8       4      8 

7 

18     6     0 

2     5     5 

20  11     5 

U 

36  11     0 

9  19  11 

46  10  11 

21 

55  16     0 

24  12     4 

79     8     4 

28 

73     3     0 

47  19    7 

121     0     7 

32 

83  10     0 

66     2     5 

149  12     5 

This  will  clearly  prove  the  very  great  advantage  to  be  derived 
from  a  provident  saving  of  a  sum  even  so  small  as  few  can  plead 
inability  to  spare. 


c«    rt  CO 
"^  1^  ^—* 

> 

o 

.  ,   y. 


O  (-" 


-»j    o    o 

O     r-      C/D 

2    rt.Si 


r^      c/3      i^ 

^    --^ 
J    ^-^ 

-tU    O    rt 

CO       ^    'M-H 

O  T)  >-^ 
+->    rt  ^ 

o    ►^   ^ 

^   a  1— I 

53  ?^  S 
c  -S  o 
'^        G 


a; 


o 


o 


c3    ^ 


O 

W       w«       _ 


S.  =  'S-g§ 

-  ,  1^  O  f^  O  X  Ol 

—  —  1- 

CO 

£  ?  1«  ra  "^ 

"*^,          (n    -C    CM   lis   >0 

CO   <M    CO 

CO 

o  c  f-  ^  o 

rH     «    CM 

CM 

>  =  >>,& 

<;<.=  ,=  ^ 

*"* 

, 

~.  tr,  l~  1^   C-,  'O 

r^    y^    r-^ 

f— 1 

i2 

O    IT!   Ol    lO   '-    O 

•0  o  -5 

1—1 

h4 

*^       z: 

t-  •<r  oc  Ci  T  ^ 

cr.  r-  o 

•—1 

< 

"  •     c 

,  ,  -t>  t-  o  >o  o  O 

CO   CO   "O 

*0 

H 

c  rr  « 

-^  tr;  C  <o •?> 

1^   — •    01 

^^ 

o 

c  "  sn 

1-  ^  00  en  o  CO 

•^   O    CM 

I^ 

<       > 

r^ 

-T  "f  M  :>r  -^ 

'T  — 

>o 

c 

"^ 

^^ 

• 

in   CO    lO   to   Ol    >T 

—  X  .to 

irj 

r-  i^  —  O  '0  r~ 

Oi   C--   CO 

<o 

o       o 

IC   Cl   •:*<    C^    i-T    C^ 

—    lO    CO 

1— 1 

H  c'S 

•T"    0^   50   CJ>    Ci   W 

r~  'J^  CO 

>.o 

-       cu 

-*<    CI   10   — 

CO 

r- 

^^    ^ 

Ol     -H 

^ 

f 

•^ 

«=-s-gl 

t-   C   "J^   C^   <Jl   "f 

t-  (M  <M 

X 

gpg-i 

i)       «  o  —  to  ■* 

^                               «    r^    CM 

(M  CO  W 

CI 

<;<.S^(5 

lO   t^   ■-!   (M   O   I^ 

CM    Ci   l^ 

X 

Q 

*2 

CI  Lo  CO  c^  -r  o 

CM   X    O 

1— ' 

"ti      c 

lO   lO   -^  ■:l'_^  00_  CO 

-^  CD   iC 

I^ 

:^; 

c      5 

a,    r?  CD  t-^  CO  o  CO 

1-^  CO   CD 

o 

<; 

c  'ii;  a 

^  r~  iri  CO  -"T  i^  -H 

Ol  _  ^ 

X 

J 

S      f. 

«  lo  en  -< 

CO 

00 

w 

<      t 

^ 

^ 

■^ 

•^ 

• 

C   CM   <r,   CM   CJl   CO 

O   O   CM 

C>) 

^      >-: 

O    CO   t-   -f   -c    CO 

I-  ^  c:^ 

t^ 

^r        .- 

CO   01    >0   CM    •* 

^(M    ^ 

X 

i  =  l 

CO   CO   lO   -H 

c? 

(J) 

CM   --H 

•^ 

^ 

^  S 

2  3-K«-3 

a,,  1^  O  r^  O  "^  O 
^          K   CO   CM    CO   ^ 

C?i   lO   CO 

(M 

CM    00   X 

CO 

Ave 
Ami 
inve 
by  e 
Depo 

"  rt  (M 

r-     —     »     C5    T     •^• 

1^    "T    CTi 

o 

m 

00  CO  l-^  CO  lO  t-- 

X  CO  er, 

>fl 

en 

■^      c 

CO   O   "^   CM    00   IT) 

X    CO   X 

f— 1 

a 
J 
< 

ii 

^  ,  CO   lo   CO    CO   o    t^ 

CXl  CO  ■*■ 

^  ■^  o  CO  ■^r  CO  " 

CM    <M 

CO 

CO 

oo 

^ 

<    > 

c 

- 

CNl    CO   ^   ■*    CO   CO 

UO   iri   Ol 

c:^ 

S      o 

O   00   00   00    00   t^ 

-^   CTi   lO 

CO 

•2--^ 

CO   ■*"   (M    CO   — 1 

c — 

CM 

S  o  s 

lO  CO  ^ 

— H 

1—1 

3         D, 

.—1 

1—1 

OJ   4^  .w             >^ 

l§s-5.2 

rv,  t-  O  CO   0~,  CO   — 
H^         CO   CO  r^   CO  irj 

1-1  CO  •* 

■*! 

J-.   C    ?^   ?    ''* 

CO    00    CO 

GO 

o  ^  a<  o  o 

^     r-,    <M 

CM 

■<5.s-^| 

00  1--  00  CO  'o  '•" 

rr  -r  'o 

CO 

Q 

■*2 

O    —    CO    W   CM    O 

rt<  lo  -r 

■5- 

'A 

c      g 

>0    00    — .   CM   1^   •* 

Ci   CTl   CD 

CM 

^ 

I'cg 

C,  1-   —    CO   -H   CO    ^ 
"*<  -1    >0   O    CM    O   — 

CO  CO  en 

CO 

J 

1-1  [^  1- 

r~ 

•o  ■*_  ^  -<  lO  X 

X    d    r-1 

0^ 

-T  Co"  00    cm"  r^ 

CM 

X 

uj 

CO   O   CM    O   I-   T 

CO  CO  >o 

•*■ 

»-•        >* 

1^   C)   LO   CO    -*•    0- 

Q  e:-.  — 

£,       *-• 

CO   CM    'O   CO    Ci  O 

C    ^    X 

q_ 

So'i 

lO   CM    05  t-   W    O' 

r^  ^  CM 

•* 

.3    Q. 

~     ^     Tji     ,H 

o 

r-t 

^   p 

CM  '^ 

■* 

-r 

4>  O  O  O  O  Q  C 
^  CM   lO  O  LO  o  c 

•  • «; 

rH    _   CM   C> 

•  «' .2 

^ 

0) 

u   .-     0) 

'O 

2   o  'o 

ca 

• «  T,    O 

3 

o   o^ 

o 
H 

s    1    1    1    1 

G.C«    D 

o     1      1      1      1 

0="^ 

"vs                         a 

"5  • - 

§.          ^ 

B    3    r- 

0)                                  X 

o  •!:  ^ 

Q                  < 

Htau 

o 

c   a> 

o 

2  S 

>. 

K 

O    D 

>~    > 

c  c 

• 

t-  "^ 

^^ 

i^  <D      . 

o 

j?r  '^ 

+->          CO 

Tj- 1- 

5  c  -TS 

O  '3 

"rt    =5 

;:;  S  a> 
S  <s  t- 

CC           HH 

o^ 

o  5?  s 

«C*H 

"r.-^rP'^ 

.5  'S 

St:  ^- 

^l!2      - 

c:   c3 

ts    C.'^S 

2.,- 

3  s^ 

CO 

Ci  O    c. 

cc  xi 

O    O   CO 

t-^1 

^>.c« 

is 

-  > 

QJ      tfi 

^t-^^ 

I-    cy 

Hi   — 

ofH  a 

c  o 


.S  "^ 
S  '^ 

CC?2    ^'S  '-' 

^c3  o  ^  H-i  a 

!^  =^  «3  c  "bb 

-^  ^  •-  a 

"  t«  jj  —  H-i 

^    "  •■      ^"^ 

c   c  S  cu  C^ 

'^^^  ^  °  1 

c  o 


Ch  cc«    > 
"(«     5u     QJ     -     « 


■"   cu 

CU 

C  7l 

^ 

^ 

4:2 

Cfl    f^ 

u    ^ 

cu 

O    C 

hO 

*J    .r- 

rt 

C3 


3    u 
en    QJ 


CS 


<u^ 
=  2 

O     CL, 


C  —    aj    tn 


OF    BANKING.  237 

A  considerable  increase  occurred  in  the  amount  of 
tlie  deposits  in  savings'  banks,  and  also  in  the  ninnber 
of  depositors,  during  the  two  years  preceding  No- 
vember, 1833.  On  this  subject  I  transcribe  the  fol- 
lowing article  from  the  "  Times  :  '* 

"  A  pamphlet,  small  in  point  of  size,  but  of  no  mean  interest  or 
importance  with  respect  to  its  contents,  has  been  just  put  forth 
by  Mr.  Pratt,  the  barrister,  appointed  to  certify  the  rules  of 
savings'  banks  and  friendly  societies.  This  production,  of  which 
a  brief  tabular  summary  recently  appeared  in  the  '  Times,'  con- 
tains accounts  of 'the  savings'  banks  in  every  county  of  England, 
Wales,  and  Ireland,  showing  the  number  and  amount  of  deposits, 
and  the  increase  or  decrease  that  has  occurred  in  each  particular 
instance,  between  November,  1831,  and  November,  1833,  the 
latest  period  to  which  the  official  returns  reach.  The  result  is, 
that  in  the  space  of  those  two  years  the  total  number  of  accounts 
has  increased  to  the  extent  of  45,755 ;  the  increase  of  depositors 
of  sums  not  exceeding  50/.  being  40,616,  and  the  gi'oss  sum 
invested  on  the  20th  of  November,  1833,  amounting  to  1,403,464/. 
more  than  in  November,  1831.  This  statement  affords  satisfac- 
tory evidence  of  a  progressive  improvement  in  the  condition  of 
the  industrious  classes.  It  is  worthy  of  observation  that  the 
few  counties  which  exhibit  a  falling  off  in  the  amount  of  their 
deposits  are  precisely  those  in  which  trades'  unions  and  turns-out 
have  prevailed  to  the  greatest  extent.  Among  parts  of  the  country 
where  unions  appear  to  have  flourished  at  the  expense  of  the 
savings'  banks,  we  may  enumerate  Derbyshire  and  Durham,  in  the 
latter  of  which  there  has  been  a  decrease  of  917  out  of  3651 
accounts.  As  might  naturally  be  supposed,  the  waste  of  capital 
has  occurred  principally  among  the  smaller  and  poorer  depositors; 
the  diminution  in  the  number  of  accounts  under  50/.  being  719, 
and  the  decrease  in  sums  below  100/.  amounting  to  830  of  the 
entire  917-  The  highest  average  amount  of  deposits  in  the 
English  counties  occurs  in  Dorset  and  Hertford,  where  the  ac- 
counts average  41/.  to  each  depositor  :  the  lowest  averages  are  in 
London  22/.  and  in  Monmouthshire  and  Warwickshire,  in  both 
which  the  average  amount  of  each  depositor  is  25/.  The  increase 
in  the  deposits  of  the  Irish  savings'  banks  has  been  proportionably 
much  greater  than  in  the  English.  In  England  and  Wales  the 
augmentations  since  1831  do  not  exceed  8  per  cent,  of  the  gross 
sum  invested,  while  in  Ireland  the  increase  has  been  above  25  per 
cent.  Of  course,  it  will  be  said  that  the  condition  of  the  Irish 
people  being  inferior  to  that  of  the  English,  there  exists  greater 
room  for  improvement  in  tlie  one  class  than  in  the  other,  and 
that  this  circumstance  explains  the  more  rapid  expansion  of 
savings'  banks  in  Ireland.  The  observation  is  undoubtedly  true, 
but  it  leaves  the  fact  of  the  increasing  prosperity  of  the  sister 


238  THE    HISTORY    AND    PRINCIPLES 

kingdom  unshaken.  It  is  clear  that  Ireland  is  not  only  in  a  state 
of  progressive  improvement,  hut  that  she  is  improving  at  a  quicker 
rate  than  this  country.  It  is  remarkable  that  the  number  of  ac- 
counts open  in  savings'  banks  greatly  exceeds  that  at  the  Bank  of 
England  for  the  receipt  of  dividends.  In  the  latter  there  are 
276,476  accounts,  but  in  the  former  they  amount  to  475,155,  with 
a  capital  of  15,715,111/.  The  humbler  classes  have  no  inconsi- 
derable pecuniary  stake  in  the  welfare  of  their  country." 

Much  useful  information  would  be  obtained  if  tlie 
returns  from  the  savings' banks  included  a  classification 
of  the  depositors,  not  merely  according  to  the  indivi- 
dual amount  of  their  deposits,  but  according  to  the 
class  of  society  to  which  they  severally  belong.  The 
savings'  bank  at  Exeter  has  published  sucli  a  state- 
ment. The  depositors  are  distributed  in  five  classes, 
each  class  having  several  subdivisions.  —  1.  Domestic 
servants,  under  three  subdivisions.  —  2.  Persons  en- 
gaged in  trade  and  manufactures,  under  eight  sub- 
divisions. —  3.  Persons  engaged  in  agriculture,  under 
three  subdivisions.  —  4.  Persons  belonging  to  the 
army  and  navy,  or  connected  with  the  revenue  offices, 
under  four  subdivisions.  —  5.  Miscellaneous  depo- 
sitors, under  three  subdivisions.  This  bank  is  esta- 
blished at  Exeter ;  but  there  are  in  the  county  of 
Devon  130  clergymen  and  gentlemen  who  act  as  its 
receivers,  and  take  deposits  from  parties  who  reside 
in  their  respective  neighbourhoods.  Hence,  while 
the  deposits  in  all  the  savings'  banks  of  England 
average  only  19'^".  Id.  for  each  person,  as  compared 
with  the  whole  population,  the  proportion  between 
the  deposits  in  the  savings'  bank  and  the  population 
of  the  county  of  Devon  is  1/.  l6.v.  Ad.  for  each  person. 
This  arises  not  from  the  deposits  being  of  larger 
amount,  but  from  tlie  depositors  being  more  nu- 
merous. It  is  remarkable  that  above  one  fifth  of  the 
amount  of  deposits  in  the  Exeter  savings'  bank  stands 
in  the  name  of  children.  A  notice  of  twenty-eight 
days  is  required  before  any  sum  can  be  withdrawn.* 

*  See  the  articles  on  savings'  banks  in  the  Quarterly  Journal  of 
Education  for  January  1-  18'^5. 


OF    BANKING.  239 

Scotland  has  always  had  the  advantage  of  savings* 
banks  by  means  of  the  deposit  system,  which  is  a  re- 
gular branch  of  the  business  of  the  commercial  banks. 
But  as  the  banks  will  not  receive  a  smaller  deposit 
than  ten  pounds,  savings*  banks  have  been  formed  to 
receive  small  deposits  ;  and  when  the  sums  received 
from  any  one  depositor  amount  to  ten  pounds,  the 
account  is  transferred  into  one  of  the  regular  banks, 
and  the  party  is  then  allowed  to  make  any  further 
addition  he  thinks  proper.  The  deposit  system  of 
banking  is  universally  considered  to  be  one  cause  of 
the  prudence  and  frugality  by  which  the  lower  classes 
of  the  people  of  Scotland  are  distinguished. 

The  savings*  banks  were  rendered  increasingly 
useful  to  the  public  by  an  act  (3  Wm.  4.  c.  14.) 
passed  in  1833,  "  to  enable  depositors  in  savings' 
banks,  and  others,  to  purchase  government  annuities 
through  the  medium  of  savings  banks.'* 

By  this  act  annuities  may  be  obtained  at  the 
savings'  banks,  either  by  persons  who  are  depositors 
or  not.  The  annuities  may  be  either  immediate  or 
deferred,  and  for  a  term  of  years  or  for  life.  The 
annuity,  however,  must  not  exceed  the  sum  of  20/., 
nor  be  granted  on  any  life  under  fifteen  years  of  age. 
The  sums  paid  for  the  purchase  of  these  annuities  are 
received  at  the  savings'  banks,  and  the  annuity  is  paid 
at  the  savings'  banks.  It  may,  however,  be  paid  at  a 
different  savings  bank  from  that  which  receives  the 
purchase  money,  if  the  party  desires  it.  The  pur- 
chaser of  an  annuity  upon  any  life  may  subsequently 
purchase  an  additional  annuity  upon  the  same  life, 
without  fresh  certificates  as  to  the  age  of  the  nominee, 
but  both  annuities  together  must  not  exceed  the  sum 
of  20/.  If  the  annual  payments  made  for  the  purchase 
of  a  deferred  annuity  be  not  kept  up,  or  if  the  nominee 
of  a  deferred  life  annuity  die  before  the  annuity 
commences,  then  all  payments  made  for  the  purchase 
thereof  are  to  be  returned.     In  places   where   no 


240  THE    HISTORY    AND    PRINCIPLES 

savings  bank  is  established,  a  society  may  be  esta- 
blished for  the  purpose  of  granting  annuities,  pro- 
vided the  rector,  or  vicar,  or  minister  of  the  parish 
for  the  time  being,  or  a  resident  justice  of  the  peace, 
be  one  of  the  trustees  of  the  society.  No  annuity 
granted  under  this  act  is  liable  to  any  taxes,  charges, 
or  impositions  whatever. 

The  following  are  the  Official  Instructions  for  the 
establishment  of  Parochial  Societies  for  granting  Go- 
vernment Annuities. 

*'  The  stat.  3  Wm.  4.  c.  14.  was  framed  with  the 
view  of  enabling  the  industrious  classes  to  purchase, 
by  the  payment  of  a  certain  sum  in  the  first  instance, 
or  by  annual  instalments,  an  annuity,  to  commence 
at  any  age  the  purchaser  may  please  ;  and  may  be 
either  immediate  or  deferred,  for  life  or  for  a  term  of 
years. 

*'  No  unnecessary  expenses  are  incurred  in  the 
management,  which  is  wholly  gratuitous,  the  trustees 
and  managers  acting  as  the  agents  of  government ; 
the  amount  of  the  annuity  to  be  purchased  cannot  be 
less  than  4/.  or  more  than  20/.  per  annum,  and  is  se- 
cured by  government.  No  annuity  can  be  con- 
tracted for  on  the  life  of  a  person  under  the  age  of 
fifteen.  The  money  to  be  paid  may  be  either  in  one 
sum  in  the  first  instance,  or  by  weekly,  monthly, 
quarterly,  or  yearly  payments,  as  may  suit  the  con- 
venience of  the  purchaser.  The  amount  of  the 
money  paid  down,  or  of  the  yearly  instalments,  will 
of  course  depend  upon  the  age  of  the  party,  and  tlie 
time  when  lie  wishes  the  annuity  to  commence.  The 
annuity  is  payable  half-yearly,  viz.  on  the  5th  of 
January  and  5th  of  Jidy,  or  the  5th  of  April  and 
10th  of  October.  But  if  a  party  wish  to  liave  tlie 
annuity  payable  quarterly,  he  may  effect  his  object  by 
purcliasing  one  half  payable  in  January  and  July,  and 
the  other  in  A})ril  or  October.  Provisions  are  also 
made  for  enabling  the  i)arty  to  make  his  annual  pay- 


OF    BANKING.  241 

ments,  or  receiving  the  annuity  at  any  other  society 
than  the  one  at  which  the  contract  was  originally  en- 
tered into.  Upon  the  death  of  the  person  on  whose 
life  the  annuity  depended,  a  sum  equal  to  one-fourth 
part  of  the  said  annuity  (over  and  above  all  half- 
yearly  arrears  thereof  respectively)  will  be  payable  to 
the  person  or  persons  entitled  to  such  annuity,  or  his, 
her,  or  their  executors  or  administrators,  (as  the  case 
may  be,)  provided  such  last-mentioned  payment  shall 
be  claimed  within  two  years  after  such  decease,  but 
not  otherwise  ;  provided  also,  that  the  fourth  part  of 
any  expired  life  annuity,  payable  under  the  provisions 
of  the  said  act,  will  not  be  payable,  nor  be  paid 
upon  or  in  respect  of  any  deferred  life  annuiiy^ 
unless  one  half-yearly  payment  of  such  deferred  life 
annuity  shall  have  been  actually  paid  or  become  due 
at  the  time  of  the  decease  of  the  nominee.  Inde- 
pendently of  the  advantages  which  are  thus  afforded 
to  the  industrious  classes  to  obtain  by  small  payments 
a  certain  provision  in  old  age,  or  at  any  other  stated 
period,  secured  by  government,  and  of  which  they 
cannot  be  deprived  on  account  of  miscalculation,  the 
tables  of  contributions  have  been  so  calculated  that 
if  the  purchaser  of'  a  deferred  life  annuity  die  before 
the  time  arrives  at  ivhich  the  annuity  is  to  commence, 
the  whole  of  the  money  he  has  actually  contributed  will 
be  returned,  without  any  deduction,  to  his  family. 
And  if  it  does  not  exceed  50/.  it  is  not  necessary  that 
probate  or  letters  of  administration  should  be  taken 
out.  But  if  he  has  left  a  will,  or  administration  is 
taken  out,  no  stamp  or  legacy  duty  is  payable  in 
respect  of  the  sum  so  returnable,  if  the  whole  estate, 
&c.  of  the  member  is  under  50/. ;  and  again,  if  a 
purchaser  is  incapable  of  continuing  the  payment  of 
his  yearly  instalments,  lie  may,  at  any  time,  upon 
giving  three  ynonths'  notice,  receive  back  the  whole  of 
the  money  he  lias  paid.  No  annuity  granted  will  be 
subject  or  liable  to  any  taxes,  &c. ;  nor  can  the  same 

R 


242  THE    HISTORY    AND    PRINCIPLES 

be  transferred  or  assigned,  but  must  continue  to  be 
the  property,  or  be  received  for  tlie  benefit  of  the 
party  by  or  for  wliom  it  was  purchased  ;  but  in  case 
of  the  bankruptcy  or  insolvency  of  the  purchaser  of 
an  annuity,  the  same  is  to  be  repurchased  by  the 
commissioners,  at  a  valuation  according  to  the  tables 
upon  which  the  annuity  was  originally  granted,  and 
the  money  will  be  paid  to  the  assignee,  for  the  benefit 
of  the  creditors. 

"  A  parochial  society  is  not  confined  to  the  parish 
in  which  it  may  be  established  ;  but  any  person, 
wheresoever  resident,  may  subscribe  thereto,  and 
will,  on  application  at  the  office  where  the  business 
of  the  society  is  transacted,  receive  every  information 
he  or  she  may  require,  and  be  furnished  with  a  form 
of  certificate  of  birth,  &c.,  which  must  be  produced 
before  the  contract  for  the  annuity  can  be  entered 
into." 

*'  From  the  above  statement  it  will  appear  that  any 
defended  annuity,  purchased  by  annual  or  otlier  pay- 
ments from  a  society  established  under  the  stat. 
3  Wm.  IV.  c.  14.  will  entitle  the  piuchaser  (if  he  live 
to  the  age  at  which  the  annuity  is  to  commence)  to 
receive  an  annuity  equivalent  to  the  value  of  all  his 
payments,  with  the  accumulation  of  compound  inte- 
rest ;  if  he  is  unable  to  continue  his  yearly  instal- 
ments, lie  may  have  back  all  the  money  he  has  paid, 
exclusive  of  interest ;  and  if  he  die  before  tlie  com- 
mencement of  the  annuity,  his  family  will,  in  like 
manner,  receive  tlie  wliole  of  the  contributions  he 
may  have  actually  made  previous  to  his  decease,  ex- 
clusive of  interest. 

"  In  order  to  establish  a  society  under  tlie  pro- 
visions of  the  above  statute,  the  first  step  to  be  taken 
is  to  call  a  meeting  of  the  persons  who  may  be  de- 
sirous of  forming  it,  and  at  such  meeting  to  appoint 
the  trustees,  treasurer,  managers,  and  secretary,  and 
to  prei)are  a  set  of  rules. 


OF    BANKING.  243 

"  The  rules  when  agreed  upon  by  the  trustees  and 
managers,  must  be  written  on  parchment,  and  signed 
by  two  of  the  trustees,  and  transmitted  to  John  Tidd 
Pratt,  Esq.,  the  barrister-at-law  appointed  to  certify 
the  rules  of  savings*  banks,  4.  Elm  Court,  Temple, 
London,  for  his  certificate,  that  they  are  in  con- 
formity to  law,  and  with  the  provisions  of  the  act 
3  Wm.  IV.  c.  14. ;  and  when  so  certified,  must  be  sent 
with  a  duplicate  copy  to  the  clerk  of  the  peace  for 
the  county,  &c.  in  which  the  parish  or  place  is 
situate,  for  the  purpose  of  being  enrolled  at  the  en- 
suing quarter  sessions ;  when  enrolled,  the  duplicate 
copy  will  be  returned  by  the  clerk  of  the  peace.  A 
copy  of  the  rules  on  parchinent^  with  the  certificate  of 
two  trustees  that  they  have  been  duly  certified  and 
enrolled^  and  that  one  of  the  ti'ustees  is  the  rector,  S^c. 
of  the  parish,  or  a  justice  of  the  peace  resident  in  the 
parish,  must  he  transmitted  to  the  commissioners  for 
the  reduction  of  the  national  debt.  Old  Jewry,  Lon- 
don, and  the  necessary  forms,  &c.  with  the  system 
of  book-keeping,  will  be  immediately  forwarded  to 
the  trustees,  to  enable  them  to  open  an  account 
with  the  said  commissioners,  for  the  purpose  of  the 
said  Act. 

