burgh to confer with the managers of the Edinburgh banks on the subject, and to induce them to rescind their order. They failed in that; the notes of the Western Bank were refused the whole day on the Tuesday."

The run of Tuesday exhausted the City of Glasgow Bank, and it did not open on Wednesday, the 11th. The state of Glasgow was so alarming that the magistrates sent for troops, and did all in their power to allay the excitement; they issued a proclamation advising the people not to press the banks for payment, and to take the notes of all the banks. They issued an order to all the rate collectors in the city to take all notes presented to them, including those of the two suspended banks. But the demand for gold was almost entirely confined to the depositors, very few noteholders coming forward. On Wednesday and Thursday large remittances of gold from London arrived about 10 o'clock in the morning, and were taken in waggons to the banks, escorted by strong bodies of police. But the run entirely ceased about 2 o'clock on Wednesday. At half past two, says the same witness, there were not half-a-dozen people in the establishment. The panic, as the witness said, only lasted one whole day and part of the next.

In fact, the refusal to take the Western Bank's notes was one of the chief causes of the run for gold; and, as soon as the other banks agreed to take them, the panic ceased. Mr. Lawrence Robertson was asked, "What was it which first caused the panic to cease?-When the stoppage of these banks took place, the other banks were not precisely informed of their position, and hesitated a little in taking their notes; after further consideration, the other banks resolved to take all the notes as they came forward, and when that was done the thing subsided. As soon as it became known that the notes of the Western Bank would be received by the general body of the banks in Scotland, the panic with regard to the notes of the Western Bank, came to an end? -Entirely."

The same witness also said, that there was no run upon any of the Glasgow banks before the stoppage of the Western Bank. "Were those parties who drew out gold over the counter in exchange for notes, or by cheques on their deposits?-It was chiefly in the case of small deposit receipts. And not for any considerable amount?-No. Do you think that it exceeded £1,000?—

It is difficult to fix upon a sum; I never looked at that. It was not of sufficient importance to call your attention to it?-No." The City of Glasgow Bank resumed payment in about a month, but the Western Bank had lost not only its whole paid up capital of £1,500,000, but as much more again.

16. The details of this great catastrophe well deserve our closest attention, because it is the first instance of a banking panic in Scotland, and even that was confined to one town. The commercial failures were confined exclusively to the herd of adventurers who had been fostered and supported by the mismanagement of the Western Bank. There was but one house of any magnitude connected with Glasgow which suspended payment during this period, Dennistoun & Co., who were more a Liverpool and London house than a Glasgow one, and whose temporary stoppage was brought about by other causes. But this calamity has been seized hold of by persons who are hostile to the Scotch system of banking in general, and also to the £1 note currency of Scotland, to condemn them. But, when we come to investigate the true facts, we shall find that they lend no support to these charges. For, with respect to the first, it is distinctly proved by the most unanswerable evidence, that from the commencement to the close of its career, the Western Bank pursued a system of business that was totally opposed to the well-recognised system of Scotch banking, and unanimously condemned by all the well-conducted banks. That, during its whole course, it was a subject of terror and alarm to the other banks. That its locking up its funds in America was totally condemned by the Bank of England, and all the other Scotch banks. And the directors themselves, when, however, it was too late, acknowledged their own misconduct, for, in their first application for assistance to the Bank of Scotland, on the 21st October, 1857, the directors say-"On the part of the board of direction, it is right that we should frankly say, that they are fully alive to the recklessness of the past management of the Bank; that its credit has been strained to the extreme point; and that, in the attempt to make large profits for the proprietary, unwise and undue risks have been run. Feeling all this, the directors have entered on a course of management, which (although the present commercial crisis renders curtailment difficult of speedy

accomplishment) will eventuate in the establishment, on a secure basis, of a business of a safer and a more legitimate, though certainly of a more limited description, than has for many years been conducted by the Western Bank of Scotland." Habemus ipsos confitentes reos. The directors themselves acknowledged that their course of business was not in accordance with the usual Scotch banking system. What possible reflection, then, can it be on the recognised system that a bank, which went right in the teeth of it, failed? The very same remarks apply, only, of course, in a lesser degree, to the City of Glasgow Bank. This Bank too, was guilty of speculating in America, instead of keeping its reserves in London; and it, too, paid the penalty by a temporary suspension.

