CHAPTER XI.
The Bill-Brokers.
Under every system of banking, whether that in which the reserve is kept in many banks, or one in which it is kept in a single bank only, there will always be a cla.s.s of persons who examine more carefully than busy bankers can the nature of different securities; and who, by attending only to one cla.s.s, come to be particularly well acquainted with that cla.s.s. And as these specially qualified dealers can for the most part lend much more than their own capital, they will always be ready to borrow largely from bankers and others, and to deposit the securities which they know to be good as a pledge for the loan. They act thus as intermediaries between the borrowing public and the less qualified capitalist; knowing better than the ordinary capitalist which loans are better and which are worse, they borrow from him, and gain a profit by charging to the public more than they pay to him.
Many stock brokers transact such business upon a great scale. They lend large sums on foreign bonds or railway shares or other such securities, and borrow those sums from bankers, depositing the securities with the bankers, and generally, though not always, giving their guarantee. But by far the greatest of these intermediate dealers are the bill-brokers. Mercantile bills are an exceedingly difficult kind of security to understand. The relative credit of different merchants is a great "tradition"; it is a large ma.s.s of most valuable knowledge which has never been described in books and is probably incapable of being so described. The subject matter of it, too, is shifting and changing daily; an accurate representation of the trustworthiness of houses at the beginning of a year might easily be a most fatal representation at the end of it.
In all years there are great changes; some houses rise a good deal and some fall. And in some particular years the changes are immense; in years like 1871 many active men make so much money that at the end of the year they are worthy of altogether greater credit than anyone would have dreamed of giving to them at the beginning. On the other hand, in years like 1866 a contagious ruin destroys the trustworthiness of very many firms and persons, and often, especially, of many who stood highest immediately before. Such years alter altogether an important part of the mercantile world: the final question of bill-brokers, "which bills will be paid and which will not? which bills are second-rate and which first-rate?" would be answered very differently at the beginning of the year and at the end. No one can be a good bill-broker who has not learnt the great mercantile tradition of what is called "the standing of parties" and who does not watch personally and incessantly the inevitable changes which from hour to hour impair the truth of that tradition. The "credit" of a person--that is, the reliance which may be placed on his pecuniary fidelity--is a different thing from his property. No doubt, other things being equal, a rich man is more likely to pay than a poor man. But on the other hand, there are many men not of much wealth who are trusted in the market, "as a matter of business," for sums much exceeding the wealth of those who are many times richer. A firm or a person who have been long known to "meet their engagements," inspire a degree of confidence not dependent on the quant.i.ty of his or their property. Persons who buy to sell again soon are often liable for amounts altogether much greater than their own capital; and the power of obtaining those sums depends upon their "respectability," their "standing," and their "credit," as the technical terms express it, and more simply upon the opinion which those who deal with them have formed of them. The princ.i.p.al mode in which money is raised by traders is by "bills of exchange;" the estimated certainty of their paying those bills on the day they fall due is the measure of their credit; and those who estimate that liability best, the only persons indeed who can estimate it exceedingly well, are the bill-brokers. And these dealers, taking advantage of their peculiar knowledge, borrow immense sums from bankers and others; they generally deposit the bills as a security; and they generally give their own guarantee of the goodness of the bill: but neither of such practices indeed is essential, though both are the ordinary rule. When Overends failed, as I have said before, they had borrowed in this way very largely. There are others now in the trade who have borrowed quite as much.
As is usually the case, this kind of business has grown up only gradually. In the year 1810 there was no such business precisely answering to what we now call bill-broking in London. Mr.
Richardson, the princ.i.p.al "bill-broker" of the time, as the term was then understood, thus described his business to the "Bullion Committee:"
"What is the nature of the agency for country banks?--It is twofold: in the first place to procure money for country bankers on bills when they have occasion to borrow on discount, which is not often the case; and in the next place, to lend the money for the country bankers on bills on discount. The sums of money which I lend for country bankers on discount are fifty times more than the sums borrowed for country bankers.
"Do you send London bills into the country for discount?--Yes.
"Do you receive bills from the country upon London in return, at a date, to be discounted?--Yes, to a very considerable amount, from particular parts of the country.
