In the Encyclopædia will be found some explanation of the nature and origin of banking; and it now remains to describe the improvements which have been subsequently introduced into this important art of money-dealing, and to give some account also of the principal banks, which, in the progress of commerce and of wealth, have been established in this, and in other countries.

The chief purpose of the different banks which were established throughout Europe during the fifteenth and sixteenth centuries, such as the banks of Venice, Genoa, Amsterdam, Hamburgh, and Nuremberg, was to provide, for the convenience of commerce, a currency of a determinate and invariable standard. Before this period, the currency of those places was lost amid an inundation of the light and debased coins of every adjacent state; and the business of commercial exchange was in this manner obstructed by the want of some certain measure of value. By the establishment of banks of deposit, as they are generally called, which paid all demands on them in money of a known weight and fineness; and by ordaining, at the same time, that all payments above a certain sum should be made in bank money, the greatest possible degree of certainty was given to the value of the currency, while, by adopting the method of paying large sums, by means of a simple transfer from one name to another in the books of the bank, great facility and dispatch were obviously given to all cash transactions. Nor were those advantages confined to the particular places in which banks were established. It was soon found, that the same improvement which was so useful in the domestic transactions of a community could be employed with even greater advantages in simplifying the cash transactions of distant places. The inconveniences to which merchants residing in the same place must have been exposed in making payments to each other, previous to the establishment of banks, would necessarily consist in the want of some fixed and invariable measure of value; in the counting, weighing, and useless transportation of large sums from one hand to another; and in the frauds and mistakes which would frequently occur in these cumbersome transactions. But in the commercial intercourse of distant places, all those disadvantages would be greatly aggravated; there would be more scope for frauds and mistakes; they would be less easily corrected; and, without some system of money-dealing, the commerce of distant places must be limited to mere barter, or to the instant exchange of specie for goods. The progress of wealth and industry is, however, necessarily accompanied by the growth of confidence and credit. Upon this new principle, commercial dealing is gradually extended; and in these circumstances, without the intervention of the money-dealer, there must be a continual and useless transportation of specie between all commercial towns. No debt can be discharged without a remittance in cash, and each separate transaction will require a separate remittance. To obviate these useless payments in detail, the business is naturally transferred to a separate class of dealers, by whom the whole debts and credits of the community, in place of being settled individually, are brought to a general balance, and it is only for the discharge of this balance, that it is necessary to remit specie. The arrangements by which this result is produced are exceedingly simple and obvious, and are now become so familiar, that they hardly require to be explained in detail.

When, in the progress of wealth and improvement, certain individuals begin to acquire, from their increased wealth and their extended trade, the general confidence of the community, it will naturally occur to inferior traders, who have remittances to make to other places, that the great merchant, by means of his credit and connections, may assist him in his transactions with those distant parts. If the one has money to remit, the other may have money to receive, and in this manner, by means of credit and confidence, the engagements of the different parties may be duly discharged by a mere transfer of debt from one person to another. Thus, we may suppose A, the great merchant, has money to receive from the same place to which B, the inferior merchant, has money to remit. He receives the money from B, giving him, of course, an order on the debtor which he has in the same place in which B's creditor resides. To this place the order being sent, the debt belonging to A is transferred to the creditor of B. And thus, by the mutual transfer of claims, without the intervention of specie, this account of debt and credit is finally settled. The credit and connections of the wealthy merchant, inducing others to deposit money with him for the purpose of being remitted to their respective creditors, the cash transactions of the town and neighbourhood gradually centre in his hands. All those who have money to remit, or money to receive, entrust the transaction to his management; he receives their money, for which he gives them his drafts, or their bills, for which he either gives them money, or undertakes to procure payment, and, in this manner, the debts and credits of the different commercial towns, in place of being settled as formerly in detail, are, by the agency of the money-dealers, brought into one general account, and reduced at once to a common balance. The establishment of such public banks as those of Venice, Genoa, Amsterdam, Hamburgh, &c., on the solid security of large deposits of treasure, by inspiring general confidence, would tend to give life and activity to this improved system of money-dealing. The credit of an individual, however respectable for wealth, integrity, and prudence, could hardly be supposed in any case to be equal to that of those public establishments which were the general depositaries of all the floating capital of the community, of which the management was committed to directors publicly chosen, and bound down in their conduct to certain general rules, from which they have no discretionary power to depart. In the two great sources of mercantile confidence, therefore, namely, the reputation of wealth and prudent management, those institutions could not be exceeded. They were evidently beyond the reach of all the ordinary casualties of commerce, and it could only be by foreign invasion, or by some great internal convulsion, which would tend to the dissolution of all civil order, that their ruin could be accomplished. Their bills and drafts possessing a proportionably extensive circulation, formed a species of currency in universal credit, throughout the great mercantile community of Europe, and furnished a most convenient instrument for settling, in the most easy and expeditious manner, the cash transactions between distant parts.

It has been suggested, that those bills of exchange and drafts were the invention of the Jews, and such may very possibly have been the case. But the just and philosophical remark of Mr Dugald Stewart, in regard to the invention of printing, may be generally applied to the progress of mankind in all other arts and sciences. On this subject, he observes, that to whomsoever the credit of this important discovery may be due, it is evident, from the state of society at that time in Europe, and from the rapid progress of all moral improvement, that some such process, for the speedy dissemination of knowledge, must have been discovered about this period. The general condition of the world, created, if we may so express ourselves, an effectual demand for the discovery; and the ingenuity of mankind being turned to this object, the necessary means for gratifying the love of knowledge and inquiry, now fairly awakened, were speedily devised. In like manner, it may be remarked of bills of exchange, that the gradual progress of mankind in wealth and improvement, favoured the growth of mercantile confidence, which was still farther strengthened by the establishment of public banks of undoubted credit; and that, by whomsoever bills of exchange were first used, some such invention was the necessary result of that increased confidence and credit, which the progress of wealth and industry was rapidly diffusing over all Europe.

In general, the public banks established throughout Europe were found to answer all the purposes of their institution. As their credit was beyond all question, they afforded a solid foundation for commercial confidence, and their affairs being managed with prudence, they increased in respectability and credit, supplying the home merchant with a safe and convenient instrument of exchange, and enabling the foreign merchant to receive remittances from abroad, or to make his payments more cheaply, safely, and expeditiously than before. In addition to those already mentioned, other banks were established in different parts of Europe, and upon the same model. But, in some cases, owing to a deviation from their original rules, and to an imprudent extension of their concerns, from a desire of inordinate gains, they were occasionally in want of specie, and being unable to pay on demand, they fell from that high degree of credit, which is essential to the usefulness and prosperity of such institutions.

By the general circulation of the bills of those public banks, the use of specie was in a great measure superseded as a medium of exchange between distant parts; and it was obvious, that, by following out the same principle in the domestic circulation of a country, paper might, in like manner, be substituted for specie in its internal commerce. When a debt against persons of undoubted ability to pay is once constituted by a written document, the debt may, by means of this document, be made over to liquidate the claims of a third party, and in this way, a cumbersome species of paper currency may be employed in the great transactions of trade. By improving the form of this instrument, however, by circulating bills for small sums, and by making them payable on demand, a public bank, in good credit, will supply the community with a paper currency so convenient as to answer all the purposes of specie.

In the course of the last century, public banks for the circulation of paper in lieu of specie have been established in most of the great cities of Europe. Of these, the most important, whether we consider its great wealth, or the vast extent of its transactions, is the Bank of England. Of the nature and origin of this establishment, an account will be found in the Encyclopedia; and, in this supplementary work, we shall proceed, briefly, to notice some of its more recent transactions, and also to describe generally the effects produced by so powerful an engine on the circulation and commerce of the country.

The Bank of England, when it was first incorporated, assisted Government with a loan of L. 1,200,000, and it has subsequently been in the practice of accommodating the public, from time to time, with loans to a considerable amount. In 1746, those advances, which form its undivided capital, amounted to L. 11,686,800, for which interest is paid by Government at the rate of 3 per cent.; and its divided capital had been, at the same time, raised, by different calls and subscriptions, to L. 10,780,000. The state of these two sums continued nearly the same till the year 1800, when the Bank, in consideration of the renewal for twenty-one years of its charter, which expired in 1812, advanced to Government a farther sum of L. 3,000,000, without interest, for six years. This sum became payable in the year 1806, at which period, it was agreed, after some discussion, that the loan should be continued to Government during the war at an interest of 3 per cent. In the following year, in consequence of the great profits arising from the vast and increasing amount of the public money deposited in the Bank, the Chancellor of the Exchequer claimed for the public some compensation, either by an annual payment of money, or by a loan without interest. In the year 1797, the deposits of cash in the Bank, whether belonging to the public or to individuals, amounted altogether to L. 5,130,140. The Government balances alone had increased, in the year 1807, to the enormous amount of between L. 11,000,000 and L. 12,000,000; and, in consideration of the profit accruing to the Bank from the use of this money, its directors agreed to lend L. 3,000,000 to Government without interest, until six months after the conclusion of a definitive treaty of peace. This loan, together with the former loan of

L. 3,000,000 granted in 1806, became due in the year 1814. The loan of 1806 was discharged, but the loan with which Government was accommodated in 1809 was continued to the public till 5th April 1816. According to an arrangement made at this time, the Bank was allowed to add to its capital L. 2,910,600; and in return the loan of L. 3,000,000 was continued at an interest of 3 per cent. An additional advance was also made to Government of Banking. L. 6,000,000, at an interest of 4 per cent. The debt of the Government to the Bank has been in this manner increased from L. 11,686,800 to L. 20,686,800.