"  By  the  9th  Geo.  IV.  c.  92.  §  4.  the  fee  payable  to 
the  barrister  for  his  certificate  is  one  guinea,  and  the 
clerk  of  the  peace  is  entitled  to  ten  shillings. 

"The  expenses  attending  the  conveyance  of  rules, 
and  of  correspondence,  &c.,  must  be  defrayed  by  the 
society." 

The  following  are  the  rules  of  the  Annuity  Society, 
established  in  the  Parish  of  St.  Clement  Danes, 
Strand. 

1.  The  object.  —  The  object  of  this  society  is  to  enable  depositors 
in  savings'  banks,  and  others,  to  purchase  government  annuities, 
immediate  or  deferred,  for  life,  or  for  a  certain  term  of  years,  ac- 
cording to  the  tables  provided  for  that  purpose,  and  sanctioned  by 
the  lords  of  the  treasury.  —  3  Wm.  IV.  c.  14.  §  1.5. 

R   2 


244  THE    HISTORY    AND    PRINCIPLES 

2.  Donatio?is,  Sfc.  —  Donations  and  legacies  will  be  received  from 
those  persons  desirous  of  promoting  the  object  of  the  institution, 
which  shall  be  considered  an  auxiliary  fund,  to  meet  any  expendi- 
ture beyond  what  the  funds  of  the  institution  may  at  first  be 
enabled  to  support ;  or  be  otherwise  disposed  of,  in  aid  of  the  ob- 
jects of  the  institution,  as  may  be  determined  by  the  trustees  and 
managers. 

3.  Management.  —  This  society  shall  be  under  the  management 
of  the  treasurer,  trustees,  and  managers  of  tlie  savings'  bank.  The 
clerk  and  officers  shall  be  appointed  and  removed  by  the  trustees 
and  managers. 

4.  No  emoluments No  person   being  a  trustee,  treasurer,  or 

manager  of  this  society,  shall  derive  any  emolument,  profit,  benefit, 
or  advantage,  directly  or  indirectly,  from  the  funds  of  this  society. 
—  9  Geo.  IV.  c.  92.  §  6. ;  3  Wm.  IV.  c.  14.  §  26. 

5.  Security  to  be  given  by  treasurer  and  other  officers. —  The 
treasurer,  as  well  as  every  officer  or  other  person  receiving  any 
salary  or  allowance  for  their  services  from  the  funds  of  this  society, 
shall  give  good  and  sufficient  security  for  the  just  and  faithful  ex- 
ecution of  such  office  of  trust,  in  such  amount  as  the  trustees  and 
managers  shall  from  time  to  time  direct ;  and  such  security  shall 
be  given,  by  bond,  to  the  clerk  of  the  peace  for  the  county  of  Mid- 
dlesex, and  be  approved  of  by  two  trustees  and  three  managers.  — 
9  Geo.  IV.  c.  92.  §  7. ;  3  Wm.  IV.  c.  14.  §  26. 

6.  Liability  of  trustees  and  managers. —  No  trustee  or  manager 
shall  be  personally  liable,  except  for  his  own  acts  and  deeds,  nor 
for  any  thing  done  by  him  in  virtue  of  his  office,  except  in  cases 
where  he  shall  be  guilty  of  wilful  neglect  or  default.  —  9  Geo.  IV 
c.  92.  §  9. ;  3  Wm.  IV.  c.  14.  §  26. 

7.  Annual  and  other  general  meetings.  —  The  office  of  this  insti- 
tution shall  be  held  at  the  vestry  room  of  St.  Clement  Danes,  or 
at  such  other  place  as  the  trustees  and  managers  may  hereafter 
appoint ;  and  the  general  meetings,  consisting  of  the  trustees  and 
managers  of  the  institution,  and  the  honorary  subscribers  thereto, 
shall  be  held  at  the  office  of  the  institution,  or  such  other  place  as 
the  trustees  and  managers  may  appoint,  on  the  third  Thursday  in 
June,  and  the  third  Thursday  in  December,  at  six  o'clock  in  the 
evening ;  and  special  general  meetings  may  be  called,  at  the  request 
of  any  seven  trustees  or  managers. 

8.  Visiting  managers. —  Two  managers  shall  be  appointed  to 
attend,  each  week,  at  the  office,  during  office  hours.  They  must 
attend  themselves,  or  procure  the  attendance  of  other  managers. 
They  shall  examine  the  account-books  and  ledgers,  and  see  that  all 
receipts  and  payments  are  regularly  entered  and  correctly  posted. 

9.  JJays  and  hours  of  attendance,  and  mode  of  transacting  business. 
—  The  office  shall  be  open  on  IMonday  in  every  week,  for  the  re- 
ceipt or  payment  of  money,  from  six  o'clock  in  the  evening  until 
seven  o'clock,  or  at  such  other  hours  and  days,  or  day,  as  at  a 
general  meeting  of  the  trustees  and  managers  may  be  ordered. 


OF    BANKING.  245 

All  money  received  shall  be  entered  in  the  account-book  or  ledger, 
in  the  presence  of  the  party  who  pays  the  same,  who,  on  applying 
to  contract  for  the  annuity,  as  well  as  at  any  time  thereafter,  when 
required  by  any  trustee  or  manager,  shall  sign  his  name  or  mark  to 
a  declaration,  in  the  form  directed  by  the  commissioners  for  the 
reduction  of  the  national  debt,  that  he  does  not  possess  or  is  not 
entitled  to  any  annuity  or  annuities,  under  the  provisions  of  the 
Stat.  3  Wm.  IV.  c.  14<.,  exceeding  in  the  whole  the  sum  of  20/.  per 
annum.  He  shall  then  receive  a  book,  containing  an  abstract  of 
the  rules,  with  a  certificate  of  the  contract  for  the  annuity,  signed 
by  two  trustees  or  managers,  and  also  an  account  of  the  money 
paid,  attested  by  the  signature  of  a  manager,  which  book  must  be 
brought  to  the  office  whenever  any  further  payment  is  made,  that 
the  transaction  may  be  entered  therein.  No  person  will  be  allowed 
to  contract  for  an  annuity  without  disclosing  his  name,  together 
with  his  profession,  business,  occupation,  calling,  and  residence, 
which  shall  be  entered  in  the  books  of  the  institution.  No  trans- 
action will  be  considered  binding  on  the  institution,  unless  a 
manager  is  present,  and  affixes  his  signature  to  every  receipt  and 
payment. —  3  Wm.  IV.  c.  1  4.  §  1. 

10.  Admission  fee,  S)'c. —  Upon  application  for  the  purchase  of  an 
annuity,  the  party  must  pay  2s.  6d.  as  an  admission  fee ;  and  if  the 
annuity  is  contracted  for,  the  further  sum  of  Is.  annually,  towards 
defraying  the  necessary  expenses  incurred  by  the  institution. — 
3  Wm.  IV.  c.  14.  §  3. 

11.  Affe  of  nominee,  and  amount  of  annuity.  —  No  annuity  can  be 
contracted  for  upon  the  life  of  any  party  or  nominee  who  is  under 
the  age  of  fifteen  ;  and  no  annuity  or  annuities  can  be  possessed  by 
any  one  individual  exceeding,  in  the  whole,  the  sum  of  20/ ,  nor 
less  than  4/.  per  annum.  If  any  individual  shall  have  or  hold,  or 
be  possessed  at  any  one  time,  of  any  annuity  or  annuities  granted 
under  the  provisions  of  3  Wm.  IV.  c.  14.  exceeding,  in  the  whole, 
the  sum  of  20/.  per  annum,  the  said  annuity  or  annuities  will  im- 
mediately cease  and  be  forfeited. —  3  Wm.  IV.  c.  14.  §  2. 

1 2.  Contracts  for  annuities  to  he  approved  of  by  Commissioners, 
Sfc. —  Proof  required  of  age  and  existence,  S^c.  of  annuitant. —  All 
contracts  for  annuities  must  be  sanctioned  by  the  commissioners 
for  the  reduction  of  the  national  debt,  or  comptroller-general,  or 
assistant  comptroller-general,  acting  under  the  said  commissioners  ; 
for  which  purpose,  any  party  desirous  of  purchasing  an  annuity 
must  furnish  the  managers  with  proof  of  the  age  of  the  person  on 
whose  life  the  annuity  is  to  be  granted  ;  and  fourteen  days  pre- 
vious to  payment  being  demanded  of  any  life  annuity,  proof,  to  the 
satisfaction  of  the  said  commissioners,  or  the  comptroller-general, 
or  assistant  comptroller-general,  must  be  given  to  the  said  ma- 
nagers of  the  existence  and  identity  of  the  party  upon  whose  life 
the  annuity  is  granted.  When  the  annuity  is  granted  for  a  term  of 
years,  the  same  will  be  paid  when  due,  without  any  proof  being 
required.—  3  Wm.  IV.  c.  14.  §  1,  2.  14,  15. 

R    3 


246  THE    HISTORY    AND    PRINCIPLES 

N.B.  The  form  of  ceitificates  of  birth,  and  of  existence  and 
identity,  may  be  obtained  on  application  at  the  office  of  the  insti- 
tution during  office  hours. 

13.  When  annuity  granted  on  life  of  nominee,  further  annuity  may 
be  purchased  loithout  fresh  proof —  Whenever  satisfactory  proof  of 
the  age  of  any  nominee  has  been  produced,  any  other  person  may 
contract  for  an  annuity  upon  the  hfe  of  such  nominee,  witliout  the 
production  of  any  further  proof  of  age. —  3  Wm.  IV.  c.  14.  §9. 

li.  Time  when  annuity  cannot  be  contracted  for. —  No  annuity 
can  be  contracted  for  within  the  space  of  fourteen  days  next  after 
any  of  the  quarterly  days  appointed  for  payment  of  annuities. — 
3  Wm.IV.  c.  14.  §12. 

15.  Money  received  for  annuities  to  be  paid  to  commissioners.  —  If 
the  annuity  purchased  is  an  immediate  annuity,  or  a  deferred  an- 
nuity, to  be  paid  for  by  the  purchaser  at  once,  the  money  received 
by  the  institution  in  such  cases  will  be  paid  over  without  delay  to 
the  commissioners  for  the  reduction  of  the  national  debt ;  but  if  the 
contract  is  for  a  deferred  annuity,  to  be  purchased  by  annual  pay- 
ments, such  annual  payments  will  be  made  to  the  said  commis- 
sioners yearly,  although  for  the  convenience  of  the  purchaser  the 
money  will  be  received  from  him  by  the  managers,  by  weekly, 
monthly,  or  other  payments,  as  mentioned  in  the  certificate  of  con- 
tract.—  3  Wm.IV.  c.  14.  §  1. 

16.  Time  when  annuities  are  payable,  and  amount  of  payment  at 
death. — All  annuities,  when  due,  will  be  payable  to  the  trustees  by 
two  equal  half-yearly  payments,  viz.  on  the  5th  of  January  and  5th 
of  July,  or  5th  of  April  and  10th  of  October,  in  every  year  ;  that  is, 
on  the  5th  of  January,  in  respect  of  all  purchases  completed  by 
payment  of  money  by  the  trustees  into  the  Bank  of  England,  at  any 
time  during  the  quarter  ending  on  the  10th  of  October  preceding 
such  5th  of  January  ;  on  the  5th  of  April,  in  respect  of  all  such 
purchases  so  completed  at  any  time  during  the  quarter  ending  on 
the  5th  of  Januar}'  preceding  tiie  5th  of  April ;  on  the  5th  of  .luly 
in  respect  of  all  such  purchases  so  completed  at  anj'  time  during 
the  quarter  ending  on  the  5th  of  April  preceding  such  5th  of  July ; 
and  on  the  10th  of  October  in  respect  of  all  such  purchases  so  com- 
pleted at  any  time  during  the  quarter  ending  on  the  5th  of  July 
preceding  such  10th  of  October.  The  annuities  will  be  payable  to 
the  parties  entitled  thereto,  upon  proof  of  the  existence  of  the 
nominee,  if  it  be  a  life  annuity,  on  the  first  day  the  institution  is 
opened,  after  the  respective  quarter  days  belbre-mentioned.  On 
the  death  of  the  nominee  or  jjcrson  on  whose  life  the  annuity  is 
granted,  a  sum  equal  to  one  fourth  part  of  the  annuity,  over  and 
above  all  half-yearly  arrears  thereof  respectively,  will  be  paid  to 
the  person  entitled  to  the  annuity,  or  to  his  or  her  executors  or 
administrators,  on  the  half-yearly  day  of  payment  next  succeeding 
the  i)roduction  to  the  trustees  of  proof  of  the  death  of  nominee, 
provided  such  proof  is  produced  to  the  trustees  (to  be  by  them 
forwarded  to  the  commissioners)  within  forty  days  next  preceding 


OF    BANKING.  247 

the  5th  of  January,  5th  of  April,  5th  of  July,  and  10th  of  October 
respectively,  and  that  such  payment  is  claimed  within  two  years 
after  the  death  of  the  nominee ;  but  the  fourth  part  of  any  expired 
life  annuity  will  not  be  payable  in  respect  of  any  deferred  life  an- 
nuity, unless  one  half-yearly  payment  of  such  deferred  life  annuity 
shall  have  been  actually  paid  or  become  due  at  the  time  of  the 
decease  of  such  nominee. —  ti  Wm.  IV.  c.  14.  §  11. 

17.  Annuiti/  contracted  for  in  one  parish  may  he  received^  S^c.  in 
another. — When  a  party,  having  contracted  for  an  annuity,  shall 
remove  his  residence,  arrangements  may  be  made,  with  the  sanction 
of  the  commissioners  for  the  reduction  of  the  national  debt,  for 
his  paying  the  weekly,  monthly,  or  other  instalments,  as  well  as  re- 
ceiving the  annuity  at  any  other  savings'  bank  or  parochial  society, 
adopting  the  provisions  of  the  stat.  3  Wm.IV.  c.  14. 

18.  Annuity  not  transferable.  —  No  annuity,  when  purchased, 
can  be  transferred  or  assigned  by  the  purchaser,  so  as  to  enable  the 
assignee  to  receive  the  same  during  the  life-time  of  the  purchaser, 
except  in  case  of  insolvency  or  bankruptcy,  when  the  same  will 
become  the  property  of  his  or  her  creditors  ;  and  in  such  case  the 
commissioners  for  the  reduction  of  the  national  debt  will  re-pur- 
chase the  annuity  at  a  fair  valuation,  according  to  the  tables  upon 
which  the  annuity  was  originally  purchased.  —  3  Wm.  IV.  c.  14. 
§16. 

19.  Stamp  duty  not  payable.  —  No  stamp  duty  is  payable  upon 
or  in  respect  of  the  copy  of  any  register  of  birth,  or  baptism,  or 
marriage,  or  burial,  of  any  nominee  or  other  person,  or  upon  or  in 
respect  of  any  certificate,  affidavit,  affirmation,  or  declaration  made 
or  taken  in  pursuance  of  the  stat.  3  W^m.  IV.  c.  14.,  or  upon  or  in 
respect  of  any  certificate  or  other  instrument  respecting  the  pay- 
ment of  money  for  the  purchase  of  any  annuity,  or  of  any  power  of 
attorney  authorizing  the  receipt,  or  in  respect  of  any  receipt  for 
the  payment  of  any  annuity  or  any  part  thereof. — 10  Geo.  IV. 
c.  24.  §  38.  ;  3  Wm.  IV.  c.  14.  §  19. 

20.  Annuity  not  subject  to  any  tax,  &;c.  —  No  annuity  will  be 
subject  or  liable  to  any  taxes,  charges,  or  impositions  whatever, 
and  shall  be  deemed  to  be  personal  estate  ;  and,  in  all  cases  where 
the  same  shall  not  depend  upon  the  life  of  the  person  purchasing 
the  same,  shall  go  to  his  executors  or  administrators.  —  3  Wm.  IV. 
c.  14.  §  17. 

21.  Money  paid  for  purchase  of  annuity,  ivhen  returnable. — 
Whenever  any  person,  having  made  one  or  more  {)ayment  or  pay- 
ments for  the  purchase  of  a  deferred  annuity,  shall  make  default  in 
paying  or  continuing  to  make  the  residue  of  such  payments,  the 
amount  of  all  the  payments  which  shall  have  been  actually  made 
previous  to  such  default  shall,  upon  three  months'  notice  to  the  trus- 
tees and  managers,  to  be  by  them  notified  to  the  commissioners 
for  the  reduction  of  the  national  debt,  of  his  inability  to  continue 
his  payments,  be  returned  to  the  said  person  so  making  default  as 
aforesaid  ;  or  in  case  of  the  death  of  the  party  having  contracted 

R  4 


248  THE    HISTORY    AND    PRINCIPLES 

for  any  deferred  annuity,  previous  to  the  said  annuity  becoming 
payable,  the  amount  of  all  the  payments  which  have  been  made 
previous  to  his  death  shall  be  paid,  exclusive  of  interest,  to  his 
executors  or  administrators.  —  3  Wm.  IV.  c.  14.  §  18. 

22.  Members  becoming  insane,  or  otherwise  incapacitated  to  act.  — 
In  case  any  member  of  this  institution  shall  become  insane,  or 
otherwise  incapacitated  to  act,  whether  from  illness  or  any  other 
cause,  and  if  the  same  shall  be  proved  to  the  satisfaction  of  the 
managers  at  one  of  their  meetings,  by  the  certificate  of  a  medical 
attendant  in  cases  of  insanity,  or  by  the  certificate  of  a  medical 
attendant  or  otherwise  in  cases  of  illness  or  other  bodily  infirmity, 
and  if  the  managers  shall  be  satisfied  of  the  necessity  of  the  case, 
they  shall  authorise  the  treasurer  or  actuary  of  this  institution  to 
pay  to  a  relation  or  friend  of  the  member  such  weekly  sum  for  the 
care,  maintenance,  and  medical  attendance  of  such  member  as  they 
shall  think  fair  and  reasonable  ;  and  they  may  also  authorise  the 
treasurer  or  actuary  to  make  such  other  payments  on  account  of 
such  member  as  the  urgency  of  the  case  may  require  ;  all  which 
weekly  or  other  payments  shall  be  made  out  of  the  monies  standing 
in  the  name  of  or  belonging  to  such  members,  on  the  receipt  of 
the  party  to  whom  such  payment  shall  have  been  directed  to  be 
made. 

23.  On  death  of  party,  if  payments  to  he  returned  exceed  501., 
probate,  Sfc.  must  be  tahen  out ;  if  under  501.,  and  no  will,  &^^c.,  same 
to  be  divided  among  relations.  —  If  any  person,  having  contracted 
for  an  annuity,  shall  die  previous  to  the  said  annuity  becoming 
payable,  and  the  money  payable  to  his  executors  or  administrators 
exceeds  the  sum  of  50?.,  the  same  shall  not  be  paid  to  any  person 
or  persons  as  representative  or  representatives,  but  upon  probate 
of  the  will  of  the  deceased,  or  letters  of  administration  to  his  or 
her  estate  and  effects  ;  provided  that  where  the  whole  estate  and 
effects  of  the  deceased,  for  or  in  respect  of  which  any  probate  or 
letters  of  administration  shall  be  granted,  shall  not  exceed  the 
value  of  50/.,  no  stamp  duty  shall  be  chargeable  thereon,  nor  upon 
any  legacy  or  residue,  or  part  thereof,  bequeathed,  nor  upon  any 
share  or  part  of  the  estate  or  effects  to  be  paid  or  distributed  by 
or  under  such  probate  or  letters  of  administration  ;  but  in  every 
such  case  a  certificate  of  the  amount  due  to  the  deceased  shall  be 
granted,  in  the  form  following,  which  shall  be  signed  by  one  trus- 
tee or  manager,  and  be  countersigned  by  the  secretary  :  — 

"  ST.  CLEMENT  DANES'  ANNUITY  SOCIETY. 

"  It  is  hereby  certified,  that  the  amount  of  the  payments  made 
by  ,  previous  to  his 

decease,  amounted  to  the  sum  of  £ 
Witness  our  hands,  this  day  of  18 

"  Trustee  or  Manager. 
"  Secretary." 


OF    ANKING.  249 

But,  in  case  the  money  paid  by  the  deceased,  and  returnable  on 
his  death,  shall  not  exceed  the  sum  of  50/.,  and  the  trustees  and 
managers  shall  be  satisfied  that  no  will  was  made  and  left  by  the 
deceased,  and  that  no  letters  of  administration  will  be  taken  out  of 
the  goods  and  chattels  of  the  deceased,  the  trustees  and  managers 
may  pay  and  divide  the  same  at  any  time  after  the  death  of  the 
deceased,  to  and  among  his  or  her  relations,  according  to  the 
statute  of  distributions.  —  9  Geo.  IV.  c.  92.  §  40,  -il. ;  3  Wm.  IV. 
c.  14.  §26. 

24.  Disputes,  how  settled.  —  If  any  disputes  shall  arise  between 
this  institution,  or  any  person  or  persons  acting  under  it,  and  any 
party  who  has  contracted  for  an  annuity,  or  any  executor,  ad- 
ministrator, next  of  kin,  or  creditor  of  any  such  party,  or  any 
person  claiming  to  be  such  executor,  administrator,  next  of  kin, 
or  creditor,  then  and  in  every  such  case  the  matter  so  in  dispute 
shall  be  referred  to  the  arbitration  of  two  indifferent  persons,  one 
to  be  chosen  and  appointed  by  the  trustees  or  managers,  and  the 
other  by  the  party  with  whom  the  dispute  arose  ;  and  in  case  the 
arbitrators  so  appointed  shall  not  agree,  then  such  matter  in  dispute 
shall  be  referred  in  writing  to  the  barrister-at-law  appointed  to 
certify  the  rules  of  savings'  banks,  who  shall  receive  a  fee  of  not 
more  than  one  guinea;  and  whatever  award,  order,  or  determin- 
ation shall  be  made  by  the  said  arbitrators,  or  by  the  said  barrister, 
shall  be  binding  and  conclusive  on  all  parties,  and  shall  be  final  to 
all  intents  and  purposes,  without  any  appeal ;  and  the  said  award, 
order,  or  determination  shall  declare  by  whom  the  said  fee  pay- 
able to  the  said  barrister  shall  be  paid,  —  9  Geo.  IV.  c.  92.  §  45. ; 
3Wm.IV.  c.  14.  §26. 

25.  Penalty  in  case  of  certificate,  S^c,  containing  untrue  statement. 
—  If  any  certificate,  affidavit,  atfirmation,  or  declaration  shall  be 
produced  to  the  commissioners,  which  shall  contain  any  untrue 
statement  of  the  age  of  any  person  proposed  or  appointed  to  be  a 
nominee,  with  intent  to  obtain  an  annuity  on  the  continuance  of  the 
life  of  any  person  under  the  age  of  fifteen,  or  to  obtain  any  higher 
rate  or  amount  of  annuity  during  the  life  of  any  nominee  than 
would  be  allowed  according  to  the  true  age  of  such  nominee,  then 
and  in  every  such  case  all  money  which  may  have  been  paid  for 
or  on  account  of  the  purchase  of  such  annuity  shall  be  forfeited, 
and  all  right  and  title  to  any  annuity  which  would  or  might  other- 
wise have  been  payable  in  respect  thereof  shall  cease  and  deter- 
mine, and  the  person  or  persons  by  whom  or  on  whose  behalf 
such  money  shall  have  been  paid  shall  forfeit  treble  the  amount  of 
any  and  every  sum  which  may  have  been  received  by  or  on  behalf 
of  such  person  on  account  or  in  respect  of  such  annuity,  and  also 
the  further  sum  of  500/.  —  10  Geo.  IV.  c.  24.  §40.;  3  Wm.  IV. 
c.  14.  §  13. 

26.  Penalty  for  forging,  S^^c.  certificate,  S^c.  —  If  any  person  shall 
forge,  counterfeit,  or  alter,  or  shall  cause  or  procure  to  be  forged, 


250  THE    HISTORY    AND    PRINCIPLES 

counterfeited,  or  altered,  or  shall  knowingly  or  wilfully  act  or  assist 
in  the  forging,  counterfeiting,  or  altering  any  register  of  the  birth 
or  baptism,  or  death  or  burial  of  any  person  or  persons  to  be 
appointed  a  nominee  or  nominees,  or  any  copy  or  certificate  of 
any  such  register,  or  the  name  or  names  of  any  witness  or  wit- 
nesses to  any  such  certificate,  or  any  affidavit  or  affirmation  re- 
quired to  be  taken,  or  any  certificate  of  any  justice  of  the  peace  or 
magistrate,  or  any  certificate  of  any  governor,  or  person  acting  as 
such,  or  minister,  or  consul,  or  chief  magistrate  of  any  province, 
town,  or  place,  or  other  person  authorised  to  grant  any  certificate 
of  the  life  or  death  of  any  nominee ;  or  if  any  person  or  persons 
shall  wilfully,  falsely,  or  deceitfully  personate  any  true  and  real 
nominee  or  nominees,  or  shall  wilfully  utter,  or  deliver,  or  pro- 
duce to  any  person  or  persons  acting  under  the  authority  of  the 
act  of  3  Wm.  IV.  c.  14.  any  such  forged  certificate,  affidavit,  or 
affirmation,  knowing  the  same  to  be  forged,  counterfeited,  or 
altered,  with  intent  to  defraud  his  Majesty,  his  heirs  and  successors, 
or  with  intent  to  defraud  any  person  or  persons  whomsoever,  then 
and  in  every  such  case  all  and  every  person  and  persons  so  offend- 
ing, and  being  lawfully  convicted  thereof,  shall  be  guilty  of  felony. 
—  10  Geo.  IV.  c.  24.  §42.;  3  Wm.  IV.  c.  14.  §13. 

