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any one of which may occur in practice at any instant. There are other doctrines and cases which are only necessary to be known, when the banker is unhappily drawn into legal proceedings. In these cases he will be in the hands of, and be guided by, his solicitor and counsel.

We have endeavoured to give a selection of those doctrines and cases only, which are comprised under the former of these divisions those which are necessary to the daily business of banking, and to omit those in which a banker may find it necessary to have recourse to his solicitor.

In endeavouring, however, to draw this line, we are sure that every one conversant with the subject must be aware of the difficulty of selecting out of the great mass of cases and decisions, those only which are fundamental, and passing over those which are only of secondary importance.

In the first Section, accordingly, we have endeavoured to explain clearly the different relations which a banker may hold to his customers, and his legal rights, duties, and liabilities on each of them, and also the legal points affecting the Instruments of Credit in which the Debts he creates are embodied. We then examine the different investments which bankers usually make.

In the second Section we have explained the general system of exchange, or clearing, by which the various banks in the country tend more and more to constitute one vast banking institution; and shewn what a marvellous economy of coin and Bank notes is effected by this means, and also shewn how it proves several of the prevalent doctrines regarding Currency to be erroneous.

In the third Section we have given what appear to us to be the necessary fundamental doctrines regarding the Instruments of Credit, in which are embodied the debts which bankers purchase from their customers, namely Bills of Exchange and Promissory Notes.

SECTION I.

ON THE NATURE OF BANKING, AND THE RELATIONS BETWEEN A BANKER AND HIS CUSTOMER-ON BANKING INSTRUMENTS OF CREDIT-ON BANKING INVESTMENTS.

1. We have found, in a former chapter, that from the time when the word "banker" was first used, it meant a person who purchased specie by means of his Credit, or promise to pay an equal sum on demand, or at some future time. In the business of the exchanges, those are called "banking operations," which consist in the buying and selling of bills. A "Banker," also buys other Debts, such as Bills of Exchange, by creating fresh Debts. Hence the business of a merchant is to buy and sell commodities with specie and Debts; the essential business of a "banker" is to purchase specie and Debts by creating other Debts. A "banker" is, therefore, essentially a Debt merchant, though he sometimes adds other species of monetary business to this.

2. In modern practice, a Banker may stand in four relations to his customer-1st. As the PURCHASER from him of specie, or specie and debts; 2ndly. As his AGENT, or TRUSTEE, or BAILEE, of his specie and valuable securities, i. e., securities for money, and convertible securities; these are termed Banking securities; 3rdly. As the PAWNEE of the same; 4thly. As his WAREHOUSEMAN for plate, specie, jewels, deeds, &c., not being banking securities.

The duties, rights, and liabilities between a banker and his customer are separate and distinct in all these relations, and we must now endeavour to explain them.

On the relation of a Banker to his Customer, as the PURCHASER from him of Specie, or Specie and Debts.

3. The first of these cases, is the ordinary one where a customer opens an account with a banker, by means of paying in money to his account. In this case, the customer cedes the

absolute property in the money, to the banker, and receives in exchange the Right, or Property, to demand an equal sum from the banker when he may require it. The transaction is, therefore, a sale, or an exchange of Money, for a Debt. The banker, and his customer stand in the common law relation of debtor and creditor. It is also part of this relation that the customer or creditor may transfer this Right, or Property, called Debt, to any one else he pleases, and this Debt may circulate exactly in the same manner as Money itself.

The Banker, therefore, has bought this money; he has acquired an entire property in it, and he may do what he pleases with it. He may apply it exclusively to his own private benefit, or purposes, in any way he pleases, and his customer has no legal ground of complaint against him. He has voluntarily parted with his money, and received in exchange for it the right to demand an equivalent sum again from his banker, and if, when he does do so, his banker is unfortunately unable to do so, he is only entitled to receive a proportion of the banker's property rateably with other creditors.

Therefore the common phrase, when a man says he has so much of "his money" at his banker's, is not quite correct. He has no money at his banker's; what he has is a right residing in his person to demand money, which is recorded in his banker's books.

If a customer makes his will bequeathing "all his ready money," "all his debts," "all his moneys," the sum standing at his credit in his banker's books has been held by numerous decisions in equity to pass under these designations.

