The Sun.
London, England, 1832-09-10 00:00:00

LONDON, MONDAY EVENING, SEPTEMBER 10, 1832.

speak of every thing with an immense degree of caution,
because it is only once in seven years that we have a peep
at the fact ; but we understood that at the time the Bank
lent the London-bridge Company a million of money, they
had many millions of deposits. I contend that their hav-
ing mint' millions of deposits was an evi knee of an exten-
sive circulation, and their lending the London-bridge
Company a million of money was calculated to increase
that excess. _ _ _

You mean, that deposits are made by bank-notes, and
that the return of bank-notes for the purpose of deposits
is the first natural effort of the public to diminish a super-
abundant currency?—lt is thereby evident there is too
much currency ; and if the deposits had been called out
and employed as in 1825, in all those adventurous specula-
tions which then ended in so much destruction, if the per-
sons that had claims upon the B ink for those deposits had
put them in activity, the presumption is, that it would
have produced some evils similar to those that arose in
18.25, and the Bank then, to have prevented a recurrence
of danger to themselves, would have resorted to a sudden
contraction, which must have ended in the ruin of the
parties who had engaged in the speculation.
Then are you of opinion that the Bank ought not to
wait, as a rule for diminishing its issues, till the action of
the demand for gold upon it takes place?—l think that is
the last stage; it is something like setting a house on fire,
and then-finding the necessity of putting it out.
Do you mean that wheat-the deposits in the bands of the
Bank are increasing they ought to contract their circula-
tion, and that when the deposits in the Bank are dimi-
nishing they may more safely expand it?—When the de-
posits are increasing they ought to contract, considering it
a sign of superabundance; but when the deposits with the
Bank are diminishing, the circulation is increased by the
action of drawing out, and therefote it does not follow
that the Bank should then also take other means to expand
the currency; it may then likewise appear needful for the
Bank to contract, to prevent any ill effect from the in-
crease occasioned by the drawing out of the deposits.
Supposing the deposits in the Bank diminished between
February 1825 and August 1825, to the amount of nearly
4,000,000 L, should you conceive that would have justified
them in increasing their issues at that time, notwithstand-
ing the exchanges were against the country ?—I think it
possible that other causes might operate, and that other
causes did operate at that time that would have made it
improper for them to have increased their issues, because
it is certain that the deposits must have decreased at that
time, and the gold was decreasing at that time, and that
was a sufficient reason why they should not increase their
notes.

Would not a spirit of commercial enterprise cause a di-
minution of deposits of such a nature, as not to be an index
of the necessity of diminishing the currency ?—lf by com-
mercial enterprise is intended a speculative increase of
prices, that would be an indication of a redun lant cur-
rency ; hence it follows that in such a case the Bank
should draw in their notes as fast as the depositors draw
them out.

In point of fact, can any other conclusion be drawn
from a great increase of deposits, than that of a redundant
currency ?—As a general rule, I should think a large in-
crease of deposits would be an indication of a redundant
currency.

Is not a fall of the foreign exchanges the consequence of
a redundant currency ?—Yes, as a general rule.
Then if the Bank govern themselves by the foreign ex-
changes they overlook the cause of the fall of the ex-
changes, which cause itself ought to govern them ?-1 du
not intend to say that the Bark Directors, in governing
themselves by the fall of the foreign exchanges, necessarily
overlook the cause, but in so governing themselves entirely
they delay their controlling cheek too long.
Is it not a matter very difficult to foresee when the
foreign exchanges are likely to turn against the country ?
—The difficulty I conceive to be considerably increased by
the existence of foreign loans; formerly when there were
no such things as foreign loans, it could be much more
easily foreseen, because the trade would be much more
easily ascertained, but now a❑ immense number of ships
would be unequal in value to one parcel, either consigned
to or received by Mr. Rothschild ; it must he obvious that
when such an immense quantity of these securities are
afloat, which are negotiable abroad and also here, it must
affect the question of the exchanges, so as to make it much
more difficult to ascertain or anticipate, than before those
loans existed.