27.  Penalty  on  receiving  annuity  after  death  of  nominee.  —  If  any 
person  shall  receive  any  one  or  more  payment  or  payments,  (other- 
wise than  is  authorised  by  these  rules,)  upon  or  in  respect  of  any 
annuity  granted  under  the  provisions  of  the  3  Wm.  IV.  c.  14.  after 
the  death  of  any  nominee  on  the  continuance  of  whose  life  such 
annuity  was  payable,  knowing  such  nominee  to  be  dead,  every 
person  so  off"ending  shall  forfeit  treble  the  amount  of  all  money  so 
received,  and  also  the  further  sum  of  500/.  —  10  Geo.  IV.  c.  24. 
§42.;  3  Wm.IV.  c.  14.  §  13. 

28.  If  affidavit  false,  party  guilty  of  perjury.  —  If  any  person,  in 
any  affidavit  to  be  taken  before  any  justice  of  the  peace  or  magis- 
trate, shall  wilfully  or  corruptly  swear  or  affirm  any  matter  or 
thing  which  shall  be  false  or  untrue,  every  such  person  so  offending, 
and  being  thereof  duly  convicted,  shall  be  subject  and  liable  to  such 
pains  and  penalties  as  by  any  laws  any  persons  convicted  of  wilful 
and  corrupt  perjury  are  subject  and  liable  to.  —  10  Geo.  IV.  c.  24. 
§  44.;  3  Wm.IV.  c.  14.  §  13. 

Tables  have  been  constructed  under  the  sanction 
of  government,  for  the  purpose  of  showing  tlie  an- 
nual payments  necessary  to  obtain  an  annuity  upon 
any  age  from  fifteen  to  eighty,  either  for  life  or  for  a 
term  of  years,  and  either  immediate  or  deferred.  A 
copy  of  these  tables  may  be  obtained  for  a  small 
charge  at  the  various  savings'  banks. 


OF    BANKING. 


251 


TABLE  I. 


Table,  showing  the  annual  payments  necessary  to 
obtain  an  annuity  of  20/.  per  annum  for  life,  com- 
mencing at  the  expiration  of  twenty,  twenty-five, 
and  thirty  years,  upon  the  under-mentioned  ages. 


Age. 

Annuity  to  com- 
mence in  twenty 
years,  yearly  sura 
required. 

Annuity  to  com- 
mence in  twenty, 
five  years,  yearly 
sum  required. 

Annuity  to  com- 
mence in  thirty 
years,  yearly  sum 
required. 

£   s.    d. 

£    S.      d. 

£   s.    d. 

18  and  under 

19 

10     4     6 

6  19     0 

4  15     6 

19         — 

20 

10     2     0 

6  17     0 

4  13     0 

20         — 

21 

9  19     6 

6  14     6 

4  110 

21         — 

22 

9  17     0 

6  12     0 

4     9     0 

22         — 

23 

9  14     0 

6     9     6 

4     7     0 

23         — 

9A 

9  11     0 

Q     Q     Q 

4     5     0 

24-         — 

25 

9     8     0 

6     4     0 

4     3     0* 

25         — 

26 

9     5     0 

6     1     0 

4     1     0 

26         — 

27 

9     1     6 

5  18     0 

3  19     0 

27         — 

28 

8  18     0 

5  15     6 

3  17     0 

28         — 

29 

8   14     0 

5  13     0 

3  15     0 

29         — 

30 

8   10     6 

5  10     0 

3  13     6 

SO         — 

31 

8     6     6 

5     7     6 

3  11     6 

31         — 

32 

8     2     6 

5     5     0 

3     9     6 

32         — 

33 

7  19     0 

5     2     6 

3     7     0 

33         — 

34 

7  15     0 

5     0     0 

3     5     0 

34         — 

35 

7  11     6 

4  17     6 

3     2     6 

35         — 

36 

7     8     0 

4  14     6 

3     0     6 

*  Example.  —  On  the  13th  of  December,  1833,  a  person  (whether  male  or 
female),  aged  twenty-four,  and  under  twenty-five,  contracts  by  annual  pay- 
ments, for  an  annuity  of  20/.  a  year,  to  be  enjoyed  by  him  or  her  during  the 
rest  of  his  or  her  life,  after  the  expiration  of  thirty  years,  reckoning  such  period 
from  the  time  of  purchase.  Under  that  contract  the  party  would  receive  the 
first  half-yearly  payment  of  the  said  annuity  on  the  .5th  of  April,  1864,  that 
being  the  second  quarterly  day  of  payment  next  following  the  expiration  of  the 
term  for  which  the  annuity  was  agreed  to  be  deferred.  In  this  case  the  party 
would  be  required,  first,  to  pay  down  41.  3s.  on  entering  into  the  contract,  on 
the  13th  of  December,  1833,  or  to  have  made  twelve  monthly  payments  of 
6s.  lid.  previous  to  tiiat  day  :  and,  secondly,  to  continue  to  make  the  same  pay- 
ments of  4/.  3.f.  annually,  on  or  before  the  lOtli  of  October,  in  each  of  the  suc- 
ceeding tiiirty  years ;  the  last,  or  thirtieth  annual  payment,  being  to  be  made  on 
the  10th  of  October,  18G3. 

If  the  party  were  to  die  on  the  1st  of  October,  1840,  or  at  that  time  to  become 
incapable  of  continuing  his  payments,  the  sum  of  29/.  Is.,  being  the  amount  of 
what  he  had  paid,  would  be  returned  by  the  society.     - 


252 


THE    HISTORY    AND    PRINCIPLES 


TABLE  III. 

Table,  showing  the  value  of  an  immediate  life  annuity 
of  20/.,  according  to  the  age  of  tlie  person  upon 
whose  life  the  annuity  is  to  depend.  The  first  half- 
yearly  payment  of  the  said  annuity  will,  in  all 
cases,  become  due  and  be  payable  on  the  second 
quarterly  day  of  payment  next  following  the  day  of 
purchase. 


Age 

of  the 

Age 

of  the 

Age  of  the 

1 

person  at 
the  time  of 

purchase, 
upon  whose 

hfe  the 
annuity  is  to 

Money  to 

be  paid  down  in 

one  sum 

at  the  time  of 

purchase. 

person  at 
the  time  of 
])urchase, 

upon  whose 
life  the 

annuity  is  to 

Money  to 

be  paid  down  in 

one  sum 

at  the  time  of 

purchase. 

person  at 
the  time  of 

purchase, 
upon  whose 

life  the 
annuity  is  to 

Money  to 

be  paid  down  in 

one  sum 

at  the  time  of 

purchase. 

depend. 

depend. 

depend. 

If 

and 

If 

and 

If 

and 

under 

£ 

s. 

d. 

under 

£ 

s. 

d. 

under 

£ 

J. 

rf. 

15 

16 

377 

15 

6 

37 

38 

321 

17 

7 

59 

60 

208 

6 

2 

16 

17 

374 

4 

1 

38 

39 

318 

2 

11 

60 

61 

202 

14 

4 

17 

18 

370 

16 

7 

39 

40 

314 

6 

7 

61 

62 

196 

17 

5 

18 

19 

367 

14 

6 

40 

41 

310 

7 

9 

62 

63 

190 

14 

11 

19 

20 

364 

19 

11 

41 

42 

306 

5 

10 

63 

64 

184 

8 

0 

20 

21 

362 

12 

2 

42 

43 

301 

18 

6 

64 

65 

178 

1 

0 

21 

22 

360 

10 

5 

43 

44 

297 

7 

10 

65 

66 

171 

14 

2 

22 

23 

359 

0 

4 

44 

45 

292 

12 

6 

66 

67 

165 

7 

5 

23 

24 

357 

12 

6 

45 

46 

287 

12 

6 

67 

68 

159 

9 

1 

24 

25 

356 

4 

7 

46 

47 

282 

7 

10 

68 

69 

153 

12 

0 

25 

26 

354 

15 

3 

47 

48 

276 

16 

0 

69 

70 

147 

16 

2 

26 

27 

353 

3 

0 

48 

49 

271 

0 

4 

70 

71 

142 

2 

6 

27 

28 

351 

1 

8 

49 

50 

265 

1 

4 

71 

72 

136 

11 

9 

28 

29 

348 

17 

1 

50 

51 

259 

0 

4 

72 

73 

131 

3 

7 

29 

30 

346 

9 

5 

51 

52 

252 

18 

11 

73 

74 

125 

14 

8 

30 

31 

343 

18 

10 

52 

53 

247 

1 

8 

74 

75 

120 

1 

5 

31 

32 

341 

5 

5 

53 

54 

241 

5 

11 

75 

76 

114 

4 

7 

32 

33 

338 

9 

5 

5i 

55 

235 

12 

7 

76 

77 

108 

4 

3 

33 

34 

335 

9 

11 

55 

56 

230 

1 

5 

77 

78 

101 

7 

5 

34 

35 

332 

6 

9 

56 

57 

224 

11 

8 

78 

79 

94 

11 

10 

35 

36 

328 

19 

11 

51 

58 

219 

3 

8 

79 

80 

88 

1 

10 

36 

37 

325 

9 

11    58 

59 

213 

15 

9 

80  0 

up- 

81 

14 

10 

wards.         1 

The  act  which  establishes  the  annuities  amended  the 
act  passed  in  1828  for  the  regulation  of  savings'  banks. 


OF    BANKING.  253 

Persons  withdrawing  the  whole  of  their  deposits  are 
allowed  to  replace  only  30/.  in  any  one  year,  reckoning 
from  the  20th  of  November  to  the  20th  of  November 
following.  The  officers  of  savings'  banks  becoming 
insolvents,  are  to  pay  the  money  they  may  owe  to 
savhigs'  banks  before  any  other  debts. 

In  every  point  of  view  the  savings'  banks  appear 
calculated  to  produce  unmingled  good.  They  extend 
to  persons  of  small  means  all  the  benefits  of  banking. 
The  industrious  have  thus  a  place  where  their  small 
savings  may  be  lodged  with  perfect  security  from 
loss,  and  with  the  certainty  of  increase.  They  tend 
to  foster  that  disposition  to  accumulate  which  is 
usually  associated  wdth  temperance  and  prudence  in 
all  the  transactions  of  life.  Upon  the  mercantile  in- 
terests of  society  they  have  the  same  effect  as  com- 
mercial banking.  The  various  small  sums  which 
were  previously  lying  unproductive  in  the  hands  of 
many  individuals,  are  collected  into  one  sum  and 
lodged  in  the  public  funds.  The  tendency  of  this,  in 
the  first  place,  is  to  raise  the  price  of  the  funds.  This 
advanced  price  may  cause  some  of  the  holders  to  sell 
out  and  to  employ  their  money  in  trade  and  com- 
merce. Thus  the  savings'  banks  augment  the  pro- 
ductive capital  of  the  nation. 

It  is  much  to  be  regretted  that  the  advocates  for 
savings'  banks  should  ever  have  proposed  these  insti- 
tutions as  substitutes  for  benefit  societies.  Cannot 
the  interest  of  one  excellent  institution  be  promoted 
but  at  the  expense  of  another  ?  Savings'  banks  are  a 
useful  addition  to  benefit  societies,  but  cannot  supply 
their  place.  A  labourer  pays  to  a  benefit  club  about 
thirty  shillings  })er  annum,  and  for  that  payment  he 
receives  about  eight  shillings  per  week  during  the  time 
of  illness.  If  this  sum  be  lodged  in  a  savings'  bank, 
how  soon  will  a  few  weeks'  illness  exhaust  the  whole. 
It  is  no  doubt  the  revelHng  and  excess  that  have 
too  often  attended  the  meeting  of  benefit  societies 


254  THE    HISTORY    AND    PRINCIPLES 

at  public-houses  that  have  given  rise  to  objections 
against  tliem.  It  may  be  expected,  however,  tliat  as 
our  labourers  and  mechanics  become  better  instructed 
these  excesses  will  be  avoided. 

But  while  savings'  banks  do  not  supersede  benefit 
societies,  neither  do  benefit  societies  supersede  the 
necessity  for  savings*  banks.  The  beneht  society  is 
of  use  only  in  case  of  illness — in  no  other  case  has 
a  member  any  claim  upon  its  funds.  He  cannot 
draw  out  money  to  support  his  wife,  to  furnish  his 
house,  or  to  educate  his  children.  The  benefit 
societies  are  only  to  guard  against  calamity,  not  to 
increase  enjoyment.  By  these  labourers  may  be 
saved  from  the  parish  workhouse,  but  they  must  also 
become  depositors  in  a  savings'  bank  if  they  wish  to 
acquire  independence. 

In  the  year  1829,  an  Act  of  Parliament  was  passed 
to  consolidate  and  amend  the  laws  relating  to  Friendly 
Societies  (9  Geo.  IV.  c.  56.).  By  this  act  any  num- 
ber of  persons  are  authorized  to  form  themselves  into 
a  society  for  the  mutual  relief  and  maintenance  of 
the  members  thereof,  their  wives,  or  children,  or 
other  relations,  in  sickness,  infancy,  or  advanced  age, 
widowhood,  or  any  other  natural  state  or  contingency, 
whereof  the  occurrence  is  susceptible  of  calculation 
by  way  of  average.  Such  societies  may  form  rules 
for  their  own  government,  and  alter  and  amend  such 
rules  as  occasion  may  require.  These  rules  must  be 
submitted  to  the  barrister  appointed  to  certify  the 
rules  of  savings'  banks  ;  and  after  having  be^n  certi- 
fied by  him  as  containing  nothing  contrary  to  law, 
must  be  deposited  with  tlie  clerk  of  the  peace.  But 
the  rules  are  not  to  be  allowed  unless  the  justices 
are  satisfied  that  "the  tables  of  the  payments  to  be 
made  by  the  members,  and  of  tlie  benefits  to  be 
received  by  them,  may  be  adopted  with  safety  to  all 
parties  concerned."  The  effects  of  the  society  are 
to  be  vested  in  the  treasurer  or  trustees  for  the  time 


OF    BANKING.  255 

being,  who  have  full  ])ower  to  bring  and  defend 
suits,  either  civil  or  criminal,  on  behalf  of  the  society. 
Justices  may  hear  cases  of  fraud,  and  punish  by  fine 
or  imprisonment.  All  documents  issued  in  compli- 
ance with  this  act  are  exempt  from  stamp  duty. 

In  the  year  1834^  an  act  was  passed  (4  &  5  Wm. 
IV.  c.  40.)  to  amend  tlie  above  act.  Among  other 
amendments  relating  chiefly  to  the  mode  of  certifying 
and  registering  the  rules  of  such  societies,  it  is  en- 
acted, that  the  funds  of  friendly  societies  may  be 
deposited  in  savings'  banks  ivithout  any  limitation  as 
to  the  amount.  In  cases  of  insolvency  the  debts  due 
from  officers  of  the  society  are  to  be  paid  before  any 
other  debts.  Letters  to  and  from  barristers  are 
exempt  from  postage.  This  act  extends  to  Great 
Britain  and  Ireland,  and  Berwick-upon-Tweed. 

From  returns  made  in  the  year  1815,  it  appears 
that  the  then  existing  benefit  societies  contained 
925,439  members ;  a  greater  number  of  persons  by 
27»446  than  were  at  that  time  receiving  relief  from 
the  poor  rates. 


SECTION  XV. 

THE    LONDON    AND    WESTMINSTER    BANK. 

My  notice  of  the  history  and  principles  of  this  bank 
will  be  confined  to  a  few  quotations  from  the  public 
documents  of  tlie  company. 

1.  The  following  are  extracts  from  the  original 
prospectus :  — 

"  His  Majesty's  government  having  declared  the  law  to  be  that 
no  obstructions  exist  to  impede  the  formation  of  Joint  Stock  Banks 
of  deposit,  with  an  unlimited  number  of  partners^  and  many  noble- 
men^  gentlemen,  merchants,  and  tradesmen,  considering  that  every 


Q56  THE    HISTORY    AND    PRINCIPLES 

circumstance  combines  to  make  it  desirable  for  the  public  good  at 
once  to  establish  a  Joint  Stock  Bank,  with  such  an  extent  of  capital 
as  will  ensure  the  perfect  confidence  and  security  of  depositors, 
and  the  greatest  practical  accommodation  and  assistance  to  trade 
and  commerce,  the  under-mentioned  committee  has  been  formed, 
on  whom  will  devolve  the  duty  of  making  the  necessary  arrange- 
ments for  constituting  the  bank,  of  forming  the  direction,  and  of 
maturing  the  plan  for  the  future  management  of  the  establishment, 
including  the  settlement  of  the  deed  of  constitution,  and  the  re- 
vision and  alteration  of  the  conditions  of  this  prospectus,  in  their 
discretion. 

"  The  success  of  Joint  Stock  Banks  is  not  experimental,  but 
ascertained,  and  practically  illustrated  by  the  admitted  prosperity 
of  such  banks  in  England,  Scotland,  and  Ireland.  This  affords  the 
best  reason  for  anticipating  similar  success  to  the  present  more 
extended  establishment,  proposed  to  be  conducted  upon  the  same 
approved  system  of  banking. 

"  The  advantages  of  Joint  Stock  Banks  are  obvious :  —  Their 
capital  cannot  be  diminished  by  either  deaths  or  retirements ; 
their  numerous  proprietors  insure  to  them  confidence  and  credit, 
as  well  as  ample  business  in  deposits,  loans,  and  discounts  ;  and 
their  rigid  exclusion  of  every  kind  of  mercantile  and  speculative 
transaction,  affords  a  satisfactory  guarantee  to  the  community  at 
large  that  their  means  are  only  employed  in  legitimate  banking 
operations.  They  are  under  the  management  and  control  of  men 
who  are  elected  by  the  respective  proprietors,  who  have  no  in- 
dividual interest  which  can  induce  them  to  depart  from  an  ap- 
proved prudential  course,  and  who  are  a  safe  and  constant  check 
upon  every  transaction  and  upon  every  officer  in  the  several  es- 
tablishments ;  and  their  system  of  accounts  is  so  accurate  that  there 
is  little  trouble  in  producing,  at  any  time,  a  clear  and  full  statement 
of  their  stock  and  business,  however  great  the  one,  or  extensive 
the  other. 

"  It  is  intended,  as  far  as  may  be  practicable,  to  allow  interest 
on  deposits ;  and  while  none  of  the  best  parts  of  the  system  pursued 
by  London  private  bankers  will  be  overlooked,  it  is  proposed  to 
give  such  otlier  facilities  to  the  public  as  have  been  aftbrded  with 
so  much  advantage  to  all  classes  by  Joint  Stock  Banks  in  Scotland, 
and  by  the  various  similar  establishments  more  recently  formed  in 
England  and  Ireland. 

"  It  is  proposed,  that  the  bank  shall  be  designated  '  The  Lon- 
don AND  Westminster  Bank,'  and  that  the  establishment  shall 
be  forthwith  formed  in  the  City  :  and  for  the  accommodation  of 
the  public,  a  branch  bank  will  be  established  at  the  West  end  of 
the  town.  Arrangements  for  commencing  business  will  be  made 
when,  in  the  judgment  of  the  committee  or  directors,  a  sufficient 
number  of  shares  have  been  subscribed  for." 


OF    BANKING.  257 

2.  The  following  are  the  terms  on  which  the  bank 
transacts  business  :  — 

"  The  bank  will  receive  current  accounts  on  the  same  terms  as 
they  are  now  received  by  London  bankers. 

"^  Persons  who  wish  to  have  current  accounts  with  the  bank, 
without  being  under  the  necessity  of  keeping  a  balance,  may,  in- 
stead thereof,  pay  to  the  bank  a  certain  sum  annually  for  the 
management  of  their  account  as  may  be  agreed  upon. 

"  The  bank  will  receive  permanent  lodgements  in  sums  from 
6^10  to  c^^lOCX),  at  the  rate  of  two  and  a  half  per  cent,  per 
annum.  For  these  sums  receipts  will  be  granted,  called  deposit 
receipts.  If  the  amount  be  withdrawn  within  three  months  no 
interest  will  be  allowed.  Sums  above  ^1000,  lodged  on  deposit 
receipts  at  interest,  will  be  made  the  subject  of  a  special  agree- 
ment. 

"  No  interest  will  be  allowed  on  the  balance  of  any  current 
account, 

"  Deposit  receipts  are  distinguished  from  current  accounts.  — 
Cheques  cannot  be  drawn  against  a  sum  lodged  on  a  deposit 
receipt,  but  when  the  sum,  or  any  part  thereof,  is  withdrawn,  the 
receipt  itself  must  be  produced  at  the  bank  and  delivered  up. 

''  Parties  respectably  introduced  not  having  an  account  with  the 
bank,  may,  nevertheless,  have  their  bills  discounted,  or  loans  granted 
to  them,  upon  approved  securities. 

"  The  bank  will  act  as  agents  to  joint  stock  banks,  private 
country  bankers,  and  other  parties  residing  at  a  distance." 

3.  The  following  is  a  statement  of  the  manner  in 
which  the  bank  conducts  its  business  in  reference  to 
suing  and  being  sued  :  — 

"  In  recovering  debts,  or  in  defending  suits  and  actions,  all  the 
partners  of  a  partnership  must,  by  the  common  law  of  England, 
sue  and  be  sued  by  their  several  and  distinct  names.  Where 
the  partners  are  numerous,  this  is  a  great  inconvenience,  and 
the  act  to  sue  and  be  sued  remedies  it  by  providing  that  all  actions 
shall  be  brought  by  or  against  the  partnership  in  the  name  of 
one  or  two  of  its  members,  who  are  called  for  this  purpose,  public 
oflBcers. 

"  A  large  partnership  desiring  to  recover  debts,  and  not  having 
such  an  act  to  sue  and  be  sued  may,  nevertheless,  sue  in  the  names 
of  all  its  partners,  and  therefore,  it  is  under  no  absolute  disability, 
nor  can  the  debtor  escape. 

"  The  utmost  that  it  experiences  from  the  want  of  such  an  act 
is  an  inconvenience ;  and  this  is  removed  by  carrying  on  business 
through  trustees. 


258  THE    HISTORY    AND    PRINCIPLES 

"  The  London  and  Westminster  Bank  acts  thus  through  trustees, 
who  are  never  more  than  five  in  number,  and  the  right  of  action  to 
recover  all  debts  is  vested  in  them  by  special  contracts. 

"  All  bonds,  mortgages,  [and  special  securities  when  taken,  are 
taken  in  the  names  of  the  trustees  ;  and  upon  these  they  have  an 
undoubted  right  of  suit. 

"  All  bills  of  exchange,  promissory  notes,  or  other  negotiable 
securities,  are  either  endorsed  to  them  specially,  in  which  case 
they  alone  sue  as  the  special  endorsees ;  or  they  are  endorsed  in 
blank  and  delivered  to  the  trustees,  in  which  case  they  alone  sue 
as  the  holders. 

"  All  guarantees  for  bills  and  otherwise,  and  all  engagements  to 
repay  money  lent,  are  taken  in  writing,  and  addressed  to  the 
trustees,  by  which  means  the  right  to  sue  on  them  is  in  the 
trustees. 

"  The  only  other  case  in  which  a  debt  can  arise  is  upon  an 
overdrawn  account :  and  to  vest  the  right  of  action  in  the  trustees, 
the  pass-book  of  the  customer  is  kept  with  the  trustees,  and  on 
opening  an  account  an  engagement  in  the  under-mentioned  form 
is  signed." 

"  To  Samuel  Anderson,  Henry  Bosanquet, 
Frederick  Burmester,  Charles  Gibbes, 
and  Henry  Harvey,  Esquires. 

''London,  1834. 

"  Gentlemen, 
"  You  engaging  that  the  London  and  Westminster  Bank 
shall  pay  to  me  whatever  sums  shall  be  due  to  me  on  my  current 
or  other  accounts  with  it,  I  hereby  agree,  as  a  separate  contract 
with  you,  to  pay  you  or  the  survivors  of  you,  after  demand,  the 
balance,  if  any,  which  shall  at  any  time  hereafter  be  due  by  me  to 
the  London  and  Westminster  Bank  on  those  accounts  or  other- 
wise ;  and  I  request  that  such  drafts  only,  on  these  accounts  may 
be  honoured  as  have  the  under-written  signature. 

"  I  am, 

"  Gentlemen, 

"  Your  obedient  Servant. 

**  The  members  of  the  company  can  be  sued  for  their  debts  with 
the  same  facility  as  strangers,  under  the  24'th  and  25th  clauses  of 
the  deed  of  settlement. 

"  All  bills  of  exchange  drawn  on  the  bank  are  accepted  on  behalf 
of  the  trustees,  and  they  may  be  sued  on  them  by  the  holders,  if 
requisite.  Upon  all  other  contracts  with  the  bank  the  trustees 
engage  to  be  sued  on  behalf  of  the  bank.  The  capital  and  assets 
of  the  company  are  all  vested  in  the  trustees,  and  are  applicable  by 
them  to  the  payment  of  all  engagements  made  by  them  or  on  their 


OF    BANKING.  259 

behalf;  and  by  these  means  the  difference  between  the  trustees 
and  the  public  officers  is  in  name  only^  and  the  public,  with  as 
great  facility,  sue  the  trustees,  and  have  the  guarantee  of  the  large 
capital  and  assets  for  the  engagements  of  the  bank,  as  if  it  had  an 
Act  to  be  sued." 