The following view of the state of its circulation at different periods, from 1718 to the present year (1816), is extracted from accounts laid before Parliament.

<table> <tr> <th>In the Year</th> <th>Notes of L. 5 and upwards.</th> <th>Notes under L. 5.</th> <th>Bank Post Bills.</th> <th>Total.</th> </tr> <tr><td>1718.</td><td>L. 1,829,930</td><td></td><td></td><td>L. 1,829,930</td></tr> <tr><td>1721.</td><td>2,054,780</td><td></td><td></td><td>2,054,780</td></tr> <tr><td>1730.</td><td>4,224,990</td><td></td><td></td><td>4,224,990</td></tr> <tr><td>1754.</td><td>3,836,870</td><td>L. 186,920</td><td>3,975,870</td><td></td></tr> <tr><td>1761.</td><td>5,863,290</td><td>138,520</td><td>6,001,810</td><td></td></tr> <tr><td>1762.</td><td>6,012,150</td><td>119,620</td><td>6,131,770</td><td></td></tr> <tr><td>1763.</td><td>6,716,660</td><td>178,020</td><td>6,889,680</td><td></td></tr> <tr><td>1772.</td><td>5,881,960</td><td>319,070</td><td>6,201,030</td><td></td></tr> <tr><td>1778.</td><td>7,030,680</td><td>509,390</td><td>7,540,070</td><td></td></tr> <tr><td>1783.</td><td>6,354,070</td><td>353,470</td><td>6,707,540</td><td></td></tr> <tr><td>1784.</td><td>6,074,930</td><td>317,800</td><td>6,392,730</td><td></td></tr> <tr><td>1791.</td><td>10,027,600</td><td>661,910</td><td>10,689,510</td><td></td></tr> <tr><td>1792. Average of Jan. and July</td><td>10,277,990</td><td>724,865</td><td>11,102,855</td><td></td></tr> <tr><td>1793. Average of Jan. and July</td><td>11,193,105</td><td>735,005</td><td>11,928,110</td><td></td></tr> <tr><td>1794. Average of Jan. and July</td><td>9,670,450</td><td>576,130</td><td>10,246,586</td><td></td></tr> <tr><td>1795. Average of Jan. and July</td><td>9,580,300</td><td>559,605</td><td>10,139,905</td><td></td></tr> <tr><td>1796. Average of Jan. and July</td><td>9,516,000</td><td>590,165</td><td>10,106,165</td><td></td></tr> <tr><td>1797. January</td><td>8,742,530</td><td>461,970</td><td>9,204,500</td><td></td></tr> <tr><td>July</td><td>9,381,920</td><td>L. 921,780</td><td>524,400</td><td>10,778,120</td></tr> <tr><td>1798.</td><td>9,571,945</td><td>1,483,740</td><td>506,045</td><td>11,561,730</td></tr> <tr><td>1799.</td><td>10,135,265</td><td>1,526,890</td><td>561,385</td><td>12,223,540</td></tr> <tr><td>1800.</td><td>11,885,380</td><td>1,704,880</td><td>723,525</td><td>13,818,785</td></tr> <tr><td>1801.</td><td>12,913,460</td><td>2,439,650</td><td>816,760</td><td>16,169,870</td></tr> <tr><td>1802.</td><td>12,541,675</td><td>2,939,730</td><td>762,710</td><td>16,244,115</td></tr> <tr><td>1803.</td><td>10,978,655</td><td>3,243,595</td><td>748,920</td><td>14,971,170</td></tr> <tr><td>1804.</td><td>11,768,035</td><td>4,564,415</td><td>739,225</td><td>17,066,675</td></tr> <tr><td>1805.</td><td>11,319,370</td><td>4,509,034</td><td>933,970</td><td>16,762,374</td></tr> <tr><td>1806.</td><td>11,491,765</td><td>4,255,130</td><td>685,495</td><td>16,432,380</td></tr> <tr><td>1807.</td><td>11,295,215</td><td>4,062,770</td><td>677,965</td><td>16,085,950</td></tr> <tr><td>1808.</td><td>12,264,170</td><td>3,987,720</td><td>667,385</td><td>16,919,275</td></tr> <tr><td>1809.</td><td>12,881,095</td><td>4,442,500</td><td>782,260</td><td>18,105,855</td></tr> <tr><td>1810.</td><td>14,627,680</td><td>5,990,695</td><td>834,555</td><td>19,452,930</td></tr> <tr><td>1811.</td><td>13,522,210</td><td>7,209,700</td><td>1,049,470</td><td>21,781,380</td></tr> <tr><td>1812.</td><td>15,238,425</td><td>7,594,605</td><td>1,048,680</td><td>23,881,710</td></tr> <tr><td>1813.</td><td>14,996,635</td><td>7,712,135</td><td>977,335</td><td>23,686,105</td></tr> <tr><td>1814.</td><td>16,214,830</td><td>8,313,380</td><td>1,089,340</td><td>25,517,550</td></tr> <tr><td>1815.</td><td>16,522,530</td><td>9,065,890</td><td>1,215,100</td><td>26,803,526</td></tr> <tr><td>1816. April</td><td>16,096,950</td><td>9,135,000</td><td>1,362,410</td><td>26,594,360</td></tr> </table>

Notwithstanding the embarrassments to which the Bank of England has been occasionally exposed from the fluctuations of commerce, and from the effects of political alarms, the amount of its capital, and the extent of its transactions, have been gradually increasing, and the wealth which it has now accumulated is greater, perhaps, than was ever before engrossed by any other trading corporation. Previous to the year 1797, the state of its affairs was not generally known to the public. But at that period its affairs having been submitted, in consequence of the suspension of its cash payments, to the investigation of a Parliamentary Committee, it appeared that, besides paying a dividend generally of from \(5\frac{1}{2}\) to 7 per cent., it had accumulated a fund of undivided profits amounting to L.3,800,000. Since the year 1797, its affairs have been even in a more flourishing condition than at any former period. Its circulation has been increased from L.11,000,000 to L.27,000,000; its transactions have been extended, and its profits have been augmented in proportion; while the law releasing it from the obligation of paying in specie, by rendering it unnecessary to keep in reserve so large a stock of cash, has tended greatly to increase its command of active and productive capital. It has been already stated that the Bank, besides transacting the ordinary business of discounting mercantile bills, is also employed as a great engine of State,—receiving and paying the interest due to the public creditors,—circulating exchequer bills,—accommodating Government with immediate advances on the credit of distant funds, and assisting generally in all the great operations of finance. In its capacity of public banker to the State, the Bank has an allowance for the management of the national debt; it has an allowance of L.800 per million on the whole amount of every loan of which it receives the payment; upon every lottery contract, it is allowed L.1000; and, lastly, it has the use of all the public money committed to its charge, besides several other allowances of less importance. The sum paid for the management of the public debt has varied according to circumstances. In the year 1786, under the economical administration of Sir Robert Walpole, L.360 per million was paid to the Bank on this account; the allowance was afterwards increased to L.562, 10s. per million. But, in the year 1786, when the public debt amounted to L.224,000,000, it was reduced to L.450 per million, at which rate it continued till the year 1807, when, in consequence of the vast increase of the public debts, it was still farther reduced to L.340 per million, on the first L.600,000,000 of debt, and to L.300 per million on the excess beyond L.600,000,000; at which rate it still continues.

In the course of the two last wars, the business transacted by the Government at the Bank has increased far beyond its former extent. The debts of the country, on the management of which the Bank receives a commission, have risen from L.224,000,000 to about L.830,000,000. In the year 1792, the sum paid to the Bank for the management of the public debt, and for receiving the contributions on loans and lotteries, amounted to L.99,803; while, for the year ending 5th April 1815, the sum paid for the same service amounted to L.281,568, being an increase of L.181,765. During the same period, the public deposits of cash at the Bank, in consequence of the increased pecuniary transactions of Government, have been accumulating in a similar proportion. In the year 1792, these deposits could not have amounted to L.4,000,000. Since that time they have been rapidly increasing; and from the year 1806, the average amount may be stated at between L.11,000,000 and L.12,000,000, on which the Bank have been receiving interest at the rate of 5 per cent. As a compensation for the use of this money, the Bank, as has been already stated, lent to Government L.3,000,000, at an interest of 3 per cent., and afterwards an additional L.3,000,000 without interest. The gain of the public on these transactions being deducted from the annual interest on L.11,000,000 of the public money, the profit of the Bank on this branch of its business will be found to have amounted, since the year 1806, to nearly L.382,000 per annum. From all these different causes, therefore, the wealth accumulated in the increased circulation of its notes, and from the vast accumulation of public business, the profits of the Bank appear to have been prodigiously augmented in the course of the late war, so that its average dividend, including the bonus from time to time added to it, will be found to amount, from the year 1797, to nearly 10 per cent.; and it is calculated besides, on data which admit of no considerable error, that the sum of undivided profit must, in the meantime, have increased to the enormous amount of L.13,000,000.* Out of this fund the Bank has advanced to Government, for the year 1816, a loan of L.6,000,000; and at a court of proprietors, held in May 1816, it was resolved to make an addition to the capital of the Bank of L.2,910,600, the effect of which is to raise the capital of each proprietor of L.100 of stock, producing at present L.10 per annum, to L.125, and to increase his income proportionally, i.e. to L.12, 10s. per annum. The great profit realized by the Bank since the suspension of its cash payments, has produced a corresponding rise in the value of its stock. Throughout the year 1797, the average price of Bank stock was about L.125 specie per cent. Since this period it has been gradually improving in value, and its market price now amounts to about L.262 per cent. The original capital of the Bank has thus acquired, since the year 1797, when the act passed releasing it from its obligation of paying in specie, an additional value equal to nearly L.16,000,000; which, added to the estimated increase in the sum of its undivided profit, amounting, according to Mr Ricardo's calculation, to L.9,599,359, makes a sum of L.25,599,359, the actual improved value of the Bank capital during the last nineteen years.

