Imatges de pÓgina
PDF
EPUB

their hands, in bankruptcy and ruin; and provided the others succeeded in securing themselves, little attention was usually paid to the interests of those they had taught to look to them for help, who were commonly destroyed by thousands. (See post.)

It is exceedingly ditficult to prevent the issue of forged notes. Various schemes have been suggested for this purpose ; and though it be hardly possible to suppose that an inimitable note will ever be produced, it is contended that by judiciously combining different sorts of engraving, forgery may be rendered so difficult, as to be but rarely attempted. But however this may be, during the period from 1797 to 1819, when the Bank of England issued 11. notes, their forgery was carried on to a great extent. And the desire to check this practice, and to lessen the frequency of capital punishments, appears to have been amongst the most prominent circumstances which led to the return to specie payments in 1821, and the suppression of ll. notes.

(S.) Bank of England Notes legal tender. -- According to the law as it stood previously to 1834, all descriptions of notes were legally payable at the pleasure of the holder in coin of the standard weight and purity. But the policy of such a regulation was very questionable; and we regard the enactment of the stat. 3 & 4 Will. 4. c. 98., which makes Bank of England notes legal tender, every where except at the Bank and its branches, for all sums above 5l., as a great improvement. The unjust liabilities imposed upon the Bank of England by the old system, placed her in a situation of great difficulty and hazard. They obliged her to provide a supply of coin and bullion, not for her own exigences only, but for those of all the country banks; and, what is harder still, they exposed her to be deeply injured by any misconduct on the part of the latter, as well as by the distress in which they might accidentally be involved. In consequence, her free action was at all times in some degree impeded; and her power to render assistance to the banking and mercantile interests in periods of discredit materially diminished. The country banks kept but a small supply of coin in their coffers. They were all, however, holders, to a greater or less extent, of government securities; and whenever any circumstance occurred to occasion a demand upon them for coin, they immediately sold or pledged the whole or a portion of their stock, carried the notes to the Bank to be exchanged, and then carried the specie to the country. Hence, when any suspicions were entertained of the credit of the country banks, or when a panic originated amongst the holders of their notes, as was the case in 1799 and 1825, the whole of them retreated upon the Bank of England, and 700 or 800 conduits were opened, to draw off the specie of that establishment, which was thus, it is evident, exposed to the risk of stoppage without having done any thing wrong. It was not the drain for gold from abroad, but the drain for gold from the country, that nearly exhausted the Bank's coffers in 1825, and forced her to issue about a million of ll and 21. notes. The currency could not be in a sound healthy state, while the Bank of England, and, through her, public credit, were placed in so perilous a situation. But the making of Bank of England notes legal tender at all places except the Bank, has tended materially to protect her from the injurious consequences of panies or runs among the holders of country bank paper; and while it does this, it has not, as it appears to us, anywise impaired the securities against over-issue or depreciation.

It has, no doubt, been contended that the measure now referred to might lead to the depreciation of provincial paper; inasmuch as the expense of sending notes from a distance to London, to be exchanged for gold, would prevent any one from demanding Bank of England notes from country banks in good credit, till the value of the notes issued by them was so much depreciated below the value of gold that the difference would more than pay the expense of sending them to London, and bringing gold back. There cannot, however, be the least difference, as respects value, in the provinces, between Bank of England paper, now that it is legal tender, and gold. London being the place where the exchanges are adjusted, the value of money in every part of the empire must depend on its value in it; and this, it is plain, is not in any degree affected by the measure under consideration. Formerly the provincial currency, gold as well as paper, might be, and indeed frequently was, depreciated. This was brought about either by an over issue on the part of the country banks, generally in the first instance the effect, but always in the end the cause, of a rise of prices; or by the issues of the Bank of England being, in consequence of an adverse exchange, narrowed sooner or more rapidly than those of the country banks. In either case, the provincial currency being redundant as compared with that of the metropolis, there was a demand on its issuers for bills on London; but it is material to observe, that, unless their credit was suspected, there was not, in such cases, any demand upon them for gold. It is, indeed, obvious that a redundancy of the currency is a defect that cannot be obviated by getting gold from the country banks, unless (as hoarding is out of the question) it be intended to send it abroad; and that may always be done better and cheaper by getting from them Bank of England notes, or bills on London. A

