necessarily limiting its liability to the amount of its capital as fixed by its charter. If it were incumbent upon the chartered Scotch banks to take the title of "limited," the Bank of England and the Bank of Ireland in common justice must likewise be required to do so. Further, there was something peculiarly unreasonable in seeking to impose the title "limited" upon these Scotch banks, when actually the change which they desire is to "un limit" themselves,-either for the first time, or else for the sake of further enlarging their liability to the public. Surely, when a bank previously limited-but which has never borne that title, owing to its being unnecessary, wholly superfluous-asks to be empowered to become practically unlimited, it is very hard upon the bank that, solely in consequence of this change, it should for the first time be compelled to style itself "limited :" such a course, in fact, totally misrepresenting the nature of the change which the bank is making. We repeat, it would be a strange thing if these banks were required for the first time to style themselves "limited" simply and solely because they have obtained power from Parliament to greatly extend and enlarge their liability to the public! It would not only be logically absurd and wholly unreasonable, but an intolerable injustice to the Scottish chartered banks that they should be dubbed "limited," when enlarging their liability, while the Bank of England and the Bank of Ireland remain exempt from that title, and yet keep themselves strictly limited, maintaining their charters unrelaxed. Surely, also, it is a most improper course for the Government to erect difficulties of this kind in the way of banks which voluntarily seek to alter their con

stitution in a manner and direction

manifestly in accordance with the general interests.

Indeed, if the two above-mentioned objections on the part of the Government stood alone, they would appear unaccountably perverse and inimical to the public interest. But when we come to the third ground of opposition taken by the Treasury, it becomes obvious that the Ministry of the day (which in such a case means Mr. Gladstone) has a special motive of its own for entirely rejecting this application to Parliament on the part of these Scotch banksa motive for nipping it in the bud, and preventing it obtaining a hearing in the House of Commons. The Banks' application is so reasonable in itself, and so obviously advantagcous to the interests of the public, that were it to come fairly before Parliament, we do not believe that even the large "mechanical" majority on the Liberal benches would sustain the Ministry in rejecting it. Certainly there is not a single Liberal member for Scotland who would support the Ministry in such a course. And hence the eagerness with which the Government has thrown every possible difficulty in the way of these Scotch banks, preventing their Bills from obtaining a hearing in Parliament.

The third ground of objection taken to these Bills by the Treasury, and which (as we shall see) explains this otherwise unaccountable conduct, is advanced in connection with the Scottish banknote circulation. The three chartered banks, as already stated, had volunteered to place their noteissues on a footing of security which all authorities on such subjects agree in regarding as the most perfect and suitable,-namely, to keep an equal amount of Government securities (Consols, &c.) spe

cially set apart as security for the "authorised" issue of these banks, and to keep gold in like manner as security for all notes in excess of the said authorised issue. In reply, the Treasury "cannot accept this offer," because (they say) it would introduce "a principle which is new, so far as the United Kingdom is concerned, and which has not received the sanction of her Majesty's Government." Surely the question is not whether this offer has received the sanction of the Government, but whether it ought not to be sanctioned, as in the present case. But really so astounding a statement, or rather gross misstatement, of facts by the Treasury, is wellnigh inconceivable. Surely even a subordinate of the Treasury, and undoubtedly the First Lord of the Treasury, knows full well that the system of issuing bank-notes upon Government securities was the very one devised by Paterson when founding the Bank of England; that this system was approved by the British Government of that time, and that it has again and again been approved both by the Government and Parliament down to the present day! Nay, more, the entire system proposed by these three Scottish banks is the very one which was applied to the Bank of England by the Act of 1844, and which is still in force. What is the law of issue for the Bank of England but this-that what was in 1844 its ordinary circulation (equivalent to the "authorised" issues of the Scotch banks) was held to be issued upon an equal amount of Government securities, and that all notes in excess of this amount shall be issued upon gold? And is not this exactly the system and principle of issue proposed by these Scotch banks, which nevertheless the Treasury alleges to be something "new in the United Kingdom, and which has not re

VOL. CXXX.-NO. DCCXCII.

ceived the sanction of her Majesty's Government"? Further, as regards the system of issuing notes upon Government securities, it is (as will appear immediately) the very one which Mr. Gladstone himself approves in this correspondence,only he wishes to adopt it in such a way as to destroy the entire right of issue on the part of banks.

