to pay this bill, in lieu of the notes of the Bank of England. But still ENGLAND would furnish the gold? Yes; because she owed Scotland the amount, and Scotland chose to draw it in this form rather than by sending up waggons to bring it home and then pay it over. But where is the injustice of either? If England has any claims on Scottish banks, to pay corn or potatoes, do the Scottish banks run away or refuse payment? No; very well, but they will pay in their own notes; and if gold is demanded for them, they will tender Bank of England notes perhaps, and that is a legal tender! Then why does the Bank of England insist for such privileges? If the Bank of England had not thought proper to have her notes mnade a legal tender, the Scottish banks must have paid in gold; and doubtless they would have contrived to do so, their small notes notwithstanding. Bank of England notes are not got for nothing, nor kept for nothing, any more than coin. It is by the Bank of England's pushing out her notes at interest, and their being made a substitute for coin, that coin flows to her. She thus not only undertakes to furnish coin on demand in lieu of her notes, but is actually paid for it. The Scotch banks pay by holding her notes at interest, just as they would for coin. Are they to pay and not have value? Is the Bank of England to be paid and not give value? The bullion in her coffers is not a dead loss. Twenty-nine millions of notes are abroad at three or other rates per cent. on the credit of thirteen or fourteen millions of gold, which thus yields her 6 per cent.; and she has in addition 3 per cent. from Government on other fourteen millions of securities, making her dead profit from her issues 9 per cent.; and this constantly and exclusively of all other gains; even the gain on dealing in bullion, to which few other banks aspire.

In one word, the men who seem to take the lead in this matter evidently do not understand it. We know that many men in parliament, on whom dependence is placed, are precisely in pari casu. The change to joint-stock banks, whatever other good it may have done, has much deteriorated the race of bankers; for the directors of these banks generally are not bankers, but men selected from very different walks, and chosen for the extent of their capitals rather than of their capacity. Ministers are therefore left greatly more than they ought to be in the hands of parties interested in the all-absorbing and very dangerous plans of the Bank of England, or in throwing capital from use in the country that it may be drawn into the funds.

To end this discussion, however, already protracted beyond our limits, though by no means its importance.

The glaring mismanagement of the joint-stock banks in

England decidedly called for regulation; they were, not by fictitious capital, as is commonly supposed, but by placing in improper hands much reserved capital, banishing steady traders from the market, and compromising therefore the steady interests and even the commercial character of England. Therefore regulation was required.

Scotland neither could nor should stand altogether excepted, neither should Ireland; and consequently the writer to whom we have referred had excogitated a general, a principled, and yet perfectly innocent plan for them all; that is to say, a plan doing all that is required in the way of good, and yet nothing ill.

He held, first, that banks should be rendered SECURE; and, next, that, in order to provide for this, the amount of their circulation must be defined; that is, restricted within certain reasonable limits.

For all the purposes of the case he suggested the following

'PROPOSALS:

First, Holding it settled that the currency of a country, so far as in paper, should be limited, the next thing to be considered is, the extent of that limit. It is generally considered that every bank should have in its coffers a sum in specie equal to one-third of its circulation, and that this would not be an improper rule for the country; and it is considered farther, that from eighteen to twenty millions is the amount of specie generally in the country. This would give a total circulation of from fifty-four to sixty millions.

'Again, the circulation of the Bank of England has varied of late years from eighteen to twenty-one millions, while the other banks have varied from twelve to sixteen. I think that in one species of circulation or another, even in paper, the amount must be greater; but hold it to have varied from thirty to thirty-seven millions, including the coin, it gives very nearly the amount assigned by the other mode of calculating. The Government is now possessed of the means of saying distinctly what has been the circulation of all banks for some years back. Let a liberal medium of that be taken, or rather the amount of some generally prosperous year, and let an allowance be added to this, for notes in transitu from one bank or branch to another, and lying in the banks ready to be issued. Suppose that altogether the circulation of this country is from fifty-eight to sixty millions, including the coin out in the country, and that two millions, being one thirtieth, should be allowed, one-half to be ready to issue, and the other (or one-sixtieth of the whole), to meet occasional expansions in the business of the country, or temporary escapes of coin, then the total circulation required by this country will be sixty millions; of which it is considered safe, that two-thirds, or forty millions, should be in paper. In this case, FORTY MILLIONS would be the amount of paper currency to be allowed to all banks, in proportion to the averages of their circulation for a certain number of years past, or from considering their position and strength.

To make these forty millions of paper SAFE, and to distribute them properly over the country, I propose

Second-That every bank proposing to issue currency, should find security in the hands of Government, by purchases into the public funds, to the extent of one-half the notes they propose to issue.

'Third-That these securities shall be intangible by the banks, while they continue to issue notes upon the faith of them; that is, neither capable of being sold nor pledged; but to be termed "bank securities," bearing the names of the special banks, and so incapable of being used in any way; and when the banks should cease to issue, or determine to restrict their issues, securities to be returned in transferable bonds, in the proportion of £100 of securities, for every £200 of notes cancelled; that being the original ratio of issues and securities.

'Fourth, To make sure that no more currency should be issued, or remain in circulation, than has been bargained for and guaranteed, STAMPED NOTES to the precise amount only, should be issued in the first instance (that stamp being very palpable and easily recognisable); and on a renewal, £100 of new notes to be issued for £100 of old; the old to be cancelled before reaching the Stamp-office, and there, in presence of proper officers, to be consumed.