"Are not both sets of bills by this means under discount?--No, the bills received from one part of the country are sent down to another part for discount.
"And they are not discounted in London?--No. In some parts of the country there is but little circulation of bills drawn upon London, as in Norfolk, Suffolk, Ess.e.x, Suss.e.x, &c.; but there is there a considerable circulation in country bank-notes, princ.i.p.ally optional notes. In Lancashire there is little or no circulation of country bank-notes; but there is a great circulation of bills drawn upon London at two or three months" date. I receive bills to a considerable amount from Lancashire in particular, and remit them to Norfolk, Suffolk, &c., where the bankers have large lodgments, and much surplus money to advance on bills for discount."
Mr. Richardson was only a broker who found money for bills and bills for money. He is further asked:
"Do you guarantee the bills you discount, and what is your charge per cent?--No, we do not guarantee them; our charge is one-eighth per cent brokerage upon the bill discounted, but we make no charge to the lender of the money.
"Do you consider that brokerage as a compensation for the skill which you exercise in selecting the bills which you thus get discounted?--Yes, for selecting of the bills, writing letters, and other trouble.
"Does the party who furnishes the money give you any kind of compensation?--None at all.
"Does he not consider you as his agent, and in some degree responsible for the safety of the bills which you give him?--Not at all.
"Does he not prefer you on the score of his judging that you will give him good intelligence upon that subject?--Yes, he relies upon us.
"Do you then exercise a discretion as to the probable safety of the bills?--Yes; if a bill comes to us which we conceive not to be safe, we return it.
"Do you not then conceive yourselves to depend in a great measure for the quant.i.ty of business which you can perform on the favour of the party lending the money?--Yes, very much so. If we manage our business well, we retain our friends; if we do not, we lose them."
It was natural enough that the owners of the money should not pay, though the owner of the bill did, for in almost all ages the borrower has been a seeker more or less anxious; he has always been ready to pay for those who will find him the money he is in search of. But the possessor of money has rarely been willing to pay anything; he has usually and rightly believed that the borrower would discover him soon.
Notwithstanding other changes, the distribution of the customers of the bill-brokers in different parts of the country still remains much as Mr. Richardson described it sixty years ago. For the most part, agricultural counties do not employ as much money as they save; manufacturing counties, on the other hand, can employ much more than they save; and therefore the money of Norfolk or of Somersetshire is deposited with the London bill-brokers, who use it to discount the bills of Lancashire and Yorkshire.
The old practice of bill-broking, which Mr. Richardson describes, also still exists. There are many brokers to be seen about Lombard Street with bills which they wish to discount but which they do not guarantee. They have sometimes discounted these bills with their own capital, and if they can re-discount them at a slightly lower rate they gain a difference which at first seems but trifling, but with which they are quite content, because this system of lending first and borrowing again immediately enables them to turn their capital very frequently, and on a few thousand pounds of capital to discount hundreds of thousands of bills; as the transactions are so many, they can be content with a smaller profit on each. In other cases, these non-guaranteeing brokers are only agents who are seeking money for bills which they have undertaken to get discounted. But in either case, as far as the banker or other ultimate capitalist is concerned, the transaction is essentially that which Mr. Richardson describes. The loan by such banker is a re-discount of the bill; that banker cannot obtain repayment of that loan, except by the payment of the bill at maturity. He has no claim upon the agent who brought him the bill. Bill-broking, in this which we may call its archaic form, is simply one of the modes in which bankers obtain bills which are acceptable to them and which they re-discount. No reference is made in it to the credit of the bill-broker; the bills being discounted "without recourse" to him are as good if taken from a pauper as if taken from a millionaire. The lender exercises his own judgment on the goodness of the bill.
But in modern bill-broking the credit of the bill-broker is a vital element. The lender considers that the bill-broker--no matter whether an individual, a company, or a firm--has considerable wealth, and he takes the "bills," relying that the broker would not venture that wealth by guaranteeing them unless he thought them good. The lender thinks, too, that the bill-broker being daily conversant with bills and bills only, knows probably all about bills: he lends partly in reliance on the wealth of the broker and partly in reliance on his skill. He does not exercise much judgment of his own on the bills deposited with him: he often does not watch them very closely.
