BANK; BANKER; BANKING. 



IUNK ; BANKER ; BANKING. 



defers, against deposit* to 94,438,4 1 7 dollars in their possession. This 

 maximum at both WM reached on the 8th of August On the 24th, 

 the Ohio Life and Trust Company, great bankers in the city of New 

 York, topped payment, and to caused much ilistnut to spread abroad ; 

 the failure of other bank* followed, increasing the panic till it rote to 

 a run upon the banka ; not to much, howerer, to get caah for the notes 

 a* for the deposit*. To meet this state of things, the bank* o 

 reduced their discount* and advances, that on the 17th of October, they 

 had fallen to 97,245,824 dollar*, the sudden contraction of accommo- 

 dation ""ing the fall of many merchant* who had depended on the 

 banka for sup|die* of money upon discounts, Ac. The drain of 

 depoata however "till proceeded. The deposits on that day were only 

 6tj4,9n dollar., a decrease of 41,546,784 dollar* in nine week*. The 

 bank* are aaid to have been guilty of improvidence in advances, partly 

 hi the injudicious mmimr in which they hod allowed too high a rate of 

 interest upon sums deposited on current accounts or at call, which U 

 Slid to have caused the bankers in the Western States and others to 

 keep large ~l-~ at New York. The effect of this was to tempt, 

 and indeed force, the New York bankers to make advances on question- 

 able security, in order to make a profit on the large sums lodged with 

 them. A tendency to panics is said to be a feature of the American 

 system of hmVW, and one reason assigned is the small quantity of 

 coin with which American bankers in general carry on their business. 

 This does not relate to the banks of the city of New York, where the 

 action of the foreign exchanges compels them to keep up a stock of 

 specie. In 1857, the 56 banks of that city had 8 million of dollars 

 of notes hi circulation, and 12 million dollars of cash in their coffers; 

 but the 255 country banks of that State are returned aa having 

 24 million dollars of notes in circulation, and 1,200,000 dollars only in 

 specie. In 1856, in Massachusetts there were no fewer than 135 banks 

 (exclusive of Boston), with 6,601,130 dollars deposits; circulation 

 13,106,068 dollars; specie in tills only 1,092,463 dollars. In Illinois, 

 in 1857, the State Bank had out notes to 725,000 dollars, and 61,000 

 dollars in the till. The Qraville Bank was circulating notes to the 

 value of 471,556 dollars, and had 18,951 dollan in coin to support 

 that immense currency upon. Other banks of that State had con- 

 siderable circulations abroad, r/A nothing but their credit to rest on. 

 In fact, the present American system is condemned by the voice of 

 their own general government ; the President having observed, in hi* 

 Message to Congress of December, 1857, that the obligation of the 

 banks holding an amount of United States, or State securities, equal 

 to their circulation, furnishes no adequate security: "However 

 valuable these securities may be in themselves, they cannot be con- 

 verted into gold and silver at the moment of pressure, aa our expe- 

 rience teaches, in sufficient time to prevent bank suspensions, and the 

 depreciation of bank notes." It has been suggested that the returns 

 made to the American government by the banks are not always 

 deserving of full credit, a suggestion of great importance to be borne in 

 mind by capitalists in this country, where American securities were 

 supposed at this time to be held to 80,000,0001. value. We will conclude 

 this part of the subject by the mention of a feature in the American 

 crisis of 1 857, which appears to possess much significance. In the State 

 of New York all the banks, with the exception of the old incorporated 

 banks already mentioned, are obliged to deposit State stock against 

 every promissory note which they issue, and any bank which wishes to 

 increase it* issue, must, before it can do so, lodge withj the Super- 

 intendent of the Banking Department an additional amount of State 

 stock to the value of the contemplated issue. Accounts of all the 

 transactions of these banks are published weekly by the Banking 

 Department of the State, from returns mode by the banka ; within the 

 two or three years previous to the crisis, the amount of subscriptions to 

 the banks, and also the amount of deposits, had greatly increased, 

 indicating increasing confidence in the stability of these establish- 

 ment*. But what showed in a still more remarkable manner the 

 tftmftAmn** jros this, after the suspension of the banks, there having 

 been a partial run for gold f ortheir notes before the suspension, the notes 

 continued to be token and received, and to pass from hand to hand in 

 the business of life, at little or no discount; though a person having a 

 bank note which he wished to get gold in exchange for, could only 

 obtain it upon a payment of one per cent, for the accommodation, 

 which, of course, was given him by private individuals anil not l>y the 

 bank, and which per centage, therefore seems to mark the lowest 

 degree in which the notes were depreciated. It should be mentioned 

 also, that by a provision in the law of that State, the noteholder of a 

 bank has a prior claim on the assets above all other creditors whatever, 

 independently of the government securities deposited. The same 

 thing took place, it appears, in most of the other States of the Union : 