4.  The  following  is  a  summary  of  some  of  the 
clauses  of  the  deed  of  settlement :  — 

"  That  the  present  and  future  proprietors  shall  be  a  company  for 
banking  under  the  style  of  the  London  and  Westminster  Bank,  and 
shall  keep  the  covenants  and  pay  the  calls  after-mentioned.  The 
capital  to  be  5,000,000/.,  to  be  subscribed  from  time  to  time,  sub- 
ject to  such  limitation  or  reduction  as  after-mentioned,  and  to  be 
divided  into  50,000  shares  of  100/.  each,  and  the  shareholders  to  be 
liable  as  amongst  themselves,  each  to  the  extent  of  their  share  in 
the  capital,  or  the  unpaid  residue  thereof,  and  to  no  more,  and  the 
allotment  of  any  of  said  shares  and  of  any  additional  shares  to 
future  subscribers  to  be  vested  in  directors.  The  business  of  the 
company  shall  be  carried  on  in  London  and  Westminster,  and  in 
such  other  places  as  the  directors  shall  think  fit.  Nature  of  the 
business  of  the  company  to  be  that  of  banking  exclusively. 

"  The  entire  management  of  all  the  affairs  and  property  of  the 
company  to  be  in  the  board  of  directors  for  the  time  being,  and  that 
the  several  persons  named,  and  those  whom  they  may  choose,  to  the 
amount  of  twenty-four  in  all,  shall  be  the  first  board  of  directors. 
Directors  to  choose  three  or  more  trustees  from  their  own  body,  or 
otherwise,  in  whose  names  contracts,  &c.  to  be  made,  who  may  sue 
and  be  sued  on  behalf  of  the  company,  and  who  are  to  be  under 
the  control  of  the  directors.  All  proper  books  to  be  kept  by  the 
directors,  and  a  balance-sheet  to  be  made  out  to  31st  of  December 
of  every  year.  Once  in  every  three  months  at  least  a  special 
committee,  consisting  of  not  less  than  three  directors,  to  examine 
into  the  state  of  the  property  and  affairs  of  the  bank,  and  to  report 
thereon,  in  writing,  to  the  board.  Power  in  the  directors  to  make 
calls  to  the  extent  of  95/.  per  share,  three  months  previous  notice 
being  given  of  each  call,  and  to  direct  proceedings  to  be  taken  for 
recovering  calls  not  paid,  or  to  declare  forfeiture  of  shares  as  after- 
mentioned.  Qualification  of  a  director  fifty  shares,  and  after 
March,  1836,  the  same  must  have  been  held  twelve  months  pre- 
vious to  election.  The  directors,  officers,  clerks.  Sec.  to  sign  a  de- 
claration of  secrecy  on  the  subject  of  the  transactions  of  the  com- 
pany with  their  customers,  and  the  state  of  their  accounts  with 
individuals.  Board  of  directors  to  remain  in  office  until  the  first 
W^ednesday  in  March,  1836.  Three  directors  to  retire  annually  in 
rotation  —  the  order  in  which  directors  are  to  vacate  their  office  to 
be  decided  by  lot,  and  afterwards  by  the  rotation  so  established. 

S   2 


260  THE    HISTORY    AND    PRINCIPLES 

Appointment  of  directors  to  supply  the  three  vacancies  to  be  by 
the  general  meeting.  The  retiring  directors  eligible  to  be  re- 
elected. Notice  to  be  given  at  the  company's  office,  six  weeks 
before  the  general  meeting  for  election  of  directors,  of  any  new 
candidate  for  the  direction. 

"  A  general  meeting  of  proprietors  to  be  held  annually  on  the 
first  Wednesday  of  March  in  each  year.  Questions  at  a  general 
meeting  to  be  decided  by  a  show  of  hands  ;  but  members  holding 
500  shares  may  demand  a  ballot,  at  which  ten  shares  shall  have  one 
vote,  fifty  shares  two  votes,  one  hundred  shares  three  votes,  two 
hundred  shares  and  upwards,  four  votes  ;  and  no  shareholder  to  be 
entitled  to  vote  in  respect  of  any  shares  he  has  not  held  for  six 
months  previously.  The  expenses  of  establishing  the  company  to 
be  advanced  out  of  the  capital  in  the  first  instance,  and  to  be  borne 
or  repaid  out  of  the  assets  of  the  company  during  the  first  ten 
years.  Interest  at  two  per  cent.,  to  be  paid  to  the  shareholders 
out  of  the  first  divisible  profits  upon  the  instalments  paid  up 
previous  to  the  31st  December,  1834,  to  be  computed  from  the 
date  of  pajMiient  to  the  31st  of  December,  1834.  The  first  year's 
profits,  if  directors  think  fit,  and  such  proportion  as  they  may  think 
requisite  of  the  nett  profits  in  subsequent  years,  to  form  a  reserved 
fund  for  the  puipose  of  meeting  losses  and  other  contingencies,  and 
of  preventing  fluctuations  in  the  dividends.  Directors  to  determine 
upon  dividends  before  general  meetings,  and  then  declare  the  same. 
Directors  to  pay  dividends  yearly  or  half  yearly,  as  they  think  fit. 
Shares  to  be  primarily  subject  to  debts  due  to  the  company  by  the 
holders.     Shares  may  be  sold  with  consent  of  the  directors. 

"  Power  of  dissolution  vested  in  two  thirds  in  number  and  value 
of  the  whole  proprietors,  and  who  shall  be  assembled  at  two  suc- 
cessive general  meetings  convened  for  that  purpose.  If  the  losses 
of  the  company  shall  have  exhausted  the  surplus  fund,  and  one 
third  of  the  paid-up  capital,  any  one  of  the  proprietors  may  insist 
on  the  dissolution  of  the  company,  and  the  company  shall  be  then 
dissolved  unless  for  the  purpose  of  winding  up  the  affairs." 


5.  The  following  is  a  copy  of  the  first  annual  report : — 

Report  of  the  Directors  of  the  London  and  Westminster  Bank,  to  the 
Proprietors,  at  their  First  Annual  Meeting,  held  March  ^th,  1835, 
at  No.  38.  Throgmorton  Street. 

Patrick  Maxwell  Stewart,  Esq.,  M.P.,  in  the  Chair. 

"  The  directors  have  much  pleasure  in  meeting  the  proprietors 
for  the  first  time,  and  in  reporting  to  them  the  progress  of  the 
bank  since  its  formation. 


OF    BANKING.  26l 

"  It  was  established  in  consequence  of  a  clause  in  the  Bank 
Charter  Renewal  Act,  declaring  it  to  be  legal  for  any  body  politic 
or  corporate,  or  society,  or  partnership,  although  consisting  of  more 
than  six  persons,  to  carry  on  the  busiliess  of  banking  in  London, 
provided  such  partnership  was  not  a  bank  of  issue. 

"  The  preliminaries  having  been  arranged,  and  the  deed  of  set- 
tlement drawn,  the  bank  was  opened  for  business,  in  Throgmorton 
Street,  and  in  Waterloo  Place,  on  the  10th  of  March  last.  Its 
progress  has  been  marked  by  a  gradual  increase  of  public  confi- 
dence, and  a  steady  improvement  in  business. 

"  The  number  of  shares  taken  up  at  its  commencement  was 
10,000,  the  number  required  by  the  deed  of  settlement.  Since 
that  period  further  shares  have  been  taken,  and  the  total  amount 
is  now  17,713.  These  are  held  by  502  proprietors,  and  represent 
a  capital  of  1,771,300/.,  upon  which  15/.  per  share  have  been  called 
up,  and  the  sum  actually  received,  to  this  day,  is  244',945/. 

"  Many  more  shares  were  allotted,  and  would  have  been  taken, 
but  for  the  representations  of  parties  interested  in  giving  a  check 
to  the  establishment  of  joint  stock  banks  in  London.  The  absurd 
fears  and  unjust  prejudices  which  were  generated  by  those  repre- 
sentations are,  however,  gradually  subsiding,  and  must  of  necessity 
soon  disappear. 

"The  accounts  of  the  bank  have  been  made  up  to  the  31st  of 
December  last.  The  profits  from  the  10th  of  March  to  that  period 
have  enabled  the  directors  to  comply  with  the  70th  clause  of  the 
deed  of  settlement,  which  provided  that  out  of  the  first  divisible 
profits,  interest  at  the  rate  of  2  per  cent,  per  annum  should  be  paid 
upon  all  instalments  received  previous  to  the  31st  of  December, 
1S34.  After  paying  this  interest  and  the  current  expenses  of  the 
establishment,  a  surplus  remains,  which  may  serve  as  the  nucleus 
of  a  reserved  fund,  or  be  applied  in  payment  of  a  portion  of  the 
preliminary  expenses. 

"  The  preliminary  expenses  are  those  which  attended  the  forma- 
tion of  the  bank.  It  is  provided  by  the  deed  of  settlement  that 
these  shall  be  spread  over  a  period  of  ten  years.  They  amount  to 
^10,635  12s.  IQd.,  the  particulars  of  which  will  be  found  in  the 
annexed  abstract. 

"  The  directors  will  now  advert  to  the  difficulties  they  have  had 
to  encounter.  These  have  been  of  no  ordinary  kind.  They  have 
been  caused  by  an  opposition,  in  some  degree  natural,  but  carried 
to  an  unfair  extent,  by  existing  establishments,  and  likewise  by  the 
unaccountable  course  adopted  by  government,  who  seem  to  have 
been  deterred  by  the  same  interested  parties  from  giving  effect  to 
their  own  law. 

"  The  opposition  of  the  private  bankers  was  manifested  at  an 
early  period,  by  their  refusal  to  permit  any  clerk  to  attend  at  the 
clearing-house  on  behalf  of  this  bank.  The  clearing-house  has 
been  in  existence  for  upwards  of  sixty  years,  and,  although  founded 

s  3 


262  THE    HISTORY    AND    PRINCIPLES 

in  tlie  first  instance  for  the  accommodation  of  such  London  bankers 
as  chose  to  avail  themselves  of  it,  yet  it  has  become  entwined  with 
the  mode  of  settling  accounts  in  several  branches  of  business,  and 
is,  for  all  practical  purposes,  a  public  institution. 

"  The  opposition  of  the  Bank  of  England  began  by  their  refusal 
to  grant  to  this  company  the  common  convenience  of  a  drawing 
account,  a  convenience  granted,  as  a  matter  of  course,  to  every 
respectable  firm  who  may  choose  to  apply  for  it.  But  their 
hostility,  as  well  as  that  of  the  government,  was  more  strongly 
shown  by  their  opposition  to  the  bill  introduced  to  parliament  for 
facility  of  suit.  This,  it  was  conceived,  was  a  course  that  no  party 
could  adopt  after  the  explicit  manner  in  which  the  law  had  been 
laid  down  in  the  preceding  session  of  parliament. 

"  The  clause  upon  the  subject  of  joint  stock  banks  in  London, 
introduced  into  the  Bank  Charter  Renewal  Act,  and  that,  too,  with 
the  consent  of  the  bank  itself,  was  not  only  declaratory  that  the 
law,  as  previously  existing,  did  not  extend  to  the  prevention  of  such 
banks  carrying  on  business  in  London,  but  it  enacted  that  for  the 
future  they  should  be  able  to  do  so.  This  enactment  being  made, 
it  was  presumed  that  it  would  be  carried  into  effect  in  the  ordinary 
manner, 

"  A  technical  form  which  requires  that  all  parties  to  a  suit  shall 
be  named  in  the  record  exists  as  an  impediment  to  the  legal  opera- 
tion of  large  companies.  It  has  been  the  invariable  custom  of  par- 
liament, which  has  not  provided  for  the  removal  of  this  obstruction 
by  any  general  law,  to  grant  to  such  companies,  on  special  appli- 
cation, a  right  to  sue  and  be  sued  in  the  name  of  one  or  more  of 
their  officers.  The  directors  therefore  applied  to  parliament  for 
this  power,  as  a  necessary  consequence  oi"  the  clause  legalising  the 
company. 

"  They  were  early  assured  by  eminent  counsel  that  the  bank 
could  be  carried  on  legally  and  substantially  by  means  of  trustees ; 
but  when  there  were  two  modes  of  conducting  the  same  proceeding 
—  one  well  known  to  the  public,  the  other  comparatively  unknown 
. —  the  directors  naturally  took  that  course  which  best  accorded 
with  the  public  habits  and  understanding.  Although  the  bill  was 
o|)posed  with  a  zeal  and  tenacity  rather  out  of  the  usual  course  of 
parliamentary  proceedings,  yet,  in  the  same  House  of  Commons 
which  a  few  months  previously  had  passed  the  Bank  Charter  Act, 
it  was  carried  by  large  majorities,  through  each  successive  stage  — 
viz.  on  the  second  reading,  by  a  majority  of  108;  in  committee, 
after  the  fullest  and  ablest  argument  by  counsel  on  both  sides,  by 
a  still  greater  proportionable  majority;  and  again,  on  the  third 
reading,  by  a  majority  of  61. 

"  Notwithstanding  these  majorities  in  the  House  of  Commons, 
the  opposition  was  continued  in  the  House  of  Lords. 

"  Counsel  were  heard  at  the  bar  of  that  House,  and  upon  the 
suggestion  of  the  government,  questions  Avere  framed  for  the  con- 


OF    BANKING. 


263 


sideration  of  the  judges,  who  declined  answering  them.  Under 
these  extraordinary  and  inexplicable  circumstances,  and  the  session 
drawing  to  a  close,  it  was  deemed  impossible  to  bring  on  the  second 
reading  with  any  chance  of  a  fair  consideration  of  the  question. 

"  The  active  opposition  of  the  Bank  of  England  has  been  again 
manifested,  by  its  giving  notice  within  these  few  days  of  its  in- 
tention to  try  the  question  of  our  power  to  accept  bills  of  exchange 
drawn  at  a  shorter  date  than  six  months.  Several  months  ago  the 
Bank  of  England  was  aware  of  the  proceedings  of  the  London  and 
Westminster  Bank  in  this  respect,  but  not  until  now  has  any  step 
been  taken. 

"  The  directors  of  the  London  and  Westminster  Bank  are  most 
ready  to  meet  the  Bank  of  England  in  any  court  of  justice  on  the 
subject,  for  having  obtained  the  best  legal  advice,  they  feel  quite 
confident  of  a  favourable  result.  They  have  no  desire  to  infringe 
the  privileges  of  the  Bank  of  England,  but  they  are  equally  deter- 
mined to  protect  the  rights  of  the  London  and  Westminster  Bank. 

"  The  Directors  congratulate  the  proprietors,  that  notwithstand- 
ing all  this  opposition,  they  have  not  only  been  able  to  stem  the 
torrent,  which,  it  must  be  evident,  arose  from  private,  and  not 
from  public  considerations,  but  they  have  seen,  from  the  progres- 
sive advancement  of  business,  that  they  occupy  a  more  favourable 
position  in  public  opinion  ;  and  whether  the  ordinary  power  to 
sue  and  be  sued  be  granted  or  not,  whether  the  courtesies  and 
facilities  usual  amongst  all  competitors  in  business  be  reciprocated 
or  not,  they  entertain  no  doubt  of  the  prosperity  of  this  establish- 
ment, founded,  as  it  is,  upon  liberal  principles,  and  upon  a  broad 
basis  of  security." 

y4  Statement  of  the  Affairs  of  the  Bank^  Dec.  31. 1834. 


DR. 


THE  LONDON  AND  WESTMINSTER  BANK. 


£ 


d. 


Due  to  the  public  on 
account  of  lodg- 
ments and  interest 
on  deposit  receipts     ]  80,380     9   10 

Due  to  proprietors  for 

paid-up  capital 182,255     0     0 

Balance  in  favour  of 

the  Bank 3,540     6     6 

£366,175   16     4 


Due  to  the  Bank  on 
account  of  invest- 
ments in  govern- 
ment securities, 
bills  discounted, &c. 
and  cash  in  hand... 

Preliminary  expenses 


CR. 


£ 


355,540     3     6 
10,635   12   10 


i?.366,175   16     4 


S    4 


264  THE    HISTORY    AND    PRINCIPLES 


Abstract  of  Profit  and  Loss  Account. 

DR.  PROFIT    AND    LOSS.  CR. 

£        s.    d. 


£        s.    d. 

Total  current  expendi- 
ture from  the  10th  of 
March  to  the  31st  of 
December,    1834 4,377     4     2 

Interest  due  to  the  pub- 
lic on  deposit  receipts        521      1      8 

Balance  in  favour  of  the 

Bank 3,540     6     6 


£8,438   12     4 


Balance  of  interest  ac- 
count     8,438   12     4 


^£8,438   12     4 


Abstract  of  Preliminary  Expenses  to  Dec.  31. 1834. 

Rent  of  Temporary  Rooms  in  Great  Winchester  Street £144:     2  6 

Do do at  No.  11.  Waterloo  Place 93   13  4 

Advertising 1401    14  7 

Printing 299   16  8 

Stationery 33   13  1 

Postages 64   16  11 

Salaries  to  the  10th  of  March,  1834 690     8  11 

Fixtures  taken  at  No.  9.  Waterloo  Place 131     3  9 

Furniture at  do 93   10  1 

Solicitors' Account  for  Law  and  Parliamentary  Expenses,  &c.  2880  17  11 

Surveyor's  Account 289   10  8 

Builders'  ditto  for  constructing  safes,  making  alterations,  &c.  3346     0  1 

Iron-smith's  and  Brazier's  Account 524  18  1 

Upholsterer's do 340   18  3 

Coals,  &c 36   12  7 

Miscellaneous  Expenses 263  15  5 

£10,635  12  10 


6.  The  following  is  a  copy  of  the  second  annual 
report : — 

Report  of  the  Directors  of  the  Lofidon  and  Westminster  Bank,  to  the 
Proprietors,  at  their  Second  Annual  Meeting,  held  March  Id. 
1836,  at  the  London  Tavern. 

Patrick  Maxwell  Stewart,  Esq.,  M.P.,  in  the  Chair. 

"  The  directors  liave  much  pleasure  in  again  meeting  the  pro- 
prietors. 

"  They  are  enabled  to  lay  before  them  a  report  of  the  operations 
of  the  first  complete  year  of  the  bank,  and  they  hope  it  will  be 
found  to  justify  the  anticipations  of  success  which  were  held  out  at 
their  former  meeting. 


OF    BANKING.  265 

"  The  accounts  have  been  made  up  to  the  31st  of  December,  the 
results  of  which,  as  shown  in  the  annexed  statement,  enable  the 
directors,  after  paying  the  current,  and  a  portion  of  the  preHminary 
expenses,  to  declare  a  dividend  of  4<  per  cent,  on  the  paid-up 
capital,  and  to  keep  a  reserve  fund  for  contingencies. 

"  It  being  evident  from  the  increasing  business  of  the  bank,  of 
which  the  above-mentioned  result  is  the  most  satisfactory  testi- 
mony, that  the  establishment  was  growing  in  public  opinion,  the 
directors  deemed  it  advisable  to  promote  this  favourable  dispo- 
sition, by  opening  branches  in  those  parts  of  the  town  which  had 
hitherto  been  comparatively  without  the  convenience  of  banks. 

"  Accordingly,  on  the  ^th  of  January,  branches  of  the  establish- 
ment were  opened  in  Bloomsbury  and  Whitechapel,  and  on  the 
29th  ultimo  a  branch  was  opened  in  Southwark.  Judging  from  the 
support  which  they  have  received  during  the  short  time  they  have 
been  in  operation,  these  branches  appear  to  hold  out  every  prospect 
of  success. 

"  From  the  increase  of  business,  both  in  the  town  and  country 
departments,  the  directors  have  thought  it  expedient  to  obtain  a 
larger  amount  of  paid-up  capital,  and  have  accordingly  made  a  call 
upon  the  proprietors  for  a  further  instalment  of  51.  per  share,  pay- 
able on  the  15th  of  April.  In  the  present  position  of  their  affairs 
they  do  not  anticipate  the  necessity  of  making  any  further  call 
during  the  current  year. 

"The  total  number  of  shares  issued  on  the  31st  of  December, 
1835,  was  17,818,  and  the  directors  have  to  acquaint  the  proprie- 
tors that  in  the  course  of  the  present  year  they  have  increased 
that  number  by  the  grant  of  2,500  shares  at  par  to  large  banking 
establishments  in  the  country,  with  a  view  to  strengthen  and  extend 
the  connections  of  the  bank.  The  amount  of  paid-up  capital  will 
thus  be  upwards  of  400,000/.  when  the  fourth  call,  due  in  April,  is 
received. 

"  In  reference  to  the  measures  mentioned  in  the  last  report  as 
threatened  by  the  Bank  of  England,  the  directors  have  now  to 
state  that  the  Bank  of  England  has  at  length  raised  in  a  legal  shape 
the  question  whether  the  London  and  Westminster  Bank  can  accept 
the  bills  of  their  country  and  foreign  customers  drawn  at  less  than 
six  months  after  date  or  sight.  It  is  a  question  which,  however  it 
may  be  determined,  cannot  arrest  the  successful  progress  of  the 
bank.  But  the  directors  having  commenced  accepting  from  the 
origin  of  the  establishment  under  the  able  advice  of  the  present 
counsel  of  the  Bank  of  England, —  having  since  taken  much  pains 
to  have  the  subject  thoroughly  elucidated, — and  having  engaged  the 
most  eminent  counsel,  —  look  with  confidence  to  a  favourable 
issue,  and  it  is  their  anxious  desire  to  obtain  a  decision  as  quickly 
as  possible. 

"  The  directors  have  further  to  state,  that  although  the  question 
in  dispute  is  confined  to  the  single  point  of  accepting  bills,  the 


Q66 


THE    HISTORY    AND    PRINCIPLES 


Bank  of  England  introduced  into  their  proceedings  against  the 
London  and  Westminster  Bank  charges  of  violating  the  exclusive 
privilege  of  issuing  notes  possessed  by  the  Bank  of  England.  The 
directors  are  justified  in  condemning  the  resort  to  these  charges, 
for  the  Bank  of  England  have  been  obliged  to  abandon  them  alto- 
gether, and  to  admit  that  they  had  not  any  foundation.  The  di- 
rectors much  regret  that  such  a  course  should  have  been  adopted 
towards  this  establishment;  but,  as  the  main  question  at  issue  is 
still  before  a  legal  tribunal,  they  consider  they  will  best  discharge 
their  duty  by  abstaining  at  present  from  any  further  comments  on 
the  subject. 

"  The  directors,  in  pursuance  of  the  power  vested  in  them  by  the 
sixth  clause  of  the  deed  of  settlement,  which  provides  that  the 
number  of  directors  shall  be  not  more  than  twenty-four,  nor  less 
than  twelve,  have  elected  Wm.  Haigh,  Esq.,  Thomas  Farncomb, 
Esq.,  and  Josiah  John  Guest,  Esq.,  M.P.,  to  be  members  of  their 
board.  The  number  of  directors  thus  amounts  to  eighteen,  which 
appears  at  present  to  be  sufficient  for  conducting  the  business  of 
the  bank. 

"  The  deed  provides  that  three  of  the  directors  shall  annually  go 
out  of  office  by  rotation :  the  gentlemen  on  the  present  occasion 
are  Sir  Thomas  Fremantle,  Bart.,  M.P.,  Wm.  Haigh,  Esq.,  and 
Pearson  Thompson,  Esq.,  who  offer  themselves  for  re-election, 
with  the  recommendation  of  the  board." 


Dt 


STATEMENT  OF  PROFITS. 


Cr. 


£ 


d. 


Payment  towards  Pre- 
liminary Expenses..        1,000     0     O 

Dividend  to  the  Pro- 
prietors of  41.  per 
cent,  upon  paid-up 
Capital 10,818   12     0 

Balance  remaining  of 

undivided  Profits...       4,407     6     5 


i;"!  6,225   18     5 


Undivided  Profits  on 
the  year  ending  the 
.31st  of  Dec.  1834...        1,205     8     5 

Net  Profits  of  the  year 
ending  the  31st  of 
Dec.  1835,  after  de- 
fraying the  current 
Expenses 15,020  10     0 

£16,225   18     5 


7.  The  following  is  a  copy  of  the  third  annual 
report : — 

Report  of  the  Directors  of  the  London  and  Westminster  Sank,  to 
the  Proprietors,  at  their  Third  Annual  Meeting,  held  March  1st. 

1837. 

"  The  directors  have  to  lay  before  the  proprietors  the  report 
of  their  management  and  transactions  for  the  past  year,  being 
the  third  annual  report  of  the  London  and  Westminster  Bank. 


OF    BANKING.  267 

"The  increase  of  the  establishment  during  that  period  has  been 
very  considerable,  inasmuch  as  the  paid-up  capital  has  been 
augmented  to  597,255/.,  and  the  profits  have  kept  pace  with  the 
capital. 

