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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 1.844 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 trade—

the 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 eckéance 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 b9J1k'11°'1<‘-B


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 state of trade;1 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 numberand amount of the bills of exchange which come up to London for discount, is apparently quite certain;” 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

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minor points of objection to the operation of the act, which we will not now consider.‘

\Vith 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 insurancef the joint stock principle has probably been most largely applied to"banking of 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

‘ 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.—Edinbur_qh

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 thiis, 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

‘See Evidence 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.

principles, to form a judgment for themselves of the transactions of the company, that had resulted, or were in the process of resulting, in assets on the one hand, or liabilities on the other. As to the audit, we shall have a word to say by and by. In the mean time, one observation must strike every one. If the accounts rendered by this class of banks, in strict accordance with the provisions of an act of Parliament, fail to convey any practical quantity of information to the proprietors or the general public, assuredly they cannot be supposed at present to carry into effect the intentions of Parliament. The annual report, it must be remembered, though in form the report of the directors to the general meeting or to the company, is in fact, and in legal effect, the statement of the company as a body, and the company as a body is responsible for the truth or falsehood of the allegations contained in it-a. principle from which very grave consequences may follow. Nor are instances wanting in the courts in exemplification of this, particularly as regards questions of contribution from shareholders on winding-up.‘ Another reason why it seems to be imperative on Parliament to make provision for the publication of accounts in such aform as shall be effectual to let light into the real state of the company’s affairs is this :—By the Joint Banking Companies’ Act, 1857 (20 & 21 Vict., c. 49. s. 3, 14), the provisions of the Joint Stock Companies’ Act, 1856, for the appointment of inspectors by the Board of Trade to examine into the affairs and report thereon, &c., is made to extend to joint stock banking companies, but only upon the application to that department of one-third, at the least, in number and value of the shareholders in the company. Now, in the first place, it is next to impossible, with the present accounts rendered to him, for a shareholder to form any judgment as to whether a case has arisen for a government inspection or not; and it must be remembered that any such proposal, except on the most ample and pressing reasons, would

‘Ex pane Brockwell, 26 L. J. Chane. 859-863, where see the previous decisions examined ; also Ex parte Duranty, 28 L. J. Chane. 37 ; Ex pm-te

Bigge, id. 50.

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