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large class which courts of justice would much prefer to be spared deciding ; but any one who will consult the reports of the case, and weigh the facts and arguments, and study the decision, will have little difficulty in concluding justice to have been done, and not to have been attainable in
other way. Some familiarity with the determinations of the courts on banking questions has led us to the opinion, that the great mass of them are capable of being shown to rest on sound principles, and to have been carefully decided; and that such of them as present at first sight an aspect of harshness upon the side adjudicated against, will invariably be found to wear that appearance solely by reason of the necessities of the particular combination of circunstances involved ; justice and conformity to the requirements of the general law being otherwise unattainable. One thing may be alleged with certainty; no layman can deal with, or canvass points of banking law to any useful purpose, without unceasingly bearing in mind that what is called the common-sense viewwhich so often means only the first sight, the casual, superficial view—but seldom comparatively coincides with the view which research and inquiry, conducted upon a circumspect and cautious reference to all the circumstances of the case, and with a knowledge of what has been found to be right in former instances of a similar character, ultimately develop. Mere common-sense cannot determine the justice of legal conclusions one bit the more than common-sense can determine the figure of the earth, or prove the circulation of the blood.
With respect to the banking legislation of 1844, many more and stronger objections have been advanced, and perhaps maintained. The Bank Charter Act, it has been urged, is a fairweather measure, operating only in periods of tranquillity; but when seasons of pressure and panic arrive, requiring, for the salvation of commerce and the peace of the country, to be suspended-in fact, violated—and acts of indemnity to be passed for the security of all who are parties in the misdemeanour. That the necessity for two instances of such breaches of the law should have arisen in the short interval which has elapsed since
its passing, is undeniably a startling circumstance; and though we will not undertake to say that it is as undeniable, yet it must be said at the least to be probable, that the result of the late parliamentary investigation has been to advance the cause of the opponents of that measure. The principal charges against the act of 1844 may be fairly presented in a condensed form, thus:There have been above fifty changes in the Bank of England's rate of discount (the Bank rate, it is needless to say, measures the rate of the general money market). Fluctuations in the rate of discount never occur without affecting trade; low rates produce excessive speculation; high rates depress prices. Excessive speculation leads to a foreign drain for bullion, and the Bank on that raises the rate of discount, in order to counteract the tendency of the bullion to flow out of her vaults. As the drain continues, the rate is still further raised. Bankers and merchants throughout the country, finding from the Bank returns what is the state of the reserve of unemployed notes and bullion, and marking also the situation of the exchanges, begin to feel that one of those periods of pressure is probably at hand, of which a continuous drain on the bullion in the Bank has ever been a forerunner; and therefore begin to contract their operations, to draw together gold and Bank of England notes—to hoard, in fact. The result is disemployment of labour, scarcity of money, the making of payments by means of bills of exchange, since gold and bank-notes are not readily to be had. These bills are sent up to London for discount in unusual numbers from the great centres of tradethe cotton and wool trades especially-aggravating the pressure for discount. The Bank of England, besides raising the rate of discount, has by this time diminished the echéance of bills ; thus rendering it still more difficult to obtain money. At length the evil rises so high that solvent houses, presenting perfectly sound commercial paper, cannot get discounts; or the period of the inconvertibility of the bill of exchange is reached, confidence is gone, and panic has set in; and the only remedy is the government letter, authorizing the Bank of England, by means of violating the statute, to produce an unlimited supply of bank-notes
to meet the public wants, and allay the general apprehension. It is to be observed that the mode of payment by way of bills and drafts on London, is resorted to so extensively in times of pressure, that in 1857 probably sixty per cent. more debt was paid in this way than is the case in the ordinary normal ştate of trade; and there is, connected with this, another fact, which accounts for a considerable amount of hoarding of Bank of England notes and gold in the hands of the country banks of issue; and explains why such hoarding begins at an earlier point on occasions of apprehended pressure than it otherwise would do, thereby accelerating the crisis. It is this :—The Bank of England absolutely refuses all discounts to a note-issuing banker upon any terms whatever. Rothschilds' bill, even at seven days, presented for discount by a country banker who issues his own notes, is refused discount.