If there is great difficulty in foreseeing what the state
of the exchanges will be at any approaching period, would
not that render such speculations upon that event very
dangerous as a rule for the management of the issues of
the Bank; for example, would it be safe for the Bank in
the month of February to regulate its issues by what it
apprehended the foreign exchanges would be in the month
of March ?—I conceive, to lay down any one principle,
and rigidly adhere to it, in a case of so much difficulty,
must be very obviously exposed to mistakes, because one
thing may arise to counteract another ; that which may
appear probable to take place at a future period may in
practice be prevented by the intervention of some other cause.
Are the causes which operate upon the foreign exchanges
so easily to be ascertained as to enable any commercial
body to regulate their conduct by the observation of those
causes?—lt must be very obvious, as it occurred to me in
one of my former answers, that kir. Rothschild's opera-
tions, which are so enormous, and which must necessarily
be conducted with great privacy, must increase the diffi-
culty of anticipating the probable state of things, so as to
regulate the conduct of any bank of issue with perfect secu-
rity, by any one determined principle.
You have stated that the Bank ought, when their depo-
sits are increasing in amount, to curtail their circulation ;
are you of opinion that they ought to observe that course
management, when under such a state of things the
foreign exchanges are in favour of this country, and gold
is coming from abroad ?—I stated the reasons ; and I
should rather re-state my reasons, that if the course of
conduct which the Bank profess to have observed, as to
regulating their issues strictly by the foreign exchanges, if
that is a safe course for themselves, I think they ought to
begin at an earlier stage, for the sake of the public ; if,
when they perceive a large quantity of unemployed circu
lation, by the amount of their notes returned to them as
deposits, they take no notice of it till those are drrawn out,
and the exchanges are turned very much against this
country by the speculations entered into in the operation
of which they are drawn out. The Bank thus, for its
own safety, ruin the speculators without notice, and the
people engaged with them.

If the deposits are placed in the Bank by the payment
in of its own notes, does not that operation, pro (auto,
diminish the amount of the circulation of the Bank ; for
example, if a person deposits in the Bank 10,0001. in
Bank of England notes, does he not diminish the circula-
tion of the country to the amount of 10,0001. ?—Ten
thousand pounds are deposited in the Bank of England,
and there are 10,000/. leas in circulation.
If, then, the Bank, looking at their liabilities, consider
the deposits as part of their liabilities as much as they con-
sider the circulating medium, is not that a correct view of
the case ?—Certainly.
Do not the deposits of the Bank of England, and of
every banking establishment, form a source of profit to
those banking establishments by the use of those depo-
sits ?—Yes.

Is it not therefore a sound principle of banking to em-
ploy the deposits of their customers either by the discount
of bills, or by the purchase of Government securities ?—lf
by the question, whether it is not a sound principle of
banking, it is meant whether it is not the usual way of
making money, I say yes, but it is a most unsafe principle
fur the Bank to go upon, because the Bank of England
ought to take into account whether by that employment
they will be enabled to sustain their credit, provided their
credit is put to the test by any extraordinary circum-
stances ; and that constitutes one of the great objections
that I have to the present system of the Bank of England.
The position taken in this question is one which I think
highly objectionable ; that sort of employment of the de-
posits with banks which is proper on the part of any other
bankers, is entirely improper and unsafe to the public on
the part of the Bank of England, and creates an amount of
danger that is incalculable.
It appears to be your opinion that if the circulation of
the country without the Bank is diminished by the pay-
ment in of bank. notes to increase the deposits of the Bank,
it is not proper for the Bank to make use of any means in
older '
to increase the circulation again to the same amount
as it was before should think it very unsafe, in refer-
ence to the stability of the Bank.
If, then, the Bank do not endeavour to increase the
amount of securities in their hands in consequence of the
increase of their deposits, you would think that a prudenr.
course of management ?—My great objection is in the
Bank choking themselves up with such securities as they
cannot avail themselves of in case of need. If they can

employ their money in available securities, then, of course,
there can be no objection ; but if they employ their money
in securities that are not available in case of need it is ma-
nifest there must be corresponding danger.
Do you think there is any objection to the Bank in conse-
quence of the increase of their amount of deposits increas.
ing the amount of their available securities ?—lf the se-
curities could be available, it does not occur to me there
can be any danger, but then I scarcely know what is
meant by available securities.

By available securities are meant Exchequer-bills and
other commercial securities ?—There are periods when
Exchequer-bills would not be available in the hands of the
Bank.

Why would not Exchequer-lulls be available in the
hands of the Bank of England ?—Just for the reason that
they were not available in December, 1525.

