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England. That, while the former derives its importance from being connected with the active classes in the community, the latter is known almost solely from its connexion with the government. And though it be an interest which cannot be accurately estimated, some criterion by which to judge of its importance may be afforded by the facts, that one banking company lent, at one time, to the farmers and traders of one county and the borders adjoining, a million sterling; and that one co-partnership in the City of London, which derives its means and its importance entirely from the country banking interest, has, in some periods, discounted a much greater amount in a single year, than the Bank of England has discounted during the same year.
The operations of industry having become dependent, to a vast extent, on the functions of the country banker, all rents and all incomes derived from fixed property (other than government security) must be greatly affected by the prosperity or adversity of the banking interest.
Is this an interest for the subversion of which the power and resources of the Bank of England must be applied? When all the processes of industry have become almost identified with the coun try bank system, and are continued by its means, is it wise so to risk the disturbance of capital, and the breaking up of establishments which afford employment to the laborers? When men of property and character have devoted their time and talents to establishing a business, requiring the most particular and anxious attention, on principles which will afford security to the lender of money, and benefit to the borrower, is it just to endeavor to deprive them of the fruits of experience, by the unfair competition of Branch Banks from the Bank of England? Can this design be accomplished, without imminent danger to the prosperity of the community, and to the resources of the state?
The Bank of England is unfitted, by its constitution and the principles of its action, to perform the general banking business of the country. If the principles were unobjectionable, that vigilant, minute, never-relaxing attention which is indispensable in the banking business, rarely can be met with in delegated functionaries, whether directors or managers; a circumstance which must render Branch Banks, at places remote from the Bank of England, eminently hazardous. The essence of the banking business is, that those who practise it can render constant attention to individual circumstances. The directors of the Bank of England will lend only for a stated period, and in a particular manner; and they require repayment, on a fixed day, of the whole sum. Other bankers will lend for a longer or a shorter period, on one kind of security or another, to be regulated by circumstances; and they
will take back the sum lent at once, or at various times, in whole or in part, according to the convenience of the borrower.
That the principle of the Bank of England is monopoly, to the heart's core of its system, is manifest; and this master vice will taint all its proceedings, and produce every where the same consequences in society. By discounting large sums, it affords facilities to the powerful to enter on speculations, and conduct enormous establishments. By refusing to discount small bills, it debars the struggling man, of little means, of its advantages. It refuses all accommodation to those who can perfect their operations only by long-continued persevering efforts; therefore, all processes in agriculture, and most of those in mining and manufacturing concerns, must proceed without its influence, or be abandoned for the want of it. Its principal transactions with the public being by means of discounting bills, it affords encouragement to middle men, who deal only by wholesale: men who, by means of discounting at the Bank of England, can at any time cause a glut, or produce an artificial scarcity; and who can thus throw the concerns of those who are engaged in producing, or those who purchase for the consumers, into ruinous confusion. No man of good credit, prudence, and industry, can borrow money of the Bank of England, but by means of a bill of that particular kind which their rules prescribe; but any such man can borrow money of a country banker, so long as he retains the qualities of prudence and industry. The directors take no cognisance of personal conduct; accordingly, any specious man, who has once established his credit with them, and opened a discount account at the Bank of England, or any of its branches, may raise money so long as he can create bills fashioned according to their particular regulations. But any man who desires to continue, from time to time, to borrow money of a country banker, must retain his character of prudence and intelligence, which first guaranteed the loan. Hence one system offers a premium for raising money by dexterous expedients and accommodation, and leads to gambling habits of speculation in commerce: the other gives encouragement to skill, and labor, and perseverance in all departments of industry, and not alone in those where bills greatly prevail. The leading principle of the Bank of England acts so as to deny all assistance to the man who is engaged in producing things, of value by continued labor, and to afford all encouragement to sharp and cunning men of the market, who deal and deal, and cause the same commodity to pass through a dozen hands, without changing in any respect its form or texture, or adding to its intrinsic value; consequently, all operations in agriculture, all mining processes, and all operations in manufactures, wherein labor is a great constituent of price, are excluded from its influence.
What an important distinction this is, in a country where employment for labor is the one thing wanted! To devise the means of profitable occupation for the people is that problem, to solve which every aspiring statesman trims his midnight lamp, while his hoary elders look on with despairing meditation.
There are other and important objections to the extension of the Bank of England system. It is not an evil solely because by suppressing country banks it will cause capital to be drawn from the long-established occupations of industry; but it is an evil of great magnitude, because, in the practical application, its direct tendency is to produce effects exactly the opposite of those which a wise man would desire.