Thus, the further we go in this matter, the more extraordinary appears both the language and the conduct of the Treasury, speaking of course on behalf of the Prime Minister. But here at length appears "the cloven foot," which could no longer be concealed. "My Lords," says the Treasury letter to the Scotch banks, "must maintain the principle which guided the authors of the Bank Acts of 1844 and 1845,- viz., that the right of issuing notes appertains to, and should be controlled by, the State." That the issuing of banknotes should be "controlled" by the State is nothing new. The State has done so from the first, just as it controls everything else; but that the issue of such notes "appertains to the State" is a very different question, and sounds a very extraordinary one. But of course, what is meant is, that there ought to be no bank-notes at all. In other words, of all trading persons, firms, or establishments, banks alone ought not to be allowed to make use of their credit! Notes are to banks precisely what bills are to the trading community at large. Yet the Treasury, on behalf of the Government, now announces that banks ought to be deprived of the only suitable means of utilising their credit; and also that the Government intends to do this as quickly as possible. Accordingly, the Treasury proposes that the Scotch banks should give up their charters, and "accept a lease of

2 K

"My Lords" of the Treasury must have been very sanguine, but marvellously little acquainted with the temper and sentiments of the Scottish banks or of the Scottish nation, when they indulged the hope that our banks would "join the Government" in any such work. If a Bill of this kind-viz., abolishing bank-notes, and thereby depriving banks of the right of credit which is free to every other person, firm, or establishment in the kingdom-were to remain in abeyance until it obtains the support or approval of the Scottish banks, we should not need to say a word more upon the subject. As was to be expected of them,

and as the Scottish nation has a right to expect of them, these three Scotch banks have point-blank refused to purchase the enlarged powers which they desire in the interests of the public, and which the Government has so unjustly withheld from them, by "joining the Government" in an attempt to rob banks of their just rights and trading freedom, as well as to inflict a grievous wrong and hardship upon all Scotland. For themselves, the banks have nothing to fear from the proposals of the Government: the dearer money is made, and the higher the rate of interest, the better for banks. But the hardship would fall upon the people

"Quicquid delirant reges, plectuntur Achivi: "

and as the guardians of this branch of Scottish interests, the Scotch banks peremptorily reject the overtures of the Treasury.

The correspondence on the part of the Scotch banks is marked by admirable temper and ability. Their final reply will not improbably prove to be a memorable document in the history of Scottish banking; and we quote the chief portions of it, alike in justice to the banks, and because it is imperatively requisite that the public should be fully apprised of the whole matter as early as possible. The reply is dated at Edinburgh, 10th June

1881:

"5. We would ask leave to remind

your Lordships of the exact state of the question now in discussion between the Treasury and the banks. The banks asked authority to extend their basis of capital in the only way open to them. This is a power possessed by every bank in the United Kingdom, not constituted by Act of Parliament or charter; it is unquestionably for the advantage of the public, and in no way touches the question of issue. Your Lordships meet the request of the banks by the stipulation that the extension of power must be bought by the surrender of their rights of issue. We, of course, admit the power of Parliament to deal with the currency of the country when it thinks proper, with a due regard to existing interests. Further, we would say that when, in the past, Parliament has resolved to deal with the currency, the Scottish banks have such a wide and important question as

never been found offering factious opposition, and have always lent

their aid in the settlement of such

questions on a footing satisfactory to the country. But we do very respectfully represent that, to make the power now asked by the banks, in itself unobjectionable and obviously for the advantage of the public, conditional upon a surrender of their rights of issue, is neither equitable nor politic.

7. Your Lordships suggest that we

should, on the basis of the Bill introduced by the Government in 1865, with reference to English issues, but not passed into law, accept a lease of our rights of issue for a number of years certain, subject to the payment of a moderate royalty; or, as a preferable course, that the banks of issue in Scotland should join the Government in considering the terms upon which a State legal tender issue of notes might be substituted for the issues of the existing banks.