The prohibition extends even to advances upon exchequer bills. The banks of issue, of course, feeling that they have no one to look to but themselves in moments of pressure, commence strengthening their reserve by hoarding gold and Bank of England notes, upon the first symptoms of danger becoming discernible in the commercial horizon. That the immediate effect of commercial anxiety, incident upon the rise of discount at the Bank of England, is to swell the number and amount of the bills of exchange which come up to London for discount, is apparently quite certain; 8 and it also appears to be well made out, as one of the ultimate effects of a crisis, that even first class paper becomes practically inconvertible. These matters become of immensely more importance and significance in the eyes of those who are aware how largely bills of exchange enter into and form a part of that wonderful mechanism, the circulation of this country. There are also some
See Evid., pp. 192, 194. · See Evid., pp. 193, 194, 376, Q. 5631, 3 See Evid., pp. 331, 333, 335, 340, 341, 382, 383.
* See Evid., pp. 150, 151, 152, 153, 161, 174, 193, 194, 331 ; Q. 4978, pp. 333, 336; Q. 5062, p. 341.
minor points of objection to the operation of the act, which we will not now consider.1
With respect to the Joint Stock Banks Act, a great deal of invective has been indulged in, betokening that excited state of the passions in which it becomes unsafe to rely implicitly on the statements advanced; but, apart from that, there can be no question, vast benefits, together with some evils, have followed from the establishments which have sprung up under that legislation. Next to locomotion, and before insurance, the joint stock principle has probably been most largely applied to bank
any species of commercial enterprise. The general success of these banks hitherto is marvellous. The London joint stock banks are considered to hold in deposits at call, or at a few days' notice, upwards of forty millions sterling; the London and Westminster Joint Stock Bank holds upwards of thirteen millions sterling. It is stated that these enormous amounts are formed by the aggregating of small sums, which were never deposited in banks before, belonging to small shopkeepers, farmers, servants, &c., who, for the first time, have been tempted to keep a banker by the interest which these banks pay upon their deposits. The whole forms a phenomenon most striking, and most attractive for examination. But at present let us see what are the objections which the mercantile world allege against the joint stock banking legislation. Now, the main complaint is this—The absence of adequate fulness in the periodical statements of the accounts, it is alleged, leads to great evils. The law has left this matter, it is said, too much at large. Every one ought to be enabled to tell from the published accounts exactly what is the real state of the bank in each year, and what is their course of trading, by a comparison of the accounts year by year. For instance, the accounts ought to state every half-year the amount of the overdue bills on hand, and the probable amount which
1 See Logic of Banking, pp. 335, 448, 454, 475, 476_486.
* In all probability the sums at present insured in the United Kingdom amount to, if they do not exceed, £200,000,000 sterling.–Edinburgh Review, January, 1859, p. 37.
they would realize; so that, if it were found that the bank had £200,000 of overdue bills as its usual sum under this head, but that in some one half-year's account the sum stood at £500,000, the circumstance would attract attention, and lead to inquiries being made by the proprietary, who might thus, by means of an improved form of account, be enabled to exercise a real and beneficial check upon the management of the business. As the existing law stands, these periodical statements of the affairs of joint stock banks, though they may be framed entirely in conformity with it, are not only, it is considered, not sure guides to the public as to the real state of the banks, but are absolutely fallacious. Now, there seems to be no adequate reason why this defect should not be altered without delay, provided it could be effected, as the plans suggested seem to show, without disclosing the state of particular accounts, and so violating the confidence which must and ought to subsist between banker and customer. So long as this cardinal object was secured in full integrity, there could be no valid ground on which the banks could object to a full statement of their transactions being communicated at short periods to their shareholders. The existing enactment on this matter, it will be remembered, is 7 and 8 Vict., c. 113, s. 4, providing that every deed of partnership or settlement shall contain provisions for the publication, once at least in every month, of the assets and liabilities, and for the yearly communication to every shareholder of the auditor's report of a balance-sheet and profit and loss account. But what are assets? what are liabilities and what is the value of the auditor's report as the law at present stands ? All these points are, in fact, far from settled; and some legislation seems to be indispensable, either to explain what shall be taken as assets and what as liabilities, or altogether to alter the requirements in respect of these accounts, by insisting on such a degree of fulness in them as would enable persons, by reference to first
1 See Eviden of Mr. Kirkman Hodgson, M.P., Evidence, p, 250; and see pp. 134, 135, 316, as to this, and as to modes proposed for improving the published accounts, so as to convey more specific information.