Are you aware that the Bank of England sold a very
considerable amount of Exchequer-bills in the course of
last year, and also the early part of this year ?—I do not
know how I should necessarily be aware of it. That con-
stitutes another of my objections to the Bahl( system. ' I
do happen to have heard it as a great secret, but I am
one out of a thousand or five thousand persons who
happened to be aware of it ; but then I, say that such a
system as that is not safe and beneficial to the public.
How do you reconcile that fact with your former an-
swer, that-Exchequer-bills are not available in the hands
of the Bank of England ?—They were available last year,
because we had not reached such a crisis as in 1825 ;
but if, for instance, any great claim was made upon the
Bank for gold, and the Bank was obliged to contract its
circulation very suddenly, they would not be available, be-
cause there would be no market.

Then practically at the close of 1825 you did not con-
sider that Exchequer-bills were available in the hands of
the Bank?—lt is a matter of fact, that for a few hours
we could not get money for Exchequer-billF, or for India-
bonds, or for stock.

Then upon that principle you could not say that there
was any commercial security that was available ?—Not at
such a period as that.

• Then at the very period when the Bank of England
have most occasion for making Exchequer-bills available,
they are not able to do to?—They are not.

You have stated that an extreme case may arise when
no commercial security is available, would that be any
reason for the Bank not laying out its money in any se-
curity at all? —I conceive that if the Bank was managed
with safety to the public intorests, its profits must neces-
sarily be small ; and that to be managed upon a principle
that is safe to the public interests, it must not employ its
fluctuating deposits as other bankers are necessarily obliged
and fairly entitled to employ them, but mast have a special
reference to their capability of paying in gold when called
upon.

If it should be the rule of the Bank never to increase the
sum-total of the securities in their hands, is not that one
mode of effecting that object ?—lt is.
What should you consider the most available securities
in a time of a run upon the Bank ?—The most available
would be bills of exchange, because they expire, as a mat-
ter of course, at a fixed day.
You consider that that is the most proper investment
for the Bank .o make of its capital ?—I do.
Is the mode in which you would recommend the pro-
fits of the Bank to be reduced, in order to give additional
security, by increasing considerably its store of bullion ?
—I thick that whenever there is an increase of its wealth
it ought to be manifested by an increase of bullion in the
bands of the Bank.

May not the Government, in making, if it should be
disposed, a new bargain with the Bank, fairly claim that
the rate of profits of the Bank should he reduced, by re-
quiring it to increase its store of bullion beyond what it
has hitherto been ?—I think that one of the evils of the
present system would be cured by that regulation.
You have stated that you think it a safe course for the
Bank to pursue, to keep the sum total of the securities in
their hands as nearly as possible at the same amount?—
Yes ; and I think so for a very great variety of reasons.

If, then, an increased demand for commercial discounts
is made upon the Bank, would you prefer that they should
refuse to discount the bills ; or, having discounted them,
bring into the market a different class of securities which
they hold, in order to prevent the securities accumulating
in their hands ?--I should think it would be desirable
that they should bring in a different class of security into
the market, and employ their capital in that species of se-
curity that appears to be the most consistent with banking.
If they sell Exchequer-bills, do they not take out of the
public an equivalent amount of currency?—Certainly.
Do they not, by taking out of the hands of the bankers
an equivalent amount of currency, distress the money-
market to that extent?—.lf there is no more than suffi-
cient beforehand.

Then, where is the difference of the effect upon the
abundance or scarcity of money, whether by selling Exche-
quer-bills they take an equivalent amount of currency out
of the money-market, or whether they refuse to snake an
issue by discounting commercial bills to the same amount?
—ln the case of selling Exchequer-bills, they withdraw
bank-notes; by refusing to discount bills, they refrain from
increasing.