Local redundancy of the currency may take place now as it has done formerly; and its occurrence cannot be prevented, even though paper were wholly banished from circulation, so long as the whole currency is not supplied from one source, and as London is the focus where the exchanges with foreign countries are adjusted. But the statements new made show that it is a radical mistake to suppose that it can take place more readily, or to a greater extent, under the present system than formerly. In this respect no change was made in 1834. And while our ancient security against over-issue was maintained unimpaired, the arrangements then made increased the stability of the Bank of England, and consequently improved our pecuniary system.

If any doubt could possibly remain as to ihe operation of this system, it would be removed by referring to Scotland. Gold has been practically banished from that coun. try for a long series of years ; and yet no one pretends to say that prices are higher in Scotland thau in England, or that her currency is depreciated. The Scotch curreney is kept at its proper level, not by the check of gold payments, but by the demand for bills on London ; and it is as effectually limited in this way as it would be were the banks universally in the habit of exchanging notes for gold. On what grounds, then, is it to be apprehended that the obligation to give Bank of England notes or bills on London will be less effectual in restraining over-issue in Yorkshire or Durhain than in Scotland ?

A banker who issues notes must keep beside him such a stock of cash and bullion as may be sufficient to answer the demands of the public for their payment. If the value of the cash and bullion in his coffers were equal to the value of his notes in circulation, he would not, it is plain, make any profit; but if he be in good credit, a third, a fourth, or even a fifth part of this sum, will probably be sufficient; and his profit consists of the excess of the interest derived from his notes in circulation over the interest of the sum he is obliged to keep dormant in his strong box, and the expenses of managing his establishment. The Bank of England, as will be after wards seen, keeps an average stock of coin and bullion equal to a third of her liabilities.

(4.) Legal description of Bank Notes. — Bank notes are merely a species of promissory notes. They are subscribed either by the parties on whose account they are issued, or by some one in their employment, whose signature is binding upon them. A Bank of England note for 51. is as follows:

Bank of England.
I promise to pay Mr. Matt" Marshall, or Bearer,
on Demand, the Sum of Five Pounds.
1846 Dec 9 London 9 Dec' 1846.

For the Gov' and Comp' of the £Fibe.

BANK OF ENGLAND.

A. B.

No particular form of words is necessary in a bank note. The essential requisites are, that it should be for a definite sum (in England and Wales not less than 5h., and in Scotland and Ireland not less than 1l.), that it should be payable to bearer on demand, and that it should be properly stamped. Promissory notes, though issued by bankers, if not payable to bearer on demand, do not come under the denomination of bank notes; they are not, like the latter, taken as cash in all ordinary transactions ; nor are they, like them, assignable by mere delivery.

The circulation of notes for less than 51. was restrained by law (stat. 15 Geo, 3. c. 51.) from 1766 to 1797. In 1808, it was enacted by stat. 48 Geo. 3. c. 88., that all bank notes, promissory notes, or other negotiable instruments for less than 20s., should be absolutely void : a penalty of from 208. to 5l, at the discretion of the justices, being imposed on their issuers. It was enacted by the 7 Geo. 4. c. 6., that the issue of all bank notes or promissory notes for less than 5l. by the Bank of England, or by any licensed English baukers, and stamped on the 5th of February, 1826, or previously after which period such notes were not stamped), should terminate on the 5th of April, 1829.

The stamp duties on bank notes or promissory notes payable on demand are

[ocr errors][merged small][merged small][merged small][merged small][merged small][ocr errors][merged small]

Which notes may be reissued after payment, as often as shall be thought fit, provided

they be issued by a banker or person who has taken out a licence, renewable annually, and costing sol., to issue notes payable to bearer on demand. Any banker or other person issuing such reissuable notes, without being duly licensed, shall forfeit 1001. for every offence.-(55 Geo. 3. c. 184. $ 27.)

These conditions do not apply to the Bank of England. The stamp duties on the notes of that establishment were formerly compounded for at the rate of 3,5001. per million of those in circulation; but the act 7 and 8 Victc. 32. has wholly exempted them froin all charge on account of stamp duties.