Probably not one-thousandth part of the creditors on security of Overend, Gurney and Co., had ever expected to have to rely on that security, or had ever given much real attention to it. Sometimes, indeed, the confidence in the bill-brokers goes farther. A considerable number of persons lend to them, not only without much looking at the security but even without taking any security. This is the exact reverse of the practice which Mr. Richardson described in 1810; then the lender relied wholly on the goodness of the bill, now, in these particular cases, he relies solely on the bill-broker, and does not take a bill in any shape. Nothing can be more natural or more inevitable than this change. It was certain that the bill-broker, being supposed to understand bills well, would be asked by the lenders to evince his reliance on the bills he offered by giving a guarantee for them. It was also most natural that the bill-brokers, having by the constant practice of this lucrative trade obtained high standing and acquired great wealth, should become, more or less, bankers too, and should receive money on deposit without giving any security for it.
But the effects of the change have been very remarkable. In the practice as Mr. Richardson described it, there is no peculiarity very likely to affect the money market. The bill-broker brought bills to the banker, just as others brought them; nothing at all could be said as to it except that the Bank must not discount bad bills, must not discount too many bills, and must keep a good reserve. But the modern practice introduces more complex considerations. In the trade of bill-broking, as it now exists, there is one great difficulty; the bill-broker has to pay interest for all the money which he receives. How this arose we have just seen. The present lender to the bill-broker at first always used to discount a bill, which is as much as saying that he was always a lender at interest. When he came to take the guarantee of the broker, and only to look at the bills as a collateral security, naturally he did not forego his interest: still less did he forego it when he ceased to take security at all. The bill-broker has, in one shape or other, to pay interest on every sixpence left with him, and that constant habit of giving interest has this grave consequence: the bill-broker cannot afford to keep much money unemployed. He has become a banker owing large sums which he may be called on to repay, but he cannot hold as much as an ordinary banker, or nearly as much, of such sums in cash, because the loss of interest would ruin him. Compet.i.tion reduces the rate which the bill-broker can charge, and raises the rate which the bill-broker must give, so that he has to live on a difference exceedingly narrow. And if he constantly kept a large h.o.a.rd of barren money he would soon be found in the "Gazette."
The difficulty is aggravated by the terms upon which a great part of the money at the bill-brokers is deposited with them. Very much of it is repayable at demand, or at very short notice. The demands on a broker in periods of alarm may consequently be very great, and in practice they often, are so. In times of panic there is always a very heavy call, if not a run upon them; and in consequence of the essential nature of their business, they cannot constantly keep a large unemployed reserve of their own in actual cash, they are obliged to ask help of some one who possesses that cash. By the conditions of his trade, the bill-broker is forced to belong to a cla.s.s of "dependent money-dealers," as we may term them, that is, of dealers who do not keep their own reserve, and must, therefore, at every crisis of great difficulty revert to others.
In a natural state of banking, that in which all the princ.i.p.al banks kept their own reserve, this demand of the bill-brokers and other dependent dealers would be one of the princ.i.p.al calls on that reserve. At every period of incipient panic the holders of it would perceive that it was of great importance to themselves to support these dependent dealers. If the panic destroyed those dealers it would grow by what it fed upon (as is its nature), and might probably destroy also the bankers, the holders of the reserve. The public terror at such times is indiscriminate. When one house of good credit has perished, other houses of equal credit though of different nature are m danger of perishing. The many holders of the banking reserve would under the natural system of banking be obliged to advance out of that reserve to uphold bill-brokers and similar dealers. It would be essential to their own preservation not to let such dealers fail, and the protection of such dealers would therefore be reckoned among the necessary purposes for which they retained that reserve.
Nor probably would the demands on the bill-brokers in such a system of banking be exceedingly formidable. Considerable sums would no doubt be drawn from them, but there would be no special reason why money should be demanded from them more than from any other money dealers. They would share the panic with the bankers who kept the reserve, but they would not feel it more than the bankers. In each crisis the set of the storm would be determined by the cause which had excited it, but there would not be anything in the nature of bill-broking to attract the advance of the alarm peculiarly to them.
They would not be more likely to suffer than other persons; the only difference would be that when they did suffer, having no adequate reserve of their own, they would be obliged to ask the aid of others.