"In  addition  to  the  597,255/.  capital,  a  sum  of  41,998/.  10*.  has 
been  derived  from  premium  on  shares,  the  appropriation  of  which 
is  stated  in  a  special  account,  appended  to  the  general  statement. 
These  shares,  to  the  number  of  9,333  were  issued,  as  was  made 
known  by  public  advertisement,  shortly  after  the  last  general 
meeting,  at  a  premium  of  4/.  lO*.  per  share,  and  with  a  fourth 
call  on  the  original  shares,  which  fell  due  in  April,  completed  the 
capital  above  stated  ;  the  total  number  of  shares  now  appropriated 
amounts  to  29,864  held  by  782  proprietors,  which  presents  a  basis 
of  stability  and  security  which  cannot  be  questioned. 

"  The  accounts  have  been  made  up  as  usual  to  the  31st  of 
December  last,  and  the  result  is  shown  by  the  annexed  statement. 

"  The  directors  have  accordingly  the  pleasure  to  announce  a 
dividend  of  5  per  cent,  upon  the  paid-up  capital,  payable  on 
Monday  next. 

"  After  the  payment  of  this  dividend,  and  after  providing  a  fund 
to  meet  the  probable  loss  upon  all  bad  and  doubtful  debts,  there 
will  remain  a  surplus  balance  to  the  credit  of  profit  and  loss 
account  of  7,027/.  0*.  6d. ;  from  which  must  be  deducted  the 
amount  of  any  vote  that  may  be  made  for  remuneration  to  the 
directors. 

"  Out  of  the  sum  raised  by  premium  on  shares,  the  directors 
have  paid  all  the  preliminary  expenses  incurred  before  the  opening 
of  the  bank,  as  detailed  in  the  first  report ;  all  the  legal  and 
other  expenses  since  incurred,  and  not  connected  with  the  ordi- 
nary business  of  the  bank  (as  hereafter  detailed),  and  all  the 
preliminary  expenses  of  opening  four  new  branches ;  after  the 
payment  of  all  these  expenses,  there  will  remain  a  surplus  balance 
on  this  account  of  20,003/.  19*.  5d. 

"  When  the  difficulties  and  derangements  which  have  prevailed 
in  the  monetary  and  mercantile  world  for  several  months  past  are 
remembered,  the  result  of  the  business  transacted  by  the  London 
and  Westminster  Bank,  must  be  regarded  as  very  favourable. 

"  The  branches  of  the  establishment  now  amount  to  five.  One 
having  been  opened  in  St.  Mary-le-bone,  at  No.  155.  Oxford 
Street,  since  the  last  meeting  of  proprietors,  and  the  whole  of 
these,  viz.  in  Westminster,  Mary-le-bone,  Bloomsbury,  Wliite- 
chapel,  and  Southwark,  are  in  a  prosperous  state. 

"  The  establishment  is  already  much  too  large  for  the  premises 
occupied  by  it  in  Throgmorton  Street,  and  the  increase  of  business 
has  made  this  inconvenience  to  be  very  sensibly  felt.  The  di- 
rectors have  accordingly  taken  measures  for  the  purchase  of  spa- 
cious premises  in  the  vicinity  of  their  present  offices.  They  have 
bought  the  freehold  property  lately  occupied  by  Messrs.  Pearce, 


268  THE    HISTORY    AND    PRINCIPLES 

in  Lothbury,  for  the  sum  of  14,250/.,  and  negotiations  are  in  pro- 
gress for  the  purchase  of  an  adjoining  building.  Though  it  will 
be  necessary  to  pull  down  the  present  houses,  and  to  build  anew, 
the  situation  is  so  eligible,  and  the  site  so  ample  for  all  the  pur- 
poses and  increasing  prospects  of  the  London  and  Westminster 
Bank,  that  the  directors  feel  confident  that  the  proprietors  will 
sanction  this  outlay.  As  it  has  been  already  said,  the  great  in- 
crease of  business  transacted  by  the  bank  made  it  absolutely 
necessary  to  extend  its  premises  considerably ;  and  when  it  is  re- 
membered that  in  the  short  period  of  seven  years,  the  charter  of 
the  Bank  of  England  must  again  be  brought  before  the  legislature, 
there  cannot  be  a  doubt  that  the  law  will  then  be  framed  so  as  to 
remove  all  impediments,  and  give  just  encouragement  to  great 
banking  companies. 

"  The  name  of  the  London  and  Westminster  Bank  has  been 
brought  so  much  forward  in  connection  with  some  of  the  recent 
occurrences  in  the  money  market,  that  the  directors  feel  it  to  be 
their  duty  to  advert  to  these  somewhat  in  detail,  in  order  to  put 
the  whole  matter  in  a  true  and  intelligible  light. 

"  During  the  late  heavy  pressure,  two  joint  stock  banks  having 
accounts  with  this  establishment  have  been  in  difficulty  ;  of  one 
of  them,  the  Agricultural  and  Commercial  Bank  of  Ireland,  it  is 
unnecessary  to  say  more  than  that  it  has  already  discharged  the 
whole  of  its  debt. 

"  To  the  other  case,  that  of  the  Northern  and  Central  Bank,  it  is 
incumbent  on  the  directors  to  advert  more  particularly,  in  order  to 
counteract  the  many  erroneous  statements  that  have  been  made 
respecting  the  connection  of  the  London  and  Westminster  Bank 
with  that  establishment. 

"  The  Northern  and  Central  Bank  was  instituted  in  Manchester 
in  1834.  It  consisted  of  1204  partners,  and  a  paid  capital  of 
nearly  800,000/.  Proposals  were  made  in  the  beginning  of  last 
year  for  opening  an  account  between  the  two  establishments. 

"  The  solidity  of  the  Northern  and  Central  Bank  was  undoubted. 
It  had  taken  advantage  of  the  facilities  of  the  London  money 
market,  to  extend  its  business,  somewhat  too  rapidly,  and  in 
removing  its  agency  to  the  London  and  Westminster  Bank,  asked 
for  liberal  terms  to  meet  any  unforeseen  emergency.  The  di- 
rectors, with  a  view  to  the  ultimate  benefit  that  might  arise  from 
so  extensive  a  connection,  granted  such  terms.  These  were  not, 
however,  sufficient ;  the  pressure,  during  the  latter  period  of  the 
year,  having  closed  the  market  upon  which  the  Northern  and 
Central  liank  had  been  accustomed  to  rely.  It  was,  consequently, 
compelled  to  apply  to  the  Bank  of  England  for  assistance.  The 
Bank  of  England  not  doubting  the  solvency  of  the  Northern  and 
Central  Bank,  consented  to  advance  the  sum  of  500,000/.  on  cer- 
tain conditions  ;  one  of  which  was,  that  the  debt  due  from  the 
Northern  and  Central  Bank  to  its  London  agents  should  be  post- 


OF    BANKING.  269 

poned  till  the  advance  of  the  Bank  of  England  was  repaid.  The 
directors  of  the  London  and  Westminster  Bank,  protesting  against 
what  they  conceived  to  be  a  preference  of  creditors,  did,  however, 
assent  to  the  arrangement,  believing  that  it  would  be  the  means  of 
placing  the  Northern  and  Central  Bank,  at  an  early  period,  in 
possession  of  its  own  funds.  These  expectations  were  not  realised  ; 
fresh  demands  upon  the  Northern  and  Central  Bank,  in  consequence 
of  the  notoriety  of  its  negotiations  with  the  Bank  of  England, 
rendered  necessary  a  second  application  to  that  body.  The  re- 
quired aid  was  oftered  on  the  same  conditions  as  before.  A  right  of 
control  over  the  affairs  of  the  Northern  and  Central  Bank  was 
also  added,  together  with  such  powers  as  in  effect  placed  the 
whole  estate  of  the  Northern  and  Central  Bank  in  the  hands  of  the 
Bank  of  England ;  by  which  arrangement  the  London  and  West- 
minster Bank  might  have  been  kept  out  of  its  funds  for  an  unlimited 
period. 

"To  such  conditions  the  directors  demurred;  and  though  they 
had  the  most  perfect  conviction  of  the  solvency  of  the  Northern 
and  Central  Bank  itself^  they  felt  it  necessary  to  take  such  special 
security  for  the  debt  due  from  the  Northern  and  Central  Bank  as 
would  bring  back  their  property  within  a  reasonable  time. 

"  Part  of  this  security  is  already  realised  in  their  possession,  and  the 
whole  debt  will  be  recovered  in  July  next,  with  interest  at  five  per 
cent,  from  the  time  of  its  becoming  due.  The  recent  report  of  the 
directors  of  the  Northern  and  Central  Bank  would  lead  us,  however, 
to  expect  that  we  shall  receive  our  debt  at  an  earlier  period  with- 
out having  recourse  to  these  securities. 

"  In  conclusion,  the  directors  have  to  advert  to  the  progress  of  the 
suit  of  the  Bank  of  England  against  the  London  and  Westminster 
Bank,  for  accepting  bills  at  a  shorter  date  than  six  months.  As  is 
publicly  known,  the  case  is  now  with  the  Master  of  the  Rolls, 
before  whom  it  was  lately  argued  ;  and  judging  from  the  arguments, 
the  directors  await  with  confidence  the  forthcoming  decision  of  his 
lordship. 

"  On  this  subject  they  repeat  the  words  of  their  last  report,  viz., 
that  however  the  question  may  be  determined,  it  cannot  arrest  the 
successful  progress  of  the  bank. 

"  The  directors  have  only  further  to  call  the  attention  of  the 
proprietors  to  the  retirement,  provided  by  the  deed  of  three  of 
their  body,  from  the  direction,  viz : 

"  Messrs.  Joseph  Esdaile;  J.  Stewart,  M.P.  ;  and  Thomas 
Farncomb.  These  gentlemen  being  re-eligible,  offer  themselves 
accordingly." 


270 


THE    HISTORY    AND    PRINCIPLES 


e) 


-« 


% 


1^ 

o 


00 
CM 

of 

CO 


ic      o 
<r)      o 


o 


o 
o 

CM 


CO 

o 

Q 


O 

Ph 


O 

3    O 
O 


rt    O    g 

e3   «   2i 


CO 


0.2 


0) 


0) 


CO    2    OJ  — -^ 


lO  .3 


c    ?=    3    5 

I-  a,  _  -  cu 


X 
Ol 


1^  §^"5^ 

I  '"'        C/2    OJ    c    >■ 

I  cj  n:  CO  ':2  -3  2 

i  -^    S  CO        -^2 
*j    C-co    C    ■*■    J3 

=i;  o~  §  ^  o 

ti_  •—  .£  ■" 

«  ^    o    P    <u   " 

cu  ^  cs  i:  oj  (1^ 


o 


05 
00 

CO 


QJ 


-Q  5  ? 


gc5 


"  S 


2iO 

W       O      4J 


._  ^  ^  -^  *J 

t^    s-    cs    '^  ^    cS    t^O    ci^    '^ 
-H  .2   o   c3 


Ml 


vn    O 


CM 

o 


s« 


bO 

3 

o 


P5 


o 


'>  o  c 


tfl  5 


^j  "-5  l-H  , 


OF   BANKING. 


271 


W 
< 

a 

CO 

o 


S« 


CO 

5< 


0 

0 

0 

0^ 

1— < 

•"I 

00 

00 

Ol 

0 

Oi 

0 

^ 

0 

•^ 

CN 

^ 

'% 

CO  'S  .^ 

2      Q  '^ 
00  S^^  b 

CO    e  jr    ^ 

a»  o   OS 


o        3   o 

go        ^    M 

o)  ^  <!  "3 


% 


CO 

CO 

CN 


o  10 


^  rtr=   o 
CD    3 

~   ^M      O  ^ 


aj  00  fi   « 
o  ao   o  -a 

-  ci  H  .£ 

C3    c<5     _ 

SJ  ^^  ^ 
*■>■>->  ^  ^ 


13    0) 


.S    G  ^  .S 
e    c3  *'    e 


QJ    O   ■«    0)    o    o 


0) 


■s-H-?^  S 


0) 


13 


^  .S   a> 


otH 


QJ 


u 


00 


CO 


«^w  s  „- 


-!->      OJ      L< 


g    to 


'hJPl, 


CO    0)  %-i 


cs  o  - 
»-}  CO  as 


O    c4    «    S 


a. 


i 


-a 


% 


272  THE    HISTORY    AND    PRINCIPLES 


PRELIMINARY  EXPENSES. 

Account  of    the    Preliminary    Ex-  £,       s.     d. 

penses  of  the  London  Office  and 

the  Westminster  Branch,  to  the 

31st  of  Dec.  1834,  as  detailed  in 

the  First  Annual  Report 10,635   12  10 

Expenses    since    incurred,   viz 

Solicitor's    Account,    not   included 

in  bills  for  current  business 2685     1     0 

Tradesmen's  Bills    and  Incidental 

Expenses 537  18     9 

3222  19     9 

Preliminary  Expenses  for  Four  New 

Branches 6451     1     5 


Deduct—  20,309  14     0 

Paid  off  out  of  the  Profits  of  1835  1000     0     0 


£19,309  14     0 


"  The  above  report  and  statement  having  been  read  to  the  meet- 
ing by  the  secretary,  it  was  unanimously  resolved  — 

"1.  That  the  report  now  read  be  received  and  printed,  and 
circulated  among  the  proprietors. 

"  2.  That  the  thanks  of  the  meeting  be  presented  to  the  directors 
for  their  able  and  successful  conduct ;  and  that  the  sum  of 
2,500/.  be  awarded  to  them  for  their  services  during  the  past 
year. 

"  3.  That  John  Stewart,  Esq.,  M.P.,  Joseph  Esdaile,  Esq., 
and  Thomas  Farncomb,  Esq.,  be  re-elected  directors. 

"  4.  That  the  thanks  of  the  proprietors  be  given  to  James 
William  Gilbart,  Esq.,  the  general  manager,  to  Oliver  Vile, 
Esq.,  manager  of  the  Westminster  Branch,  and  to  the  other 
managers  of  the  bank,  for  the  zealous  and  effective  manner  in 
which  they  have  discharged  their  official  duties. 

"  5.  That  the  thanks  of  the  meeting  be  offered  to  Patrick 
Maxwell  Stewart,  Esq.,  M.P.,  for  his  able  and  courteous  con- 
duct in  the  chair. 

"  Extracted  from  the  Minutes. 

"FREDERICK  NEALE,  Secretary." 


8.  The  following  are  the  names  of  the   directors 
and  officers  for  1837  :  — 


or    BATSfKING. 


0*73 


iDircctors 
Kenry  Bosanuuet,  Esq. 
Frederick  Burmester,  Esq. 
Wm.Rt.  Keith  Douglas,  Esq. 
Joseph  Esdaile,  Esq. 
Thomas  Farncomb,  Esq. 
Sir   Thomas    F.   Fremantle, 

Bart.,  M.P. 
Charles  Gibbes,  Esq. 
JosiAn  John  Guest,  Esq.,M.P. 


for  1837. 

William  Haigh,  Esq. 
Henry  Harvey,  Esq.,  F.R.S. 
James  Holford,  Esq. 
Jon.  Ha  worth  Peel,  Esq. 
Mat.  Boulton  Rennie,  Esq 
David  Salomons,  Esq. 
Patrick  Maxwell  Stewart, 

Esq.,  M.P. 
John  Stewart,  Esq.,  M.P. 


Henry  Bosanquet,  Esq. 
Frederick  Burmester,  Esq. 
Joseph  Esdaile,  Esq. 
Charles  Gibbes,  Esq. 
Henry  Harvey,  Esq. 


HEAD  OFFICE,  38,  THROGMORTON   STREET. 

James  William  Gilbart,  General  Manager. 

William  Thompson  Henderson,  Suh-Manager. 

Frederick  Neale,  Secretary. 

Joseph  Tapp,  Chief  Clerk. 

Westminster  Branch,  9.  Waterloo  Place. 
Oliver  Vile,  Manager. 

Bloomsbury  Branch,  213.  High  Holborn. 
William  Ewings,  Manager. 

Southwark  Branch,  12.  Wellington  Street,  Borougli. 
Edward  Kingsford,  Manager. 

Eastern  Branch,  87.  High  Street,  Whitechapel. 
Charles  G.  Rees,  Manager. 

St.  Marylebone  Branch,  155.  Oxford  Street. 
Frederick  Vulliamy,  Manager. 


274. 


INDEX. 


A. 

Abraham  made  a  purchase  with  money  current  with  the  merchant, 
2  —  paid  the  money  by  weight,  2. 

Accej)tance  of  bills  of  exchange,  laws  respecting  the,  184,  185. 

Act  of  Parliament  passed  to  encourage  loan  societies,  215. 

Advances,  made  by  the  bank  of  England  upon  merchandise  in  1826, 
G5  —  an  act  of  parliament  passed  to  facilitate,  66  —  on  govern- 
ment securities,  held  Feb.  29.  1832,  77  —  on  bills  and  cash  cre- 
dits compared,  203. 

Agency,  banks  of —  the  London  banks  are  banks  of  agency  for 
country  banks,  112  —  mode  of  payment,  112  —  Bank  of  Eng- 
land are  agents  to  the  bank  of  Ireland,  bank  of  Scotland,  and 
roj'al  bank  of  Scotland,  78  —  Country  joint  stock  banks  allowed 
to  have  agents  in  London,  89. 

Agio,  the  premium  on  bank  money  at  Amsterdam,  so  called,  10. 

Agriculture  the  chief  employment  of  ancient  nations,  1  —  does  not 
require  banks  so  much  as  commerce,  1. 

Alexander  Severus  reduced  the  market  rate  of  interest  by  lending 
money  at  a  lower  rate  to  poor  citizens,  7. 

Alloivance  to  the  bank  of  England  for  conducting  the  government 
business,  42  —  reduction  of  in  1786,  42  —  further  reduction  in 
1808,  49  —  further  reduction  by  120,000/.  per  annum,  in  1833, 
93  —  a  source  of  their  profits,  83  —  amount  received  in  the  vear 
1832,  78. 

Althorp,  Lord  (now  Earl  Spencer),  chancellor  of  the  exchequer, 
his  letter  to  the  directors  of  the  bank  of  England,  85  —  his  reso- 
lutions for  regulating  country  banks,  86  —  is  successfully  op- 
posed by  the  country  bankers,  87  —  his  act  for  the  renewal  of 
the  bank  charter,  87  —  memorial  of  the  country  bankers  to,  115. 

American  embargo  alleged  to  be  the  cause  of  great  distress  in 
England,  51. 

Amiens,  peace  of,  between  England  and  France,  48. 

Amsterdam,  the  bank  of,  occasioned  by  the  bad  state  of  the  coin, 
10 — the  property  of  the  city,  and  governed  by  four  burgomas- 
ters, 10  —  adopted  the  principle  of  transfer,  147. 

Ancients,  their  employment  chiefly  agriculture,  1  —  were  unac- 
quainted with  joint  stock  banks,  paper  money,  and  bills  of  ex- 
change, 2. 


INDEX.  27.5 

Anecdote  of  Oliver  Cromwell  upon  the  readmission  of  the  Jews 
into  England,  18. 

Annuities,  Act  for  granting  government,  for  sums  not  exceeding 
201.,  239 — may  be  administered  by  savings'  banks  or  parochial 
societies,  239  —  rules  of  St.  Clement  Danes  annuity  society,  243 
—  tables  showing  the  annual  payments  necessary  to  obtain  an 
annuity  of  20A,  251  — table  showing  the  value  of  an  immediate 
life  annuity  of  20/.  at  various  ages,  252. 

Annuities,  government,  purchased  by  the  Bank  of  England,  59,  96. 

Annuity  society,  rules  of  the  St.  Clement  Danes,  24'3. 

Apollo,  the  temple  of,  the  great  bank  of  Ionia,  3. 

Apprentices,  public  notaries  in  London  must  serve  an  apprentice- 
ship of  seven  years,  186  —  savings'  banks  very  useful  to,  222. 

Aristotle  condemned  the  taking  of  interest  for  money,  19. 

Arragon,  legal  rate  of  interest  fixed  there  by  James  I.  at  eighteen 
per  cent,  20. 

Art,  banking  as  an  art  and  as  a  science,  preface  —  the  progress  of 
useful  arts  passed  over  by  historians,  1. 

Astlett,  Mr.,  his  fraud  on  the  bank  of  England,  48. 

Athens,  banking  a  flourishing  trade  at,  4. 

Attornies  may  be  licensed  to  act  as  notaries  beyond  ten  miles  from 
the  Royal  Exchange,  187. 

Augmentations  of  the  capital  of  the  Bank  of  England,  table  of,  55. 

Augustus  Ccesar  established  a  loan  bank,  and  lent  money  without 
interest  to  poor  citizens  who  could  pledge  value  to  double  the 
amount,  7. 

Austrian  loan  contracted  in  England,  61. 

B. 

Banh,  the  word  whence  derived,  7. 

Banking  is  both  an  art  and  a  science,  preface  —  is  a  kind  of  trade, 

l^l  — the  four  principal  branches  of,  11. 
Bank  of  Engla7id  projected  by  Mr.  Paterson,  26  —  arguments  for 

and  against  its   establishment,  26  —  title   of  the  act,  27  —  its 

charter,  28  —  charges  against  in  1737,  36 — public  advantages 

from,  37  —  mode  of  government,  98 — their  opposition   to  the 

London  and  Westminster  bank,  95,  261,  262. 
Bank  of  Scotland  empowered  to  act  as  a  loan  bank,  205  —  the 

Bank  of  England  the  agent  to,  78. 
Bank  charter,  see  charter. 
Bank  charter  renewal  Act,  copy  of,  87. 
Bank  circulation,  a  mode  of  borrowing  money  adopted  in  1751  by 

the  Bank  of  England  so  called,  39. 
Bank  contract,  a  contract  between  the  Bank  of  England  and   the 

South  Sea  Company,  33. 
Bank  post  hills  first  issued  by  the  Bank  of  England,  37. 
Bank  restriction  Act  passed  in  1796,  45  — continued,  46  —  farther 

continued,  48 — farther  continued,  54  —  farther  continued,  55. 

T    2 


27C  INDEX. 

JBanJtruptcies  among  bankers,  110. 

Barcelona,  a  bank  established  tlierc,  9. 

Belgian  loan  contracted  in  England,  61. 

Berlin  and  Milan  decrees,  decrees  issued  at  tliose  places  by  Napo- 
leon Buonaparte  against  English  merchandise,  51. 

Bexlejj,  Lord,  (formerly  Mr.  Vansittart),  his  resolutions  respect- 
ing the  bullion  question  adopted  by  the  House  of  Commons, 
52. 

Bills  of  exchange,  nature  and  origin  of,  171 — foreign  and  inland, 
172,  184  —  traffick  in  is  a  distinct  branch  of  business,  174  — 
are  the  chief  means  of  making  remittances,  175  —  five  advan- 
tages of  bills,  175  — five  classes  of  bills,  179 — short  bills  versus 
long  bills,  and  long  bills  versus  short  bills,  180  —  laws  respecting 
the  noting  and  protesting  of  bills,  183  —  country  bankers  reissue 
the  bills  they  have  discounted,  186  —  rate  of  discount  on,  187 — 
effects  of  on  the  circulation  of  notes,  196  —  bills  are  drawn  for 
larger  amounts  in  seasons  of  high  prices,  165  —  investments  in 
are  well  adapted  for  bankers,  170. 

Birmingham,  advances  to  in  1826,  Q5 — state  of  the  Bank  of  Eng- 
land branch  at,  140 — joint  stock  banks  at,  130. 

Bonuses  granted  by  the  Bank  of  England  to  its  proprietors,  46, 47, 
48.  84. 

Branch  banhs  are  the  eff'ect  of  joint  stock  banks,  133  —  comparison 
between  a  branch  bank  and  a  private  bank,  133  —  comparison 
between  a  branch  bank  and  an  independent  joint  stock  bank,  134 
—  their  defects,  136. 

Branches  of  the  Bank  of  England,  suggested  in  the  year  1737,  36 
proposed  by  the  government  in  1826,  65  —  authorised  by  law, 
67  —  caused  dissatisfaction  among  the  country  bankers,  67  — 
refused  the  notes  of  country  banks,  69  —  issued  unstamped  bills 
at  21  days  upon  the  parent  establishment,  69  —  their  notes  must 
be  payable  at  the  place  of  issue,  89 — number  and  business  of, 
138 —  affairs  of  from  1828  to  1831,  139  — affiiirs  of  the  indivi- 
dual branches,  140. 

Brazilian  loans  contracted  in  England,  61. 

Bristol,  state  of  the  Bank  of  England  branch  at,  140 — joint  stock 
banks  at,  130. 

Bubble,  South  Sea,  an  account  of,  33. 

Bucldersbury,  the  banking  goldsmiths'  shops  extended  from  the 
Old  Change  to,  14. 

Buenos  Ayres,  loan  on  account  of,  contracted  in  England,  61. 

Bullion  used  as  money  in  the  early  ages,  2  —  amount  of  in  the 
Bank  of  England  first  published,  73  —  gold  and  silver  in  the 
bank  from  1815  to  1832,  74  —  total  amount  of  from  1778  to 
1832,  74  —  increase  of  diminishes  the  profits,  80  —  amount  of 
during  1834,  97. 

Bullion  committee  appointed  in  1810,  49  —  tlieir  report,  50  — re- 
jected by  the  House  of  Commons,  52. 


INDEX.  ^^77 

Burgess,  Henry,  Esq.,  his  calculation  as  to  the  circulation  of  coun- 
try banks  from  1  SI 8  to  182.5,  114. 
Burnett,  Bishop,  his  observations  on  the  Bank  of  England,  27. 


