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of the general suspicion, many stopped payment, who were afterwards proved not only to be solvent, but wealthy. It will not be denied, that the public will place greater confidence in a bank, where, in addition to the paid-up capital they have a claim upon the property of all the partners, than where they have to depend upon the paid-up capital alone. It is remarkable that this tendency of unlimited liability to inspire public confidence should be advanced as an objection against it. It has been said, that the public confidence may be abused, and that banks presuming on the confidence they know they have acquired, may engage in speculations to which they would not otherwise resort. We grant that the public confidence may be abused; but is there no way of guarding against these abuses, but by rendering the banks less deserving of confidence? If a commander presuming on the goodness of his ship were to attempt a dangerous voyage, in which he should peril the ship and cargo, that might be a very good reason for displacing the commander, or for prohibiting him making the same voyage à second time; but would that be a sufficient reason for damaging the ship, so as to render her less sea-worthy? They who assert that unlimited liability acquires an excessive degree of public confidence, admit that the public opinion is in opposition to their own. They think that unlimited liability renders a bank less worthy of confidence; the public think the reverse, and they act accordingly.

But it is said, that if the liability were limited, a more respectable class of persons would become shareholders in joint stock banks. Perhaps this is the case with a few of the landed gentry, but certainly not with any large portion of them. They are the principal declaimers against joint stock banks. But why is it so desirable that they should become partners? Is it on account of their habits of business, or their superior knowledge of banking? No; it is because their large properties would give weight and respectability to the bank. But of what value

would their property be to the bank, if their liability was limited to the amount of the paid-up capital? Besides, it is not necessary that every man of property in the country should be a shareholder in a joint stock bank; and if we have a sufficient number of wealthy men to make the banks safe and respectable, why need we alter the law to meet the scruples of others whose assistance is not required?

But it is said that unlimited liability has been tried and failed. The private banks in England were all founded on unlimited liability, and yet large numbers of them have failed. Is it believed that if these private banks had been founded on limited liability, the failures would have been less numerous? Besides, is it fair to infer that because the unlimited liability of six partners fails to produce a good bank, that therefore the unlimited liability of six hundred partners would be equally ineffectual? And if in some cases even this has been found to fail, are there no failures on the other side? Has not limited liability been also tried and failed? Are the one hundred and sixtyfive chartered banks that have failed in America to go for nothing? And what are all the returns, the oaths of the directors, the examinations and countings of the money by government commissioners, but so many acknowledgments that limited liability is not to be trusted?

If limited liability is to be tried at all, it should be under heavy restrictions-restrictions more severe than those imposed upon the banks of America. It is perhaps possible to frame charters with such provisions as might justify the limitation of the liability to three or four times the amount of the paid-up capital. may have occasion to notice some of these provisions at the end of this section.

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"Sec. 15. Be it further enacted, that every bank shall be kept in the city or town in which it is, or shall be originally established, and in such part of such city or town as is prescribed by its charter.”

The Americans have adopted the district system.

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The banks of every state confine themselves to that state, and do not extend their branches into the neighbouring states. Analogous to this is the district system of banking adopted by the joint stock banks in England. Had the law of 1826 permitted joint stock banks to be established in London, we should probably by this time have had ten or a dozen banks having their head quarters in London, and extending their branches throughout the country. But as the law prohibited these banks being established within sixtyfive miles of London, it necessarily gave rise to banks occupying particular districts in the country. The advantages which are alleged to belong to the district system are the following-that the bank will be better adapted to the wants and habits of the people— that a local feeling will be excited in its favour, hence the inhabitants of the district will take shares, and the occurrence of runs upon the bank will be less probable that a better system of management may be expected, as it can more easily be governed, and will be more under controul-that a panic in the district will not affect the other parts of the country, and hence supplies may be more easily obtained-that banks will be of a moderate size, and hence will be attended with the advantages arising from numerous banks acting as checks upon each other, instead of a few large banks who may combine for objects injurious to the nation; and that as each bank will have an agent in London, the bills they draw will thus have two parties as securities, and the public will have a pledge that there is no excessive issue in the form of kites or accommodation bills. On the other hand, it may be contended, that in Scotland the large metropolitan banks which have branches extended throughout the country, have generally been more successful than the provincial or district banksthat there is a greater security to the public for the notes or deposits-that advances are not so likely to be made to speculative parties merely on account of their local influence-that the capital raised in one part of

the country can be employed in another-that the transmission of money from one part of the country to another is more rapid and direct-that the establishment of the bank being on a larger scale, you have a superior class of directors, and can demand the services of higher talents in those who are employed as officers.

It does not appear that these two systems are necessarily at variance with each other. County or districts banks have no doubt many advantages, but they do not seem to supersede banks on a larger scale.

Both the district and the extended system of banking are attended with a system of branches. The Bank of the United States had a branch in every state, and several of the state banks have also branches. It will be seen at page 48 that the 558 banks have 146 branches.

When the law existed in England that no bank should have more than six partners, the branch system scarcely existed. In some cases, a bank had a branch or two a few miles distant, but no instance occurred of a bank extending itself throughout a county or a district. But with joint stock banking arose the branch system-the head office was placed in the county town, and branches were opened in the principal towns and villages around. The credit of the bank being firmly established, its notes circulated freely throughout the whole district. The chief advantages of this system are the following:

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There is greater security to the public. The security of the whole bank is attached to the transactions of every branch; hence there is greater safety to the public than could be afforded by a number of separate private banks, or even so many independent joint stock banks. These banks could have but a small number of partners-the paid-up capital and the private property of the partners must be comparatively small; hence the holder of a note issued by one of the independent joint stock banks could have a claim

only on that bank: but if that bank, instead of being independent, were a branch of a large establishment, the holder of a note would have the security of that large establishment; hence the branch system unites. together a greater number of persons, and affords a more ample guarantee.

The branch system provides greater facilities for the transmission of money. The sending of money from one town to another is greatly facilitated, if a branch of the same bank be established in each of those towns, for all the branches grant letters of credit upon each other. Otherwise you have to ask the banker in the town from which the money is sent to give you a bill upon London, which is transmitted by post, or you request him to advise his London agent to pay the money to the London agent of the banker, who resides in the town to which the money is remitted. This takes up more time, and is attended with more expense. A facility of transmitting money between two places usually facilitates the trade between those places.

The branch system extends the benefits of banking to small places where independent banks could not be supported. An independent bank must have an independent board of directors who in most cases will be better paid-the manager must have a higher salary because he has a heavier responsibility, and a large amount of cash must be kept unemployed in the till, because there is no neighbouring resource in case of a run. There must be a paid-up capital, upon which good dividends are expected; a large proportion of the funds must be invested in exchequer bills, or other government securities, at a low interest, in order that the bank may be prepared to meet sudden calls; and the charge for agencies will also be more. On the other hand, a branch has seldom need of a board of directors, one or two being quite sufficient-the manager is not so well paid: there is no necessity for a large sum in the till, because in case of necessity the branch has recourse to the head office, or to the neighbouring