One great inducement to establish a bank for the circulation of paper in place of specie is, that it provides a cheap instrument of exchange in place of a more expensive one, and from the obvious advantage of such an operation, both to the individual and to

* This view of the affairs of the Bank, since the year 1797, is founded on the statements contained in the work of Mr Ricardo. He seems to have made his calculations on grounds sufficiently certain, and his capacity for diligent research leaves little room to question his accuracy. The amount of the surplus capital accumulated by the Bank in 1797, which is the foundation of all the subsequent conclusions, is ascertained from the account of its affairs laid before Parliament, at the time of the suspension of cash payments in 1797. See Ricardo's Proposals for a Secure and Economical Currency, Appendix, No. V. p. 103. Banking. the community, paper, after it is once introduced, is gradually found to limit, and at last entirely to supersede, the use of specie in the circulation of a country. Such has been the progress of paper in the currency of Britain. Specie is now entirely excluded from circulation; all that portion of our currency which formerly consisted of the precious metals has either been exported, or is stored up by the bankers, by whom it is kept in reserve, to answer occasional demands. The establishment of one great bank in the capital of the country would facilitate the introduction into other parts of similar establishments, on a smaller scale. Such a bank is naturally a general reservoir of specie for the whole kingdom. Its transactions are of so much greater an extent than those of any other establishment of the same kind, that all the specie which it could collect at home would be insufficient to supply its wants. When its coffers are exhausted, therefore, they must be replenished from abroad. Bullion must be purchased in the great market of the civilized world, and the supply thus imported is gradually distributed, in the general course of circulation and commerce, among the lesser banks. The wants of those smaller establishments can always be supplied, to any extent, from the store of specie collected in the great bank; for they have only to convert a certain portion of their property into its promissory-notes, in order to procure the supply necessary to replenish their exhausted coffers.

Since the establishment of the Bank of England, banks on a smaller scale have accordingly been begun in almost all the provincial towns of Great Britain. They seem to have increased with great rapidity in the course of that short interval of prosperity and peace which followed the American war. During this period, all the great branches of national industry were extremely flourishing—the capital of the country was daily augmenting—the principle of mercantile confidence, the natural effect of such a state of things, was in full vigour,—and spirited individuals, in every quarter, taking advantage of these favourable circumstances, proceeded to establish banks; and having thus created a currency on the foundation of credit, the precious metals were no longer required to carry on the circulation of the country. According to an estimate made by Mr Thornton,* which is rather moderate than otherwise, the number of country banks in Great Britain amounted, in the year 1797, to 353. In 1799, they had increased to 366, and, in 1800, to 386. About this period, they appear to have increased rapidly, for we find the number of licences granted in 1809, for the issue of promissory-notes in Great Britain, to have amounted to 735. In 1812, they amounted to 878; and, in 1814 and 1815, to about 1000. Of these, there are in London, besides the Bank of England, about 70 private banking-houses, and the remaining 930 are dispersed throughout the kingdom. To the management of these various money-dealers, the whole circulation of the country is committed. Their business consists in settling the cash transactions of distant places, and in issuing their notes, for the accommodation of trade, by discounting mercantile bills; and the arrangements which they adopt for this purpose are eminently calculated to promote the dispatch of business, and the economy of cash.

We have already, in part, explained in what manner the establishment of accredited banks tends to simplify the cash transactions of distant parts, and it is obvious that a community abounding in bankers of established character and credit, whose promissory-notes and bills of exchange circulate, to the exclusion of specie, must possess ample means for carrying into effect all the refinements of money-dealing. In Great Britain, accordingly, the general progress of trade and manufactures—the known wealth of banking establishments—the security derived from the long continuance of domestic peace—the high state of commercial confidence—the facilities of communication, joined to other advantages peculiar to such an advanced state of society, have brought the system to perfection. By means of bills of exchange, circulated among the different bankers, remittances are made to the most distant parts with the most perfect security, and at an inconsiderable expence. The respective debts and credits of the great commercial towns, in place of being settled in detail, or by remittances in specie, are, by the agency of the money-dealers, collected into one general account, which is brought to a common balance, and in this way the most extensive transactions may be settled with a comparatively small quantity of specie. If we suppose, for example, one of the two trading towns of Glasgow and Manchester to export, to the other, goods to the amount of L.2,000,000 annually, and to receive a return to the value of L.1,900,000, those transactions being, through the medium of the bankers, brought into one general account, there remains only an undischarged balance of L.100,000. But the tendency of the system being to make the whole complicated transactions of an extensive country centre in one common account, it may not be necessary, even for this balance of L.100,000, to send a remittance of specie, seeing that it may be transferred, by a draft on some third place, to a more general fund of debt and credit, where it may be finally met and liquidated by opposite balances to the same amount. Thus, we may suppose the balance of L.100,000, due from Manchester to Glasgow, to be discharged by a draft on London. In this case, London comes in the place of Glasgow, as the creditor of Manchester, the transaction being substantially to transfer the debt to the general cash account of those two places. But Manchester, in consequence of a favourable balance of trade, may be the creditor of other towns, as well as the debtor; and London being credited with the money to be received, as it was formerly charged with the money to be paid, all these insulated transactions are brought into one general account, on which the balance is struck, and it is only for this last and final balance that cash must be provided. In this highly artificial and curious system, the wealthy and populous towns natu-

* See Inquiry into the Nature and Effects of the Paper Credit of Great Britain, p. 154. rally draw, as to a common centre, all the cash transactions of the neighbourhood; the insulated balances, arising on the commerce of the surrounding country, are formed into new accounts by the money-dealers of these towns, who, by a simple transfer of debt and credit in their books, bring them to a general balance. This balance they afterwards carry to a still more general account; and thus, at length, all the scattered debts of the country are collected into one common account by the bankers of the metropolis, which is then brought to a final balance. The metropolis, the centre of intercourse and trade, is the centre, also, of this vast system of money-dealing. Here, as to a point, all the cash transactions of the country naturally converge, and here the account is finally closed by payments in cash.

In this manner, all the money-dealing of this country, which cannot be transacted without remitting specie, is transferred to London. The payments of London, originating in its own extended commerce, and in its great wealth and population, are of themselves immense. These are still further increased by the payment of the interest on the national debt, which is issued every quarter from the Bank of England; and London having also, in the course of the late wars, grown up to be in some degree the commercial metropolis, both of America and of Europe, it has been found convenient to transfer the payment of foreign bills to it from all parts. In consequence of these extended transactions, London has its debtors and creditors in every quarter of the kingdom. It is the general centre of all money-dealing, and there being, on this account, a greater demand in the country for money in London, than there is in London for money in the country, bills on London are invariably sold in the money market of the country for a premium. The currency of every other bank is limited in its circulation within particular districts, and cannot, therefore, be employed in transacting the payments of distant places. But money in London is a commodity in universal request, and bills for its payment constitute a medium of exchange common to the whole country.

All the various money-dealers who are dispersed throughout the kingdom, require to be provided with a stock of this common currency in order to carry on their business, and, for this purpose, they find it necessary to establish a credit on the metropolis, on which, for a suitable premium, drafts may be obtained from them at all times. By thus transferring the payments of the country, to be settled in one general account in the metropolis, both the expence and trouble of making remittances between distant places has been greatly diminished. It would be interesting if we could collect any exact account of the progressive diminution which took place, in consequence of this improved system of banking, in the expence of managing the cash transactions of the country. But unfortunately those instructive facts which illustrate the progress and internal structure of society, though of far more real importance than the accounts of wars and battles, seldom attract the same attention. On this account, all traces of them are frequently lost before their importance is discovered, and the future inquirer finds himself reduced either to glean from oral tradition, or from the passing and imperfect records of the day, the scanty materials of domestic history. From some inquiries on this subject, made by a Committee of the House of Commons in 1780, we find, according to the evidence of several of the collectors, that, before this period, the mode of remitting the public revenue to the treasury was both irregular, cumbersome, and expensive. In Scotland there was no certain or regular channel of remitting to the metropolis, and the remittances were not only very uncertain as to the time, but the collectors, not being always able to procure bills, were frequently under the necessity of remitting to the Receiver-General the actual money which they had collected. In different parts of England the same difficulties had, at a former period, been experienced in the remitting of the public revenue. From about the year 1740, it appears, that a premium had been paid to those who undertook the charge of remitting the money, of from 20s. to 2s. 6d. per cent. This premium, as the country advanced in wealth and industry, was gradually diminished, and about the year 1778, it was entirely done away, the dates of the bills drawn on London being also at the same time shortened. In 1764, the collector of the Wales district paid 7s. per cent. for bills on London, and in 1774, a premium of 2s. 6d. per cent. was paid by the collector of Dorsetshire, for bills payable on London at 40 days date. Even so late as the year 1780, though the collectors found no difficulty in the remitting of the public revenue, it was chiefly from merchants and manufacturers that they procured bills on the metropolis. Only a small part of their remittances were made through the medium of the country banks, and in all cases security was required for the whole sum remitted. Since the general establishment of banks, and the consequent increase of commercial confidence, the largest sums are now remitted from the remotest parts with the most perfect regularity, and without either premium or security; the only advantage derived by the banker from the transaction, being the use of the money for a certain number of days, varying in proportion to the distance from London.

