even Pound, Schilling, & Co., though long ago gone to the bad—are accustomed to deal.
Any one who will take the trouble to read numerous reports of parliamentary committees on the subject of this black art, will at once perceive how recondite and abstruse are the principles upon which it is founded. Contradictions, absurdieties, proofs of ignorance, and confessions of doubt pervade them all; proving that, however deep may be the knowledge of the mathematics possessed by authorities in these matters, their study of inductive philosophy has been anything but satisfactory in a public and useful sense. Nothing but a medical consultation upon one of those common cases at which the healing profession are so frequently all agog, can exceed the display of opposite theories and remedies advocated by Lord A., Sir B. C. That, Mr. D., and Messrs. Pound & Schilling, of the firm of Pound, Schilling, Pense, & Company. It is not surprising how soon people in trade came to appreciate the advantages of possessing the moneys of others; but it is rather strange how readily capitalists deposited their wealth, tempted by the small profit and convenience which at first were held out to them. But faith being once established, and the system become common, our wonder entirely ceases; for, say what you will of the nineteenth century and the stalking schoolmaster, half the world do believe in the semi-supernatural nature of the banker's vocation, and delight to repose their faith where they cannot exercise their understanding.
But let us look more closely into this obscure business, and by so doing dispel something of its mystery. It consists mainly of discounting bills, which is, in fact, buying debts payable at some future period, which the banker can sell again, or re-discount, as it is termed, whenever he pleases. Next to this comes lending money; and this is generally done upon mortgage, in which case the mortgate is held as collateral security for payment. Sometimes loans are cash credits, which means credits upon overdrawn accounts. What the banker pays for the bills are “promises to pay,” embodied in bank notes, or figures put to his customers' accounts. These “promises” extend far behond his actual cash, that is, his capabilities, and ar, so far, built upon his credit, the foundation of his earnings; and thirdly, he commands a source of profit in the purchase of public securities, such as stock and exchequer bills. Now, the price he pays for these debts and securites, and what he charges for pecuniary accomodation, vary, according to the market value of money, from three to the extreme limit, ten per cent.; for money, the value of which is derived from the Bank of England rate of discount, was never known to than this latter quotation. To do all this safely with his customers’ money, requires circumspection. He has to busy himself not only with the characters and affairs of his customers, but of those upon whom his customers are accustomed to draw bills, that is, his customers’ creditors and connections. City men often talk of bad times, of things being (to use that elegant phraseology which is not unusual among them) as “dull as ditch water,” of “nothing doing,” and of “business being at a deplorable stand-still.” The present moment is such a time. Gold has been got at by the French for defraying the expenses of the Mexican expedition; a vast quantity of it is gone to St. Petersburg, and the new producers of cotton have received large cash payments for the fruit of their industry.
This makes it dear at home and in many other markets, and therefore sends up the priceat which the Bank of England will buy the debts I have just identified with bills brought to be discounted. As things may become worse, small capitalists abstain from investing their spare cash at present, hoping for the more advantageous terms which lower prices would confer; and accordingly they rush to the deposit banks, and there avail themselves of the handsome interest allowed for the use of their money. Alarmists are a race I detest; but since I have laid aside my notions of diabolical agency in the conduct of banking affairs, I have come to believe in the risk we all run when an overplus of dear money gets into the hands of dealers, who, being compelled to employ it at a high rate of interest in order to create a margin for their own profits, are unable to exercise all that caution of which the disposal of a smaller sum necessarily admits.
These observations have reference principally to our joint-stock banks, about which I will now say a few words.
The merchants of London formerly lodged their money, for the sake of security, in the Tower of London; but as Charles I. was hard up, and therefore not over scrupulous about ways and means, one fine morning he went to that fortress, and, being by divine right lord of all he surveyed, the treasure thus accumulated—at least 12,000l. worth, in bullion and hard cash—disappeared; and, accordingly, the faith of the public has been transferred to private and joint-stock bankers. But this latter classs of banker is the growth of more recent times. If indeed banking is understood merely to mean lending out money deposited by capitalits, then the trade is far older than the Christian