"8. In regard to the former alternative, we beg to remark that we have for a very long period, -in one case for 186 years, in another for 154 years, and in the third for 135 years, -issued notes which have always been received by the people of Scotland as part of the recognised circulation of the country, and that we have throughout enjoyed their entire confidence, even in times of national difficulty and distrust, and notably so during the crisis of 1878. Further, we say that the rights of issue proposed to be leased to us are already ours, having been enjoyed and exercised under the sanction of the law, and of express grants from the Crown or Parliament, for the long periods

to the banks, for it would involve a great inroad on the resources of the banks now available for the wants of the country, and would lead to a serious change in the banking facilities afforded to the public, and to the suppression of branch banks in many places where they can be kept up only under the present system.

10. We venture to add, as a reason for not interfering with that system, that no country in the world is better served by its banks, or has greater banking facilities, than Scotland."

One thing made manifest in this correspondence is, that Mr. Gladstone has reached a new stage in his views upon this great question, and that he is now resolved to proceed to work in his long-cherished idea of abolishing bank-notes-in other words, abolishing banks of issue altogether, and establishing a State-issued paper-money for the entire kingdom; and that he is resolved to put every possible pressure upon the existing banks in order to tempt or force them into compliance with his will and purpose. As the Scotch banks remark, the "extension of their capital powers" which they seek stands on the same footing as the application which Parliament unhesitatingly

ditions under which their business has spread over the country and is now carried on, alike forbid the adoption of the suggestion which your Lordships have been good enough to make.

9. As regards the second alternative, we regret that we are unable to enter into any negotiation based upon an immediate surrender of our rights of issue to make way for a State legal tender issue. It would be misleading your Lordships were we to allow you to suppose that any issue having the quality of legal tender would, in our opinion, even if made satisfactory to the banks, be acceptable to the people

of Scotland. Moreover, we are thoroughly satisfied that such a change would be more prejudicial to the interests of the public than it would be

To fully exhibit the animus of the Treasury-that is, of the Prime Minister-in this important affair, we need say but one word more. Besides amply enlarging their liability to the public, the Scotch banks desire to make absolutely perfect the security for their noteissues; and it is precisely because they do this, and seek to render their entire position beyond criticism, and completely satisfactory alike to themselves and the public, that Mr. Gladstone so obstinately opposes them, and last session prevented their Bills from obtaining a hearing in Parliament. The proposals of the Scotch banks, if granted, would not only make perfect their own note-circulation and right of issue, but would show a simple and universally approved method for perfecting the banks of issue throughout the kingdom. And this is exactly why the Prime Minister opposes them. He strives with all his might to maintain any or every defect (though it be but theoretical) in the present system, in order to furnish himself with some excuse or argument for abolishing it. So entirely is he absorbed by this miserable and really personal object-so utterly regard less is he of the public interests in comparison with furthering his own particular scheme that, as explicitly stated by the Treasury, he is ready, if they will accept a "lease" in lieu of their charters, to guarantee all the rights and privileges of the Scotch banks just as they are. Only they must not improve themselves! Indeed it seems no exaggeration to say that the more defective the constitution of the Scotch banks of issue, the better would Mr. Gladstone be pleased, and the more readily would he give them "a lease for a number of years certain." Mr. Gladstone's object is quite plain: He refuses to allow the Scotch

banks to make any improvementany change which would satisfy themselves and the public - in order that he may thereby have a better chance of succeeding with his own scheme. Surely it must be a sorry scheme which needs bolstering like this! And the people of Scotland, at least, will remember, when Mr. Gladstone brings in his Bill for abolishing their banks of issue, that the only defects (and very small ones) in the present system which he can plead in support of his proposals, have been forcibly perpetuated by the Prime Minister himself, in opposition to the wishes and desired legislation of the banks themselves.

The

The fundamental change, amounting to a revolution, in the currency of the United Kingdom, now contemplated and announced by Mr. Gladstone through the Treasury, is a momentous subject of vital interest to the banking classes and to the community at large. It must be reserved for separate consideration, for it is much too important a matter to be dealt with at the close of an article which has already reached the ordinary limits. first thing to be done was to make generally known the facts (which, strangely enough, have hitherto escaped public attention), and to warn the public, and especially the people of Scotland, of what the Government has in store for them. The warning which we give comes not a day too soon. Judging from the statements contained in the Treasury letters, a Bill for the abolition of bank-notes and of the existing banks of issue may already be in the hands of the Government "draughtsmen," ready to figure in the Ministerial programme for the next session of Parliament. This will almost certainly be the case if Mr. Gladstone does not see his way to a sensational Budget,—