But under a one-reserve system of banking, the position of the bill-brokers is much more singular and much more precarious. In fact, in Lombard Street, the princ.i.p.al depositors of the bill-brokers are the bankers, whether of London, or of provincial England, or of Scotland, or Ireland. Such deposits are, in fact, a portion of the reserve of these bankers; they make an essential part of the sums which they have provided and laid by against a panic.
Accordingly, in every panic these sums are sure to be called in from the bill-brokers; they were wanted to be used by their owners in time of panic, and in time of panic they ask for them. "Perhaps it may be interesting," said Alderman Salomons, speaking on behalf of the London and Westminster Bank, after the panic of 1857, to the committee, "to know that, on November 11, we held discounted bills for brokers to the amount of 5,623,000 L. Out of these bills 2,800,000 L. matured between November 1 and December 4; 2,000,000 L.
more between December 1 and December 31; consequently we were prepared merely by the maturing of our bills of exchange for any demand that might come upon us." This is not indeed a direct withdrawal of money on deposit, but its princ.i.p.al effect is identical. At the beginning of the time the London and Westminster Bank had lent 5,000,000 L. more to the bill-brokers than they had at the end of it; and that 5,000,000 L. the bank had added to its reserve against a time of difficulty.
The intensity of the demand on the bill-broker is aggravated therefore by our peculiar system of banking. Just at the moment when, by the nature of their business, they have to resort to the reserves of bankers for necessary support, the bankers remove from them large sums in order to strengthen those reserves. A great additional strain is thrown upon them just at the moment when they are least able to bear it; and it is thrown by those who under a natural system of banking would not aggravate the pressure on the bill-brokers, but relieve it.
And the profits of bill-broking are proportionably raised. The reserves of the bankers so deposited with the bill-broker form a most profitable part of his business; they are on the whole of very large amount, and at all times, except those of panic, may well be depended upon. The bankers are pretty sure to keep them there, just because they must keep a reserve, and they consider it one of the best places in which to keep it. Under a more natural system, no part of the banking reserve would ever be lodged at the brokers.
Bankers would deposit with the brokers only their extra money, the money which they considered they could safely lend, and which they would not require during a panic. In the eye of the banker, money at the brokers would then be one of the investments of cash, it would not be a part of such cash. The deposits of bill-brokers and the profits of bill-broking are increased by our present system, just in proportion as the dangers of bill-brokers during a panic are increased by it.
The strain, too, on our banking reserve which is caused by the demands of the bill-brokers, is also more dangerous than it would be under a natural system, because that reserve is in itself less. The system of keeping the entire ultimate reserve at a single bank, undoubtedly diminishes the amount of reserve which is kept. And exactly on that very account the danger of any particular demand on that reserve is augmented, because the magnitude of the fund upon which that demand falls is diminished. So that our one-reserve system of banking combines two evils: first, it makes the demand of the brokers upon the final reserve greater, because under it so many bankers remove so much money from the brokers; and under it also the final reserve is reduced to its minimum point, and the entire system of credit is made more delicate, and more sensitive.
The peculiarity, indeed, of the effects of the one reserve is indeed even greater in this respect. Under the natural system, the bill-brokers would be in no respect the rivals of the bankers which kept the ultimate reserve. They would be rather the agents for these bankers in lending upon certain securities which they did not themselves like, or on which they did not feel competent to lend safely. The bankers who in time of panic had to help them would in ordinary times derive much advantage from them. But under our present system all this is reversed. The Bank of England never deposits any money with the bill-brokers; in ordinary times it never derives any advantage from them. On the other hand, as the Bank carries on itself a large discount business, as it considers that it is itself competent to lend on all kinds of bills, the bill-brokers are its most formidable rivals. As they constantly give high rates for money it is necessary that they should undersell the Bank, and in ordinary times they do undersell it. But as the Bank of England alone keeps the final banking reserve, the bill-brokers of necessity have to resort to that final reserve; so that at every panic, and by the essential const.i.tution of the money market, the Bank of England has to help, has to maintain in existence, the dealers, who never in return help the Bank at any time, but who are in ordinary times its closest compet.i.tors and its keenest rivals.