The second charge, too, is equally groundless against the small note circulation. For it is said that these small notes aggravate a panic, and that a panic is most likely to commence amongst their holders. But, in this case, the evidence most decisively negatives the supposition that any part of the panic was due to the small notes, and not only that, but it decisively proves that the demand for gold was greatly lessened on account of the notes. Mr. Fleming says, Q. 5532-"I may say there was no run for payments of notes all through. There may have been a few notes presented, but I should certainly limit the demand for gold in exchange for notes to £5,000 or £6,000. I do not think it would exceed that. Mr. Wilson: In point of fact, the whole pressure on the Bank at any time was in respect to its deposits, and not in respect to its circulation?-Decidedly, there was no pressure in respect to its circulation; so much so, that during the last two days for which the Bank was in operation, I do not think £1,000 was paid away in gold at the head office. The whole money withdrawn was taken away in notes, and the consequence was, that on the afternoon of the 9th November, when the Bank stopped, there was a very large amount of notes in circulation, something about £720,000. Mr. Wilson: Then the depositors became uneasy about the security of their deposits, went to the Bank, and took the Bank's notes?Yes. Mr. Wilson: Did they pay them immediately into other banks?—Yes. Mr. Wilson: They thereby indirectly obtained payment through the other banks?-Precisely so; they transferred their deposits from one bank to the other. Mr.

Wilson: Did many of the depositors demand gold ?—Almost none; during the week, after the 10th October, there was a slight demand for gold, and in the country, I believe, there was a very slight demand for gold." Mr. Fleming then gave the figures, shewing that the total demand for gold during the whole month, from the 10th October to the 9th November, was only £44,000, of which more than £6,000 was in exchange for notes, but the total demand for deposits and balances on account was £1,280,000; from which it follows, of course, that the total pressure on the Bank was this

Now, if the Bank had not issued notes, how would this last item have been demanded? Of course, in gold. So that it is quite clear that the power of the Bank to issue notes saved and lessened the demand for gold to that extent. And we have already shewn that it was not any run for gold which made the Bank stop, but its inability to provide for payment of the adverse balance of exchange. But it may be said-See what followed the next morning. There was undoubtedly a run for gold next morning on some of the other banks. But then there would have been the very same run if there had been no notes at all. And that very run was greatly aggravated, if, indeed, it was not chiefly due to the most unfortunate decision of the other banks to refuse the Western Bank's notes. As soon as the other banks agreed to take the Western's notes, the panic immediately subsided, even though a second bank stopped the same morning. Now, what is the effect we might naturally have expected from a second bank's stopping in the midst of a panic? Clearly that that panic would have been greatly intensified. But in this case it was not so. The City Bank did not open on the Wednesday morning, and yet the whole panic was over by two o'clock that day. The whole demand on the Royal Bank for gold did not exceed £1,000.

Now, without prejudicing the question in any way, whether

the Scotch £1 notes should be suppressed, there is no dispassionate man who can, after reading the details of this crisis, come to the conclusion that they had anything whatever to do with this panic. The great wonder is, that after the unprecedented circumstance of two great banks stopping payment, the panic was so short, and so slight as it was. Does any man who knows London think that, if a similar case had happened there, the consequences would have been so comparatively trifling? The two London banks of most nearly equal magnitude with the Glasgow ones that stopped, are the Union and the London and County. Let us imagine that the Union Bank of London was to stop payment, and two days after the London and County. Does any man who knows London suppose that in such a case the panic would be limited to one day and a half. No man in his senses would think so.

Nor can there, we think, be any reasonable doubt that the refusal of the Edinburgh banks to take the notes of the Western Bank was a most unfortunate one. When the Ayr Bank failed, all the other banks immediately gave notice that they would take its notes at par, because they knew very well that its proprietors were perfectly well able to discharge all the claims upon them. It was perfectly well known that the proprietors of the Western Bank were worth many millions of money, and that there was no possible danger of any ultimate loss. Yet the banks on this occasion decided to refuse their notes, which decision they were afterwards obliged to rescind. And this is a very good proof that it was wrong from the first; and immediately that the notes were taken the panic ceased.

In the years of the great speculations in railways, numbers of persons wished to carry on the game of speculation by buying shares, and then raising money upon them from bankers. The old banks prudently declined this sort of business, and a number of banks were got up, principally for this business-if, indeed, it can be called business at all-as it was, in fact, pure gambling. After a short time, the railway shares went down as fast as they had risen, and all these banks, which were called Exchange Banks, were ruined, some of them under the most disastrous circumstances.

We have said that one of the principal features of the Scotch banking system is to have a small number of very large banks,