Capital,  to  increase  the  rapidity  of  its  circulation  has  the  same 
effect  as  to  increase  its  amount,  143  —  how  banks  of  remittance 
cause  it  to  revolve  more  rapidly,  155  —  effects  of  its  advance  by 
way  of  discount,  197  —  is  obtained  at  a  cheaper  rate  when  banks 
are  established,  161,  162  —  how  its  cheapness  promotes  specu- 
lation, 162 — its  removal  from  one  country  to  another  may 
sometimes  be  occasioned  by  an  increased  issue  of  notes,  169  — 
the  same  capital  made  to  carry  on  a  larger  business  by  means  of 
bills,  176 —  way  in  which  capital  is  transferred  from  one  branch 
of  trade  to  another,  177  — the  abundance  of  capital  a  reason  for 
abolishing  the  laws  of  usury,  189  —  profit  on  was  formerly  in- 
fluenced by  the  legal  rate  of  interest,  190  —  advanced  by  way 
of  loans  has  the  same  effect  as  when  advanced  by  way  of  dis- 
counting bills,  206. 

Capital,  banking,  three  ways  in  which  it  may  be  raised,  by  depo- 
sits, notes,  or  bills,  141  — usually  regulate  the  amount  of  a 
banker's  profits,  142  —  how  raised  by  discounting  bills,  143. 

Capital  of  the  Bank  of  England,  its  original  amount,  27  —  its  va- 
rious augmentations,  55  —  the  proprietors  determine  not  to  re- 
duce it,  96. 

Capitals  of  joint  stock  banks,  Lord  Althorp's  regulations  respecting, 
86  —  the  smaller  the  capital  the  greater  the  dividend,  129. 

Capitals  of  branch  banks,  133. 

Case  of  need,  on  bills  of  exchange,  explanation  of,  186. 

Cash  Credits,  definition  of,  199  —  advantages  to  the  borrower,  200 

—  gives  additional  facilities  to  the  merchants  of  Scotland,  201 

—  bills  of  exchange  versus  cash  credits,  203  — cash  credits  ver- 
sus bills  of  exchange,  203  —  designed  to  promote  the  circulation 
of  notes,  116,  204. 

Cash  payments,  suspension  of  by  the  Bank  of  England,  43  —  re- 
sumption of  recommended  by  the  bullion  committee,  51 — ac- 
tual resumption  of,  57. 

Chamber  of  St.  George,  the  name  of  the  Bank  of  Genoa,  10. 

Chamberlain,  Dr.  Hugh,  projected  the  Bank  of  England,  but  his 
plan  was  not  adopted,  26. 

Champagne,  the  rate  of  legal  interest  in  the  fairs  of,  20. 

Charges  at  a  branch  bank  less  than  at  an  independent  bank,  135. 

Charitable  musical  society  in  Dublin,  a  loan  bank  so  called,  210. 

Charitable  societies,  amount  of  their  deposits  in  savings'  banks,  236 
—  cannot  deposit  more  than  100/.  a  year,  nor  more  than  300/.  in 
the  whole,  227.  230. 

T    3 


278  INDEX. 

Charles  I.  revived  the  office  of  royal  exchanger,  12  —  his  curious 
proclamation,  12  —  his  reply  to  the  Goldsmiths'  Company,  14<  — 
took  possession  of  20(),0{)0/.  of  the  merchants'  money  that  had 
been  lodged  in  the  mint,  21. 

Charles  II.  borrowed  money  of  the  bankers  at  10  per  cent,  23  — 
shut  up  the  Exchequer,  and  would  not  pay  the  principal  or  the 
interest  of  the  money  he  had  borrowed,  2.5. 

Charles  V.  fixed  the  rate  of  interest  in  the  Low  Countries  at  12 
per  cent.,  20. 

Charter  of  the  Bank  of  England,  its  provisions,  28.  32  —  discus- 
sions respecting,  36  —  its  various  renewals,  30,  31,  32.  37-  40, 
41.  47  —  committee  appointed  respecting,  71  —  the  last  bank 
charter  renewal  act,  87. 

Chatham  set  fire  to  by  the  Dutch,  occasioned  a  run  on  the  London 
bankers,  24. 

Cheapside,  the  shops  of  the  banking  goldsmiths  were  situated 
chiefly  in  the  south  row  of,  14. 

Cheques,  regulation  of  the  Bank  of  England  respecting,  148,  149. 

Child,  Sir  Josiah,  his  attack  on  the  new-fashioned  bankers,  23  — 
his  observations  on  the  rate  of  interest,  190. 

Children,  one-fifth  of  the  deposits  in  Exeter  Savings'  Bank  lodged 
by,  238. 

Childs  Sf  Co.'s  banking-house  established  before  the  Bank  of 
England,  107. 

Chili  loan  contracted  in  England,  61. 

Circulation  of  notes  by  the  Bank  of  England,  15/.  notes  first 
issued,  40 —  10/.  notes  first  issued,  40  —  Ftl.  notes  first  issued,  43 
—  IZ.  and  21.  notes  first  issued,  45  —  \l.  and  2/.  notes  withdrawn, 
57  —  total  amount  of  notes  in  circulation  from  1778  to  1832.74 
— ^  notes  under  5/.  in  circulation  from  1798  to  1832,76  —  in- 
crease of,  a  source  of  increased  profit,  80  —  expense  attending 
the,  78. 

Circulation,  banks  of,  defined,  \BG  —  charges  against,  157  —  com- 
pared with  banks  of  deposit  as  to  their  effect  on  the  currency, 
142  —  checks  upon  excessive  issue  by,  158  —  accused  of  en- 
couraging speculation,  159,  see  speculation  —  accused  of  ad- 
vancing prices,  163,  see  prices  —  effects  of,  on  the  foreign 
exchanges,  167. 

Circulating  medium,  economised  h\  banks  of  deposit,  147  —  an  in- 
crease in  amount  is  no  proof  of  excess,  164  —  amount  of,  regu- 
lated by  the  (|uantity  of  conunodities  to  be  circulated,  164  — 
and  their  scarcitjs  165  —  an  increase  in  the  amount  of  some- 
times causes  an  increase  in  the  quantity  of  commodities  pro- 
duced, 164  —  an  increase  of  sometimes  causes  a  reduction  of 
prices,  166 — how  an  increase  of  affects  the  foreign  exchanges, 
167  —  effects  of  discounts  upon,  196. 

Citg  hands  in  the  hands  of  the  Bank  of  l^ngland,  77. 

Clearing-house,    when    established,    107  —  number     of    clearing 


INDEX.  279 

bankers,  108  —  London  and  Westminster  Bank  excluded  from, 
261. 

Clergy  prohibited  to  take  usm-y,  15  —  were  divided  as  to  the  re- 
admission  of  the  Jews  into  England,  18. 

Clerks,  number  of  in  the  Bank  of  England,  and  the  average  amount 
of  their  salaries,  79  —  some  pensioned  off  when  small  notes  were 
discontinued,  59. 

Coin,  loss  on  silver  coin  remelted  by  the  Bank  of  England^  71. 

Colony,  a  branch  bank  resembles,  13G. 

Columbian  loan  contracted  in  England,  61. 

Commerce  of  Athens,  4  —  increases  wealth  and  gave  rise  to 
bankers,  4. 

Commercial  distress,  seasons  of,  1697,  30 —  1793,  42  —  1811,  51 
—  1826,  &5. 

Commissions  of  bankruptcy,  number  of,  issued  against  country 
bankers,  110. 

Composition  for  stamp  duties,  country  bankers  allowed  to  com- 
pound for  the  stamp  duties  on  their  notes,  and  twenty-one  day 
bills  on  London  at  7*.  per  cent,  per  annum,  69  —  rendered  com- 
pulsory as  far  as  making  the  returns,  115  —  amount  of,  received 
in  the  years  1820  to  1823,  114. 

Compound  interest,  case  in  which  it  may  be  charged  by  bankers, 
196  — is  granted  by  the  savings'  banks,  229. 

Copper  first  coined  in  England  in  the  year  1609,  11. 

Corsica,  the  kingdom  of,  held  by  the  Bank  of  Genoa  as  security  for 
the  debts  of  the  state,  10. 

Cosmo  di  Medici,  the  banker,  was  reckoned  the  most  wealthy  mer- 
chant ever  known  in  Europe,  8  —  his  bank  was  to  become 
surety  for  Louis  XL,  King  of  France,  8. 

Cotton,  a  comparison  between  the  price  of  cotton  and  the  interest 
of  money,  191. 

Counterfeiting  silver  dollars  and  tokens,  an  act  passed  to  prevent, 
49. 

Country  hanks,  origin  of,  109  —  their  number,  59.  110.  112  — 
licences  granted  to,  110  —  number  of,  bankrupts,  110  —  the 
kind  of  business  they  carry  on,  112  —  their  connection  with  the 
London  bankers,  1 12  —  their  notes,  see  7iotes  —  sums  paid  by, 
for  stamp  duties,  114  —  are  allowed  to  compound  for  stamp 
duties,  69  —  are  required  to  make  quarterly  returns  of  the 
weekly  amount  of  notes  in  circulation,  115. 

Country  bankers  are  dissatisfied  with  the  establishment  of  branches 
of  the  Bank  of  England,  67  —  hold  a  meeting  at  the  London 
Tavern,  and  pass  resolutions  upon  the  subject,  68  —  their  inter- 
view with  Lord  Goderich,  68 — complain  of  the  branch  banks 
issuing  21  day  bills  on  London  without  a  stamp,  69  —  their  me- 
morial to  the  Treasury  in  1828,  70  —  their  memorial  to  Earl 
Grey  and  Lord  Althorp  in  1833,  115  —  way  in  which  their 
issues  are  affected  by  the  issues  of  the  Bank  ol'  England,  118. 

T  4 


280  INDEX. 

Country  bank  circulation,  number  of  notes  stamped  from  18-20  ta 

1831,  113  —  amount  of  stamp  duty  received,  114-  —  propor- 
tionate view  of  the  circulation  of,  156 — country  banks  fron> 
1818  to  1825,  114  —  has  a  tendency  to  increase  the  manufacture 
and  exportation  of  domestic  productions,  115  —  effect  of,  on  the 
foreign  exchanges  comparatively  insignificant,  115  —  fluctuated 
less  from  1817  to  182G  than  the  circulation  of  the  Bank  of 
England,  115  —  effect  of  numerous  banks  of  issue  upon  the 
amount  of  the  circulation,  IIG  —  numerous  banks  occasion  a 
more  equal  distribution  of  the  circulation,  116  —  way  in  which 
the  command  of  the  circulation  may  be  rendered  subservient  to 
individual  advantage,  117  —  enable  the  country  banker  to  lend 
money  at  a  lower  rate  of  interest,  117  —  useful  to  miners  and 
manufacturers,  118  —  effect  produced  upon  the  country  bank 
circulation  by  the  issues  of  the  Bank  of  England,  118. 

D. 

Danish  loan  contracted  in  England,  61. 

Days,  number  of  that  notes  of  different  denominations  remain  in 
circulation,  42.  55. 

Dead  weight,  military  and  naval  pensions,  so  called,  60 — sum 
advanced  on  Feb.  29,  1832,  77. 

Debt,  permanent,  due  from  the  government  to  the  Bank  of  England, 
38  — increased  in  1816,  54  —  reduced  in  1834,  91.  96. 

Debts,  time  of  payment  fixed  by  bills,  175  —  are  most  easily 
proved  or  transferred  by  means  of  bills,  175  —  between  coun- 
tries, how  settled,  172,  173. 

Delphi,  its  temple  the  great  bank  of  Greece,  3. 

Deposit,  banks  of,  141 — how  capital  is  raised  by,  141  —  effects 
of,  143  —  their  different  kinds  of  deposits,  145 — the  issue  of 
notes  by,  145  —  effects  of  on  the  circulating  medium,  147  — 
compared  with  banks  of  remittance  as  to  their  effects  on  the 
revolution  of  capital,  156. 

Deposits,  facilities  granted  by  the  Bank  of  England  to  persons 
having,  148 — amount  of  in  the  Bank  of  England,  from  1807 
to  1831,  private  and  public,  149  —  gross  amount  of,  from  1778 

1832,  74— amount  of,  during  18.S4,  97. 

Devonshire,  deposits  in  savings'  banks  as  compared  with  the  popu- 
lation, 238. 

Directors  of  the  Bank  of  En (f  land,  their  qualification,  28  —  names  of 
the  first,  29  —  names  of  in  1732,  35  —  names  of  in  1835,  98  — 
their  power,  98 — committees  of,  99  —  of  the  London  and 
Westminster  Bank,  246. 

Discount,  hanks,  of,  170  —  i.  Nature  and  origin  of  bills  of  exchange, 
171  — ii.  Advantages  of  bills,  175  —  iii.  Classes  of  bills,  179  — 
iv.  Notaries  public,  182  —  v.  The  rate  of  discount,  187 — vi. 
Effects  of  discount  on  the  circulation,  196. 


INDEX.  ^81 

Discounts,  amount  of,  in  the  Bank  of  England,  from  1795  to  1831, 
198  —  amount  of,  at  the  respective  brandies,  110  —  notices  from 
tlie  bank  respecting,  43 — rules  for  discounting,  179  —  banks 
that  issue  notes  can  discount  on  lower  terms,  117  —  query,  is  it 
most  for  the  advantage  of  a  bank  to  discount  long-dated  or 
short-dated  bills  ?  1 80  —  is  it  better  for  a  bank  to  make  advances 
by  means  of  cash  credits,  or  by  discounting  bills?  203. 

Dividends  on  the  public  funds^  are  received  by  the  London  bankers 
on  account  of  the  country  banks,  112  —  are  received  by  the 
Bank  of  England  for  their  customers,  l^S  —  proposal  to  render 
the  unclaimed  available  to  the  public  service,  42. 

Dividends  on  Bank  of  England  stock,  from  1708  to  1729,  31  — 
1730  to  1747,  34—1747  to  1753,  39—  1754  to  1764,  39  — 
1764  to  1767,  40—1767  to  1781,41  —  1781  to  1788,  41 — 
1788  to  1807,  42—1807  to  1823,  49—1823  to  the  present 
time,  59  —  annual  amount  paid,  78,  84. 

Dollars  issued  by  the  Bank  of  England  in  1797,  45  —  in  1804,  4 
—  an  act  passed  to  prevent  the  counterfeiting  of,  53. 


East  India  Bonds,  interest  on  raised  to  five  per  cent.,  103. 

East  India  Company.,  lent  money  to  the  Bank  of  England  at  2  per 

cent.,  94. 
Edward  the  Confessor  prohibited  the  taking  interest  for  money,  15. 
Edward  I.,  curious  law  respecting  the  Jews  passed  in  his  reign,  17. 
Edward  III.,  in  his  reign  gold  was  first  coined  in  England,   1 1 

—  established  the  office  of  royal  exchanger,  12. 
Eight  per  cent,  made  the  legal  rate  of  interest  in  England,  21. 
English,  Mr.,  his  view  of  joint  stock  companies  formed  during  the 

years  1824  and  1825,  60. 
Equitable  loan  Bank,  formed  in   London   in    1824,  but  failed  to 

obtain  an  act  of  parliament,  206. 
Esdaile  and  Company,  a  London  banking  house,  received  assist- 
ance from  the  Bank  of  England  on  condition  of  winding  up,  104. 
Exchange,  why  the  place  where  merchants  meet  is  so  called,  12. 
Exchanges  between  bankers,  a  check  to  an  over-issue  of  notes,  158. 
Exchanges,  foreign,  see  foreign  exchanges. 
Exchequer  Bills,  advance  in  the  rate  of  interest  on,  in  1836,  102  — 

table  of  the  different  rates  on,  102. 
Exeter,  state  of  the  Bank  of  England  branch  at,  HO  —  the  branch 

abandoned,  140  —  the  savings'  bank  at,  238. 
Expenses  of  the  Bank  of  England  in  the  year  1832,  78  —  of  the 

branches,  139. 
Exportation  of  gold  and  silver  coin  permitted,  57. 
Extracts  from  public  documents,  from  the  Bank  of  England  charter, 

28  —  the  order  in  council  commanding  the  suspension  of  cash 

payments,  43  —  from  the  act  of  parliament  against  forgery,  47  — 


282  INDEX. 

from  the  report  of  the  bullion  committee,  50 — from  the  evi- 
dence taken  before  the  bank  committee,  58.  G'5,  61-.  1 18.  liS  — 
from  the  memorial  presented  by  the  country  bankers  to  the 
treasury  against  the  Bank  of  England  branches,  70 —  the  report 
of  the  bank  committee,  72  —  letter  from  Lord  Althorp  to  the 
bank  directors,  85  —  the  last  bank  charter  renewal  act,  87  — 
notice  of  the  reduction  of  the  4  per  cents.,  1826,  95  —  from  the 
memorial  presented  by  the  country  bankers  to  Earl  Grey,  115  — 
from  the  act  permitting  joint  stock  banks  to  be  established  65 
miles  from  London,  125 —  the  resolutions  of  a  committee  of  the 
House  of  Commons  against  the  usury  laws,  191  —  official  in- 
structions for  the  establishment  of  parochial  societies  for  granting 
small  government  annuities,  240. 


F. 

Failures  of  banks,  evil  effects  of,  122. 

Faiinthroy^  Mr.,  executed  for  forgery  of  powers  of  attorney,  62 — 
total  loss  sustained  by  the  bank,  63. 

Fifteen  pound  notes  first  issued  by  the  Bank  of  England,  40. 

Five  per  cent,  made  the  legal  rate  of  interest  in  England,  21  — five 
per  cent,  navy  stock  reduced  to  four,  59. 

Five  pound  notes  first  issued  by  the  Bank  of  England,  43. 

Fee  paid  to  barrister  for  certifying  the  rules  of  savings'  banks  and 
annuity  societies,  243. 

Flanders,  the  Countess  of,  borrowed  money  at  from  twenty  to 
thirty  per  cent,  to  pay  her  husband's  ransom,  19. 

Florence  was  one  of  the  first  cities  in  Christendom,  8  —  its  inhabit- 
ants had  great  skill  in  banking,  7. 

Fluctuations  in  the  price  of  commodities,  not  promoted  by  the 
issues  of  the  country  banks  so  much  as  by  the  issues  of  the  Bank 
of  England,  115  —  originate  in  the  speculations  of  influential 
merchants,  115  —  not  promoted  by  numerous  banks  of  issue, 
116  —  see  prices. 

Foreign  exchanges,  explanation  of,  172  —  were  unfavourable  in 
1808  and  1809,  50  —  are  stated  to  have  no  connection  with  the 
issues  of  Bank  of  England  notes,  50  —  opinion  of  the  bullion 
committee  on  this  subject,  51  — affected  by  commercial  specula- 
tions, 64  —  adverse  exchanges  succeed  great  importations,  115  — 
said  to  be  not  so  much  affected  by  the  issues  of  country  bankers, 
as  by  those  of  the  Bank  of  England,  115  —  effect  on  by  the  in- 
creased issue  of  notes,  167  —  two  ways  in  which  this  effect  is 
produced,  168  —  are  regulated  by  the  proportion  between  the 
exports  and  imports,  168  —  and  by  the  removal  of  capital  from 
one  country  to  another,  169. 

Foreign  loans,  a  list  of  contracted  in  England,  61. 

Forgery,  the  first  Bank  of  England  notes,  40  —  it  is  legally  decided 
that  the  bank  is  not  liable  to  pay  forged  notes,  41  —  law  passed 


INDEX.  283 

to  prevent,  47  —  detention  of  forged  notes  by  the  bank  dis- 
continued, 56  —  an  act  to  prevent  forgery,  57  —  annual  loss  to 
the  Bank  of  England  from  forgeries  in  the  public  funds,  79  — 
the  forgeries  of  Fauntleroy,  63  —  penalty  of  forging  certificates 
in  annuity  societies,  249- 

Foundation  stone  of  the  Bank  of  England  laid,  34. 

Foundling  hospital  of  St.  Petersburg!!,  profits  of  the  loan  bank 
given  to,  209. 

Four  per  cents.,  1826,  reduction  of  to  S^per  cent.,  and  consolidated 
witii  the  new  83  per  cent.,  95. 

Friendly  Societies,  act  extended  to  the  Isles  of  Guernsey,  Jersey, 
and  Man,  215  —  not  superseded  by  savings' banks,  253  —  acts 
of  parliament  for  establishing,  254  —  number  of  their  members 
in  1815,  255  —  may  subscribe  their  funds  in  savings'  banks,  223 

—  this  privilege  repealed,  225  —  renewed  with  limitations,  227. 
230  —  the  limitations  removed,  237  —  amount  of  their  deposits 
in  «:avings'  banks,  236. 

Friendly  Loan    Society  formed  at  50.  Leicester  Square,  215  — 

first  report  of,  216. 
Funds,  public,  investing  money  in,  not  an  operation  of  banking,  207. 

G. 

Genoa,  Bank  of,  9  —  its  capital  formed  of  loans  lent  by  the 
citizens  to  the  state,  10  —  called  the  chamber  of  St.  George,  10 

—  held  as  security  the  port  of  Caffa  and  the  kingdom  of  Cor- 
sica, 10. 

Gloucester,  state  of  the  Bank  of  England  branch  at,  140 — joint 
stock  banks  at,  130. 

Goderich,  Lord  (now  Earl  Ripon),  deputation  from  the  country 
bankers  waited  upon  him,  68. 

Gold  first  used  as  money  in  the  form  of  bullion,  2 — first  coined  in 
England,  11  —  how  procured  from  abroad  by  the  Bank  of  Eng- 
land, 58. 

Goldsmiths  accused  of  melting  and  exporting  the  coin  of  the 
rcahn,  3 — their  shops  extended  from  the  Old  Change  to 
Bucklersbury,  14  —  their  business,  22 — became  new-fashioned 
bankers,  21  — allowed  fourpence  per  cent,  per  diem  interest  on 
money  deposited,  22 — became  agents  for  receiving  rents,  23  — 
advanced  money  to  the  king,  23  —  accused  of  causing  a  scarcity 
of  money,  especially  in  the  country,  23  —  and  of  raising  the 
rate  of  interest,  24 — mode  of  transacting  their  business  with 
the  king,  25  —  a  run  vipon,  25  —  the  king  refused  to  pay  them 
the  money  he  had  borrowed,  25  —  their  notes  rendered  trans- 
ferable by  indorsement,  106. 

Goldsmiths'  company  petitioned  against  the  renewal  of  the  office 
of  royal  exchanger,  14  —  the  king's  reply,  14. 

Goldsmiths'  notes  were  probably  transferable  receipts  for  money 
lodged,  21  — the  first  kind  ot  bank  notes  issued  in  England,  21. 


284  INDEX. 

Gold  watches,  forty  casks  of,  lodged  in  the  loan  bank  at  Paris,  '209. 

Gooil  luck,  an  instance  of,  64. 

Government  annuities    may    be    granted    for   20/.    and    under    to 

depositors  in  savings"  banks  and  others,  239  —  rules  for  annuity 

societies,  243  —  tables  of,  251,  252, 
Greece,    the    first    banks    there,    3  —  different    modes    of  lending 

money,  4  —  interest  as  high  as  thirty  per  cent.,  bankers  allowed 

12  per  cent,  on  deposits,  4 — plan  for  joint  stock  in,  5. 
Greek  loans  contracted  in  England,  61. 
Grey,  Earl,  memorial  of  the  country  bankers  to,  115. 
Grocers  Hall  in  the  Poultry,  the  business  of  the  bank  of  England 

formerly  transacted  there,  35. 
Gtiadalijava  loan  contracted  in  England,  61. 
Guarantee,  an  easy  mode  of  giving  one,  177. 
Guatemala  loan  contracted  in  England,  61. 
Guernsey,  Friendly  Societies  Act  extended  to,  215. 

H. 

Harman,  Jeremiah,  Esq.,  extract  from  his  evidence  before  the  bank 

committee,  64. 
Henry  III.  prohibited  the  Jews  taking  more  than  two-pence  per 

week  for  every  20*.  they  lent  to  the  students  of  Oxford,  16. 
Henry  VIII.,  in  his  reign  the  office  of  royal  exchanger  fell  into 

disuse,   12  —  interest  of  money  fixed  at  10  per  cent.,  20  —  the 

coin  of  the  realm  greatly  debased,  13. 
Herries,  Mr.,  chancellor  of  the  exchequer,  interview  of  the  country 

bankers  with,  68. 
Hibernian  Bank  empowered  to  act  as  a  loan  bank,  206. 
Highrvay  robberies  occasioned  the  issue  of  bank  post  bills,  37. 
Historians  have  neglected  to  record  the  progress  of  banking,  1. 
Hoares,  Messrs.  of  Fleet  Street,  their  bank  was  established  before 

the  Bank  of  England,  107. 
Holland,  the  Earl  of,  appointed  to  the  office  of  royal  exchanger  by 

Charles  I.,  13. 
Holidays  kept  at  the  Bank  of  England,  97. 
House  of  Commons  rejected  the   report  of  the  bullion  committee, 

52 — number  of  members  who  voted  on  the  London  and  West- 
minster Bank  bill,  95. 
Hull,  state  of  the  Bank  of  England  branch  at,  140 — joint  stock 

bank  at,  131. 

I. 

Immortality,  private  bankers   not  endowed   with,  138  —  a  public 

company  never  dies,  .37. 
India,  what  rate  of  interest  may   be    charged    on  bills   returned 

j)rolested  iiom,  196. 


INDEX.  285 

Inscription  on  the  statue  of  King  William  III.  in  the  liall  of  the 
Bank  of  England,  35. 

