at Uxbridge, and as a bill-discounter in London. Another feature of security in the Bank referred to was the following : The Bank will be established under a deed of settlement with a power of suing and being sued, in the name of one of its officers, and with effectual provisions for limiting the liabilities of shareholders, by rendering it imperative on the part of the Directors or Auditors, or a majority in value of the Proprietors present at any meeting convened for the purpose by public advertisment, to dissolve the bank, in the event of one third of the subscribed capital being lost." Both these features I would recommend in any Bank that may be estabished in Honolulu. No doubt one great source of profit to banks is in their issue; and an issue of paper to the extent of one fourth of the paid up capital would be a very safe one in other countries; but here, where the natives are so suspicious about what coins they take, that fourth part of notes would be returned so rapidly for gold or silver, that the Bank would have to keep constantly in its vaults an equal value in metallic currency to redeem its paper circulation, and thus the latter would leave no profit whatever. To intoduce a paper circulation into these islands, always convertible into gold or silver on demand, would require much time and careful management. An experiment might perhaps be made with an issue of notes to the amount of say 5 per cent on the paid up capital, and if that succeeded it might be followed up by an equal issue every year, till the whole issue amounted to 25 per cent upon the whole paid up capital. But for Honolulu, as I have before said, I would prefer, for safety, a Bank purely of Deposit, Loan and Discount. There are two kinds of Banks, viz: private and public. A private Bank consists of but few partners, who supply the whole capital from their own resources. It is the cheapest, because the partner's attend to its inangement, without any salary. A public Bank is one where the capital is divided into shares and raised by subscription. The shareholders, for its management, elect a certain number from among themselves, as Directors, who are paid for their services. Such a Bank is called a Joint Stock Bank. A Bank of the latter description although more costly, would, I think, be most acceptable in this community, as it would give to all, natives and foreigners, an equal opportunity of participating in its profits. The next important question is:-Could an adequate capital be raised in this community, and in what manner? I think it could, and in some such manner as that shown in the following supposed PROS PECTUS: HAWAIIAN BANK OF DEPOSIT, LOAN, AND DISCOUNT. In 5000 shares of $100 each. Deposit $10 the first two years, payable by tervals of not less than three months. President. Six Ordinary Directors. To serve gratis for the first year and thereafter to be paid moderately for their daily attendances. One Managing Director of Banking experience, to be always on the spot and well paid. 1. The shares of the Company will be issued in two series of 2500 each. The second series shall not be appropriated until the business of the Bank require their allotment. The holders of the first series, will have a preference, pro rata, in their distribution. 2. No one shall be eligible to the office of President or Ordinary Director who shall hold less than 100 shares, nor for that of Auditor or Solicitor who shall hold less than 30 shares; nor for Managing Director who shall hold less than 50 shares; any of said officers in default for non-payment of any call, for more than three months after it is due, shall forfeit his office; and all calls must be paid in hard coin. 3. Each series of shares shall have a portion reserved for distribution abroad, where the calls can be paid to the agents of the Bank, and where the dividends may be received at the option of the shareholders. 4. The provisional directors shall hold office only till the first general meeting, but then, and afterwards, they, and all other officers of the Bank, shall be elected by the shareholders, by ballot. Directors and other officers shall be indefinitely re-eligible; and absent or foreign shareholders may vote at all general meetings, by proxy. 5. A general meeting of the shareholders will be held annually, at which a full report of the affairs of the Company and a balance sheet will be submitted to the shareholders, thereafter printed, and a copy sent to every shareholder. 6. The qualifications for voting at the yearly meetings for the election of officers, shall be 5 shares one vote; 15 shares two votes; 25 shares 3 votes; 40 shares 4 votes; 60 shares 5 votes; 80 shares 6 votes; and 100 shares 7 votes, and in the same proportion for any additional number of shares. 7. The shares shall be transferable without endorsement, but the dividends shall only be paid to the parties in whose names the shares may be registered, at the time when the dividend is due. 8. In the absence of a charter limiting responsibility, the Bank will be established under a deed of settlement, which shall contain the most effectual provisions for the discharge of all its debts, and yet protect the shareholders, by rendering imperative the dissolution of the institution, in the event of one third of the subscribed capital being lost. 9. The operations of the Bank will be confined, to those of Deposit, Loan, and Discount, dealings in Exchange, Bullion and Coins. 