cheapness with which bullion now flies from one commercial centre to another.

These considerations give a final and conclusive answer to those persons who conceive that the Rate of Discount can be kept fixed. These variations are in modern times absolutely indispensable, and the only method by which the Bank can preserve its security. They must necessarily have been made, had the Bank Act never existed at all. In fact, if this principle of controlling the Paper Currency had been understood and acted upon in former times, there never would have been any necessity for the Act. It was the very ignorance or neglect of this principle which had brought the Bank into danger so many times before.

25. It is a matter of very serious doubt indeed whether the sweeping words of the Bank Act of 1844 have not rendered all English banking illegal. For the 11th section enacts, in the broadest possible terms, that no banker "shall make any engagement for the payment of money payable to bearer on demand." Now we have shewn the utter misconception of the very nature of banking business so generally prevalent, even among persons who might naturally have been expected to have been better informed. Thus, even Gilbart and Lord Overstone consider the business of banking to consist in borrowing money from one set of persons and lending it to another. So, also, paragraph 62 of the Report of the Committee of the House of Commons on the crisis of 1857; among other errors and misconceptions, which we have already refuted, says "the use of Money, and that only they regard as the province of a bank, whether a private person or incorporation, or of the banking department of the Bank of England."

Now we have over and over again pointed out that this is the business of a Bill Discounter, and not of a "Banker." A banker never lends money in the first instance; we have already explained that the very essence of banking is to create Credit, or liabilities payable to bearer on demand. We have already shewn1 how completely Mr. Cardwell and Mr. Wilson were mistaken as to the very nature of the business of banking. Equally ill informed also was Mill, for in the early editions of his Political Economy, he has this note in his chapter on the Regulation of Currency, Book 1 Vol. I., Ch. 6, § 15.

III., ch. 24, § 3.-"It would not be to the purpose to say, by way of objection, that the obstacle may be evaded by granting the increased advance in book credits, to be drawn against by cheques, without the aid of bank notes. This is, indeed, possible, as Mr. Fullarton has remarked, and as I have myself said in a former chapter. But this substitute for bank note currency certainly has not yet been organised (!!); and the law having clearly manifested its intention that in the case supposed, increased Credits should not be granted, it is yet a problem whether the law would not reach what might be regarded as an evasion of its prohibitions, or whether deference to the law would not produce (as it has hitherto done!) on the part of banking establishments, conformity to its spirit and purpose, as well as to its mere letter."

Now what Mill in this extract said has never yet been organised happens to be the precise thing in which "banking" consists! It is right to add that in the later editions of his work this paragraph has been omitted.

But though Mill shewed his ignorance of the existing facts in this case, his admission is valuable that this practice is a direct violation of the spirit and purpose of the Bank Act; but whether it is not also a direct violation of its letter is very seriously doubtful.

All banking advances, then, are made by creating Credit or Deposits; and whether this Credit is transferred from one person to another, by means of Bank Notes, or Cheques, in no way affects its nature or its quantity. And it is this very thing which is already creating so much alarm in the minds of many persons when they see the huge mass of deposits, or Banking Credits, reared up by the London Banks, on so slender a basis of bullion: for these Deposits are in reality neither more nor less than so many Bank Notes in disguise.

Now, when a banker creates a Credit in his customer's favour, either in exchange for money, or bills, or any other security, by the fundamental contract between banker and customer he engages to pay this Credit to his customer, or to any one else to whom his customer may assign it: and in token of this he delivers to his customer a book containing blank slips payable to bearer on demand, or to order on demand, called in modern commercial language Cheques. The very essence and business of banking consists in "making engagements to pay money payable to bearer

on demand." It may be said, indeed, that a banker is not a party to the cheque: true, his name is not on the face of the instrument, as an obligor; but he is bonâ fide, and, in reality, a party to it so long as he has funds to meet it: for it is a legal liability of his to pay his customer, or any one his customer may assign it to; and by the very fact of his creating the Credit, he authorises his customer to put it into circulation. So long as his customer does not exceed the amount at the credit of his account, the banker is legally a sleeping party to the cheque.

Now, suppose that two men agree to assail a traveller; one of them points a loaded pistol at the traveller's head, the other pulls the trigger: both are equally guilty of the murder. Suppose one man lights a match and gives it to another man, and tells him to set the house on fire, both are equally guilty of the

arson.