Fifth, To compensate the country for this power to coin in a substance of no value (which, though profitable to the state, is yet more directly so to individuals), and for the trouble of superintending and regulating the system, the deposits should bear a reduced interest; say of not more than two, or two and one-half per cent.; which, supposing 2 per cent. struck off, would be admitting the public to share in the profits of this species of currency, to the extent of 14 per cent.; the banks issuing £200 of notes, on every £100 of securities.

'Sixth, I conceive that on the same ground, the securities should be made of fixed amount; that is, neither rising nor falling as the other debts of the state in the mean time rise and fall; fixity of value being an essential of securities.

'Seventh, Let the power of issuing the circulation fixed on, be distributed over all the banks; and let provision be made that these banks, instead of being limited to one or a few spots, and so drawing the profits of banking, and the facilities afforded by it to capital cities, should as equally as possible be distributed over the country according to its wants and upon cause shown to Parliament, let the privilege be extended or limited; or transferred to new banks, or to new localities.

This is my plan; and though exceedingly short and simple, I believe it meets all the exigencies of the case, and is in no point impolitic or unjust. It would be for the interest of existing banks, in putting an end to useless competition, almost as much as the proposed law would be; and yet it would not tie down the country to those existing banks, in themselves, or their localities, nor consequently give them a monopoly or a despotism; and it would be immediately and obviously profitable to the state, in many ways, as well as undoubtedly safe; for the securities could not be obtained without first retiring the notes.'

This then is the plan we have referred to. It appears to have been conceived and promulgated some years since, which is necessary to be stated in order to explain some part of the objects intended, one of which was to arrest the public debts in their ascent to par, so far as this scheme could have arrested them, and which at that time would have struck off about sixteen per cent.

As we observed in the outset, it has a strong resemblance to the Government plan, except where the Government plan is objectionable. It proposes to limit the issues of paper to a certain agreed amount, to be ascertained by the average circulation of the banks for years past, or rather in some generally prosperous year.' Sir Robert Peel has ultimately adopted this.

It proposes that all the banks should find security in the public funds to the extent of one-half the notes proposed to be issued by them. Sir Robert Peel has adopted this in the case of the Bank of England, and most probably meditates it for that of Ireland. This writer proposed that it should be universal, and we see not why it should not. The Scottish banks could find no difficulty in this, for they have always greatly more than this amount in the hands of Government.

It proposes that these securities shall be intangible by the banks, and at a reduced interest. This already is and long has been the case with regard to the Bank of England, and virtually of Ireland also to a certain extent.

It proposes that the check on the circulation shall be, not by returns, which the writer seems to deride, but the simple and self-operating yet infallible one by the stamps. This would surely be more decisive than any other can be, and it appears to us more rational and business-like. If (says this writer) on the best consideration, a certain sum of currency is thought necessary for the purposes of the country, and an inevitable limit is placed to the sum total thus considered necessary, and security found for it so far as is considered necessary, surely we may allow the banks to act freely within this limit, particularly after having so long allowed them to act without any limit whatever. It may be perfectly wise for a time to obtain returns (monthly, or quarterly, or even weekly) merely to ascertain how far the estimate made has been judicious, and how far it is operating beneficially. But a constant supervision of banks, with a view to judging of their credit, (for it could have no other object,) would be injudicious, and in every probability rendered nugatory.'

To the limitation of their number and the amount of their issues the banks in Scotland are already tied down, and they have submitted-it is for their interest; but we think with this

writer that the country should not submit to either of these absolutely, but have power on establishing a case to Parliament to have any proper addition made to the number of banks and to the localities to be occupied by them.

We think also they should submit to find security as the Bank of England has done, and that of Ireland will certainly be called to do. It would put an end to the idea of panics, or runs upon the banks. That they should submit also to have their securities fixed in amount to their value at the period of funding them, and invested at a moderate interest; and that they should insist upon having their circulation limited by the effectual, yet easy and uninquisitorial operation of the stamp, the return being at once troublesome, inquisitorial, and useless; for neither can a bank with branches make it correctly, nor will it long be heeded when made.

In all other points the Scottish banks should remain untouched. We say again and again that if notes are well secured, it is of no consequence whatever what their denomination. may be; if the plan proposed of limiting the paper in the currency to two-thirds of the requirements of the country all over, one-third of the actual currency must have been in the metals; and as to Scotland drawing the gold required by it on emergency from England, it is a right impossible to be controlled if necessary; but to control it were neither necessary nor just. Withdraw the privilege of legal tender from the Bank of England notes, and Scotland must provide gold for itself. At the same time it will pay no more for the gold than it does at present for the Bank of England note; but the Bank of England will lose that payment; the gold and silver by being divided will be less economized, and the intelligence of bankers generally will be less concentrated. But Scotland will lose nothing whichever plan is adopted, if she is left only to her present arrangements in all other particulars; and for them she should contend without regard to any theory that may be brought against her from any quarter, for they are sound and useful beyond question: they are the result of much sagacity matured by long experience, and it may be safely said there is no device by which they could be advantageously replaced.

We trust therefore the Government will see the propriety of not interfering with arrangements that fairly carried out have never offended against principle, and that by a few and trivial alterations, formal rather than essential, might be pronounced absolutely perfect. On the other hand the issue scheme of the Bank of England has already failed as was predicted. It has already extinguished itself by placing its all in the power of the banking department. It exercises no control.

VOL. I.-NO. VII.

20