Notes or bills not payable to bearer on demand are not reissuable, under a penalty of 501. For the stamp dutiis affecting them, see Exchange.

By the 9 Geo. 4. c. 23., English bankers not in the city of London, or within three miles thereof, are authorised to issue promissory notes, and to draw and issue bills of exchange, on unstamped paper, for any sum of 5l. or upwards, expressed to be payable to the bearer on demand, or to order at any period not exceeding 7 days after sight (bills may also be drawn at any period not exceeding 21 days after date), upon obtaining licences, costing 30l., to that effect; provided such bills of exchange be drawn upon bankers in London, Westminster, or Southwark; or provided such bills be drawn by any banker of bankers at the place where he or they shall be licensed to issue unstamped notes and bills, upon himself or themselves, or his or their copartner or copartners, payable at any other place where such banker or bankers shall be licensed to issue such notes and bills. Bankers having such licences are to give security, by bond, that they will keep a true account of all promissory notes and bills so issued, and account for the duties on them at the rate of 38. 6d. for every 1001., and also for the fractional parts of 1001. of the average value of such notes and bills in circulation. Persons post-dating unstamped notes or bills shall, for every such offence, forfeit 1001.

(5.) Legal Effect of the Puyment of Bank Notes. Notes of the bank of England were not, previously to the act 3 & 4 Will. 4. c. 98., like bills of exchange, mere secu. rities, or documents of debt, but were treated as money or cash in the ordinary course or transactions of business; the receipts given upon their payment being always given as for money. Now, however, they are legal tender, everywhere except at the Bank, for all suins above 51.

All notes payable to bearer are assignable by delivery. The holder of a bank note is primâ facie entitled to its prompt payment, and cannot be affected by the previous fraud of any former holder in obtaining it, unless evidence be given to show that he was privy to such fraud. Such privity may, however, be inferred from the circumstances of the case. To use the words of Lord Tenderden, “ If a person take a bill, note, or any other kind of security, under circumstances which ought to ercite suspicion in the mind of any reasonable man acquainted with the ordinary affairs of life, and which ought to put him on his guard to make the necessary inquiries, and he do not, then he loses the right of maiutaining possession of the instrument against the lawful owner." -(Guildhall, 25th October, 1826.)

Country bank notes are usually received as cash. But though taken as such, if they be presented in due time and pot paid, they do not amount to a payment, and the deliverer of the notes is still liable to the holder. It is not easy to determine what is a due or reasonable time, inasmuch as it must depend in a great measure on the circumstances of each particular case. On the whole, the safest rule seems to be to present all notes or drafts payable on demand, if received in the place where they are payable, on the day on which they are received, or as soon after as possible. When they have to be transmitted by post for payment, no unnecessary delay should be allowed to intervene. —-(Chitty's Commercial Law, vol. iii. p. 590.; and the art. Check in this Dictionary.)

6. Distinction between Bank Notes and Bills of Erchange. It is common with those who object to any restrictions being laid on the issue of bank notes to represent them as substantially identical with ordinary bills of exchange, and to contend that if it would be imprudent or impracticable to interfere with the issue of the latter, the issue of the former should also be left to the discretion of the parties. The cases, however, are not parallel. It is true that bills of exchange perform in some respects the functions of money ; and being transferred from one individual to another make payments much in the same way as if they were bank notes, But though there are, no doubt, certain points in which bills of exchange and bank notes closely resemble each other, there are others, and those too of the greatest importance, in wbich there is a distinct and material difference between them. Bank notes are issued only by parties licensed for the purpose, or by bankers; they are uniformly payable on demand, or when presented; they are not indorsed by the holder on bis paying them away; the party receiving hus no claim on the party from whom he received them in the event of the failure of the issuers * ; and every one is thus encouraged, reckoning