All those complicated payments of the country, which are transferred to London, are finally settled by the London bankers, with specie or with notes of the Bank of England, it being the practice to use the Bank's no other currency in the payments of the metropolis; in London, and in managing those extensive money-dealings, they still act upon the principle of collecting the insulated transactions of individuals into one common account, and this account is brought to a general balance. For this purpose a clerk, it appears, is dispatched from each banker, at an appointed hour in the afternoon, and a meeting of the whole having taken place in a room provided for the purpose, each clerk exchanges the drafts on other bankers, received at his own house, for the drafts on his own house, received at the houses of other bankers. The balances of the several bankers being then transferred from one to another, in a manner which it is unnecessary to explain in detail, the several accounts are finally wound up by each clerk into one balance, and it is only for this single balance that each banker has to provide specie or notes. By this contrivance, so great a saving of cash is effected, that though the daily transactions of those bankers are calculated to amount to nearly L. 5,000,000, about L. 220,000 of bank-notes is generally found sufficient for the discharge of the several balances due at the settlement of the account. Other devices are also put in practice by these active and ingenious money-dealers, for economising the use of cash. Many bankers are allowed to have a general cash-account with the Bank of England, in which, if they are careful to keep a supply of good bills, they may always procure whatever cash they require on a day's notice. For the same purpose also of preventing any waste of the circulating medium, accredited brokers are in the habit of hourly walking Lombard Street, and of borrowing the superfluous cash of one broker and lending it to another, for a day, a week, or any longer period, to be repaid when called for; and so nicely is the scale adjusted by those various devices, that the most opulent houses are frequently accommodated with a supply of cash before three o'clock, to be repaid by a draft at the general balance of accounts, which takes place in the afternoon.*

The recent policy of the Bank of England has also tended greatly to favour those economical contrivances of the inferior bankers. The daily demand made upon them by the Bank for the amount of bills accepted and payable at their several houses, is of course considerable, and was formerly made at an early hour, before the notes were issued for bills discounted on the same day, and without any previous notice to the bankers of the demands for which they might be liable, and of which they had no means of judging. For some time past the Bank has adopted a different practice, having notified the amount of the demand at an earlier hour, and taken payment at four in the afternoon, receiving for part of the sum such drafts or bills as the bankers may happen to hold in place of bank-notes.

In consequence of all those contrivances, the circulation of London is carried on with the smallest possible quantity of currency which is consistent with the regularity of its payments; and any sudden reduction, therefore, in the amount of its circulating cash, would ultimately lead to a state of general insolvency and suspension of confidence. Bills and drafts from all quarters of the country being also made payable in London, and accepted by the different bankers, and a failure in any one of those payments being deemed an act of insolvency, it is evident that any general derangement of credit in London must spread far and wide throughout the kingdom. The punctuality of the London payments is necessary to sustain and regulate the whole paper credit of the country; and these payments being made exclusively in Bank of England notes, the circulation of those notes cannot, in any case, be materially reduced with safety to the community. Prior to the restriction act, there was no risk of any undue increase in the circulation of bank-notes, as the excess would have been immediately returned in exchange for specie. But the Bank, being now released from its obligation to pay in specie, and being thus closed against any return of its superfluous notes, its circulation may be increased at the discretion of its directors; and, in these very peculiar circumstances, it is the opinion of Mr Thornton,† that the true policy of the Bank is generally to allow its circulation to vibrate within certain limits; to resort, when the temptation to borrow in the way of discounts is too strong, to some effectual principle of restriction, but in no case materially to reduce the sum in circulation; to afford a slow and cautious extension of it, as the general trade of the kingdom is enlarged; and to allow of a temporary increase, even beyond its usual limits, in a season of extraordinary difficulty or alarm.

It is justly observed by Dr Smith, after he has explained all the advantages of banking, that the commerce and industry of a country cannot be so secure when managed with paper money, as when managed with a currency of gold and silver. "The gold and silver money which circulates in any country," he observes, "may very properly be compared to a highway, which, while it circulates and carries to market all the grass and corn of the country, produces itself not a single pile of either. The judicious operations of banking, by providing, if I may be allowed so violent a metaphor, a sort of waggon-way through the air, enable the country to convert, as it were, a great part of its highways into good pastures and corn-fields, and thereby to increase very considerably the annual produce of its land and labour. The commerce and industry of the country, however, it must be acknowledged, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended on the Dedalian wings of paper money, as when they travel about upon the solid ground of gold and silver. Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money, they are liable to several others, from which no prudence or skill of these conductors can guard them." (Wealth of Nations. Buchanan's edit. Vol. I. p. 508.)

The necessary effect of every system of paper currency is, to encourage the principle of commercial credit. This is, indeed, the foundation on which it is raised, and the more widely the circulation of paper is extended, the more closely will the mercantile community be knit together by the artificial ties of confidence and credit. Wherever there is trade, there must no doubt be credit. But where banks are generally established for the purpose of circulating paper money, credit must be augmented tenfold, seeing that, in such circumstances, no one can receive a payment without becoming a creditor. It is an evil, therefore, inseparable from any system under which a currency of the precious metals is supersed-

* Bonsanquet's Observations on the Report of the Bullion Committee. † Inquiry into the Nature and Effects of the Paper Credit of Great Britain, p. 295. ed by one purely conventional, that while a useless expence is thereby saved to the community, and while its capital also acquires an increased degree of activity, the trading part of society are brought into such a state of general dependence, that every man may be said, in some degree, to rest upon his neighbour, and the whole to rest upon the principle of confidence in each other. The banker's notes obtain a general circulation; no demand is made upon him for their payment in cash, because the public believe that he has property to pay them. The banker, in like manner, discounts the merchant's bills, from an opinion of his solvency, and the merchant, in giving credit, is guided by the same rule. Confidence, in short, is the charm which holds the whole together, and while this principle prevails, no evil will result from this complicated system of credit. Bank-notes will circulate freely—there will be no great demand for specie—and the merchant will always be enabled to convert his bills into cash. In these circumstances, every expedient will be adopted to spare the use both of notes and of specie. The merchant will naturally be anxious to reduce as low as possible the stock of cash which he reserves for occasional demands; in many cases he will trust to accident for providing funds, such as to the sale of his goods, or to his credit with his banker; while the banker, who provides a cheap instrument of exchange in place of a more expensive one, and whose profit consists in lending it on the same terms, has, in like manner, a strong inducement to increase the circulation of his paper, and, trusting to his credit, to diminish the specie reserved for its payment. While the system is in this manner strained to its utmost pitch, the merchants managing the commerce of the country with the smallest possible quantity of paper, and the bankers circulating the paper with the smallest possible quantity of specie, let us suppose, that from whatever cause, either from the alarms of war, or from a succession of bankruptcies, the principle of mercantile confidence begins to fail. In this case, the former ties by which merchants were connected with each other are now broken; the usual channels of circulation, by which a small quantity of cash rapidly passing from one hand to another, served for transacting the payments of the community, are interrupted, and the money in circulation is, in consequence, found insufficient for the punctuality of mercantile payments. The supply of currency, however, in place of being increased, is still further diminished; the bankers, from the fears natural to their situation, limiting the circulation of their notes, and refusing to accommodate the merchant, as before, by discounting his bills; and the public, in their turn, discrediting the paper of the banks. This general failure of confidence immediately produces alarming bankruptcies, many merchants stopping payments, not from a want of property, but from a want of cash; a run commences on the banks for specie, many of whom are, in consequence, obliged to suspend their cash payments. The Bank of England being the great repository of gold in this country, the demands of the country banks for specie gradually centre in the metropolis, the bankers generally disposing of the property which they hold in the public funds and other Government securities, and demanding from the Bank of England specie for whatever quantity of its notes they can collect. The Directors of the Bank, astonished by this alarming drain of their cash, naturally contract the circulation of their paper. But the transactions of the metropolis having been hitherto managed with the most exact frugality, both of notes and specie, this sudden diminution of its circulating cash must leave the money-dealers unprovided with funds necessary for their immense payments, and must thus derange the whole economy of that complicated system which has been raised upon the frail foundations of confidence and credit. The disorder arising in the metropolis, from a want of cash, will soon extend itself to the remotest extremities of the kingdom. In the mutual dependence created by credit and confidence, the failure of one merchant involves others in the same fate, bankruptcies multiply in every quarter, and the alarm increases with such rapidity, as to threaten a general subversion of credit and confidence throughout the country.*

In such a disordered state of the circulation, all Policy to be adopted by the inferior banks are naturally induced, from a prudent regard to their own safety, to limit the issue of their notes, by which means the scarcity of cash is increased, and the evil greatly aggravated. But the state of the Bank of England cannot safely act on such a contracted policy; for it is evident, that the general discredit of bank-notes is occasioned by the alarm prevailing in the country, and that, while this alarm continues, the Bank may be drained of its specie by the most limited circulation of its notes, which will be returned upon it as fast as they are issued. In all such cases, therefore, the only safe course for the Bank to pursue, is rather to enlarge the circulation of its notes, that the alarm may be quieted, and that the supply of currency may be perfectly adequate to effect the daily payments of London, of which the punctual discharge is necessary to the solvency of the country at large. It is not to be wondered at, however, if the Bank, while the nature of paper circulation, and of the evils to which it is exposed, were but imperfectly known, should not always have understood its true interest, and should therefore have hesitated to embrace a policy so unusual, and apparently so hazardous. In the course of the year 1793, the country was agitated by a sudden and general alarm. The scarcity of money was extreme, and paper was discredited. Numerous bankruptcies took place, and there was a great demand among the country banks for specie, which the Bank of England was as usual ultimately called upon to supply. Embarrassed by the drain of its specie, the Directors of the Bank refused to accommodate several great and opulent country banks who applied for assistance, and they were also unwilling to augment the issue of their paper. Immediate and important failures ensued, and the increasing alarm and distress for money in London, plainly showed that the relief of the

* Buchanan's edition of Smith's Wealth of Nations, additional volume, p. 99. country was necessary to the solvency of the metropolis. It did not appear, that, at this period, the notes issued by the Bank of England were fewer than usual, but, owing to the failure of confidence among mercantile men, they circulated more slowly, and they became in this manner inadequate to transact the immense payments of London, with the same regularity as before.