Then, if there be no difference in the effect upon the
money-market, why is it that, in your former answer, you
have stated that you thought the most expedient course
for the Bank to adopt would be rather to dispose of its
Exchequer-bills, and to discount an increased number of
commercial bill,?—lt has always appeared to me that
capital to be drawn from a bank should be only temporary,
that a bank should furnish that sort of temporary capital,
being a medium between the party who wanted ternpor iry
capital and the party who had too much; and that that
was a legitimate employment of the money held by a
bank. It the Bank is for commercial convenience, it
Would appear to me more desirable that they should be en-
gaged in affording those facilities to commerce which de•
rend upon the discounting bills of exchange, than coming
into permanent advances to Government, whether in the
shape of Exchequer-bills or any other mode.
The question is, whether by selling Exchequer-bills, and
increasing the discounts to the same amount, it really
does give increased facilities to commerce?—lt would ap-
pear to me that negotiating between the party who for a
short time has too much money, and the party who for a
short time has too little, was giving a facility to com-
merce; that I conceive to be the effect of discounting bills.
If that money which is taken out of the hands of the
public by the Bank selling Exchequer-bills remained in the
money market, would not the holders of that money be
employing it probably in the discount of commercial bills ?
—They probably would.
Then as far as meeting the wants of commerce are con-
cerned, it appears that the effect produced by the two
modes of conduct of. the Bank would be nearly the same ?
know there is a difference of opinion about that.
On the ground, however, that commercial bills are the
fittest investment for a body like the Bank, you would pre-
fer that they should rather discount bills than continue to
hold Exchequer bills ?—What I mean is this, as well as I
can appreciate all the bearings of the subject, I should
prefer that the Bank should he in a situation to afford libe-
ral discount rather than by one steady advance refuse all
discounts.

That is, you mean to say that a bank that deals in dis-
count will be more beneficial to trade than a bank that
deals in public securities ?—I think so.
In objecting to the renewal of the charter of the Bank
of England with its exclusive privileges, what other plan
do you look to for supplying London with bank-notes?—
I did not contemplate to go into any opinions upon that
subject. I confess that I cannot help thinking that the
Scotch banking system would be much safer than the pre-
sent system of the Bank, whilst I by no means am confi-
dent that evils may nut arise out of that ; but still, upon
the whole, I think the securities are greater than in the
continuance of the Bank upon the present plan of its ex-
clusive privileges.

Tnat. is, by the Scotch system, you mean a system of
flee banking?-1 mean a system of free banking; but I
think the great thing would be publicity.
Do you think the system of free banking would give
greater facility against excessive issues and consequent re-
vulsions ?—Yes, I think by one checking the other.
Taking into consideration what have been the effects of
the monopoly system, and what may be looked forward to
as the proper and natural consequences of an entirely free
system, you would depend rather upon the latter than the
former ?—Yes.

Do you think that under such a system there would be
sufficient protection against over-issues of paper ?--I have
a qualm on the subj.ct ; I am not so perfectly satisfied
about that an 1 could wish to be, yet I do think that the
system of the banks checking each other, and especially

if it was controlled by publicity, would present most
security.

Suppose several banks with large capital, if their paper
returned upon them as it does now upon the Bank of Eng-
land in the shape of deposits, would not that circumstance
force them to diminish their issues instead of leaving them
at liberty to do as the Bank of England now do, increase
their issues under such circumstances ?—I think it would,
and especially if it were controlled by public observation.
In point of fact, the return of paper upon banks deal-
ing under competition would in this way more effectually
protect the public from over-issue of paper and a redun-
dant currency than the Bank of England now protects it ?
—I think decidedly more than the Bank of England now.
Do you think that periods of great distress and convul-
sion would so often arise under a free system of banking as
they have arisen under the monopoly system ?—I think
certainly not ; and I think so for this (to me) obvious
reason, that if the free system were controlled by public
observation, and completely mixed up with public know-
ledge, there would not be the same kind of jealousy and
distrust that must always attend any system that is in-
volved in mystery and concealment.
Do you think that under a free system it would have
been possible to have increased the circulation in defiance uf
a►l the indications of a redundant currency, as the Bank of
;England ofte❑ has done ?—I think banking upon a free
system, controlled by public knowledge and by public ob-
servation, could not have led to those mischievous expan-
sions.

