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26. Thus we see it finally established that both by Common Law and Statute, every person, and every partnership, and every corporation, is fully entitled to issue Promissory Notes payable to bearer, just in the same way as they may issue bills of exchange. In short, they are legally entitled to trade and make a profit by their Credit in any form they please: and nothing but a Statute can take away this right. We have now to consider the different statutory modifications and restrictions on this Common Law and and Statutory right.

At the time of the foundation of the Bank of England there was a large number of banking partnerships in London, doing business in the method we have described in a previous chapter, buying money and debts by creating other debts in the form of deposits, which Credits their customers might utilise either by having the banker's own Notes or by writing a Note to him directing him to pay money to any one or to bearer, called, in modern language, Cheques. Now, these partnerships might at Common Law consist of any number of partners; and it was quite legal at Common Law to form a Joint Stock Bank with transferable shares, though as a matter of fact no one thought of such a thing, and none were formed.

In 1694 the Bank of England was founded by Act of Parliament, with the privilege of limited liability, but it received no monopoly in its favour. So far from that, in 1696, Parliament passed an Act to found another Bank, called the Land Bank, as we have fully detailed in a previous chapter. The unsuccessful attempt to form this Bank greatly added to the embarrassment of the finances, and in 1697 when the capital of the Bank was increased, a clause was inserted in the Act "that during the continuance of the Corporation of the Governor and Company of the Bank of England, no other Bank, or any other Corporation, society, fellowship, company or constitution in the nature of a bank, shall be erected or established, permitted, suffered, countenanced, or allowed by Act of Parliament within this kingdom, i. e., England."

Now the meaning of this clause is perfectly clear. It never forbade banking partnerships or companies at Common Law, however large they might be; it only enacted that no Bank should be erected by Act of Parliament; it never for a moment con1 Chapter viii., § 43.

templated, as some learned Counsel have contended, that it prevented banking partnerships at Common Law being created, because a large number of such existed at the time it was passed, which it never pretended to put down, and in 1704, as we have seen, an Act was passed to remove all doubts as to the power of any person, partnership, or corporation, to issue Promissory Notes payable to bearer.

27. Notwithstanding this Act, however, expressly permitting Corporations to issue Notes payable to bearer, when a Corporation did exercise this power, the Act of 1709 was passed, for the first time limiting and restricting the right of "borrowing, owing, or taking up any sum or sums of money on their bills or notes payable at demand, or at any less time than six months from the borrowing thereof" to partnerships of not more than six persons.

Now, as this and the subsequent monopoly clauses are penal acts, they, of course, must be construed in the strictest sense. And here we see that the monopoly or restriction was confined solely to issuing Notes; and still there was nothing to prevent corporations or partnerships of any magnitude from buying money and Debts as before by means of their Credit; so long as they did not issue Promissory Notes at a less date than six months. They were perfectly at liberty to create these Credits and allow their customers to transfer them by means of Cheques, as the present Joint Stock Banks in London do.

Again, in 1742, when the monopoly was more strictly defined, it was still restricted to issuing Notes; and the monopoly of the Bank was expressly defined to consist in this power of issuing Notes, and it was always repeated in the same words in subsequent Acts. Consequently, every other species of banking was left absolutely free. But, in fact, at that time the essence of banking was considered to consist so exclusively in issuing Notes, that to prohibit that was considered as an effectual bar against banking. Nobody at that time ever thought that a bank could be formed without the power of issuing notes. Consequently this clause did for a long time effectually prevent the formation of any Joint Stock Bank in England. But about the end of the last century London bankers of their own accord discontinued issuing Notes, and without any legal compulsion they restricted their customers to the use of Cheques. Hence the discovery was made that

banking could be carried on in a large city like London without the power of issuing Notes.

About the year 1822, as we have seen in a previous section, this flaw in the monopoly of the Bank was detected by Mr. Joplin, but no result followed at that time. In 1826 the first breach was effected in the monopoly of the Bank, and Joint Stock Banks of Issue were allowed to be formed at a distance of not less than 65 miles from London, provided that they had no house of business or establishment as bankers in London, or at any place within 65 miles of it.

At the time of the renewal of the Bank Charter in 1833, the idea of Mr. Joplin had taken root, and a joint stock bank was being formed to carry on banking business in the manner then usual among London bankers, i. e., without issuing Notes. And some eminent Counsel gave it as their opinion that such banks were illegal. The Bank of England endeavoured to get the Government to prohibit them. But Sir John Campbell, the Solicitor-General, declared that Joint Stock Banks of Deposit and Discount were perfectly legal at Common Law, and no infringement of the privileges of the Bank, and he brought up a clause by way of rider declaring the right of any company or partnership to form such a bank; and several joint stock banks were formed.

Now this clause did not confer any new rights; it merely declared the Common Law right which had always existed, and had never been taken away.

We now, then, distinctly see what the monopoly or privilege of the Bank of England does consist in; it is nothing but this, that while the Corporation exists, no banking partnership of more than six persons shall issue notes or bills payable at less than six months date in England. All other kinds of banks and banking are left absolutely free. Now, with reference to the circumstances which gave rise to this discussion, the opening of branches by the Scotch banks in London and other parts of England, the sole question is this-By so doing do they issue Notes in England? The plain answer is, they do not: and, therefore, they are perfectly legal. The argument brought forward by Sir Henry Thring that it is not likely that a Scotch Bank may do what a Somersetshire Bank may not, is nothing to the purpose. It is a matter of pure law; and as a matter of fact, a Scotch Bank, or any Foreign bank, the Bank of France, or the Bank of Amsterdam, or a Bank in Japan, may

legally do what a Somersetshire or any provincial Joint Stock Bank of Issue may not do,-it may open a branch in London or anywhere in England and do every kind of banking business, except only issuing Notes. No doubt it is utterly absurd and irrational that such should be the case; but, nevertheless, it is Law; and it is only an example of the chaotic and absurd state of the banking laws of this country, and shews the necessity for their thorough investigation and reform, as they will inevitably, some day, if not reformed, lead to a fearful catastrophe.

CHAPTER XVI.

ON THE BUSINESS OF BANKING.

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SECTION I. ON THE NATURE OF BANKING RELATION BETWEEN A BANKER AND HIS CUSTOMER-ON BANKING INSTRUMENTS OF CREDIT-ON BANKING INVESTMENTS.

SECTION II. ON THE CLEARING SYSTEM.

SECTION III. ON BILLS OF EXCHANGE AND PROMISSORY NOTES.

In the preceding chapters we have endeavoured to investigate fully the fundamental conceptions of Economics which are necessary to understand the nature of Credit, or Debts, the commodity in which bankers deal, and we have explained the general effects of banking in respect to Commerce and the Foreign Exchanges. We have also set forth the history of banking in this country, and the various monetary crises which have occurred during nearly a century.

We then examined certain theories of Currency which have acquired considerable importance, and explained the somewhat anomalous organisation of the Bank of England, and the theories upon which it has been constructed and managed. We are now come to the more particular question of the practical details of banking business.

The difficulty in compressing the subject within a moderate compass consists in this, that CREDIT, the commodity with which bankers are concerned, constitutes one of the most extensive and abstruse branches of Law and Bankruptcy.

To enumerate all the decisions which have been given, would fill a treatise considerably larger than the whole of this work. That it would be manifestly impossible to do, besides the fact of there being several excellent legal treatises on every branch of it.

The line that we have endeavoured to draw is this-There are certain legal doctrines and cases which are absolutely indispensable for a banker to be familiar with in his daily business,

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