The Bank of England, not deeming it expedient to enlarge the issue of its paper, a remedy of exactly the same nature was administered by Parliament. A loan of Exchequer bills, to the amount, if required, of L. 5,000,000, was directed to be made to as many merchants, giving proper security, as should apply. Such were the salutary effects of this measure, that the very expectation of a seasonable supply of what could be immediately converted into cash, diffused a general feeling of confidence; the punctuality of the London payments was restored, and the credit of the country began to recover. Of the sum proposed to be granted by Parliament, applications were made for L. 3,825,624, some of which being either rejected or withdrawn, the actual sum issued from the Exchequer amounted to L. 2,202,000, which was punctually repaid without either apparent difficulty or distress. The effect of this measure was to supply the community with a temporary currency, in place of that which had fallen into discredit, or which had been withdrawn from circulation by the caution of the banks; and its advantages were evinced by the speedy restoration of mercantile confidence, and by the increased facility of raising money, which was previously felt both in the metropolis and in the country at large.*

This state of confidence continued, with little interruption of Cre-turbation, until the year 1795. At this period, the dit in 1797, Bank, in consequence of the large advances which it and Suspens had made to Government, was under the necessity of Cash Payments of retrenching the sum usually allotted for the disbursement of the count of mercantile bills. A scarcity of cash was soon felt among the merchants and money-dealers of the metropolis, and the threatened invasion of the country, during the year 1796, concurred to spread a general alarm, which naturally gave rise to the discredit of bank-notes, and to a demand for specie. About this period, several banks in the north of England were under the necessity of suspending their cash payments, and the alarm of these failures soon reaching the metropolis, the Bank of England was subjected, about the beginning of the year 1797, to an alarming drain of specie, partly to supply the demand of the country banks, and partly from the return of its own discredited notes. In order to check this increasing pressure, the Bank diminished the circulation of its notes, which having, for several years before, amounted to nearly L.11,000,000, and having been reduced, for some time, to between L.9,000,000 and L.10,000,000, were, at this particular period, brought down to between L.8,000,000 and L.9,000,000. From a combination of all these circumstances, therefore, namely, the alarm in the country—the discredit of country bank-notes—the pressing demands of those banks for specie, all centering in the metropolis,—and, lastly, the undue restriction of its issues by the Bank, such a scarcity of cash was produced in London, and such an alarm followed, that the run upon the Bank of England for specie, so far from abating, continued to increase with an alarming rapidity. In these circumstances, the Directors communicated to the Chancellor of the Exchequer an account of the precise reduction which had taken place in the amount of their cash, the consequence of which was, that an Order in Council was at length issued, on Sunday the 26th February, restraining the Bank from all further payments in specie. An act of Parliament was soon after passed, confirming the restriction on the cash payments of the Bank; and this principle has been since continued, by successive acts of Parliament. By the last act, passed in April 1816, it is continued for two years from that date.

An event so unlooked-for and unprecedented as a stoppage of payments by the Bank of England, produced, at first, a general feeling of astonishment and alarm; and as the executive government had interfered, on its own discretion, to suspend the obligations of the Bank to its creditors, it was necessary that the sanction of the Legislature should be obtained for this extraordinary exercise of power. The whole matter being therefore referred to the consideration of Parliament, long and anxious discussions took place, on the causes which had given rise to this great convulsion in the mercantile world, and on the policy to be pursued, in a state of things so wholly unexpected. Parliamentary committees were appointed, with power to examine the officers of the Bank, both as to the general state of its affairs, and as to the circumstances which led to its present embarrassments; and by the labour of these committees, joined to the able publications of individuals on the subject, such a precise and accurate account has been collected respecting all the facts of this extraordinary case, that it has not only been made clear in itself, but a new and steady light has been thrown, by the information disclosed, on the general principles of paper currency. We shall briefly consider, on these general principles, to what causes this memorable suspension of cash payments by the Bank of England was chiefly owing.

It is obvious, from the very nature of banking, that the stock of specie reserved by a bank for the payment of such demands as may be made upon it, cannot bear any proportion to the amount of its notes in circulation; and that, if a certain proportion of these notes should at any time be suddenly returned for payment, a suspension of its cash payments must be the inevitable consequence. This is an evil inherent in the very nature of paper currency, against which no caution can duly provide, since the profit of the banker is exactly in proportion to the

* Report of the Commissioners to the House of Commons. Thornton On Paper Credit, p. 51. Buchanan's edition of Smith's Wealth of Nations, additional volume, p. 102. Edinburgh Review, Vol. IX. p. 193. excess of his circulating paper over the specie reserved for its payment.

A bank, and more especially a national bank, may be subjected to demands for specie from either of the two following causes: 1st, From an unfavourable balance of trade; or, 2dly, From domestic alarm.

1. When the imports of a nation exceed its exports, a balance of debt will remain due to foreign countries; and in the country which owes the balance there will be a greater demand for money abroad than for money at home. If the unfavourable balance of trade continues, the demand for money abroad, with which the balance may be discharged, will increase, and foreign money, or bills on foreign bankers, will be sold for a premium. In this case, there arises a temptation to export the coin of the country, which, from the state of trade, has become more valuable abroad than at home; and where a national bank is established, whose notes are convertible into cash at the will of the holder, it may undoubtedly be exposed, by an unfavourable balance of trade, to demands for specie to a considerable amount. But, in the nature of things, the drain of specie from this cause must be slow and gradual, and where a bank has ample funds where-with to purchase specie, it can hardly ever, in this case, be driven to the exceptionable measure of suspending its cash payments. The Bank of England has frequently been exposed, from this or from similar causes, to a regular drain of its specie; but its credit was in no danger from those demands, because its coffers could always be replenished as fast as they were exhausted. Prior to the great recoinage, in 1774, the gold currency of this country was in a very debased state; the market price of gold rose, in consequence, above its mint price; and the value of bank-notes was lowered to the standard of the debased coin, for which they were currently interchanged. In these circumstances, it was a profitable transaction to procure bank-notes for their nominal price in light and worn guineas, and to return them upon the Bank for the same nominal price in guineas of their standard weight, which last were melted down and sold for bank-notes at the market price of bullion; and these notes were immediately returned upon the Bank in exchange for a new supply of standard guineas, to be again melted and sold. In consequence of this state of the currency, the Bank of England was subjected to a constant and regular drain of its specie, and to a very great annual expence in replacing the guineas of which it was drained. But there was no risk that this drain, however expensive and troublesome, would ever lead to a suspension of its cash payments, because it was regular and gradual, and subject to calculation; so that, as long as the Bank had wherewithal to purchase guineas, they could always be provided in sufficient quantity to answer the demand.

In like manner, though a public bank, from an unfavourable balance of trade, or from a great expenditure abroad, may undoubtedly be exposed to an inconvenient drain of its specie, it seems scarcely possible that this drain can be so rapid as to endanger its credit. It is not in the nature of trade to produce any such sudden and unexpected crisis. The operations of trade always leave time for some previous arrangement, and they have generally some respect also to the convenience of all the parties concerned. It is well known, for example, that in the case of a heavy accumulation of foreign debt, from whatever cause, the balance is more frequently discharged by an exportation of goods than of specie. The effect of foreign debt is to depress the exchange; an unfavourable exchange, or, in other words, the high price of money abroad, operates as an inducement to export goods; the exporter, besides his usual profit, gaining an additional profit equal to the difference of the exchange. It will always be observed, therefore, that a great foreign expenditure is very soon followed by a large exportation of goods, and though specie may be partly remitted for its discharge, the produce of the country is found to answer the purpose equally well. From the year 1793 to 1797, the foreign exportation of this country on the Continent of Europe and to the West Indies, amounted to L.33,510,779.* and in consequence of these heavy expenses abroad, the Bank was subjected to demands for specie to a considerable amount. But though the Directors of the Bank, in their correspondence with the Government, complain heavily of the loss of specie which the Bank had experienced, and though, in February 1796, they even go the length of formally recording it as their opinion, that any farther advance to the Emperor of Germany, or any foreign state, would be fatal to the Bank,† this opinion seems evidently to have been the result of undue apprehension, and to have been expressed strongly for the purpose of deterring the Chancellor of the Exchequer from persevering in his system of lavish advances to foreign powers, the effect of which, they justly conceived, would be injurious to the Bank, by subjecting it to a farther and very inconvenient drain of its specie. But since, in the course of the three several years of 1794, 1795, and 1796, the foreign expenditure of the country amounted to something more than L.8,000,000, L.11,000,000, and L.10,000,000, without injuring the credit of the Bank, it can hardly be believed that an additional expenditure of L.3,000,000, or even L.4,000,000, could have given such a sudden shock to its credit, as to have occasioned the suspension of its cash payments. Nor do the Directors, although they express generally their uneasiness at the drain of their specie, ever seem to have contemplated such a catastrophe. On the contrary, the Governor and Deputy-governor, when examined before the Secret Committee of the House of Lords, state that they did not apprehend imminent danger previous to the 21st February 1797.§ From all these circumstances, therefore, it appears that the

* Report of the Lords' Committee of Secrecy, Appendix, p. 107. † Copy of a Resolution of the Court of Directors of the Bank of England, 11th February 1796. See Report of the Lords' Committee of Secrecy, p. 80. ‡ Report of the Lords' Committee of Secrecy, Minutes of Evidence, p. 11. drain of specie to which the Bank was subjected in consequence of the great foreign expenditure of the country previous to the year 1797, or in consequence of any unfavourable balance of trade, though constant, was confined within certain limits; that provision could have been made for it; and that, though it imposed on the Bank a certain annual expence, yet, with due exertion to procure the necessary supplies of specie, it could never have been fatal to the credit of so great an establishment.