 after the suspension of cash payments by banks, the notes still 

 continued in circulation, passing freely at little or no discount when 

 they were notes issued on the deposit of an equal amount of State 

 scuritim or ..f bullion. These banks are called Subscription Banks, 

 from the mode in which they usually originate. The promoters of a 

 scheme for a bank, put out a lint of supporters, with the amount of 

 capital Intended to be raised. The list is exposed in the Stock 

 Exchanges, and i filled up with the names of persons willing to take 

 ban*, until the full amount i* subscribed. It is understood th.it in 

 all oases the liability of the shareholders is limited to the extent (it 

 seems) of the subscriptions or aharei of each. The management is in 



the general form of a chairman, a cashier or [secretary, and twelve 

 director*. The number of shareholders is unlimited, and before they 

 can commence business, all the shares must be paid up in full. In 

 New York the usury lawn prevent a higher rate of interest than 7 per 

 cent. In other States there are also usury laws, under which various 

 rates are enforced. (See ' Report of Committee of House of Commons 

 on Bank Acts, *c.' 1858.) The history of the crisis seems to be 

 deserving of study ; it presents curious phenomena, both with respect 

 to the confidence displayed by the noteholders, and still more by the 

 depositors; in some instances, depositors were known to have re- 

 turned the day after the suspension, and replaced their deposits in the 

 very banks from which a day or two before they had withdrawn UK-MI ; 

 and in general, the banks of America, notwithstanding their frequent 

 insolvencies, hold large amounts of deposit*. 



Itmilt of India. Banking, as conducted by natives in the into 

 India, is chiefly confined to the issuing and discounting of bills of 

 <. These native bankers are called Shroffs, and the bills in 

 which they deal are called Hoondees. They do not issue promissory 

 notes payable to bearer. There is a very considerable circulation of 

 hoondees, the interior inland business being principally conducted by 

 ih.-ir means. The great banking-houses at Benares have branches of 

 their establishments in almost all the principal cities of Hindostan; 

 by their means remittances from one part of the country to another are 

 greatly facilitated. Europeans have not yet undertaken this branch of 

 business, except at Calcutta and Madras. An attempt was made some 

 years ago, by an English house in Calcutta, to establish a bank -it 

 Bhauleah, but without success. 



There were at one tune four private banks in Calcutta managed by 

 Europeans; but two of them have ceased to operate. Only one of 

 these banks issues notes : its circulation was at one time between 

 40,0001. and 50,000V., but its issues have lately been much con- 

 tracted. 



A government bank, under the title of the Bank of Bengal, was 

 opened in 1809. Its capital is 500,0002., one-fifth of which was sub- 

 scribed by the East India Company. This bank is said to have proved 

 a great convenience to the community and the Bengal government, 

 especially in Calcutta, where its notes chiefly circulate. This establish- 

 ment receives deposits, discounts bills, and effects remittances to and 

 from country districts, as well aa issues its own notes : the amount of 

 its paper in circulation is about 800,0002., in notes varying in amount 

 from ten rupees to 20,000 (II. to 20002.) ; the largest part is in notes of 

 100 rupees and upwards. In 1823 the bank obtained a new chart, i i',.r 

 five years, but exists now under the sufferance of the government. 

 The management is vested in nine directors, three of whom are nomi- 

 nated by the Indian government. The president is chosen from among 

 their own body by the directors. Natives are eligible to become 

 directors, none of whom ore paid for their services. A statement of 

 its affairs is submitted twice in each year to the proprietors, and sent 

 to the government. This bank has at times lost considerably through 

 having advanced money on forged documents to natives, who are great 

 adepts at this kind of dishonesty. Although thus closely connected 

 with the government, the bank does not transact its money business. 

 The government keeps its own treasury quite distinct, but frequently 

 holds a considerable sum in the notes of the bank. The average divi- 

 dend made to the proprietors has been from nine to ten per cent : the 

 stock bears a high premium. 



There is a bank at Madras which is altogether a government concern. 

 It receives deposits, discounts bills, and issues notes which have no 

 circulation beyond the limits of the city of Madras. It yields an 

 annual profit of about 10,000V. to the East India Company. 



The Bank of Bombay divided, fer the half-year ending 81st Dec., 

 1858, of rupees forty-five per share, being at the rate of nine per cent, 

 per annum on the capital stock of the bank. 



Colonial Hank*. In several (not all) of the British colonies the banks 

 pay interest on the deposits made by their customers. The practice 

 has been discontinued in New South Wales, as far as accounts 

 current are concerned; it has never been in operation in Tasmania, 

 and has not yet (1859) been carried into effect in South Australia. 



The Bank of Australia was established in 1835. Since 1841, the 

 capital (which was enlarged in that year) has been 900,0002., on which 

 the dividend of 202. per cent, per annum is now jirl. 



The Bank of New South Wales paid, for the half year ending 30th 

 Sept., 1858, at the rate of 20V, per cent, per annum: this was the 

 sixteenth half-yearly meeting of the company. 



The Colonial Bank (established twenty-two years) divided last year 

 at the rate of eight per cent, per annum, on a paid-up capital of 

 500,0007. 



The Union Bonk of Australia, for the year ending 31st Dec., 1858, 

 divided at the rate of ten per cent, per annum on a paid-up capital 

 of 920,0002. 



Most of these, as well as various other banks whose business lies 

 chiefly in the colonies, are managed by boards of directors sitting hi 

 London. For particulars respecting the law as relates to them, see 

 Grant's ' Law of Bankers.' 



II. Object! and General PrinciiJn of Rankimj. From what we have 

 already stated, it will lie seen that banking extablishments are under- 

 taken with very different objects, and are prosecuted by very 1 1 

 methods. The whole may be divided into three classes, namely, banks 