During the last forty years of the last century, when the laborious were attracted by the discoveries and inventions of genius to new objects, and the energies of industry were becoming more and more extended and developed, capital was the one thing needed: the directors of the Bank then withheld all assistance from the country. Now, when capital has become abundant, they endeavor to force an additional supply of it; and they force it too, where it is least required. Bills being the most convertible of all securities for loans, and affording the greatest certainty of a quick return of capital, all temporary holders of surplus money seek bills for temporary investment; consequently, there is a tendency to draw all floating capital to the seats of commerce and manufactures, where bills abound. It is in the undertakings in husbandry, and among small traders, that capital is deficient. Many farmers are prevented from cultivating their farms most advantageously, or from making any improvements on the land, because they have not money enough to buy that kind of live stock, or to raise that sort of crop, best adapted to their purpose. It is a gross fallacy, and betrays excessive ignorance of the subject, to suppose that country bankers are too prone to lend money to farmers. The return of the money being always at an uncertain, and often at a distant point of time; and there being no current transactions to render profit to bankers; there has, from the year 1815 to this moment, been a great reluctance to lend money to farmers. In those parts of the country, where agriculture and the rearing and feeding of cattle occupy the people, much money is deposited in the banks on interest; but of any given quantity of money so deposited by rich farmers and graziers, not more than one-fourth is lent by the bankers to farmers of inferior property; and the remaining three-fourths is lent to merchants, manufacturers, and traders. The great merchants and manufacturers of England are enabled, by this state of things, to borrow money in so great abundance, and on terms so easy, that they are induced to employ large sums in mining, manufacturing,
and commercial undertakings abroad. In this manner rival interests are encouraged to grow up in foreign states. Arbitrary changes in banking affairs, introduced, and threatened to be introduced, by "A bill for the further regulation of bankers," have induced bankers to draw in, gradually, much of their money from farmers, to whom they have, for a long time, lent it reluctantly; and this is thrown into great masses in London, and thence forced into those particular channels of commerce which are already too full. In this state of things, the directors of the Bank attempt to force an overflowing supply in the same channels. The effect of this combination of circumstances cannot fail to be injurious to British interests. The directors of the Bank of England, by offering to lend money on bills alone, and pushing their agents into districts where excess in the currency is always generated by means of bills, have adopted a glaring error in principle, which will lead to pernicious consequences.
Having shown the evil tendency of the Branch Bank system in a general sense, a very few words will be sufficient to show its particular danger, local, personal, or temporary.
In a manufacturing district, it would be a great evil to have the supply of money to pay wages suddenly stopped. Yet, when the exchanges become disordered, and a great amount of gold is exported, alarm ensues. Coin is hoarded: the Bank is pressed for gold: the directors have no resource but to stop, all at once, their accommodation, from all who have sought relief and assistance from Branch Banks. They have no sympathy with individuals;' and their rule cannot be relaxed for particular cases, however urgent or distressing. The gold in their coffers must not be exhausted-a catastrophe which nothing can prevent but sealing up the conduits by which money flowed from the Bank to the public. At such a juncture, none but those who have absolute demands can get money at a Branch Bank. Works will be instantly stopped, workmen dismissed, and misery will ensue. The country bankers, at such crises, dare not hazard their reputation by refusing to continue any stipulated accommodation, or suddenly drawing in advances; but they take their own locked-up securities, and seek temporary aid from other great depositories of capital. The Bank of England can resort to no third party for relief, except the government. In times when paper circulation becomes discredited, the mere act of changing one kind of paper for another stems the demand for gold; and thus, time is gained for counteracting proceedings which will bring matters right.
Excess in paper circulation is far more likely to be promoted by Branch Banks than by country banks; partly, though not solely or principally, because their terms of business are cheaper. Seven
parts out of eight of all demands on country bankers who failed in the crisis of the year 1825-6, have been paid in full. If country banks had been suppressed before that period, and Branch Banks had existed in their places, and an equal demand for gold had prevailed, would seven out of eight parts of all demands have been paid in so short a space of time by the Bank of England, at the Mint standard? Five days of continued general demand for gold would have closed the Bank of England, or have brought out a compulsory government-paper to its support. Is it expedient to adhere to the law which compels all payments to be made in gold when demanded? It is considered to be so important, that one of the alleged motives for establishing Branch Banks was to prevent excess, which would endanger it. To take a commodity into a full market, and offer it at a reduced price, is a curious mode of lessening supply. Comparative cheapness will bring custom, and Branch Banks will, in time, acquire business.. They are already resorted to more and more for receiving dividends on stock; and the profound secrecy kept respecting all bill transactions, together with the cheapness, will induce traders to discount at the Branch Banks, wherever bills are much in use. No device within human skill to adopt, could so infallibly cause the law which compels cash payments to be broken, as that of suppressing country bank notes and country banks, and substituting the notes of the Bank of England and Branch Banks. The system, therefore, cannot be established, without producing the greatest danger to the Bank of England, and enormous evil in the country.
Your memorialist having stated his reasons, at some length, against the establishment of Branch Banks as an exclusive system, must bestow a brief notice on the consideration that it may go on advantageously, band in hand, with the private bank system.
The directors will either succeed in their object, or they will not. If they cannot succeed, the present state of uncertainty and apprehension should be put an end to immediately, by the entire abandonment of the scheme; but if they do succeed, and take from country bankers all their wealthy customers, and those who are engaged in most extensive traffic, the other classes (the most im portant in regard to raising or maturing the productions which constitute permanent national wealth) must be abandoned; because the extensive traders and the opulent members of the community are those alone on whom bankers can depend for repayment of loans, or assistance in sudden emergencies. To this cause, and the alarm engendered in the minds of bankers regarding the effects which may flow from chimerical attempts to improve the banking system, must be ascribed the late and present difficulty in employing money. The country bankers draw it in from the many