2. The drain of specie to which a great national bank may be subjected from the prevalence of a general alarm, is in all respects different from that which may be produced by a great foreign expenditure, or by the fluctuations of trade. The impulse given by panic is, in its very nature, sudden and instantaneous. It generally terminates also, and that speedily, in some violent crisis. If we suppose, therefore, that a bank, which circulates its notes extensively, suddenly falls into discredit, that from some unknown cause, a sudden suspicion of its solvency seizes all the holders of its notes, it is obvious that all these persons, under the violent impulse of their fears, will rush at once to the bank with notes in exchange for specie; and it is equally certain, that whatever funds a bank may ultimately possess, its stock of specie must be speedily exhausted by such a sudden inundation of its discredited notes. In this case its cash payments must be suspended for a time, until the alarm of its creditors be dissipated by a full disclosure of its affairs. Such being the fatal operation of domestic alarm on the credit of a bank, it can scarcely be doubted that this was the immediate cause of the catastrophe which befel the Bank of England in 1797; more especially, as we find that it was exposed for more than two years to the drain of specie occasioned by foreign expenditure, without any injury to its credit, while one single week or little more of domestic alarm, terminated in a suspension of its cash payments. On Tuesday the 21st February, the Directors of the Bank were so alarmed by the increasing demand for specie, that they communicated to the Chancellor of the Exchequer the precise reduction which had taken place in the amount of their cash. In the course of the preceding week, the drain of guineas had been considerable; but after Tuesday the 21st, it continued increasing with the most alarming rapidity, insomuch that, according to the evidence of the Directors, the demand for specie, on the two last days of the week, exceeded that of the four preceding days. This is the great and conclusive fact, which points at once to the cause of the ruin which was impending over the Bank. It was not so much the actual loss of specie which excited apprehension, its cash having been lower both during the American war and in the year 1782; but the unparalleled rapidity with which the drain increased, was the alarming circumstance which defied all precautions, and which finally rendered the suspension of cash payments by the Bank an act of overruling necessity. Its stock of specie had no doubt been previously reduced by the demand arising from an unfavourable balance of trade, and this would naturally tend to bring matters more speedily to a crisis. But however well replenished the Bank might have been with specie, the demand was increasing at such an accelerated rate, that, in the course of a few days more, it would have been quite sufficient, without the help of any other cause, to have drained it of its last guinea.*

* That the embarrassments of the Bank were occasioned by the demand at home is plain, from the following evidence of Mr Giles and Mr Raikes, before the Lords' Committee of Secrecy:—

Mr Giles was examined as follows:— "Has the Bank of England lately experienced an unusual drain of cash?—Most certainly. "Are you able to ascertain how far this drain was wholly, or in part, occasioned by demands for cash from different parts of the country?—It was owing, in great part, to demands from the country: indirectly from the country, but directly from the bankers in London (who are to supply the country) upon us. "Whether, by the effects of this drain, the balance of cash remaining in your hands has been reduced considerably below the amount at which it has usually been maintained?—The cash of the Bank has, of late, been considerably reduced. I have known it a great deal lower; but, on this occasion, the demands have been unparalleledly rapid; they have, of late, been progressively increasing, but, in the last week, particularly so; and we had every reason to apprehend that these demands would continue, and even increase. "Whether such reduction had been continuing in an increased proportion to the balance remaining in your hands up to the date of the minute of Council transmitted to you?—We have generally answered this question in our preceding answer; but, we beg leave to add, that the demands have been progressively increasing in the course of the last week, and in the last two days exceeded the demands of the four preceding days." Mr Giles and Mr Raikes were examined as follows:— "Do you think the restriction made by the order of Council of the 26th of February was necessary?—Certainly. "Do you consider it as necessary to the interest of the Bank?—The rapid drains we had upon the Bank, and the continuance of them, made us think it advisable to communicate to his Majesty's Ministers the situation of the Bank, that they might, in their wisdom, use such means as they might think expedient. "When was that communication made to the Chancellor of the Exchequer?—We think the first was on Tuesday the 21st of February; the drains not only continued but increased, and so rapidly the last day or two, that we communicated it to the Chancellor of the Exchequer on Saturday, and had the honour to meet his Majesty's Ministers on the Sunday, The act restricting the Bank of England from paying its notes in specie, or rather the act by which it obtained this privilege, was, when it was first passed, justified by the necessity of the case. The alarm was so general, that no other expedient remained to save the credit of the Bank. But all sudden and violent alarms are in their own nature of short duration; and when the Parliamentary inquiry, which was commenced into the affairs of the Bank, disclosed in its favour a large balance of accumulated profits, all suspicion of its solvency, and all farther alarm, was immediately done away. In these circumstances, the privilege of refusing specie for its notes being still continued to the Bank, it was necessary to justify this proceeding on different grounds from those urged in favour of the original measure; and with this view, Mr Thornton, the great advocate of the Bank, insists, that, to have enforced the resumption of cash payments, after they were once suspended, at any subsequent period of the last war, would have endangered the credit of the Bank as much as when the first restriction act was passed—that, after the conclusion of peace, the country was embarrassed by an unfavourable balance of trade, proceeding chiefly from the necessity of making large importations of corn, in order to supply the deficiencies of two successively bad crops,—that the Bank must, in consequence, have been exposed to a continual drain of its specie,—and that the restriction on its cash payments was, therefore, still necessary, as a security against this danger.

We have already endeavoured to show, that the drain of specie to which an unfavourable balance of trade may subject the Bank, can never be such as to endanger its credit, because, in such cases, the demand is neither so rapid nor so considerable as to preclude the Bank from providing the necessary supply of gold. Where trade is in such a state, indeed, the Bank will be exposed to a considerable annual expence in procuring specie. The punctual and honourable discharge of its obligations to the public will frequently be found to be both inconvenient and expensive, and its Directors will naturally be desirous to be free from that which increases responsibility, and diminishes profit. But, unless in the case of a general alarm, and discredit of bank-notes, it does not seem that a suspension of cash payments can ever be necessary to the safety of a bank. It deserves to be considered also, that an unfavourable balance of trade, accompanied by an unfavourable exchange, is in its own nature of short duration. It is an evil which tends to redress itself; a large importation of goods, necessarily leading to an exportation in the same proportion. But, although it is not consistent with the plan of the present article to enter fully into the subject for the consideration of which at greater length other opportunities will occur, we may observe, that the foreign exchanges of a country may be influenced by the state of its currency at home, as well as by an unfavourable balance on its foreign trade; and as it is of the first importance to mark the distinction between an unfavourable exchange proceeding from the state of trade, and an unfavourable exchange proceeding from the state of the currency, since the least want of accuracy in this essential point must throw the whole subject into confusion, it is material to remark, that the unfavourable state of the exchange, and the demands for specie to which the Bank was in consequence exposed, which are urged by Mr Thornton as reasons for continuing the restriction on cash payments, have always been ascribed by those who deny the necessity of that restriction, not to the state of trade, but to the depreciation of the paper, in consequence of that over-issue which they maintain to have taken place very soon after the Bank was released from its obligation of paying in specie. Mr Thornton insists, * that if the Bank had been opened to demands for specie, it might, in consequence of the unfavourable state of the exchange, have been exhausted of its cash; and that, to guard against this, it was still necessary to continue the suspension of its cash payments. According to the opposite hypothesis, it is maintained, that the state of the exchange, to which Mr Thornton refers, was connected not with the state of the trade, but with the state of the currency,—that the Bank being now closed against any return of its notes, had issued them in excess,—that having, in consequence, fallen in value, it became profitable to return them upon the Bank for specie,—that the demand for specie, of which the advocates of the Bank complain, was in reality produced by the depreciation of its own notes,—and that the reasons, therefore, assigned by Mr Thornton for the continuance of the restriction, rather prove the necessity of reinforcing on the Bank the obligation of paying in cash, by which means its currency being restored to the value from which it had fallen, the demand for specie would have ceased; and Bank-notes and specie would have been demanded indiscriminately. The one would have answered all the purposes of the other, and the business of the country would have been transacted, as before, with a mixed currency of paper and of gold. It is not to be supposed, indeed, that there were no such occurrences in the history of the country, previous to the year 1797, as unfavourable balances of trade, large importations of corn, in consequence of scarcity, and heavy foreign expenditure, in consequence of war. The Bank, from the time of its first establishment, has had to encounter all the fluctuations incident to peace or war. It has also been exposed to drains of specie from unfavourable balances of trade, as well as from the debased state of the

* Inquiry into the Nature and Effects of the Paper Credit of Britain, p. 115. Banking currency; but it was not until the year 1797, that its Directors, as a security against those inconveniences, bethougt themselves of the singular expedient of dishonouring their own notes. In former periods too, the credit of the Bank was nearly subverted by domestic alarm. A case of this nature occurred in the reign of Queen Anne, when, from the apprehension of a French invasion, the Bank was assailed by an alarming demand for specie. The alarm, however, as is usual in all such cases, soon passing away, the credit of the Bank was entirely re-established, and payments in specie were of course continued during the remainder of the war. The Directors did not venture upon the bold step of making a temporary alarm a pretext for the permanent suspension of their cash payments. They reserved this extreme remedy for extreme cases, not thinking it applicable to those ordinary casualties to which all banks are necessarily exposed.