* Practically speaking, this is the fact ; but, as seen above, a person paying away a country bank note is liable to be recalled upou for repayment, should the bank fail before it was in the power of the party

on the facility of passing them to others, to accept bank notes, “even though he should doubt the ultimate solvency of the issuers." - ( Thornton on Paper Credit, p. 172.) Bills, on the contrary, may be drawn by all individuals; they are mostly all made payable at sonje distant period; and those into whose hands they come, if they be not in want of money, prefer retaining them in their possession, in order that they may get the interest accruing upon them. But the principal distinction between notes and bills is, that the latter are not assignable by mere delivery, but that every individual, in passing a bill to another, has to indorse it, and by doing so makes himself responsible for its payment. “ A bill circulates," says Mr. Thornton, " in consequence chiefly of the confidence placed by each receiver of it in the last indorser, his own correspondent in trade; whereas the circulation of a bank note is owing rather to the circumstance of the name of the issuer being so well known as to give it an universal credit." (P. 40.) Nothing, then, can be more inaccurate than to represent bills and notes in the same point of view. If A. pay to B. 1001. in satisfaction of a debt, there is an end of the transaction ; but if A. pay to B. a bill of exchange for 100l., the transaction is not completed ; and, in the event of the bill not being paid by the person on whom it is drawn, B. will have recourse upon A. for its value. It is clear, therefore, that a great deal more consideration is always required, and may be fairly presumed to be given, before any one accepts a bill of exchange in payment, than before he accepts a bank note. The note is payable on the instant, without deduction — the bill not until some future period ; the note may be passed to another withoui incurring any risk or responsibility, whereas every fresh issuer of the bill makes himself responsible for its value. Notes form the currency of all classes, not only of those who are, but also of those who are not engaged in business, very many of whom are, as already seen, without the power to refuse them, and without the means of forming any correct conclusion as to the solvency of the issuers. Bills, on the other hand, pass only, with very few exceptions, among persons engaged in business, who, being fully aware of the risk they run in taking them, reject such as they apprehend might involve them in loss. There is plainly, therefore, a wide and obvious distinction between the two species of currency; and it would be ridiculous to argue that because government is bound to interfere to regulate the issue of the one, it should also regulate the issue of the other.

II. BANK OF ENGLAND (Account or). (1.) Historical Sketch of the Bank. This great establishment, which has long been the principal bank of deposit and circulation, not in this country only, but in Europe, was founded in 1694. Its principal projector was Mr. William Paterson, an enterprising and intelligent Scotch gentleman, who was afterwards engaged in the ill-fated colony at Darien. Government being at the time much distressed for want of money, partly from the defects and abuses in the system of taxation, and partly from the difficulty of borrowing, because of the supposed instability of the revolutionary establishment, the bank grew out of a loan of 1,200,0001. for the public service. The subscribers, besides receiving eight per cent. on the sum advanced as interest, and 4,0001. a year as the expense of management, in all 100,0001. a year, were incorporated into a society denominated the Governor and Company of the Bank of England. The charter is dated the 27th of July, 1694. It declares, amongst other things, that they shall “ be capable in law to purchase, enjoy, and retain to them and their successors, any manors, lands, rents, tenements, and possessions whatsoever; and to purchase and acquire all sorts of goods and chattels whatsoever, wherein they are not restrained by act of parliament; and also to grant, demise, and dispose of the same.

That the management and government of the corporation be committed to the governor, deputy governor, and twenty-four directors, who shall be elected between the 25th day of March and 25th day of April, each year, from among the members of the Company duly qualified.

“ That no dividend shall at any time be made by the said Governor and Company, save only out of the interest, profit, or produce arising by or out of the said capital stock or fund, or by such dealing as is allowed by act of parliament.

“ They must be natural-born subjects of England, or naturalised subjects; they shall have in their own name and for their own use, severally, viz. - the governor at least 4,0001., the deputy governor 3,0001., and each director 2,0001. of the capital stock of the said corporation.

" That thirteen or more of the said governors and directors (of which the governor or deputy governor must be always one) shall constitute a court of directors, for the management of the affairs of the Company, and for the appointment of all agents and servants which may be necessary, paying them such salaries as they may consider reasonable. to whom it was paid, using ordinary diligence, to present it. The responsibility seldom exceeds a couple of hours, and can hardly in any case exceed a couple of days. In practice it is never adverted to.

