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notions having, but a few years back, prevailed among practical men; whilst the judges, in their decisions on banking questions, have never swerved from one line, the consequence of which is, that—the line having been on the first instance drawn with admirable truth-this head of law exhibits less of oscillation, and overruling, and variety of opinion and dicta, than perhaps any other of equal extent that can be mentioned. We believe the gratitude of the country is due in an especial manner to our judges for the enlightened views, the steadiness, and the scrupulousness with which, ever since questions of this description began to appear in the courts, they have administered the laws regulating the relations of bankers with their customers.
In strong contrast with this uniformity of the law, stands out the tenacity with which popular opinion—including in the expression, not merely the hastily adopted sentiment or belief of the general public, but the settled conviction of the business classes, the practical men, respecting these relations—has been adhered to by them until within quite a recent period. More than one commercial panic was attributed to the over issue of their notes by the country bankers, which was said, by unduly increasing the currency of the kingdom, to raise prices, and operate disastrously on the foreign exchanges, and lead directly to that state of collapse of trade, and general withdrawal of confidence in all transactions, which constitutes what is called a panic. Now, the best authorities among the practical men (Mr. Weguelin, Mr. Hubbard, and others) tell us--and no person comes forward to deny it, because the statement is rested on practical details which cannot be questioned—that an excessive issue of bank-notes by the banks of issue is impossible in the nature of business; and so the conclusion which was arrived at by the Bullion Committee of 1810 is at length the received doctrine,' and very respectable opinions have been given, that so far from the increased issues of the country bankers causing increased prices of commodities, it is the
1 See Evid, before Committee of 1858, on the Bank Acts, pp. 345, 378, 379, 35, 180, q. 2619, 2620.-Rep. p. 25. Logic of Banking, pp. 208, 212, 353, 394, 463, 496, 502, 503.
rise in prices that causes for a time any increase in the country bank-note circulation which is ever observable. As regards the possibility of a banker materially increasing en permanence his note circulation, the question, it might seem, would have been at once disposed of, by adverting to the general legal relation between a banker and all his customers, whether note-holders or depositors with him, which the courts have always asserted, without any shadow of changing, to be that simply of debtor and creditor;? and this being once ascertained, the negative of the above question seems to follow, because the law affords no means by which a debtor can increase at his pleasure the number of his creditors, or the weight of his liabilities, and especially not in a case like that of a banker and customer, where each debt is payable on demand.
That portion of the commercial law which regulates banking, seems, as regards the great body of it, to be satisfactory to the public. It is true there is a large school of political economists, including many practical men, who complain of the operation of the Bank of England Charter Act of 1844 (7 and 8 Vict., c. 32), and others who dissent from the principle of the Joint Stock Banks' Regulation Act of the same year (7 and 8 Vict., c. 113), and many who deprecate the policy of applying the principle of limited liability to banking associations. A very small, indeed scarcely noticeable, amount of objection is felt to those parts of the law, touching this subject, which have been built up by judicial decision. The experience of both the Committee of the House of Commons on the Bank Acts which sat in 1857, and that which sat last year, shows this. Witnesses were examined before both on a great variety of heads, but extremely few material complaints, applicable to those parts of the law, were brought forward. The principal instance of this kind occurred in the course of the evidence before the committee of last year. It was this :—The Bank of Ireland manages that portion of the public debt, the dividends on which are payable
See Grant's Law of Bankers and Banking, p. 5—the cases collected. * See Evidence, &c., pp. 286, 287, 288.
in Ireland. An incorporated body, the trustees of Evans’s Charity, in Kilkenny, held in their corporate capacity some stock. Their secretary, with whom their seal was of necessity intrusted, affixed it without authority to powers of attorney for the transfer of portions of this stock, which he appropriated, forging the names of persons purporting to be attesting witnesses to the due fixing of the seal; and the Courts in Ireland and the House of Lords held that the Bank was liable for the sum lost, and for interest, amounting on the whole to between £9000 and £10,000. But the apparent hardship of this result vanishes when the matter comes to be scrutinized. The case is one of those which occur so frequently in this department of law; and the ratio decidendi in which is involved in solving the question on which of two innocent parties is the loss to fall. Here the Corporation (that is, practically the objects of the Charity), and the Bank of Ireland, are the parties. The question, then, in this case, as in all others of the same class, is, which of the two innocent parties acted so as to open the way to the fraud being effectuated ? Not the trustees, for they were not shown to have been guilty of any laches, or neglect of duty in any respect. But how was it with the Bank? They were bound to see that the deed presented to them for the transfer of the stock was a valid document—that is, that it was the deed of the body from whom it purported to come; to ascertain that it was not sufficient to observe that the seal affixed to it was the common seal of the Corporation-yet that was all they did. They omitted to inquire as to the genuineness of the attestations (made necessary by statute), and so let in the fraud, and the loss was properly cast upon them, according to the universal rule in all cases, where, from the circumstances that have occurred, it is inevitable that a loss must be suffered, and the only parties upon whom it can fall are innocent of the fraud, or any evil intention contributing to the loss. It may be that the case is one of that
I See Bank of Ireland v. Evans's Trustees, 3 Irish Law Report (N. S.) 280, S. C. 5 H. Lds. 389. Also, Youny v. Grote, 4 Bing. 259; Marsh v. Keativg, 2 Cla. and F. 264; Bridgman v. Gill, 24 Beav. 302.
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 any 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 circumstances 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
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 board, 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