Then, under a free system, the instances would be more
rare in which the trade of London would be placed under
the necessity of seeking relief ?—Certainly.
Would a system of free banks in London be capable of
affording considerable assistance to trade in times of diffi-
culty ?-111y belief is, as contra-distinguished from the
present system, that it would ; that if there were many
establishments, and those establishments conducted with
publicity, and well managed, not with the privacy of the
present Bank establishment, but with an almost general
knowledge, there would be no motive for distrust, and in
practice would not he distrusted, as naturally is the case
under the present system, from its privacy and concealment.
Do you conceive that it is part of the duty of those
who issue bank paper in London to manage the foreign
exchanges ?—I should be very glad of a system of bank-
ing that did not require that the Bank should trouble
themselves with any thing but their own business, but, as
it now stands, of course the Bank of England must look at
the foreign exchanges.
Then in your opinion it would not be an objection to a
free system of banking in London that such banks would
be less competent to manage the foreign exchanges than the
Bank of England is ?—lf there were no other checks upon
the many brinks it must be obvious, if the foreign ex-
changes are necessary to be managed, that if there were
ten companies to manage them instead of one, there must
be more difficulty in ten companies managing that which
one company would be otherwise called upon to manage;
but my own belief is, that there would be less necessity,
from the intervention of other checks, to have reference to
it; but the ten companies, when they found it was neces-
s try to have recourse to it, would do as the bankers in
London I believe now do; it is understood that there is
that sort of strict community of interest among the
bankers which enables them to exchange their opinions
freely.
Inasmuch as the foreign exchanges contribute to regu-
late the amount of currency under the present system of
the Bank monopoly, would they not equally contribute to
do so under a system of free trade ?—Yee.
Do you think there is any reason to doubt that if the
exclusive privileges were withheld from the Bank of Eng-
land, a number of banks would be established in London
with very considerable capitals ?—No doubt at all.
Do you think that the amount of capital that would be
so invested would be sufficient to render those banks per-
fectly solvent and safe ?—I should think so.
And that all operations of banking under establishments
so supported by large capital might be carried on benefi-
cially to the public ?—I should think so; I see no diffi-
culty whatever in it.
Do you believe that previous to 1825 the Scotch banks
made any great increase of their issues ?—I do not posi-
tively recollect that, but my impression is that there was
some increase. .

You have stated that the essential benefit to be derived
from competition of different banks would be from the
publicity of their proceedings ; do you think that the ad-
vantage of having a competition of bankers over the pre-
sent system would be diminished considerably if the Bank
of England were compelled to make their proceedings
public ?—Certainly I do consider that there would be a
less necessity, and that there would be less advantages in an
alteration, if publicity pervaded the present system.
If the Bank of England were compelled to publish their
affairs, should you wish to deprive them of the monopoly
of the circulation of the metropolis ?—I confess in such
questions I should be slow in trying experiments ; and
therefore that which would be the least change, with ma-
nifest improvement, perhaps is fairly entitled to be tried
first ; upon that principle, if the present system of issue
was tried with all the advantages of publicity, it would,
as being the least change in a case in which considerable
doubt and great anxiety must prevail, therefore be fairly
said to be the expedient course.
Do you apprehend that there would be any danger to
the Bank of England from a periodical publication of the
amount of bullion in its coffers ?—I believe the great dan-
ger is from the secrecy, because there is just enough secrecy
for the purpose of mischief, without there being secrecy for
the purpose of good.
You stated you thought that if ten banks were esta-
blished in the metropolis, as there is at present between
the great bankers of London a communication and an ex•
change of their opinions, that exchange of opinions would
take place if there were ten banks of issue acting at the
same time ?—I cannot see any reason why there should
not be, always keeping in view that publicity should per-
vade the operations of all banks of issue.
If there were such a change of opinions, would not that
in fact be a combination of banks, rather than a rivalry of
different banks ?—lt would be a sort of concord of the
banking interest, but I do not see why it should neces•
sarily become a combination to prevent rivalry.
Would it not in fact be a system of monopoly divided
among a great number of persons, instead of a system of
monopoly, as it is now, in the hands of one body
not think it would have all the injurious character of mo-
nopoly, though it would comprise the advantages of com-
munication.

Would it have the advantages of a competition f—l do
not see any reaso❑ why it would not.
Would not the principle of private interest and making
profits have the same operation in banking when free as it
has in every other trade when ftee ?—I can see no reason
why it would not.

