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operate with sufficient force on the minds of men, to deter thein from the pursuits of immediate advantage, and I know not why it should be expected that the risk of loss of fortune, which does not prevent improvidence in the pursuits of the merchant or manufacturer, should secure invariable caution and good management in banking. But why, it may be said, endeavour to secure the trade, of banking, from the vicissitudes to which others are exposed ? Because the public have a deep interest in the stability of banks, and none, or next to none, in the fluctuation of prosperity in other trades. The failure of the merchant affects but comparatively few individuals ; the failure of a bank spreads distress or ruin amongst thousands. How, then, shall we secure that stability of banks essential to the welfare of the community? The principle of responsibility has failed; to what other shall we resort ?' To one which, if fairly and fully brought into operation, would go near, I cannot but think to the attainment of the object in view,I mean the subjecting banks to the constant and jealous vigilance of the public.
This may be effected by a threefold process. In the first place, I would have chartered banks, with limited liability of the shareholders, that is, -so that all persons dealing with a bank should be aware that they had no other security for payment than the assets of the corporation and the prudence with which its concerns were managed. By this
provision we should at once put an end to the spurious credit always to be obtained by the combination of many individuals, although the credit of each may be separately tasked to the utmost.* In the second, I would give a charter solely on condition of the whole capital of the bank being fully paid up; and this mainly with the same view as I would confer limited liability, viz. in order that the credit a bank could obtain should be commensurate only with the funds that are, and not with those that are not, immediately available. It should never be forgotten that the great object with respect to banks is to secure their immediate rather than their ultimate solvency. It is the stopping payment by a bank which is so disastrous to the community : whether it does or does not, after a lapse of years, pay twenty shillings in the pound, is comparatively of little importance. Of the sixty or seventy country banks which stopped payment in 1826, all, or by far the greater part, paid their creditors in full; but the expectation that they might do so did not prevent, as it ought not to have prevented, Parliament from taking measures to prevent a recurrence of the calamity.
* There is no one more certain inference to be drawn, either from the evidence given before the “ Joint Stock Banks" Committee, or from the events which have occurred since the close of the inquiry—than that the element in the constitution of these bodies, referred to in the text, has been the main cause of the temptations to which they have been exposed, and the disasters they have sustained.
A capital not paid up, like the unlimited responsibility of shareholders, gives the appearance but not the reality of security. No call on shareholders will ever be available as a resource at a time of pressure. A moment's reflection shews that it could not be so, and experience confirms the truth of the supposition. I do not believe that an instance can be given among the many cases of embarrassment of joint-stock banks, of assistance being thus procured. I doubt whether an instance can be found even of the attempt being made, certainly it was not in the memorable case of the “ Northern and Central Bank of England," which became embarrassed in the autumn of 1836, and in the winding up the affairs of which the Bank of England intervened on the express ground of the wide spread ruin which a suspension of its payments at that juncture would have produced. That association consisted of 1,200 members, many of them persons of considerable reputed property (they were said to be worth, in the aggregate, ten millions,) and yet it was distinctly stated by the Chairman of that Bank to the Committee, that the Directors never received the offer of assistance from any shareholder; and that during months of gradually increasing difficulties, it was never even attempted to procure funds by a call on the proprietary.
Lastly I would insist on the utmost publicity of accounts. It has been said, that such publicity would be of no value that the accounts would
never give a true impression of the state of any bank. I do not say that, where there was the wish to deceive, that the real state of a bank might not partially, and for a short time, be concealed from the public; but I do affirm, that the periodical production might be required of such accounts as would render continued deception impossible, and enable any one interested in the stability of a bank, whether depositor or shareholder, to form a shrewd guess at the condition of its affairs. Supposing it were a condition of bank charters, that statements specifying the respective amounts of liabilities and assets, with the main particulars of each--on the one side the deposits on demand and for terms, bills accepted, credits given; on the other the amounts held of cash, notes, public funds, specifying the quantity of each, bills good and overdue, bad and doubtful debts, in addition to being submitted to half-yearly meetings of proprietors were pablished in the public papers of the neighbourhood where the bank was established. It would be impos. sible to falsify. them without leading to suspi. cion; and if they were true, my readers, I think, 'will agree with me, that gross 'mismanagement of a bank could scarcely continue. By the two former provisions stated, the vigilance of the public would be directed to the proceedings of banks-by the latter its exercise would be facilitated, and the effect of all would be greatly to increase the chances of good management. : .. They would yet further tend to this result by
another process; I mean by greatly augmenting the inducement to persons of fortune and character to become connected with such institutions. That the risks at present to be encountered, do operate to prevent such persons from holding shares of banks, is as notorious as it is natural. It is, indeed, rather matter of surprise that, after the late disclosures, and with a knowledge of the present state of the law, any one having anything to lose should become a proprietor in a joint-stock bank: but banks, constituted as I have suggested, would gradually enrol among their members a very large proportion of the wealth, intelligence, and respectability of every part of the country. I would not insist on all existing banks accepting charters; but I would give them to all banks willing to comply with the conditions; and I believe that banks, so constituted, would soon supersede all others.
I know not whether it be worth while to anticipate the objection, that the constitution of the American banks is nearly of the character above stated, and yet has failed to secure that country from monetary disturbance. It might be replied, in the first place, that the constitution of the American banks does not entirely fulfil the conditions required; the responsibility, although limited, extending beyond the capital subscribed ; and the publicity of accounts not being nearly sufficient : and, in the next that, such as it is, it has had the effect of creating a system of banking, very far su