the issuing banks for the amounts thus put into circulation, which must riot exceed the amount of their existing authorized issues ; and the interest on these securities would be paid to the banks, less a fixed charge to defray the cost of preparing and issuing the notes delivered to them. The notes thus issued would be payable at the central State office, and would circulate throughout the kingdom ; but as often as they were brought back to the central office they would be cleared again by the several issuing banks for reissue, unless the latter desired to retired from the arrangement, in which case the issuing bank would redeem the notes it issued, which would be cancelled, and the securities deposited, or a corresponding part of them, would be handed back. It would not be improper to force this plan on the acceptance of the privileged banks of issue, although we believe it would be freely accepted, inasmuch as their notes would at once acquire currency throughout the kingdom without discrimination of locality in exchange for the deposit of security, and the gain they now realize from the issue of notes would be left un- diminished. We must, however, repeat the expression of the conviction that neither this nor any other change of the present system can be regarded as practicable until the impulse of agitating circumstances has stirred up Parlia ment to face the question.
Different Species of Banks—The Clearing-house—Authorization of Banks with Limited Liability.
We have elsewhere hinted at the subdivision of the business of banking which has accompanied the develop ment of commerce. A banker borrows and lends money, but the conditions under which money is borrowed or lent may be extremely various, and the different classes of bankers are distinguished from one another by differences in the rules which they observe in borrowing or lending. Bankers may borrow money on call, at deposit, on deben tures, at interest, or without interest, and they may lend on open credits, by discounting bills, by advances on mortgage repayable in instalments or otherwise, &c., &c.
Banks of Deposit.—These banks receive money on deposit, that is to say, on conditions that a certain pre scribed notice shall be given of the time of withdrawal. They allow interest, and they usually lend a large pro portion of their money on securities which are not at any moment immediately capable of being realized.
Land Mortgage Banks may be classed with banks of deposit, but they are also accustomed to borrow on deben tures repayable at the end of one, two, three, or a larger number of years, at rates of interest varying with the period of the debenture. These institutions were first started for the purpose of granting facilities to the mortgagers of land. The money received on debentures was lent out again to proprietors and purchasers of laud, who repaid their debts by annual instalments. It was in this way that the legislation of Stein was facilitated in Germany ; the peasant being able to obtain at ones from the Land Mortgage Bank the capital necessary to redeem the feudal rights of his lord, a debt which he repaid by a series of annual payments often corresponding to what he had pre viously paid as rent, until he became an absolute unin- cumbered owner of the fields he cultivated.
Credit Companies, such as the Crédit Foncier, the Crédit Mobilier, &c., &c., are strictly analogous to land mortgage banks, except that they invest their funds in loans on the security of general industrial undertakings, to which business they have added the function of negotiators of direct loans between companies formed for the conduct of such undertakings and the capitalist public.
Discount Banks and Discount Agencies borrow money on call or deposit, and lend it exclusively in the discount of bills and negotiable securities, which they often rediscouut with capitalists desirous of investing their money in forms capable of being speedily realized.
Trust Associations borrow money on debentures and in vest it in the loans of foreign states or similar securities, the principle of such an association being that the original investor can be secured against the default of any one borrower by the receipt of a high average rate of interest and the general solvency of the rest.
Savings-Banks are institutions established for the receipt of the smaller savings of the poor. As at present existing they are divided into two classes, the Trustees Savings- banks and the Post Office Savings-banks ; but it seems probable that some rearrangement of their machinery will be made in the next session of Parliament. For further particulars see Savings-banks.
Allusion has already been made (ante, p. 316) to the Clearing-house. This institution was established, just a century ago, as a place where the clerks of the bankers in the City of London could assemble daily to exchange with one another the cheques drawn upon and bills payable at their respective houses. Before the Clearing-house existed, each banker had to send a clerk to the places of business of all the other bankers in London to collect the sums payable by them in respect of cheques and bills ; and it is obvious that much time was consumed by this process, which involved also the use of an unnecessary quantity of money and corresponding risks of safe carriage. In 1775 the common centre of exchange was agreed upon. Its use was confined to the bankers, at that time and long afterwards exclusively private bankers, doing business within the City, and the bankers in the west end of the metropolis used some one or other of the City banks as their agent in clearing, a practice which still continues. When the joint-stock banks were first established the jealousy of the existing banks was powerful enough to exclude them altogether from the use of the Clearing-house ; and sorno years elapsed before this feeling was removed so as to allow them to be admitted.
At first the Clearing-house was simply a place of.meeting, but it came to be perceived that the sorting and distribu tion of cheques, bills, &c., could be more expeditiously conducted by the appointment of two or three common clerks to whom each banker s clerk could give all the instruments of exchange he wished to collect, and from whom he could receive all those payable at his own house. The payment of the balance settled the transaction, and an analysis of the statistics of the Clearing-house by the late Mr Babbage (Jour. Statist. Soc., March 1856), shows that the amount of cash that passed was often less than 4 per cent, of the total sums cleared. Latterly, however, the arrangements of the Clearing-house have been further perfected, so that neither notes nor coin are now required. The Clearing-house, as well as each banker using it, has an account at the Bank of England ; and the balances due at the close of each day s transactions are settled by transfers from one account to another at the bank.
in 1858, so as to include the settlement of exchanges between the country bankers of England. Before that time each country banker receiving cheques on other country bankers sent them to those other bankers by post (supposing they were not carrying on business in the same place), and requested that the amount should be paid by the London agent of the banker on whom the cheques were drawn to the London agent of the banker remitting them. Cheques* were thus collected by correspondence, and each remittance involved a separate payment in London. In
1858 it was proposed to set up a country clearing-house in