In point of fact each banker will gain just in propor-
atimonout
no
tt
of
fe
businessex ent o f
ashis
a business,wh oi
whole,
thean and
larger
re
share
eg
eacha per-
son
ce rt ain
has of it the more profit he will make ?—Yes.
Is not one principle mode of the Bank of England ob-
taining profits increasing the amount of its issues ?
Certainly.
When there is a rise of prices, and when consequently
there is a tendency to speculation, is it not in the power
of a banker to increase his issues more than at any other
time ?--That, of course, presents a facility of increasing,
but there may be other causes in operation.
Then, if it is the interest of a banker to increase his
issues as much as he can, in order to make profit con-
sistently with his safety, would it not be the interest of any
or all of those bankers, at a period of a rise of prices, to
increase their issues simultaneously ?—lt would be their
interest, but then I conceive it would be checked by a re-
gard to their s ifety ; that must in practice operate against
their embracing the facility that may be presented to them
by a rise of prices.
If they made their issues upon good security, would
they not be acting quite consistently with their own safety?
—That must depend upon the state of their concerns, to
what extent they increase their issues; if they increase
their issues upon securities that are always available,
clearly so.
At a period of a rise of prices, is there not necessarily
an increased detna +A for the discount of good bills?—
There is natural! 'so.
a Then,
facility when
ofi
nperriecaess were
their rising
issues
he
pngoodbankers w would have
and
lls,
therefore quite consistently with their own security ?
They may discount more bills than would be consistent
with their own security ; it is quite manifest that if they
have no regard to their capital, or their certain ability to
obtain discount themselves if required, that in discounting
bills they may he in a situation of obvious difficulty.
Would not every bank, when its interest appeared in the
Li metanee to be that of increasing ite ism, take into

consideration what would be the ultimate effect of its
doing so, and of other banks doing tie same at the tame
moment?—l think in practice a wdl-reguyatcd bank
would say, we are called upon for such an amount of dis-
count, now how does that comport with our own private
ability ; they would look to the money they had, and to
the money coining in, and they would measure the ac-
commodation wanted by a regard to their own peiuniary
circumstances.

If, in point of fact, any bank or set of banks, in-
fluenced by the motive of their own apparent interest,
issued more notes than it was really proper to issue, would
not the immediate return of their notes show that the
currency was redundant?—lies.
Then, after such an evidence of redundancy, would
not cease to be their interest altogether to continue to
issue largely ?...-They would immediately check their ac-
commodation of every sort.
So that though it may be stated in the abstract that it
is the interest of a bank to issue as much paper as pos-
sible, it is not correct to draw from that circumstance this
c unclusion, that a bank will, whenever it has an opportu-
nity, increase its issues without looking to the result ?
Judicious banking will always lead a banker to look to
his means in lending hie money.
With regard to the result of a rise of prices in leading
to a demand on banks for increased discounts, will not thr
banks take into consideration the effect which acceding to
that demand will produce upon the general currency, and
to the injurious consequences to themselves, of making it
redundant ?—That is more a question about what is pro-
battle under another state of things than that which has
existed. It must be obvious that the first principle of a
banker is to make the largest sum of money that he can,
consonant with his own security ; every thing I want to
require of a banker is, that he shall have regard to his
own safety, that he shall not mix up the character of a
legislator with that of a banker. This constitutes one of
my objections to the present system, that they (the Bank
directors) are in part legislators as well as bankers.
Will not the security of a bank, or a system of banks,
be essentially dependent upon their taking the strictest
care not to over-issue paper, and thereby not to have a
redundant currency ?—Certainly, their own safety wil
oblige them to look to certain rules, which, if they disre-
gard, will bring their awn credit into danger.
Is it more likely that a number of banks acting in coin,
petition will act upon such fixed rules, than it is that one
company, subject to publicity, would?—That is a ques-
tion, I confess, I have some difficulty in answering ; a
great deal may be said on both sides.
In regard to one company, is it not entirely free to do as it
p'eases, and to act without any control, whereas where there
are several banks, is not that control established by coin
petition ?—Certainly. My difficulty in answering the
question in favour of one company, arises from the diffi-
culty of my looking to a state of things which will make
that company keep to rules that will be safe; and I am
inclined to think that more security would be attained from
the division of management and from the increased publi-
city that would be gained from the ten companies.
With respect to the bearing of a state of high prices
upon the issuing of paper, will not every bank act upon
the same principles in its calculations as to high prices as
every merchant would in trade; that is, when he found a
great demand upon him in consequence of high prices and
great enterprise and speculation, would not he be induced
to act with great caution in trusting to their continuance?
—I think a wise banker would necessarily act with consi-
derable regard to that principle; but I should hesitate
whether he would act to the same extent of caution as a
merchant, because the profit of the merchant depends en-
tirely upon the fluctuation of price, the profit of the banker
depends upon the use of money, not so directly upon the
fluctuation in the market price of commodities.
As the general result of a fall of prices would be injuri-
ous to bankers, and as that fall will be great in proportion
as prices have been excessive, would not that be a sufficient
reason with him to be cautious bow he issued his paper
when it WAS in great demand from a state of high prices ?
—Clearly ; the banker would look at the parties to whom
he lent his money, be would look at the sort of paper pro-
posed to him for discount, and if be perceived that the
parties to that paper were connected with speculations
which were likely to be ruined by a revulsion consequent
upon the existing state of things be would be shy of such
paper.