At the time when the Bank of England suspended its cash payments, a law was passed, protecting a debtor who offered its notes in payment against arrest, though his creditor, by a common action of debt, might still recover payment in guineas, the legal currency of the country. In 1810, when guineas began to be currently sold for 25s. and 26s. in paper, a law was passed prohibiting this traffic, and imposing severe penalties on those who should exchange bank-notes for less than their nominal value in gold. Tenants, who offered payment of their rents in bank-notes, were at the same time protected against distress, though they were still liable to a common action of debt or of ejectment. In 1811, in consequence of a great landed proprietor announcing that he would exact payment of his rents in guineas, an act was passed, protecting a debtor who offered Bank of England notes in payment of his debt against all farther proceedings. The paper of the Bank of England became, in this manner, legal tender for all existing debts, however depreciated it might be in its value, and the law conferring upon it this important privilege still continues in force.

In Scotland, banking has been generally carried on with great prudence and success. There are at present, in the metropolis of Scotland, three banks incorporated by charter, namely, the Bank of Scotland, established by act of Parliament in 1695; the Royal Bank, established by royal charter in 1727; and the British Linen Company, originally incorporated in 1746, with a capital of L100,000, for the encouragement of the linen manufacture, but afterwards converted into a bank, for the issue of promissory-notes, and the discounting of bills. Those different banks, besides their annual dividends, have been accumulating a fund of undivided profit, which they have, from time to time, been adding to their original capital. The Bank of Scotland and the Royal Bank, have each a capital of L1,000,000, with an additional L500,000 subscribed for, but which has never been called up. The capital of the British Linen Company was lately increased from L200,000 to L500,000.

Of the country banks in Scotland, it may be remarked, that in most cases they have been established on the security of ample funds; and having conducted their affairs with prudence, they have generally increased their original capital, and on this account have acquired a great degree of respectability and credit. It is a well known fact, that among the Scotch banks failures have been much less frequent than among the country banks in England.

In no country, perhaps, has banking been carried to such an injurious excess as of late years it has been in Ireland. The national Bank of Ireland was established in 1783, with an original capital of L600,000, raised by subscription, which was lent to government at an interest of 4 per cent. It was placed under the management of a governor, deputy-governor, and fifteen directors; eight of whom, including the governor and deputy-governor, were to form a court of directors, for managing the concerns of the Bank. They were eligible every year, and it was provided that one third, at least, of the directors should be annually changed.

In 1809, the Bank of Ireland obtained a renewal of its charter for twenty-one years, on condition that its capital should be increased by L1,000,000 of stock, to be raised from the proprietary at the rate of L1.25 per cent., and to be lent to government at 5 per cent. per annum. The Bank also agreed to continue the management of the public debt and loans, free of expense to government, during the continuance of its charter.

In 1797, when the Bank of England suspended its cash payments, the same privilege was extended to the Bank of Ireland, and after this period its circulation was rapidly increased. The following is an account of the amount of its notes in circulation at different periods:

<table> <tr> <th>Year</th> <th>Circulation</th> </tr> <tr> <td>1797</td> <td>L 621,917</td> </tr> <tr> <td>1801</td> <td>2,266,471</td> </tr> <tr> <td>1802</td> <td>2,678,980</td> </tr> <tr> <td>1803</td> <td>2,633,864</td> </tr> <tr> <td>1804</td> <td>2,986,999</td> </tr> <tr> <td>1805</td> <td>2,902,438</td> </tr> <tr> <td>1806</td> <td>2,465,710</td> </tr> <tr> <td>1807</td> <td>2,818,140</td> </tr> <tr> <td>1808</td> <td>2,782,483</td> </tr> <tr> <td>1809</td> <td>3,141,410</td> </tr> <tr> <td>1810</td> <td>3,192,186</td> </tr> </table>

This increased circulation of paper appears to have exceeded the wants of the community, since it was followed by rise in the price of bullion, and by the depression of the exchange. About the year 1804, this evil had proceeded to such an extent, that guineas were openly advertised and sold for a premium of 10 per cent., and the exchange with London was about 17 per cent. against Dublin. From this depreciation of the notes of the national Bank many serious evils arose. The silver currency, which circulated in Ireland, was generally in a debased state, and the intrinsic value of the different coins was not equal to the value for which they were current. But by the fall which had taken place in the notes of the Bank of Ireland, those debased silver coins became more valuable in the form of bullion than in the form of currency. They were, accordingly, all melted down, and the community being in consequence exposed to the greatest inconvenience, their place was supplied in Dublin and other parts by counterfeits, and in several districts by a paper currency, issued for sums gradually decreasing from 6s. to 6d., and even to 3d. It is calculated by several persons, who gave evidence before a committee of the House of Commons in 1804, that, about this time, there were dispersed throughout Ireland 295 issuers of this paper money, chiefly consisting of a motley body of shopkeepers, merchants, and petty-dealers of all descriptions. The country was inundated with this exceptionable currency, and it was the occasion of such general inconvenience, as well as of such numerous forgeries and frauds, that the circulation of notes for such small sums was at length prohibited by law. Notwithstanding the prohibition, those notes still continued to circulate, the law was evaded by various contrivances, and the want of a better currency secured their circulation. The Bank of Ireland has since made an issue of stamped dollars, which, by supplying the wants of trade, has, in a great measure, remedied the evil complained of.

The premium on guineas, which, in 1804, was 10 per cent., has since greatly declined, and the foreign exchanges of Ireland have also become more favourable. In 1808, guineas were exchanged for paper at a premium of 8d., and paper has since risen nearly to par. As the Bank of Ireland has increased, in place of diminishing, its circulation, since 1804, the cause of this rise in the value of paper must be sought for in the retrenchment of the notes of other banks. It appears, accordingly, that the number of provincial banks has, of late years, been very considerably diminished in Ireland, and that of fifty banks which issued notes in the year 1804, not more than nineteen remained in 1812, the others having either failed or withdrawn from business.* The extinction of so large a portion of the currency would necessarily increase the value of what remained in circulation.

The price of Irish bank-stock has been greatly improved in value within the last twenty years. The following is an account of its price at different periods:

<table> <tr><th>Year</th><th>January</th><th>per cent.</th></tr> <tr><td>1798</td><td>90</td><td>per cent.</td></tr> <tr><td>1799</td><td>115</td><td></td></tr> <tr><td>1802</td><td>179</td><td></td></tr> <tr><td>1804</td><td>140</td><td></td></tr> <tr><td>1810</td><td>189</td><td></td></tr> <tr><td>1816</td><td>214</td><td></td></tr> </table>

Dividend on Irish bank-stock at different periods.

<table> <tr><th>Year</th><th>per cent.</th></tr> <tr><td>1798</td><td>6 1/2</td></tr> <tr><td>1801</td><td>6 1/2</td></tr> <tr><td>1803</td><td>7 1/2</td></tr> <tr><td>Bonus in 1803</td><td>5</td></tr> <tr><td>1816</td><td>10</td></tr> </table>

In France the progress of banking, as of every other domestic improvement, was retarded by the convulsions of the revolution. But in the year 1803, when the peace of the continent appeared to be secured, and tranquillity prevailed at home, the different banks in Paris were consolidated into one great national bank, called the Bank of France, by an act of the imperial government. The act establishing this bank fixed its capital at 45,000,000 francs, equal to L. 1,875,000 Sterling, to be divided into 45,000 shares of 1000 francs each. It was vested with the exclusive privilege of issuing promissory-notes, payable on demand, in consideration of which, it made large advances to government. Its business was to discount bills of exchange, notes, or bonds; but it was prohibited from carrying on any commerce, except in cash or bullion. The administration of the Bank of France was committed to fifteen directors and three censors, and to these was added a council of discount, consisting of twelve of the principal merchants in Paris, who were to have the privilege of a vote in all matters relative to the discounting of bills. The great body of the proprietors were represented by 200 delegates, chosen from among those possessed of the greatest number of shares, who were to meet annually, or oftener if they were required. To this assembly the affairs of the Bank were to be annually submitted, and the members of the council of discount were to state, whether, in granting discounts, the directors had conformed to the general rules established to regulate their proceedings. These 200 representatives were also to elect the directors, of whom three, and the censors, of whom one, were to be annually changed. It was provided that the dividend for the year (1804) should not exceed eight per cent., to be paid half-yearly, and that whatever profit remained should be invested in the public funds, and allowed to accumulate as a fund of reserve against contingencies. The exclusive privileges of the Bank were granted for fifteen years, commencing from the year 1804.