10. The general management of the Bank will be vested in the Managing Director, and the ordinary Directors, under the supervision of the President, all of whom shall be accountable to the shareholders in their general meetings. You are requested to bear in mind that the foregoing is a mere imaginary PROSPECTUS, open to improvement, by those who might take part in the undertaking. But I may add that with such a PROSPECTUS, or an improved one on similar principles, as might be agreed upon, under a better security for the preservation of the public peace, I should be willing for myself to take 100 shares, which would be an interest of say ten thousand dollars, and to pledge my best exertions to dispose of another hundred among my personal friends abroad. As the money market now is in the United States and Europe, and as it is likely long to be, if peace be preserved, from the great influx of gold from California and Australia, there would be no difficulty in obtaining a large subscription by foreign capitalists, if we could only convince them that the Banking House would be safe, that their capital would be safe, and that it would yield a dividend twice or three times the interest that they could make at home. Capitalists are essentially the friends of order; nothing would tempt them to risk their money here, if they thought the Government had not a sufficient force to protect the Bank from being plundered. For this purpose a small, well-organised force would be sufficient in such a place as Honolulu. There is no country in the world where Banks have done so much good, and been so well managed as in my native country, Scotland. The Bank of Scotland, chartered in 1695, is still in prosperous existence, and its shares of £100 are worth £183. The Royal Bank of Scotland, chartered in 1727, is in the same condition, and its shares of £100 are worth £135. The Bank known under the name of the British Linen Company, chartered in 1746, is also flourishing to this day, and its shares of £100 are worth £199 10s. Besides these which are the most ancient Banks in Scotland, there are numerous others, such as the Aberdeen Banking Company, the Aberdeen town and county Bank, the Arbroath Banking Company, the Bank of Ayr, Carrick and Company's Bank of Glasgow, the Commercial Banking Company of Scotland, the Commercial Banking Company, the Dundee Banking Company, the Dundee Bank, the Dundee Commercial Bank, the Dundee Union Bank, the Exchange and Deposit Bank, the Falkirk Banking Company, the Fife Banking Company, the Greenock Banking Company, the Glasgow Banking Company, the Leith Banking Company, the National Bank of Scotland, the Montrose Bank, the Paisley Union Bank, the Perth Banking Company, the Perth Union Bank, Ramsay Bonar & Co's Bank, Edinburgh, the Renfrewshire Banking Company, the Shetland Bank, Sir William Forbes & Co's Bank, Edinburgh, the Stirling Banking Company, the Thistle Bank, the Ayrshire Banking Company, the Glasgow Union Banking Company, the Western Bank of Scotland, and the Central Bank of Scotland, all of which pay large dividends; and their shares sell at a premium. All these Banks, so far as I know, issue their own notes as low as 20 shillings, and act liberally upon the plan of granting credits, on cash accounts, which was introduced by the Bank of Scotland in 1729. The nature of these cash accounts consists in a credit, given by the Banks, on loan, to the extent of any given sum, to any one that can produce two or more persons of undoubted credit and property to become sureties for the repayment on demand of the sum credited, with interest. Any person having obtained this credit, may employ the amount in his business, paying interest not on the whole amount, but upon the sums which he actually draws for; and obtaining interest on the smallest amount he may pay in, in satisfaction of that credit. These loans are advanced in the notes of the Bank which are equal to gold, which is the chief advantage of the Bank in giving such credits. These cash accounts have greatly advanced the prosperity of Scotland since the system was commenced. They enable any young man of good character, who enjoys the confidence of his own friends, to commence business, without any Capital of his own, and often to rise to a condition of great opulence. In 1793 and 1825, when so many bankruptcies took place among country bankers in England, not one Scotch bank failed to make good its engagements. The committee of the House of Lords, which sat in 1826, reported that the banks of Scotland, whether chartered or joint stock companies, or private establishments, had for more than a century exhibited a stability which they believed to be unexampled in the history of Banking; that they supported themselves from 1797 to 1812 without any protection from the restrictions by which the Bank of England and that of Ireland were relieved from cash payments, and that there was little demand for gold in Scotland during the great embarrassments in the circulation which prevailed in England, previous to 1826. The same committee further reported that as, during the whole of that period, a large portion of their issues consisted almost entirely of notes not exceeding £1 or £1 1s, there was the strongest reason for concluding that as far as respected the Banks of Scotland, the issue of paper of that description had been found compatible with the highest degree of solidity. The Act of 1826 which put an end to the circulation of notes under the value of £5 in England, did not extend to Scotland, where, to this day, a large portion of the circulation of the country, always at par with gold, is of £1 notes. |