Does not the history of the trade of this country show
that every instance of very great prosperity, arising from
very high prices, has been followed by a very sudde❑ fall
of prices and a consequent revulsion ?—As far as my
knowledge extends.
Then, in point of fact, experience should teach a banker
not to yield to a demand for issues in a state of very high
prices, but, on the contrary, to be cautious how he kept
his issues to their usual amount ?—Yes, I conceive the
caution would operate practically in reference to the qua-
lity of paper proposed to him ; a prudent banker, if there
was a mania such as existed in 1825, would look at the
quality of the paper proposed to him ; if he perceived it
was paper connected with adventurous speculation he would
be shy of it.
Would not he look to the general state of enterprise and
speculation going on around him ?—I have in my imtne-
diate view a certain class of bankers who would look a:
that ; and I can imagine another class of bankers, who
know little about the subject, and who would be governed
entirely by the other more direct considerations.
You have been comparing a single bank without pub-
licity with many banks coupled with publicity ; is it from
the publicity, or from the increased number of banks, that
you would most expect an increased security ?—I think the
publicity of the utmost importance, but I do think
considerable hope may be indulged from the rivalry of
the increased number.

If there were a single bank with publicity, would not
this be the best form of publicity, that they should make
known the principles upon which they intend to act ; and
that by frequent publication of their accounts, the public
should then be able to judge how far they conformed to
those principles ?—ln reference to a single establishment,
I conceive that that is the only efficient system of publicity,
and I think that every body, using common diligence,
with common means of judgment, should have it in his
power
to form a fairly confident opinion of the natural
operations of industry, and of the fluctuations of public
concerns.

Suppose the case of a single bank in any district, subject
to publicity, and acting upon fixed rule., will not that
bank be liable to make an increased issue when prices are
rising, and to contract its issue when prices are falling?—
The rise of prices, of course, affords a facility to the in-
crease of its issue., and a contraction of prices, of course,
presents a state of things that requires a smaller issue.
Of course, with whatever prudence the affairs of such
bank may be conducted, this will occasion a fluctuation in
the amount of its issues ?—Unquestionably.

Supposing the case of the same district, and the bank-
ing business of that district to be divided amongst several
banks, equally subject to publicity, conducting their affairs
with precisely the same prudence as the single bank, those
banks exchanging their paper, like the Scotch Banks,
at certain fixed intervals, in what respect would
the multiplying the number of banks give to the
public an increased security against over-issue ; would
increasing the number of banks alone, supposing
the same degree of prudence, coupled with those
other checks, any way tend to make the danger of over-
issues less in the case of the many banks than in the case
of the single bank ?—I should rather decline any answer
to that question : not that I am without an opinion, but
I have also some doubts ; there is a great diversity of opi-
nion about it. lam under an impression, arising from
one view of the case, that a number of banks, checking
each other by the over issues, acting to expedite returns,
would tend to repress over issues. Then 1 can imagine
also a state of things by which there may not be that
union and that concord, and in which different rival issues
may for a time thereby be increased, as well as from a
variety of other causes, such as every person accustomed
to banking must remember in the course of his life, which
will temporarily operate to increase the issues. Prudence
may be lost sight of by some part of the ten banks, and
this of itself may for a time lead to over-issue. Then,
again, as it respects a single bank, though it be subject to
publicity, yet I can imagine that the persons who are in
the management of the concern may overlook the rules of
prudence and their responsibility to public opinion for a
time, and also depart from the proper course. So that I
have great difficulty about it ; it is quite, in my view, a
speculative question.
Supposing there is perfect union among the many banks,
and that daily or even hourly they adjust the balances one
with the other, does it not reduce the case of the man:,
banks precisely to the case of a single bank, giving then
character for equal prudence, and that there is no conipe-
titiou or rivalry amongst the many which gives an with-