It might be expected that such a state of things would cause much discontent at the Bank of England, and in matter of fact there has been much discussion about it, and much objection taken to it. After the panic of 1857, this was so especially. During that panic, the Bank of England advanced to the bill-brokers more than 9,000,000 L., though their advances to bankers, whether London or country, were only 8,000,000 L.; and, not unnaturally, the Bank thought it unreasonable that so large an inroad upon their resources should be made by their rivals. In consequence, in 1858 they made a rule that they would only advance to the bill-brokers at certain seasons of the year, when the public money is particularly large at the bank, and that at other times any application for an advance should be considered exceptional, and dealt with accordingly. And the object of that regulation was officially stated to be "to make them keep their own reserve, and not to be dependent on the Bank of England."
As might be supposed, this rule was exceedingly unpopular with the brokers, and the greatest of them, Overend, Gurney and Co., resolved on a strange policy in the hope of abolishing it. They thought they could frighten the Bank of England, and could show that if they were dependent on it, it was also dependent on them. They accordingly acc.u.mulated a large deposit at the Bank to the amount of 3,000,000 L., and then withdrew it all at once. But this policy had no effect, except that of exciting a distrust of "Overends": the credit of the Bank of England was not diminished; Overends had to return the money in a few days, and had the dissatisfaction of feeling that they had in vain attempted to a.s.sail the solid basis of everyone"s credit, and that everyone disliked them for doing so. But though this un-conceived attempt failed as it deserved, the rule itself could not be maintained. The Bank does, in fact, at every period of pressure, advance to the bin-brokers; the case may be considered "exceptional," but the advance is always made if the security offered is really good. However much the Bank may dislike to aid their rivals, yet they must aid them; at a crisis they feel that they would only be aggravating incipient demand, and be augmenting the probable pressure on themselves if they refused to do so.
I shall be asked if this anomaly is inevitable, and I am afraid that for practical purposes we must consider it to be so. It may be lessened; the bill-brokers may, and should, discourage as much as they can the deposit of money with them on demand, and encourage the deposit of it at distant fixed dates or long notice. This will diminish the anomaly, but it will not cure it. Practically, bin-brokers cannot refuse to receive money at call. In every market a dealer must conduct his business according to the custom of the market, or he will not be able to conduct it at all. All the bin-brokers can do is to offer better rates for more permanent money, and this (though possibly not so much as might be wished) they do at present. In its essence, this anomaly is, I believe, an inevitable part of the system of banking which history has given us, and which we have only to make the best of, since we cannot alter it.
CHAPTER XII.
The Principles Which Should Regulate the Amount of the Banking Reserve to Be Kept by the Bank of England.
There is a very common notion that the amount of the reserve which the Bank of England ought to keep can be determined at once from the face of their weekly balance sheet. It is imagined that you have only to take the liabilities of the Banking department, and that a third or some other fixed proportion will in all cases be the amount of reserve which the Bank should keep against those liabilities. But to this there are several objections, some arising from the general nature of the banking trade, and others from the special position of the Bank of England.
That the amount of the liabilities of a bank is a princ.i.p.al element in determining the proper amount of its reserve is plainly true; but that it is the only element by which that amount is determined is plainly false. The intrinsic nature of these liabilities must be considered, as well as their numerical quant.i.ty. For example, no one would say that the same amount of reserve ought to be kept against acceptances which cannot be paid except at a certain day, and against deposits at call, which may be demanded at any moment. If a bank groups these liabilities together in the balance-sheet, you cannot tell the amount of reserve it ought to keep. The necessary information is not given you.
Nor can you certainly determine the amount of reserve necessary to be kept against deposits unless you know something as to the nature of these deposits. If out of 3,000,000 L. of money, one depositor has 1,000,000 L. to his credit, and may draw it out when he pleases, a much larger reserve will be necessary against that liability of 1,000,000 L. than against the remaining 2,000,000 L. The intensity of the liability, so to say, is much greater; and therefore the provision in store must be much greater also. On the other hand, supposing that this single depositor is one of calculable habits--suppose that it is a public body, the time of whose demands is known, and the time of whose receipts is known also--this single liability requires a less reserve than that of an equal amount of ordinary liabilities. The danger that it will be called for is much less; and therefore the security taken against it may be much less too. Unless the quality of the liabilities is considered as well as their quant.i.ty, the due provision for their payment cannot be determined.