Interest  of  money,  high  at  Athens,  5  —  the  taking  of  deemed  sinful 
in  the  middle  ages,  19  —  condemned  by  the  Mosaic  law,  15  — 
and  why,  188  —  prohibited  in  England  by  Edward  the  Confessor 
and  by  a  council  held  at  Westminster,  in  1  126,  15  —  the  pro- 
hibition of  not  adapted  to  the  present  times,  15  —  a  defence  of, 
189  —  amount  received  at  the  several  branches  of  the  Bank  of 
England,  110  —  alterations  in  the  rate  of,  189,  see  rate  of 
interest  —  compound,  see  compound  interest. 

Interest,  rate  of,  charged  by  loan  societies,  215. 

Interest  on  deposits,  in  hands  of  bankers,  a  check  to  over-issue  of 
notes,  159  —  granted  by  the  Bank  of  England  to  the  East  India 
company,  94  —  granted  by  the  London  and  Westminster  Bank, 
257. 

Ireland,  facilities  granted  by  banks  to  exporters  of  butter  in,  155 
—  the  legal  rate  of  interest  in,  77  —  the  laws  of  usury  repealed 
in,  as  far  as  regards  three  months' bills,  91 — bills  drawn  from 
are  regarded  as  foreign  bills,  185  — an  account  of  the  charitable 
loan  banks  in,  210 — an  Act  passed  to  encourage  loan  banks  in, 
211  —  manner  in  which  they  are  conducted  in,  212  —  an  Act 
passed  to  encourage  savings'  banks  in,  225  —  a  view  of  the 
savings'  banks  in,  and  the  number  of  their  depositors,  236  — 
compared  with  the  population,  236  —  their  progress  from  1831 
to  1833,  237 — bills  returned  to  protested  may  be  charged  six 
per  cent,  interest,  196  —  Bank  of  Ireland  employ  the  Bank  of 
England  as  their  agent,  78. 

Issues  of  notes  by  country  bankers,  alleged  to  have  less  tendency 
to  promote  fluctuations  of  price  than  those  of  the  Bank  of  En- 
gland, 116  —  act  exclusively  in  promoting  home  productions, 
115  —  do  not  greatly  influence  the  foreign  exchanges,  115  — 
advantage  of  numerous  banks  of  issue,  116  — effects  of  the  issues 
of  the  Bank  of  England  upon  those  of  the  country  bankers,  118. 

J. 

James  I,  fixed  the  legal  rate  of  interest  in  Arragon  at  18  per  cent., 
20. 

Jersey,  Friendly  Societies  Act  extended  to,  215. 

Jerusalem,  probable  business  of  the  money-changers  in  the  temple 
of,  2. 

Jews  arrived  in  England  about  the  time  of  the  conquest  and  be- 
came famous  for  wealth  and  usury,  16  —  opinions  as  to  the 
cause,  16  —  prohibited  taking  more  than  two-pence  per  week 
for  the  loan  of  20*.  to  the  students  at  Oxford,  16  —  curious  laws 
respecting,  17  —  letter  concerning  them  from  the  Archdeacon 
of  Bath,  17  —  expelled  from  England  in  1290,  18  —  re-admitted 
by  Oliver  Cromwell,  18. 


286  INDEX. 

John,  King,  farmed  out  tlie  office  of  royal  exclianger  for  five 
thousand  marks,  13. 

Joint  stock  banks,  suggestion  for  forming  one  by  Xenophon,  5  — 
prohibited  in  England  in  1708,  31  — permitted  beyond  sixty- 
five  miles  from  London  in  1826,  QiQ  —  permitted  in  London  if 
not  banks  of  issue,  89  —  advantage  of,  120.  256  —  possess 
greater'^  security  than  private  banks,  120  —  are  less  liable  to 
runs,  121 — more  prudent  in  their  management,  123  —  the 
legal  liabilities  of  shareholders  in,  121'  —  a  list  of  in  England 
and  Wales,  130. 

Joint  stock  companies,  the  number  of,  projected  in  1824-  and  1825, 
60. 

Journeymen,  savings'  banks  useful  to,  221. 


K. 

King,  Lord,  his  letter  to  his  tenantry  requiring  his  rents  to  be 
paid  in  gold,  53. 

Kites,  or  accommodation  bills,  uses  of,  177  —  should  not  be  en- 
couraged by  bankers^  179. 


Labourers  thrown  out  of  employ  by  runs  upon  banks,  1 22  —  may 

be  assisted  by  loan  banks,  212  —  savings'  banks  useful  to,  222. 
Land,  the  value  of,  reduced  by  a  high  rate  of  interest,  23. 
Leeds,  state  of  the  Bank  of  England  branch  at,  140 — joint  stock 

bank  at,  131. 
Legal  tender.  Bank  of  England  notes  above  Bl.  made  so,  90. 
Letters  from  the  Archdeacon  of  Bath  to  the  Bishop  of  Ely,  17  — 

from  Lord  King  to  his  tenantry,  53  —  from  Lord  Althorp  to  the 

bank  directors,  85. 
Liabilities  of  the  Bank  of  England  from  1778  to  1832,  74  —  during 

the  year  1834,  97. 
Liabilities  and  securities  of  the  bank  during  the  year  1834,  97  — 

during  1835,  99  —  during  1836,  103. 
Licences  to  country  bankers,  an  account  of  the  number  of,  110. 
Liverpool,  large   amount  of  debts  of  speculative  merchants  who 

failed    there,    116  —  the    most   speculative   place   in    England 

though    without    country   notes,    161  —  state    of  the   Bank    of 

England  branch  at,  140 — joint  stock  banks  at,  131. 
Loans,  all  advances  by  bankers  are  loans,  206  —  dead  ones  opposed 

to  sound  principles  of  banking,  1()2.  207. 
Loans,  foreign,  contracted  in  England,  a  list  of,  61. 
Loans,  toia\  amount  granted  by  the  Friendly  Loan   Society,  217 

—  classifications  of,  218  —  smaller  loans  more  regularly  paid, 

219. 


INDEX.  287 

Loans,  government,  raised  during  tlic  seven  years'  war,  and  the 
rates  of  interest,  40  —  during  the  American  war,  11 — during 
the  war  with  republican  France,  48  —  during  the  war  with  the 
French  empire,  5^  —  subscriptions  for,  first  received  at  the  Bank 
of  England,  32 

Loa7i  Banks,  in  ancient  Rome,  7  —  of  two  kinds,  204-,  205  —  the 
Bank  of  England,  the  banks  of  Scotland,  and  the  Hibernian 
Bank  are  loan  banks,  205  —  established  in  Italy,  208  —  in 
France,  208 — in  Russia,  209  —  in  Ireland,  210  —  act  for 
regulating  in  Ireland,  211  —  Sir  Francis  Brewster's  proposal  for 
one,  209  —  the  equitable  loan  bank  attempted  to  be  formed  in 
London,  206  —  effects  of  capital  advanced  by,  206  —  Mr. 
Trench's  observations  on  charitable  loan  banks,  212  —  are 
worthy  of  legislative  encouragement,  214'. 

Loan  Societies,  act  of  parliament  passed  to  encourage,  215. 

Lombards,  who  so  called,  18  —  dealt  largely  as  bankers^  19  —  fre- 
quently lent  money  to  the  English  monarchs,  20. 

Lombard  Street,  so  called  from  the  Lombards  residing  there,  20. 

London  Bankers,  are  successors  of  the  goldsmiths  or  new-fashioned 
bankers,  9 — their  business,  106.  14'4' — do  not  issue  notes 
though  they  have  the  power,  106  —  the  oldest  in  London,  107 
—  established  the  clearing,  107  —  discount  for  those  only  who 
have  current  accounts  with  them,  143 — list  of  in  1837,  108  — 
list  of  those  discontinued,  102  —  how  paid  for  their  agency  by 
the  country  banks,  1 12. 

London  Dock  Company,  their  debt  to  the  Rank  of  England,  Feb.  27, 
1832,  77. 

London  Gazette,  announcement  in,  that  the  Bank  of  England 
would  lend  money  on  plate,  lead,  tin,  copper,  steel,  and  iron,  at 
4  per  cent.,  30  —  quarterly  account  of  the  affairs  of  the  Bank  of 
England  to  be  published  monthly  in,  91. 

London  Magazine.,  extracts  from  in  1737,  respecting  the  Bank  of 
England,  36. 

London  and  Westminster  Bank,  extracts  from  the  original  prospec- 
tus, 255  —  terms  of  doing  business,  257  —  mode  of  suing  and 
being  sued,  257  —  copy  of  the  annual  report,  260  —  a  statement 
of  its  affairs,  263  —  summary  of  its  deed  of  settlement,  259  — 
names  of  directors,  273. 

Long  bills  versus  short  bills,  180. 

Losses  increased  by  the  Friendly  Loan  Society,  216. 

Low  Countries,  the  rate  of  interest  fixed  there  by  Charles  V.,  at  12 
per  cent.,  20. 

Lyndhurst,  Lord,  his  motion  with  reference  to  the  Reform  Bill 
produced  a  run  on  the  Bank  of  England,  84. 

M. 

Man,  Isle  of,  Friendly  Societies  Act  extended  to,  215. 


288  INDEX. 

Manaqeimnt  of  joint   stock   hanks  more  prudent  than  of  private 

hanks,  123. 
Manchester,  state  of  the  Bank  of  England  hranch  at,  140 — joint 

stock  banks  at,  131. 
Manna  in  the  wildcrnesS;,  could  not  be  a  subject  of  speculation, 

160. 
Marriages,   early  and    improvident,  prevented  by  savings'    banks, 

222. 
Married  women  may  deposit  money  in  savings'  banks,  230. 
Marylebone  savings'  banks,  rules  of,  228. 
Memorial  of  the  country  bankers  to   the  treasury,  69  —  to  Earl 

Grey,  115. 
Meath  Charitable  Loan  Society,  an  account  of,  210. 
Meetings  of  proprietors  in  1835,  98,  99  — in  1836,  100  — in  1837, 

104". 
Merchants  used  for  money  gold  and  silver  bullion  of  a  certain  fine- 
ness, 2  —  of  Athens,  their  dealings  with  their  bankers,  4  —  sign 

a  declaration  of  their  willingness  to  take  Bank  of  England  notes, 

38.  44  —  Irish,  benefited  by  banks,  155. 
Mexican  loans  contracted  in  England,  61. 
Minors  may  deposit  money  in  savings'  banks,  230. 
Mint  price  of  gold,  £3  lis.  IQld.  per  ounce,  50. 
Moment,  a  lucky  one,  (^5. 
Money  current  with  the  merchant,  2  — bankers  are  dealers  in,  141 

—  see  circulating  medium. 
Money  borrowing  at  Jerusalem,  3  —  by  the    goldsmiths,  22  —  a 

branch  of  modern  banking,  11  — see  banks  of  deposits. 
Mo7iey  changing  at  Jerusalem,  2  —  a  branch   of   banking,  11  —  a 

public    officer   appointed    in    England  for,   12  —  see   royal   ex- 
changer. 
Money  lending  a  branch   of  banking,  14  —  see  loan  banks,  and 

banks  of  discounts,  and  cash  credit  banks. 
Money  market,  pressure  on  in  1836,  101. 
Moneyed  class  are   the   means    of    transferring  capital   from   one 

branch  of  trade  to  another,  178. 
Mortgage,  the  Bank  of  England  advance  money  on,  60  —  amount 

of  outstanding,  77  —  interest  received  on  account  of,  78. 
Moses  prohibited  the  taking  of  interest  for  money,  but  not  from 

strangers,  15  —  the  spirit  of  his  laws,  188. 
Mounts  of  Piety,  loan  banks  so  called,  208,  209. 


N. 

Nations,  the  farther  back  vvc  trace  their  origin  the  poorer  we  find 

them,  15. 
Neapolitan  loans  contracted  in  England,  61. 
Netv  three  and  a  half  per  cent,  stock  created,  71. 


INDEX.  289 

New  four  per  cent,  stock  created,  59 — reduced  to  three  and  a  half 

per  cent.,  70. 
Neio  five  per  cent,  stock  created,  71. 
iVew-fashioned  bankers,  their  mystery  discovered,  22. 
Newcastle-\x\)orL-TynQ,  state  of  the  Bank  of  England  branch  at,  140 

—  joint  stock  bank  at,  132. 
Noble,  a  gold  coin  worth  6s.  Sd.,  first  issued  by  Edward  III.,  11. 
Northern  and  Central  Bank  of  England,  at  Manchester,  received 

assistance  from  the  Bank  of  England,   and  on  what    conditions, 

103. 
Norwich,  state  of  the    Bank  of  England  branch   at,  140 — joint 

stock  banks  at,  131. 
Notaries  public,  origin  of,  182  —  business  of  in  the   present   day, 

182  —  difference  between  noting  and  protesting  bills  of  exchange, 

183  —  form  of  protest,  183  —  laws  respecting  protesting,  134  — 
charges  of  notaries,  185  —  acts  of  parliament  for  regulating 
notaries,  186. 

Notes  of  a  less  amount  than  20s.  prohibited  in  England,  41  —  under 
51.  prohibited  in  1777,  41  — permitted  in  1797,  46  —  continued 
in  1822  until  the  termination  of  the  bank  charter,  58  —  prohi- 
bited in  1826  after  1829,  66. 

Notes  payable  on  demand  are  a  check  to  over-issue,  158  —  no  bank 
having  more  than  six  partners  allowed  to  issue  them  in  London, 
or  within  sixty-five  miles  thereof,  89  —  see  Circulation. 

Notice,  one  year's  notice  after  the  expiration  of  ten  years  from  the 
1st  August,  1834,  to  be  given  to  the  Bank  of  England  of  the  non- 
continuation  of  their  charter,  90  —  a  resolution  of  the  House  of 
Commons  delivered  at  the  bank  to  be  deemed  a  sufficient  notice, 
90  —  should  such  notice  not  be  given  for  six  months  after  Aug. 
1,  1844,  then  the  charter  to  be  continued  until  the  end  of  twelve 
months'  notice  to  be  given  after  August  1.  1855,  94. 

Notices  from  the  Bank  of  England  respecting  lending  money  on 
plate,  &c.,  30  —  on  suspending  payment,  44  —  on  issuing  dol- 
lars, 45  —  to  pay  cash,  46  —  to  pay  cash,  55  — •  to  make  ad- 
vances while  stocks  are  closed,  70.  97  —  to  reduce  the  number 
of  holidays,  97. 

Notices  issued  by  the  bank,  97,  98,  99.  101.  103,  104. 

O. 

Officers  of  savings'  banks  to  pay  the  money  they  owe  to  such  banks 

before  any  other  debts,  253. 
Old  Change  in  Cheapside,  a  street  so  called  from  the  office  of  royal 

exchanger  being  there,  13  —  goldsmiths'  shops   extended  from 

the  Old  Change  to  Bucklersbury,  14. 
Old  four  per  cents,  reduced  to  three  and  a  half,  60. 
Oliver  Cromwell  readmitted  the  Jews  into  England,  18. 
Olympia,  the  temple  of,  a  great  bank. 

U 


290  INDEX. 

One  pound  notes  saved  the  credit  of  the  country,  6.5. 
Oxford,  students  at,  not  to  pay  more  than  two-pence  per  week  for 
every  twenty  shillings  they  borrowed  of  the  Jews,  16. 


Palmer,  John  Horsley,  Esq.,  his  opinion  as  to  the  causes  of  the 
panic,  63  —  his  statement  as  to  the  effects  of  the  issues  of  the 
Bank  of  England  upon  those  of  the  private  bankers,  118. 

Panic  of  1825,  causes  of,  63  —  conduct  of  the  Bank  of  England  in, 
61^. 

Par  of  exchange  between  nations,  173  —  between  country  towns 
and  London,  175. 

Parochial  societies  for  granting  government  annuities,  206. 

Partnership,  law  of,  an  instance  of  its  pernicious  absurdity,  24'0  — 
in  what  way  it  affects  the  operations  of  large  companies,  262  — 
how  its  inconveniences  are  obviated  by  means  of  trustees,  257 

—  modification  of,  as  far  as  regards  joint  stock   banks  beyond 
sixty-five  miles  from  London,  126,  127. 

Pnterson,  William,  projector  of  the  Bank  of  England,  26 — one  of 
the  first  directors,  29. 

Peel,  Mr.  (now  Sir  Robert),  his  bill  for  the  resumption  of  cash 
payments  on  the  part  of  the  Bank  of  England,  BQ. 

Penny,  silver,  the  highest  denomination  of  coin  formerly  in  Eng- 
land, 11  —  the  quantity  of  silver  it  contained,  11 — cut  into 
half-pence  and  farthings,  11. 

Pe7isions  to  Bank  of  England  clerks,  59  —  average  amount  of,  79 

—  naval  and  military   pensions,   arrangement  between  the  go- 
vernment and  the  bank  respecting,  59. 

Peruvian  loans  contracted  in  England,  61. 

Peter  of  Blois,  Archdeacon  of  Bath,  his  letter  to  the  Bisliop  of 
Ely,  17. 

Philip  IV.  fixed  the  legal  interest  of  money  in  the  fairs  of  Cham- 
pagne at  twenty  per  cent.,  20. 

Placentia,  the  interest  of  money  there  forty  per  cent,  in  the  year 
1490,  20. 

Pole  and  Co.,  the  failure  of  their  bank  in  1825  one  cause  of  the 
panic,  64. 

Political  economy,  banking  a  part  of,  preface  —  see  articles  capi- 
tal, circulation,  circulating  medium,  foreign  exchanges,  interest 
of  money,  prices  of  cominodities,  speculation,  usury,  &'C.  &c. 

Popidation  of  England,  Wales,  and  Ireland,  average  lodgments  in 
savings'  banks  for  each  person,  236. 

Portsmouth,  a  bank  of  England  branch  opened  there,  140. 

Portuyuese  loans  contracted  in  England,  61. 

Price  of  gold,  standard  of  at  the  mint,  50 —  market  price  during 
the  years  1S06,  1807,  and  1608,  50  —  price  at  which  it  is  taken 
by  tlie  Bank  of  England,  99. 


INDEX.  ^291 

Prices  of  commodities,  reduced  prices  of  commodities  the  only 
means  whereby  the  Bank  ollMigland  can  obtain  gold  from  abroad, 
58  —  nia}'  be  altered  by  the  bank  directors  for  the  purpose  of 
speculation,  117  —  how  affected  by  banks  of  remittance,  151  — 
how  far  they  can  be  affected  by  banks  of  circulation,  IQ'i  —  may 
be  advanced  for  a  time  by  the  issues  of  the  Bank  of  England, 
163  —  cases  in  which  an  increased  issue  oi^  notes  will  not  ad- 
vance prices,  16^  —  an  increased  issue  of  notes  sometimes  the 
effect  not  the  cause  of  an  advance  of  prices,  1G5  —  an  advance  of 
prices  caused  by  an  issue  of  notes  can  be  only  temporary,  165  — 
an  increased  issue  of  notes  sometimes  causes  a  reduction  of 
prices,  166. 

Privilege,  exclusive  of  the  Bank  of  England,  when  first  granted,  31 
—  relaxed  in  1826  with  regard  to  banks  at  a  greater  distance 
than  sixty-five  miles  from  London,  66  —  relaxed  or  explained  in 
1833  with  regard  to  banks  of  deposit  in  London,  89  —  how  long 
continued,  90. 

Proclamation  of  Charles  L  respecting  the  office  of  royal  exchanger, 
12. 

Proctors  may  be  licensed  to  act  as  notaries  beyond  ten  miles  from 
the  Royal  Exchange,  187. 

Profits  of  the  Bank  of  England,  annual  amount  of,  from  1779  to 
1832,  79  —  years  in  which  the  profits  increased,  80  —  years  in 
which  there  was  a  diminution  of  profits,  82  —  sources  of  profits, 
83  —  amount  of  from  the  destruction  of  bank  notes,  83  —  distri- 
bution of  to  the  proprietors,  84<. 

Promissory  notes  rendered  transferable  by  indorsement  like  bills  of 
exchange,  106. 

Protest  of  bills  of  exchange,  form  of  one,  183  —  wherein  protesting 
differs  from  noting,  183  — laws  respecting,  184  —  charges  for, 
185  —  rate  of  interest  chargeable  on  protested  bills,  196. 

Prn,ssian  loans  contracted  in  England,  61. 

Public  officers,  joint  stock  banks  have  power  to  sue  and  be  sued  in 
their  names,  125  —  this  privilege  not  obtained  by  the  London 
and  Westminster  Bank,  95.  262. 

Q. 

Qualifications  for  governor,  deputy  governor,  director,  and  voter  at 
the  bank  of  England,  28. 

Queen  Elizabeth,  the  13^<^/.,  9(^/.,  and'l^rf.  pieces  coined  in  her  reign 
were  melted  down  by  the  goldsmiths,  14. 

Questions  in  banking:  Arc  chartered  banks  advantageous  or  injurious 
to  a  country  ?  26 — ought  the  charter  of  the  Bank  of  England  to  be 
continued  ?  36  —  was  the  suspension  of  cash  payments  by  the 
Bank  of  England  in  1797  justifiable  ?  43  —  can  the  issues  of  the 
Bank  of  England  be  excessive  if  the  notes  are  issued  oiily  in  the 
discount  of  bills  founded  on  real  commercial  transactions  ?  50  — 

u  2 


292  INDEX. 

is  the  opinion  correct,  tliat  "  the  amount  of  notes  of  the  Bank  of 
England  in  circulation,  and  the  course  of  the  exchange  during 
the  operation  of  the  Bank  Restriction  Act  had  frequently  no 
connection?"  50 — was  the  unfavourable  course  of  tlie  foreign 
exchange  in  1806,  7,  and  8,  produced  by  an  excessive  issue  of 
Bank  of  England  notes,  or  by  the  political  and  commercial  rela- 
tions of  the  country?  52  —  was  the  panic  of  1825  produced  by 
an  over-issue  of  notes  on  the  part  of  the  Bank  of  England  and 
the  country  banks?  64'  —  are  the  branches  of  the  Bank  of  Eng- 
land or  the  private  country  bankers  the  best  adapted  to  promote 
the  prosperity  of  trade,  to  support  agriculture,  and  increase  ge- 
[  neral  improvement?  68 — whether  the  issuing  of  notes  in  London 
should  be  confined  to  one  bank,  or  whether  a  competition  of  dif- 
ferent banks  of  issue,  each  consisting  of  an  unlimited  number  of 
partners,  should  be  permitted?  72 — supposing  the  issue  of  notes 
in  London  ought  to  be  confined  to  the  Bank  of  England,  what 
exclusive  privileges  ought  that  bank  to  have  in  order  to  secure 
this  object  ?  72  —  what  checks  are  necessary  to  secure  to  the 
public  the  proper  management  of  banks  at  issue,  and  especially 
would  it  be  expedient  and  safe  to  compel  them  periodically  to 
publish  their  accounts  ?  72  —  would  it  be  advisable  to  adopt  the 
resolutions  proposed  by  Lord  Althorp  for  the  regulation  of  coun- 
try banks  ?  86  —  have  the  issues  of  the  Bank  of  England  or 
those  of  the  country  bankers  the  greatest  effect  in  causing  fluc- 
tuation in  the  foreign  exchanges?  J 15  —  would  it  be  desirable 
to  have  throughout  the  country  numerous  banks  of  issue,  or  only 
one  bank  of  issue?  116 — have  the  directors  of  the  Bank  of 
England  by  means  of  their  control  over  the  issues  of  notes  the 
power  of  rendering  those  issues  subservient  to  their  individual 
advantage?  116  —  are  the  state  of  the  foreign  exchanges  a  safe 
guide  for  a  country  banker  in  granting  accommodation  to  his  cus- 
tomers ?  118  —  what  effect  has  an  increase  or  decrease  of  Lon- 
don bank  notes  upon  the  issues  of  country  bankers  ?  1 1 8  —  what 
adeantage  have  joint  stock  banks  over  private  banks?  120  — 
what  responsibility  is  incurred  by  shareholders  in  joint  stock 
banks,  and  would  it  be  for  the  advantage  of  those  banks  to  dimi- 
nish the  responsibility  ?  124'.  129  —  what  advantages  or  disad- 
vantages have  branches  of  joint  stock  banks  as  compared  with 
private  banks?  133  —  what  advantage  or  disadvantage  has  a 
branch  as  compared  with  an  indejjendent  joint  stock  bank?  119 
—  have  banks  of  deposit  a  tendency  to  produce  the  same  effects 
upon  trade  and  connnerce  as  banks  of  circulation?  ItS.  156  — 
in  what  way  do  banks  of  remittance  encourage  the  trade  of  a 
district?  154-  —  what  are  the  checks  to  an  over-issue  of  notes 
on  the  part  of  the  country  bankers?  157  — have  banks  of  circu- 
lation a  tendency  to  promote  speculation  ?  159  —  what  effect 
have  banks  of  circulation  upon  the  prices  of  commodities?  163 
ill  what  way  do  banks  of  circulation  affect  the  foreign  exchanges? 


INDEX.  293 

167  —  is  it  most  for  the  interest  of  a  banker  to  discount  long- 
dated bills  or  short-dated  bills?  180  —  is  it  just  to  take  interest 
for  the  loan  of  money?  189  —  is  the  rate  of  interest  in  any 
country  regulated  by  the  rate  of  profit?  189  —  is  a  low  rate  of 
interest  advantageous  or  injurious  to  a  country?  23.  19t  — 
ought  the  usury  huvs  to  be  repealed?  191 — is  it  better  for  a 
bank  to  make  advances  of  money  on  cash  credits,  or  by  discount- 
ing bills  of  exchange?  903  — ought  an  act  of  Parliament  to  be 
passed  for  the   encouragement  of  charitable  loan  banks?  214' 

—  do  savings'  banks  supersede  the  necessity  for  friendly  socie- 
ties ?  253. 