Under these regulations, the Bank of France commenced its operations; and during the first year of its establishment, its profits amounted to 4,185,937 francs (L. 174,414), being rather more than 12 per cent. upon its original capital. Of this sum, 8 per cent. was divided among the proprietors; the remainder was invested in 5 per cent. stock, as a fund of reserve; and in the following year, the net profit amounted to 4,652,398 francs (L. 193,850). In the latter part of the year 1805, the Bank of France was considerably embarrassed by the drain of its specie, which, in 1806, continued to increase with such rapidity, that the Bank was obliged to suspend its cash payments. Various causes are assigned for this catastrophe, which seems to have chiefly originated in the necessity of making large remittances of specie to the armies then engaged in the Austrian war—in the great advances of the Bank to the Government—in the over issue of its notes—and finally, in vague and unfounded alarms which generally prevailed respecting its solvency. Its notes fell from their standard value, and were exchanged at a discount for specie. The exchange with the country of France became at the same time unfavourable to Paris, to the amount of 12 per cent.; and the Bank having restricted its discounts, several important bankruptcies took place, which tended greatly to increase the general alarm.* After the peace of the Continent was re-established by the treaty of Presburg, the advances made by the Bank to the government were punctually repaid, and payments in cash were resumed about the commencement of the year 1806. In the course of this year also, in consequence of a decree of the imperial government, a change took place in the administration of the Bank. In place of fifteen directors, its affairs were committed to a governor and two deputy-governors, who were to be appointed by the Emperor. At the same time, its capital, consisting of 45,000 shares of 1000 francs each, was increased to 90,000 shares, or to 90,000,000 of francs.

The new shares were disposed of by the Bank to great advantage, and in consequence of this accession to its capital, it was enabled considerably to extend its operations. By an imperial decree issued at Bayonne, in the year 1808, it was authorized to establish branches in some of the chief provincial towns; and establishments of this nature were begun at Lyons and Rouen, for the purpose of circulating bank-notes, and of discounting bills of exchange. But the merchants of these towns, though they willingly received accommodation from the banks, showed no disposition to circulate their notes. Almost all the notes issued were immediately returned on the Bank for payment; and it is worthy of remark, that neither the notes of the ancient Caisse d'Escompte, nor those of the present Paris Bank, have ever obtained any general circulation in the country of France.

In 1814, when France was invaded by the combined armies of Europe, the Bank of Paris was called upon to make large advances to government, and, at this period, its notes in circulation, joined to its other engagements, exceeded by about 20 millions of francs the value of the specie, and other effects of which it was possessed. A general alarm began to prevail; the Bank was exposed to a ruinous drain of its specie; and on the 18th January a resolution was adopted, not entirely to suspend its cash payments, but to limit the sum to be paid in cash to 500,000 francs per day, and not to pay more to each individual than 1000 francs. In February the Bank, having made the necessary arrangements, resumed its payments in cash for all sums, and during the siege and capture of Paris, it continued to pay in cash, even while the cannon thundered at the gates of the city. In like manner, during the subsequent invasion of the country in 1815, payments in cash were not, nor have they ever been since suspended even for a day.

In all the trying situations in which they have been placed, the Directors of the Bank of France appear to have displayed a laudable zeal to fulfil their engagements to the public. This bank, like the Bank of England, has frequently been employed as a great engine of state; its funds have been diverted from their proper purposes to assist in the great emergencies of the public service; and its directors, yielding to the pressure of temporary demands, have been forced, for a time, to suspend their payments in cash. But the Bank of France has always resumed the ordinary course of its payments as soon as the alarm and the demand for specie began to abate; while the Bank of England, having once obtained a dispensation from its obligations to the public, seems ever since to have been intent on securing the continuance of this privilege. The example of the Bank of France, which, though it suspended its cash payments, in consequence of the pressure arising from domestic alarm, resumed those payments as soon as the alarm began to subside, may serve to expose the insufficiency of the arguments urged in this country in favour of the continued suspension of cash payments by the Bank of England. The circumstances of the two banks appear to have been precisely similar, and no reason can be imagined to justify the one more than the other in continuing to refuse payment of its notes.

The following is a statement of the affairs of the Bank of France on the 12th August 1816:†

<table> <tr> <th></th> <th>Francs.</th> <th>L.</th> </tr> <tr> <td>90,000 shares of 1000 francs (L. 45 each),</td> <td>90,000,000</td> <td>4,125,000</td> </tr> <tr> <td>Fund of undivided profit,</td> <td>21,600,000</td> <td>990,000</td> </tr> <tr> <td colspan="2">111,600,000</td> <td>5,115,000</td> </tr> </table>

Investment of this Capital.

<table> <tr> <th></th> <th>Francs.</th> <th>L.</th> </tr> <tr> <td>In the 5 per cent. Consol. (from which a revenue is derived of 2 millions),</td> <td>33,500,000</td> <td>1,395,884</td> </tr> <tr> <td>In shares of its own, which it has repurchased (which has the same effect as if, by the rules of its institution, the number of shares had been more limited),</td> <td>25,500,000</td> <td>1,062,500</td> </tr> <tr> <td>Advances made to government on treasury-bonds, or other securities bearing interest,</td> <td>26,000,000</td> <td>1,083,333</td> </tr> <tr> <td>Property,</td> <td>4,000,000</td> <td>166,666</td> </tr> <tr> <td>Specie and bills,</td> <td>22,600,000</td> <td>941,667</td> </tr> <tr> <td colspan="2">111,600,000</td> <td>4,650,000</td> </tr> </table>

* Considérations sur L'Institution des principales Banques de L'Europe, particulièrement sur celle de France. Par M. Monbrion. 1805. Rapport fait à la Chambre de Commerce par une commission spéciale sur la Banque de France, et les causes de la crise qu'elle a éprouvée. 1806.

† The Editor was enabled to furnish the Writer of this article with some of these particulars in regard to the Bank of France, and with this statement of its affairs, by means of a communication kindly made to him by M. Jean-Batiste Say, dated at Paris, on the 14th August last (1816). M. Say is well known as the Author of Traité d'Economie Politique, in 2 vols. 8vo, a work, perhaps the most generally sound, instructive, and comprehensive, that has been published on that important science since the appearance of the Wealth of Nations. Debts owing by the Bank of France on the 12th August 1816:

<table> <tr> <th></th> <th>Francs.</th> <th>L.</th> </tr> <tr> <td>The amount of its notes in circulation,</td> <td>70,000,000</td> <td>2,916,667</td> </tr> <tr> <td>Amount of deposits,</td> <td>20,000,000</td> <td>833,334</td> </tr> <tr> <td></td> <td>90,000,000</td> <td>3,750,000</td> </tr> </table>

For this sum the Bank has either specie in its coffers, or good bills, generally at the short date of 45 days. If we add to this the sum of 22,600 francs in bills and specie, already stated as part of its capital, it follows that the Bank of France, on the 12th August 1816, was possessed of effects to the amount of 112,600,000 francs (L. 4,691,667). Of this sum it had 41,000,000 francs in hard cash.

The following is an account of the dividends from 1806 inclusive:

<table> <tr> <th rowspan="2">Profit Divided.</th> <th colspan="2">Profit Undivided.</th> </tr> <tr> <th>Francs.</th> <th>Francs.</th> </tr> <tr> <td>1805-6.</td> <td>72 per cent.</td> <td>.80</td> </tr> <tr> <td>100 Days of 1806, to December 31.</td> <td>20</td> <td>2 .40</td> </tr> <tr> <td>1807.</td> <td>82</td> <td>10 .29</td> </tr> <tr> <td>1808.</td> <td>73</td> <td>6 .87</td> </tr> <tr> <td>1809.</td> <td>74</td> <td>7</td> </tr> <tr> <td>1810.</td> <td>74</td> <td>7 .07</td> </tr> <tr> <td>1811.</td> <td>66</td> <td>3 .02</td> </tr> <tr> <td>1812.</td> <td>69 .75</td> <td>4 .87</td> </tr> <tr> <td>1813.</td> <td>75 .50</td> <td>7 .75</td> </tr> <tr> <td>1814.</td> <td>60 *</td> <td></td> </tr> <tr> <td>1815.</td> <td>64</td> <td>2</td> </tr> <tr> <td>1816. half-yearly dividend.</td> <td>36</td> <td>3</td> </tr> </table>

In the United States, banking has of late years kept pace with the general progress of wealth and improvement throughout the country, and banks have, in consequence, been established in all the most considerable towns. In 1804, they were calculated, according to the most accurate computation that could be made, to amount to eighty, including ten subordinate banks; and the capital invested in this business was estimated at 50,000,000 of dollars.†

The principal American bank is that of the United States, which was incorporated by an act of the Legislature in 1791. By this act, it is provided, that the capital stock shall consist of 10,000,000 dollars, in 25,000 shares of 400 dollars each, one-fourth to be paid in specie, and three-fourths in 6 per cent. stock. The bank is restricted from taking more than 6 per cent. on their discounts, or from advancing more to government than 100,000 dollars. It declares half-yearly dividends, which, from its establishment, have been 4 per cent., with two surplus dividends, one of 1 per cent., and the other of 2 per cent. The date at which it discounts bills is two months.

The late war in which America was involved with Great Britain, seems to have occasioned considerable disorder in the state of her circulation. From the speech of the President to the Congress, in December 1815, it would appear, that the public finances and trade of the United States had been exposed to great inconvenience from the want of some uniform national currency, and from the disappearance of the precious metals. To remedy these evils, it was purposed to establish a new bank at Philadelphia, on the security of such ample funds as should engage universal confidence, and should thus give its notes a free circulation through every part of the United States. A bill, for this purpose, was passed in the last Session of Congress, and it is understood, that the capital required has been since subscribed.