The very same argument applies to the ordinary routine business of banker and customer. The law distinctly says that no banker "shall make any engagement to pay money payable to bearer on demand." But the ordinary routine business of a banker is to create a credit in favour of his customer which he expressly authorises his customer to make payable to bearer on demand, and put it into circulation. Now what is this transaction but a clear conspiracy between the banker and the customer to violate the express words of the Bank Charter Act of 1844 ? The banker creates the engagement, and the customer puts it into circulation. The banker loads and points the pistol at the Bank Act, and the customer pulls the trigger: or the banker lights the match and delivers it to the customer who consumes the Act. How is this transaction one whit less a conspiracy in law than in the case of the murder or the arson?

Of course, the whole difficulty has been created by the gross ignorance of those who drew the Act of the routine business of banking but that is no business of ours. There stand the distinct words of the Law; and there are the actual facts of banking; and it is not possible for the wit of man to reconcile them.

26. The subject cannot fail, we think, very soon to engage the attention of the Courts of Law and the Legislature, for very recently a new institution has been founded which is still a bolder

contravention, not only of the Bank Charter Act of 1844, but of all our monetary legislation for the last 100 years, with a certain exception.

This Bank is called the CHEQUE BANK, and we will first describe its method of business, and then compare it with the existing monetary Laws.

It receives Money only, and in exchange for this money it issues an exactly equal amount of cheques payable to order, and crossed with the words —“ & Co."

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Thus, suppose a person pays in £50; it will give him a book containing ten cheques payable to order and crossed, and perforated with the mark not exceeding £5. The customer may, of course, fill up the cheque with £5, or any less sum: but not with any greater sum and supposing that any balance remains after the customer has exhausted the 10 cheques, the Bank will give him cheques to the amount of the balance.

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As the cheques are crossed it pays no money over the counter, but all its cheques must pass through the hands of a banker, and are only payable to a banker. But though the Bank itself only pays them to a banker, any banker or other person may give cash for them just in the same way as for an ordinary cheque, and in the first year of its existence it has already established relations with about 1,500 home, foreign, and colonial banks, which will cash its cheques.

The plan adopted by this Bank obviates an objection to which ordinary cheques are liable: when a customer places money with an ordinary banker, the banker gives him a cheque book, but there is no security that the customer may not draw cheques in excess of the credit he has in the Bank: consequently, no one who takes an ordinary cheque has any guarantee that the drawer has any funds to meet it. But this cannot happen with the cheques of the Cheque Bank. They are not issued except in exchange for money and any one who takes one of them is positively assured that it will be paid. These cheques, therefore, have all the actual security of cash. They are intended by the promoters of the bank to be received as a substitute for cash; and already several Railway and other companies have agreed to receive them as cash. The Directors also propose to supersede Post Office Orders; and there can be no doubt that they are far more convenient and cheaper than Post Office Orders. As the Directors take care to

issue no more cheques than money paid in, they publicly announce that none of their cheques will ever be refused, however long it may remain in circulation. These cheques are, therefore, in reality, crossed Bank Notes.

Now we do not intend for one moment to question the merit, the ingenuity, and the utility of this Bank. But the question is, How does it consist with the whole of our monetary legislation for the last hundred years, as well as with the Bank Act of 1844? About one hundred years ago many parts of the country were deluged with silver notes for 5s. and 10s., and even less they were found such an intolerable nuisance that an Act was passed in 1775 to prohibit all notes under 20s. ; and in 1777 another Act was passed, prohibiting all notes under £5. And, with the exception of the period between 1797 and 1829, it has been the inflexible determination of the Legislature to prohibit any banking obligations payable to bearer on demand, for less that £5, from being issued and circulated. And since the Bank Act of 1844, even this right has been restricted to those bankers who were in existence at that period. No new banks may issue obligations payable to bearer on demand. It was even for a long time illegal to draw cheques for less than £5, though that restriction is now removed. It is perfectly well known that coin cannot circulate along with paper of the same denomination; consequently, for a hundred years it has been the settled purpose of Parliament that no paper shall come into competition with the coin of the realm.

Now the Cheque Bank publicly guarantees the payment of all its cheques. It is, therefore, avowedly a party to them. What, then, prevents them, or is supposed to prevent them, from being an express violation of the words of the Bank Charter Act?—

1st. It is said that they are issued payable to order on demand, and not to bearer on demand.

Now, this cannot save them from the penalties of the Act, because as soon as the payee has indorsed them, they become payable to bearer on demand; and, consequently, the bank is a party to an obligation payable to bearer on demand contrary to the express words of the Act.

This subtlety, therefore, will not hold water for an instant.

2nd. But there is a second one. The cheques are crossed, and, therefore, they are not literally payable over the counter to bearer