66

« Every elector must have in his own name and for his own use, 5001. or more capital stock, and can only give one vote. He must, if required by any member present, take the oath of stock; or the declaration of stock, in case he be one of the people called Quakers.

“ Four general courts to be held in every year ; in the months of September, December, April, and July. A general court may be summoned, at any time, upon the requisition of nine proprietors, duly qualified as electors.

* The majority of electors in general courts have the power to make and constitute by-laws and ordinances for the government of the corporation, provided that such bylaws and ordinances be not repugnant to the laws of the kingdom, and be confirmed and approved, according to the statutes in such case made and provided.”

The corporation is prohibited from engaging in any sort of commercial undertaking other than dealing in bills of exchange, and in gold and silver. It is authorised to advance money upon the security of goods or merchandise pledged to it; and to sell by public auction such goods as are not redeemed within a specified time.

It was also enacted in the same year in which the Bank was establisbed, by statute 6 William and Mary, c. 20., that the Bank "shall not deal in any goods, wares, or merchandise (except bullion), or purchase any lands or revenues belonging to the crown, or advance or lend to their Majesties, their heirs or successors, any sum or sums of money by way of loan or anticipation, or any part or parts, branch or branches, fund or funds of the revenue, now granted or belonging, or hereafter to be granted to their Majesties, their heirs and successors, other than such fund or funds, part or parts, branch or branches of the said revenue only, on which a credit of loan is or shall be granted by parliament.” And in 1697 it was enacted, that the “ common capital and principal stock, and also the real fund of the Governor and Company, or any profit or produce to be made thereof, or arising thereby, shall be exempted from any rates, taxes, assessments, or impositions whatsoever, during the continuance of the Bank; and that all the profit, benefit, and advantage, from time to time arising out of the management of the said corporation, shall be applied to the uses of all the members of the said corporation of the Governor and Company of the Bank of England, rateably and in proportion to each member's part, share, and interest in the common capital and principal stock of the said Governor and Company hereby established.

It was further enacted, in 1697, that the forgery of the Company's seal, or of any sealed bill or bank note, should be felony without benefit of clergy, and that the making of any alteration or erasure in any bill or note should also be felony.

In 1696, during the great recoinage, the Bank was involved in considerable diffi. culties, and was even compelled to suspend payment of her notes, which were at a heavy discount. Owing, however, to the judicious conduct of the directors, and the assistance of government, the Bank got over the crisis. But it was at the same time judged expedient, in order to place her in a situation the better to withstand any adverse circumstances that might afterwards occur, to increase her capital from 1,200,0001. to 2,201,1711. In 1708, the directors undertook to pay off and cancel one million and a half of Exchequer bills they had circulated two years before, at 4 per cent., with the interest on them, amounting in all to 1,775,0281. ; which increased the permanent debt due by the public to the Bank, including 400,0001. then advanced in consideration of the renewal of the charter, to 3,375,0281., for which they were allowed 6 per cent. The Bank capital was then also doubled or increased to 4,402,3431. But the year 1708 is chiefly memorable, in the history of the Bank, for the act that was then passed, which declared, that during the continuance of the corporation of the Bank of England, “it should not be lawful for any body politic, erected or to be erected, other than the said Governor and Company of the Bank of England, or for any persons whatsoever, united or to be united in covenants or partnership, exceeding the number of 6 persons, in that part of Great Britian called England, to borrow, owe, or take up any sum or sums of money on their bills or notes payable on demand, or in any less time than 6 months from the borrowing thereof.” — This proviso, which has had so powerful an operation on banking in England, is said to have been elicited by the Mine-adventure Company having commenced banking business, and begun to issue notes.

It has been pretty generally imagined, from the private banking companies in the metropolis not issuing notes, that they were legally incapacitated from doing so. But the clause in the act of 1708, which has been the only restriction on the issue of notes, applied generally to all England, and had no peculiar reference to London. The fact that banks with 6 or fewer partners have not issued notes in the metropolis, as well as in the provinces, is, therefore, ascribable either to their being aware that their notes would obtain no considerable circulation concurrently with those of a great association like the Bank of England, or from their believing that their issue would not be proftable.

We subjoin

« AnteriorContinua »