The relation between banker and customer being simply that of Debtor and Creditor, if a customer were to leave a balance in his banker's hands for more than six years without operating on his account, it would appear that the Statute of Limitations would take effect, and he might if he chose, refuse to pay it.

The case we have been considering is the simplest between a banker and his customer, and in such a one the latter is said to have a Drawing or Current Account with his banker.

4. Trading customers, however, usually keep a different kind of an account with their banker. take a bill at 3 months for them.

They sell their goods, and
As this bill is inconvenient

for trading purposes, they take it to their banker, and offer it to him for sale. If he thinks it a good debt, which will be paid at maturity, he buys it from his customer. He writes down the full sum of the bill to the credit of hls customer, and at the same time charges him with the sum he agrees to receive as profit. When the profit is retained at the time of the advance, it is called DISCOUNT. The discount is, therefore, the difference between the price of the bill and its amount. When a banker buys a bill in this manner he is said to discount it.

When a banker discounts a bill for his customer it is a complete sale of the debt. The banker first makes his customer indorse it, that is, write his name on the back of it. The effect of this is this, that if the principal debtor, or acceptor, does not pay the bill at maturity, the banker has the right to charge his customer with the amount of the bill, provided he gives him immediate notice of the fact of dishonour.

When a banker discounts a bill, the entire property in it passes to him, just as we have seen above, the entire property in the money paid in by his customers vests in him. He has the whole property and interest in it, as much as in any chattels he possesses. He may sell it again if he pleases, or re-discount it, as it is termed, and if he became bankrupt, the entire property in it would pass to his assignees.

It is of importance to observe this. In the loose language in which Economic subjects are usually treated, it is commonly said that when a banker discounts a bill for a customer, he makes him a loan on the security of the bill. This, however, is a complete misconception of the nature of the transaction; and it can easily be shewn to be so. If the banker merely made a loan to his customer on the security of the bill, it would be the customer's duty to repay the money at the time fixed, just as in all other loans it is the duty of the person receiving the money to repay it. But when a banker discounts a bill it is wholly different. He does not seek repayment of the money from his own customer, but he demands payment of the debt from the acceptor of the bill, and if it is duly paid, his customer never hears of or sees the bill again. It is only in the event of its non-payment by the acceptor that he comes back upon his customer. If he made a loan to his customer on the security of the bill, he would not only seek repayment from his customer,

but give him the bill back again when he was repaid, whereas, he never does so. In such a case the property in the bill would remain with the customer, and pass to his assignees in the case of his bankruptcy; whereas it does not do so, it is given to the banker, and the assignees of the customer have no right to it.

The transaction is, in reality, an exchange of Debts. The banker buys a Debt, payable at a future time, by creating a Debt in his customer's favour, payable on demand.

It may seem to some to be mere logomachy to distinguish between a discount as a sale and as a loan on the security of a bill; it is, however, nothing of the kind; the two transactions are essentially distinct, and involve distinct legal consequences to all parties, of the most important nature, civil as well as criminal.

In these cases, therefore, which are the simplest, the banker does not stand in any fiduciary relation to his customer. They are independent exchangers, or buyers and sellers, of specie and debts.

On the relation of a Banker to his Customer, as his AGENT, or TRUSTEE, or BAILEE of SPECIE, and Banking Securities.

5. Besides, however, the simplest and most ordinary relation between bankers and their customers, as exchangers of Money and Debts, bankers do undertake trusts, and enter into fiduciary relations with their customers. They receive sums of money, which are specifically directed by their customers to be appropriated to some special purpose, as well as securities, and other valuable property, such as Stock, Shares, &c., to receive the dividends, &c., on behalf of their customers; they receive Bills of Exchange on behalf of their customers, and collect them for their customers, in exactly the same manner as they do for themselves, and are answerable to them for any loss incurred through any negligence in not complying with the known usages of commerce. Bills of exchange, stock, shares, Exchequer bills, &c., are called Banking Securities.

In such cases as this, the property in these valuable securities does not pass to the banker; he is the mere AGENT, TRUSTEE, or BAILEE of his customer, and he has to obey his specific instructions in each case, and if he appropriated them to his own use, it would

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