Quotations  from  Dr.  Watts  upon  the  best  way  of  learning  a  science, 
preface  —  from  Dr.  Robertson  upon  History,  1  —  from  Scrip- 
ture respecting  the  money  changers,  3  —  from  Mitford  upon  the 
banks  of  Greece,  3  —  from  Abbi  Barthelemy  upon  the  Athenian 
bankers,  4  —  from  Mitford  upon  Xenophon's  plan  of  a  joint 
stock  bank,  5 — from  Dr.  Robertson  upon  the  Florentine  bank- 
ers, 7  —  from  Dr.  Henry  upon  the  office  of  royal  exchanger,  12 

—  from  Anderson  upon  ditto,  12  —  from  ditto  upon  ditto,  13  — 
from  Michaelis  upon  the  Mosaic  law  against  usury,  \o  —  from 
Hume  upon  the  usury  of  the  Jews,  16  —  from  Dr.  Henry  upon 
ditto,  17  —  from  Dr.  Robertson  upon  the  rate  of  interest  in  the 
middle  ages,  18  —  from  Anderson  respecting  the  new-fashioned 
bankers,  22  —  from  Sir  Josiah  Child  upon  ditto,  23  —  from 
Bishop  Burnett  upon  the  Bank  of  England,  27  —  from  Smollett 
on  the  South  Sea  bubble,  33  —  from  the  London  Magazine  of 
1737  on  the  Bank  of  England  charter,  36 — from  Mr.  Ricardo 
upon  the  transfer  of  capital,  178  —  from   Burn's   ecclesiastical 

,  Law  upon  notaries  public,  182  —  from  Adam  Smith  upon  cash 
credits,  201  — from  Sir  Francis  Brewster  upon  lumbers,  209 — 
from  Mr.  Trench  upon  loan  societies,  212  —  from  the  Hon. 
George  Rose  upon  savings'  banks,  220,  221  —  from  the  Times 
upon  the  increased  deposits  in  savings'  banks,  237. 


R. 

Raikes,  Richard  Mee,  Esq.,  governor  of  the  Bank  of  England,  de- 
clared bankrupt,  97. 

Rate  of  discount  charged  by  the  Bank  of  England  in  1694  and  1695 
29  — in  not,  31 —in  1716  and  1719,  32  — in  1742,  37  —  in 
1746,  38  —  1773  to  1822,  5  per  cent,  41  —  June  22,  1822,  to 
Dec.  13,  1825,  4  per  cent.,  59—  1825  to  July  5,  1827,  4  per 
cent.,  where  it  still  remains,  67. 

Rate  of  Interest,  the  bankers  at  Athens  allowed   12  per  cent.,  4 

maritime  interest  in  Greece  sometimes  30  per  cent,  4  —  first 
mentioned  in  English  history  in  the  year  1 199,  16  —  the  market 
rate  appears  to  have  been  10  per   cent,  till   the  time  of  Henry 

U    3 


294  INDEX. 

VIII.,  but  a  higher  rate  taken  by  the  Jews  and  Lombards,  16  — 
the  Lombards  demanded  20  per  cent.,  19  —  the  Jews  allovred 
to  charge  the  scholars  at  Oxford  43/.  6s.  8d.  per  cent,  16  —  fixed 
in  the  fairs  of  Charlemagne  at  20  per  cent.,  20  —  at  Placentia  in 
1490  at  40  per  cent.,  20  —  Charles  V.  fixed  it  in  the  low  coun- 
tries at  12  per  cent.,  20  —  fixed  by  law  in  England  in  1546  at 
10  per  cent.,  20 — in  1624  at  8  per  cent.,  21  — in  1651  at  6 
per  cent.,  21  —  in  1714  at  5  per  cent.,  21  —  in  Ireland  the  legal 
rate  of  interest  is  6  per  cent.  21 —  advanced  by  the  new-fash- 
ioned bankers,  23  —  country  bankers  better  paid  by  charging  4 
or  5  per  cent,  on  their  own  notes  than  7  per  cent,  on  the  notes 
of  the  Bank  of  England,  117  — whether  it  regulates  the  rate  of 
profit,  191  —  its  effect  on  the  price  of  land,  190  —  causes  which 
regulate,  190  —  must  vary  in  different  places,  193  —  injurious 
effects  of  a  low  rate  of  interest,  63,  194  —  rate  of  interest 
charged  on  temporary  loans  by  the  bank  of  England,  70.  97  — 
rate  of  interest  paid  on  government  loans,  see  loans  —  rate  of  in- 
terest granted  by  savings'  banks,  see  savings'  hanks. 

Kate  of  interest,  on  temporary  advances,  4  per  cent.,  98  —  allowed 
for  prompt  payments  on  West  India  loan,  98  —  on  temporary  ad- 
vances, 3^  per  cent.,  99  — on  discoimts  raised  to  4J  per  cent., 
101  — on  discounts  raised  to  five  percent.,  101  — on  temporary 
loans  raised  to  five  per  cent.,  102  —  advances  of  on  Exchequer 
bills,  102  —  and  on  East  India  bonds,  103. 

Receipts  and  expenses  of  the  Bank  of  England  in  the  year  ending 
February,  1832,  78. 

Tteductions  in  the  interest  of  the  national  debt,  of  navy  5  per  cent, 
to  4  per  cent.,  59 — old  4  per  cents,  to  3^  per  cent.  60  —  new  4 
per  cents,  reduced  to  3^,  70  —  4  per  cents,  of  1 826  reduced  to 
3^  per  cent.,  95  —  the  first  cause  of  the  panic  of  1825,  63. 

Reform  bill,  during  its  progress  a  run  for  gold  upon  the  bank  of 
England,  84. 

Remittance,  banks  of,  none  in  new  countries,  150  —  are  the  result 
of  extensive  intercourse,  151  —  different  ways  in  which  money 
is  remitted,  151  —  how  remitted  from  London  to  the  country, 
from  the  country  to  London,  and  from  one  part  of  the  country 
to  another,  152  —  banks  remit  by  agencies,  151  —  by  branches, 
152  —  and  by  their  circulation,  152  —  amount  of  remittances 
regulated  generally  by  the  trade,  152 — affected  by  imports  and 
exports,  and  indicate  the  balance  of  trade,  154  —  advantage  of 
branch  banks  in  remitting,  134  —  effects  of  banks  of  remittance 

\  on  the  operations  of  trade,  154  —  effect  upon  the  currency,  144 
—  on  the  prices  of  commodities,  144  —  on  the  revolutions  of 
capital,  155  —  banks  of  remittance  compared  with  banks  of  de- 
posit, 155,  156. 

7?e«#  or  surplus  profit  of  the  Bank  of  England  in  1797,44 — in 
1819,56  —  from  17H8  to  1832,74  —  the  profits  of  each  year 
mav  be  calculated  Irom,  80. 


INDEX.  205 

Rest,  sums  taken  from  to  make  up  the  dividend,  98,  99  —  addition 
to,  100— amount  of,  99.  104-. 

Renciools  of  the  Bank  of  England  charter,  in  the  year  1697,  80  — 
in  1708,  31— in  1713,  32  — in  iTt'i,  37  — in  1764,  10— in 
1781,  41  —  in  1800,  47  —  in  1833,  87. 

Report  of  the  bullion  committee,  50  —  of  the  bank  charter  renewal 
committee,  72. 

Resolutions  of  the  merchants  in  reference  to  taking  bank  notes,  44 
—  of  a  meeting  of  bank  proprietors,  96  —  of  a  committee  of  the 
House  of  Commons  respecting  the  laws  of  usury,  191. 

Resumption  of  cash  payments  by  the  Bank  of  England,  57. 

Ricluird  I.,  first  mention  of  a  yearly  allowance  for  the  interest  of 
money  was  in  his  reign,  16. 

Rome,  bankers  of,  6  —  names  of  their  banking-houses,  6  —  some  of 
their  bankers  receivers-general  and  consuls,  7  —  settled  ac- 
counts sometimes  by  transfer,  6  —  the  loan  banks,  7. 

Rose^  Right  Hon.  Sir  George,  procured  the  Acts  of  parliament  for 
the  establishment  of  savings'  banks,  223  —  his  pamphlet  on  the 
subject,  220,  221. 

Rothschild,  Mr.  N.  M.,  foreign  loans  contracted  by  him,  61. 

Royal  exchanger,  the  office  of,  established  in  the  reign  of  Edward 
in. ,12 — was  farmed  by  king  John  for  five  thousand  marks,  13 — 
fell  into  disuse  in  the  reign  of  Henry  VUI.,  12 —  revived  in  1627 
by  Charles  I.,  12  —  Lord  Mayor,  the  court  of  aldermen,  and  the 
common  council  petitioned  against,  14  —  the  king's  reply  to  the 
goldsmiths'  company  respecting,  14. 

Royal  bank  of  Scotland,  empowered  to  act  as  a  loan  bank,  205  — 
the  Bank  of  England  agent  to,  78. 

Runs  tq)on  banks,  the  first  mentioned  in  English  history,  24  — 
evils  of,  122  — joint  stock  banks  less  liable  to  than  private  banks, 
121  — run  upon  the  Bank  of  England  occasioned  by  the  re- 
bellion in  Scotland,  37  —  a  run  during  the  passing  of  the  reform 
bill,  84. 

Russian  loans  contracted  in  England,  61. 

S. 

Salary,  average,  of  the  clerks  in  the  Bank  of  England,  79. 

Savings'  Banks,  nature  of,  220  —  origin  of,  220  —  classes  of  per- 
sons to  whom  useful,  221  —  acts  of  parliament  relating  to,  223 
—  interest  granted  to  them  three-pence  per  cent,  per  diem,  224 
reduced  to  two-pence  half-penny  from  the  government,  and  not 
to  exceed  two-pence  farthing  to  the  depositors,  227.  229  — 
amount  of  deposits  to  be  received  from  any  one  person,  224, 
225.227.  229 — mode  of  establishing  a  savings'  bank,  227  — 
rules  of  the  Marylebone  savings'  bank,  228  —  an  account  of  the 
number  of  depositors  in  savings'  banks,  in  F.ngland,  Wales,  and 
Ireland,  236  —  compared  with  tlic  population,  236  —  increase  in 


Q9Q  INDEX. 

the  deposits,  237  —  Exeter  savings'  banks,  238  —  savings'  banks 
in  Scotland,  239  —  annuities  may  be  granted  by  savings'  banks, 
239  —  effect  on  capital  and  trade,  253  —  do  not  supersede 
benefit  societies,  253. 

Scie?ice,  banking  is  one,  the  best  way  of  learning  a,  preface. 

Scotland,  rebellion  in,  caused  a  run  on  the  Bank  of  England,  37  — 
bills  drawn  from,  regarded  as  foreign  bills,  185  —  its  commerce 
inconsiderable  before  the  establishment  of  banks,  15  —  its  mer- 
chants have  great  advantage  from  the  system  of  cash  credits, 
202  —  bank  of,  and  royal  bank  of,  empowered  to  act  as  loan 
banks,  205  —  savings'  banks  in,  239  —  the  prudence  and  frugahty 
of  the  lower  classes  of,  how  produced,  239. 

Scripture,  the  money-changers  mentioned  in,  2  —  corn  speculators 
noticed  in,  161  — manna  in  the  wilderness  could  not  be  a  sub- 
ject of  speculation,  161. 

Securities  held  by  the  Bank  of  England,  public  and  private,  from 
1778  to  1832,  74^  —  of  what  they  consist,  76  —  securities  and 
liabilities  during  the  year  1834',  97- 

Securities  in  loan  banks,  214' — in  savings'  banks,  228. 

Seignorage,  amount  repaid  to  the  Bank  of  England,  by  vote  of  the 
House  of  Commons,  101. 

Short  bills  versus  long  bills,  180. 

Silver  coin,  for  several  centuries  the  only  coin  current  in  England, 
11  — loss  sustained  by  the  Bank  of  England  by  melting,  71. 

Six  per  cent,  made  the  legal  rate  of  interest  in  England,  21  — is 
still  the  legal  rate  in   Ireland,  21. 

Sixpenny -pieces,  loss  of  the  Bank  of  England  by,  71. 

Snow  and  Co.,  their  banking-house  established  before  the  Bank  of 
England,  107. 

Solicitors  may  be  licensed  to  act  as  notaries  beyond  ten  miles  from 
the  Royal  Exchange,  187. 

Solon,  his  laws  did  not  prohibit  usury,  4. 

South  American  loans  contracted  in  England,  61. 

South  American  republics,  acknowledgment  of  their  independence 
one  cause  of  the  panic,  64'. 

South  Sea  Bubble,  Smollett's  account  of,  33. 

South  Sea  Company,  an  account  of,  33  —  their  contract  with  the 
Bank  of  England,  34. 

Sovereigns,  when  first  issued,  57- 

Spanish  loans  contracted  in  England,  61. 

Specidation,  in  commercial  produce,  renders  the  exchanges  un- 
favourable, 64  —  banks  of  circulation  accused  of  encouraging, 
1,57  —  the  nature  of,  160  —  no  system  of  banking  can  prevent, 
1(31  — liow  far  it  may  be  promoted  by  banking,  162  —  not  the 
interest  of  bankers  to  encourage,  162  —  cft'ect  of  on  the  amount 
of  the  circulating  mcdiuni,  1()3  —  maybe  carried  on  success- 
fully by  Bank  of  England  directors,  117. 

aSV.  Petersburgh,  a  loan  bank  Ibrmcd  at,  209. 


INDEX.  297 

Stamp  duties,  on  country  notes,  49  —  increased,  49  —  fartlier  in- 
creased, 54 —  composition  for,  67  —  composition  for  on  notes 
and  bills,  69  —  sums  received  iVom  country  banks,  114  —  sums 
received  from  the  Bank  of  England,  69.  78  —  bonds  connected 
with  loan  banks  not  chargeable  with,  211  — legacies  and  powers 
of  attorney  connected  with  savings'  banks  not  chargeable  with, 
224.  232,  233,  234  —  exemption  in  case  of  annuity  societies, 
247  —  and  friendly  societies,  254. 

Stamp  dutij,  no  note,  security,  receipt,  or  other  documents  con- 
nected with  loan  societies  to  be  liable  to,  215. 

Statue  of  King  William  erected  in  the  hall  of  the  Bank  of  England, 
35. 

Statute  of  distributions,  sums  above  20/.  in  savings'  banks  to  be 
divided  by,  224. 

Stanhope,  Earl  of,  his  bill  for  preventing  Bank  of  England  notes 
being  taken  for  less  than  their  nominal  value,  52  —  the  act  con- 
tinued, 53  —  the  act  revived  and  continued,  53. 

Statement  of  the  affairs  of  the  Bank  of  England,  Feb.  29.  1832,  77 
—  of  the  affairs  of  the  London  and  Westminster  Bank,  Dec  31. 
1834,  263. 

Steel  y aril  company  were  a  kind  of  bank  to  our  kings,  20. 

Stock  government,  dividends  are  received  on  through  country 
banks,  112 — and  by  the  Bank  of  England,  148  —  the  Bank  of 
England  first  advanced  money  on  the  security  of,  60. 

Stocks  market,  so  called  from  the  public  stocks  being  placed  there 
for  the  punishment  of  offenders,  209. 

Stolen  notes,  it  is  legally  decided  that  the  bank  is  not  liable  to  pay, 
40. 

Subscriptions  for  government  loans  first  received  by  the  Bank  of 
England,  32. 

Suspension  of  cash  payments  by  the  Bank  of  England,  43. 

Swa7isea,  state  of  the  Bank  of  England  branch  at,  140. 


Tables,  particulars  of  the  permanent  debt  due  from  the  government 
to  the  bank,  38  —  the  government  loans  contracted  during  the 
seven  years'  war,  and  the  respective  rates  of  interest,  40 — the 
loans  contracted  during  the  American  war,  and  the  respective 
rates  of  interest,  41 — the  loans  contracted  in  the  war  with 
republican  France,  and  the  respective  rates  of  interest,  48  — 
the  loans  contracted  during  the  war  with  the  Fren(;h  empire,  and 
the  respective  rates  of  interest,  54  —  the  various  augmentations 
of  the  capital  of  the  Bank  of  England,  55  —  a  list  of  the  various 
classes  of  joint  stock  companies  formed  in  182t  and  1825,  60  — 
a  list  of  the  foreign  loans  contracted  in  England,  61  —  an 
account  of  the  average  amoimt  of  gold  and  siver  bullion  held  by 
the  Bank  of  England  from  1815  to  1832,  74  —  an  account  of  the 


298  INDEX. 

amount  of  the  notes  of  the  Bank  of  England  in  circulation,  the 
amount  of  all  deposits,  the  amount  of  the  surplus  capital,  the 
amount  of  all  securities  held  by  the  bank,  and  the  amount  of 
bullion  in  the  bank  on  the  last  day  of  February,  from  1778  to  1832, 
74  —  the  amount  of  notes  under  51.  in  circulation  on  the  last 
day  of  February,  from  1798  to  1832,  76  —  a  statement  of  the 
affairs  of  the  Bank  of  England,  Feb.  29,  1832,  77  —  the  receipts 
and  expenses  of  the  Bank  of  England  for  the  year  ending  29tli 
of  February,  1832,  78  —  an  acccount  of  the  annual  profits  of 
the  Bank  England  from  1779  to  1832,  79 — the  amount  of 
Bank  of  England  notes  in  circulation,  of  dates  beyond  five,  ten, 
fifteen,  and  twenty  years  respectively,  83  —  an  account  of  all 
distributions  of  profits  made  by  the  Bank  of  England  among  its 
proj^rietors,  84  —  the  liabilities  and  securities  of  the  Bank  of 
England  during  the  year  1834,  97  —  an  account  of  the  number 
of  licences  issued  to  country  bankers,  and  the  number  of  com- 
missions of  bankruptcy  issued  against  country  banks  from  1809 
to  1832,  103 — an  account  of  the  number  of  country  banks  in 
England  and  Wales,  from  1811  to  1818,  distinguishing  each 
county,  111  —  an  account  of  the  number  of  bank  notes  of  all 
denominations  stamped  in  each  year  from  1820  to  1831,  113  — 
an  account  of  the  sums  received  for  stamp  duties,  and  as  a  com- 
position of  the  duty  upon  country  bank  notes,  from  1816  to  1832, 
114  —  proportional  circulation  of  122  country  banks  from  1818 
to  1825,  114  —  a  list  of  the  country  joint  stock  banks  at  present 
existing  in  England,  130  —  a  statement  of  the  affairs  of  the 
branches  of  the  Bank  of  England  from  1828  to  1831,  139  — a 
statement  of  the  affairs  of  the  branches  individually  during  the 
year  1831,  140  —  the  amount  of  the  public  and  private  deposits 
in  the  Bank  of  England  from  1807  to  1831,  149  —  average 
annual  amount  of  bills  under  discount  at  the  Bank  of  England 
from  1795  to  1831,  198  —  the  amount  of  weekly  savings  of  one 
shilling  deposited  in  savings'  banks  for  various  periods,  235  — 
an  account  of  the  number  of  depositors  in  savings'  banks  and  the 
amount  of  deposits  in  England,  Wales,  and  Ireland,  236  —  the 
annual  payments  necessary  to  obtain  an  annuity  of  20/.  for  life, 
251  —  the  value  of  an  immediate  life  annuity  of  20/.  at  various 
ages,  252  —  a  statement  of  the  affairs  of  the  London  and  West- 
minster Bank,  263. 

Temple,  money-changers  in  the  temple  at  Jerusalem,  2 — of  Delphi, 
the  great  bank  of  Greece,  3  —  of  Apollo,  the  chief  depository  of 
the  wealth  of  Ionia,  3  —  of  Olympia,  used  also  as  a  bank,  4. 

Temporary  loans  granted  by  the  Bank  of  England  while  the  funds 
are  closed  previous  to  the  payments  of  dividends,  70.  97. 

Ten  jicr  cent,  made  the  legal  rate  of  interest  in  England,  20. 

Ten  pound  notes  first  issued  by  the  Bank  of  England,  40. 

Threadneedle  Street,  nevv  Bank  of  England  house  built  there,  34. 

Three  per  rents.,  1726,  created  l)y  means  of  a  lottery,  34. 


INDEX.  299 

Three  per  cents,  consols  created  in  1 752,  39. 

Three  per  cents,  reduced  created  in  1 757,  39. 

Thiee  and  a  half  per  cents,  (new),  created  in  1830,  71  — reduced, 
created  in  1824,  60. 

Tokens,  silver,  issued  by  the  Bank  of"  England,  48. 

Toicer  of  London  used  by  the  merchants  as  a  bank,  21. 

Trade,  banking  a  branch  of"  trade,  preface  —  the  Athenians  em- 
ployed their  money  in,  4  —  engrossed  by  the  Lombards,  18  — 
promoted  by  the  circulation  of  15ank  of  England  notes,  36  —  its 
prosperity  promoted  by  country  banks,  68  —  how  affected  by 
the  issues  of  country  banks,  115  —  how  it  may  be  regulated 
by  the  Bank  of  England  directors,  117  —  how  affected  by 
runs  upon  banks,  121 — wherein  banking  differs  from  other 
trades,  111  — influence  upon,  by  banks  of  deposit  and  banks  of 
circulation,  143.  155.  164  —  was  at  first  carried  on  with  ready 
money,  150  —  how  it  is  facilitated  by  banks  of  remittance,  154 
—  sometimes  is  nearly  allied  to  speculation,  162  —  effects  of, 
on  the  foreign  exchanges,  168  —  facilities  granted  to  by  bills  of 
exchange,  176  — bills  arising  out  of  trade,  179. 

Trades'  Unions  cause  deposits  to  be  withdrawn  from  savings' banks, 
237  —  trades  and  occupation  of  persons  who  borrowed  loans  of 
the  friendly  loan  society,  218. 

Transfer,  debts  at  Rome  paid  by  a  transfer  in  the  bankers'  books, 
G  —  at  Venice  by  a  transfer  of  bank  money  or  stock,  9  —  and  in 
Holland,  10  —  the  principle  of  transfer  early  applied  to  banking, 
146  —  economises  the  use  of  the  circulating  medium,  147  — 
might  supersede  money  altogether,  148  —  transfer  of  debts  by 
means  of  bills  of  exchange,  175  —  transferring  capital  from  one 
employment  to  another,  how  effected,  178  —  transfer  of  capital 
from  one  nation  to  another  may  be  caused  by  an  operation 
on  the  currency,  169  —  transfer  of  deposits  in  savings' banks, 
222. 

Transmission  of  money,  how  effected,  25  —  see  remittance. 

Trench,  Mr.,  his  remarks  on  loan  banks,  212. 

U. 

Unclaimed  dividends,  a  proposal  to  render  them  available  to  the 
public  service,  42. 

Usury,  prohibition  of,  increases  it,  19  —  prohibited  by  the  Mosaic 
law  except  to  strangers,  15  — allowed  by  the  law  of  Solon,  4  — 
practised  by  Jews  and  Lombards,  16  —  change  in  the  meaning 
of  the  word,  21 — cases  in  which  bankers  are  not  guilty  of, 
though  they  receive  more  than  legal  interest,  148. 

Usury,  loan  societies  may  charge  five  per  cent,  at  the  time  of 
granting  a  loan  without  being  subject  to,  215. 

Usury  laws,  bills  not  having  more  than  three  months  to  run 
exempted  from  their  operation,  91  —  may  have  been  useful  in 
former  ages,  189' — resolutions  of  a  committee  of  the  House  of 
Commons  respecting,  191. 


300  INDEX. 


Vansittart,  Mr.  (now  Lord  Bexley),  his  resolutions  in  opposition 

to  the  bullion  committee,  52. 
Vaughan,  R.  W.,  the  first  man  who  was  hanged  for  forging  Bank 

of  England  notes,  tO. 
Venice,  the  bank  of,  9  —  stock  transferable,  9  —  bills  of  exchange 

payable  only  in  bank  money,  9  —  debts  paid  by  transfers,  9. 

W. 

Wales,  savings'  banks  in,  236. 

Walpole,  Sir  Robert,  drew  up  the  bank  contract,  33. 

Weekly  accounts  required  to  be  sent  from  the  Bank  of  England  to 
the  chancellor  of  the  exchequer,  and  an  average  of  tlie  preceding 
three  months  to  be  published  monthly  in  the  London  Gazette, 
91 — amount  of  weekly  savings  of  one  shilling  for  various 
periods,  235. 

Weight  oi  512   10/.  Bank  of  England  notes,  40. 

West  India  loan,  conditions  of,  98  —  interest  allowed  for  prompt 
payment,  98. 

William  III.,  his  statue  in  the  hall  of  the  Bank  of  England,  35. 

Wrotesley,  Sir  John,  chairman  at  a  meeting  of  country  bankers, 
and  formed  one  of  a  deputation  that  waited  on  Lord  Goderich, 
68. 

Wills  made  by  purchasers  of  small  government  annuities,  regula- 
tions respecting,  248. 

X. 

Xenophon,  his  plan  of  a  joint  stock  bank,  5. 


TTIK    END. 


5  26  1 


London : 

Printed  by  A.  Spottiswoodk, 

New-  Street-  Square. 


'if^     1.U5  Ai\lj£.J-i:3 


UNm.  f  CALTFOT^NTA 


/^ 


3  1158  00138  2489 


UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


AA    001  100  708    5 


mmi