These are general truths as to all banks, and they have a very particular application to the Bank of England. The first application is favourable to the Bank; for it shows the danger of one of the princ.i.p.al liabilities to be much smaller than it seems. The largest account at the Bank of England is that of the English Government; and probably there has never been any account of which it was so easy in time of peace to calculate the course. All the material facts relative to the English revenue, and the English expenditure, are exceedingly well known; and the amount of the coming payments to and from this account are always, except in war times, to be calculated with wonderful accuracy. In war, no doubt, this is all reversed; the account of a government at war is probably the most uncertain of all accounts, especially of a government of a scattered empire, like the English, whose places of outlay in time of war are so many and so distant, and the amount of whose payments is therefore so incalculable. Ordinarily, however, there is no account of which the course can be so easily predicted; and therefore no account which needs in ordinary times so little reserve. The princ.i.p.al payments, when they are made, are also of the most satisfactory kind to a banker; they are, to a great extent, made to another account at his bank. These largest ordinary payments of the Government are the dividends on the debt, and these are mostly made to bankers who act as agents for the creditors of the nation. The payment of the dividends for the Government is, therefore, in great part a transfer from the account of the Government to the accounts of the various bankers. A certain amount no doubt goes almost at once to the non-banking cla.s.ses; to those who keep coin and notes in house, and have no account at any bank. But even this amount is calculable, for it is always nearly the same. And the entire operation is, to those who can watch it, singularly invariable time after time.
But it is important to observe, that the published accounts of the Bank give no such information to the public as win enable them to make their own calculations. The account of which we have been speaking is the yearly account of the English Government--what we may call the Budget account, that of revenue and expenditure. And the laws of this are, as we have shown, already known. But under the head "Public Deposits" in the accounts of the Bank, are contained also other accounts, and particularly that of the Secretary for India in Council, the laws of which must be different and are quite unknown. The Secretary for India is a large lender on its account.
If any one proposed to give such power to the Chancellor of the Exchequer, there would be great fear and outcry. But so much depends on habit and tradition, that the India Office on one side of Downing Street can do without remark, and with universal a.s.sent, what it would be thought "unsound" and extravagant to propose that the other side should do. The present India Office inherits this independence from the old Board of the Company, which, being mercantile and business-like, used to lend its own money on the Stock Exchange as it pleased; the Council of India, its successor, retains the power.
Nothing can be better than that it should be allowed to do as it likes; but the mixing up the account of a body which has such a power, and which draws money from India, with that of the Home government clearly prevents the general public from being able to draw inferences as to the course of the combined account from its knowledge of home finance only. The account of "public deposits" in the Bank return includes other accounts too, as the Savings" Bank balance, the Chancery Funds account, and others; and in consequence, till lately the public had but little knowledge of the real changes of the account of our Government, properly so called. But Mr. Lowe has lately given us a weekly account, and from this, and not from the Bank account, we are able to form a judgment. This account and the return of the Bank of England, it is true, unhappily appear on different days; but except for that accident our knowledge would be perfect; and as it is, for almost all purposes what we know is reasonably sufficient. We can now calculate the course of the Government account nearly as well as it is possible to calculate it.
So far, as we have said, an a.n.a.lysis of the return of the Bank of England is very favourable to the Bank. So great a reserve need not usually be kept against the Government account as if it were a common account. We know the laws of its changes peculiarly well: we can tell when its princ.i.p.al changes will happen with great accuracy; and we know that at such changes most of what is paid away by the Government is only paid to other depositors at the Bank, and that it will really stay at the Bank, though under another name. If we look to the private deposits of the Bank of England, at first sight we may think that the result is the same. By far the most important of these are the "Bankers" deposits"; and, for the most part, these deposits as a whole are likely to vary very little. Each banker, we will suppose, keeps as little as he can, but in all domestic transactions payment from one is really payment to the other. All the most important transactions in the country are settled by cheques; these cheques are paid in to the "clearing-house," and the balances resulting from them are settled by transfers from the account of one banker to another at the Bank of England. Payments out of the bankers" balances, therefore, correspond with payments in. As a whole, the deposit of the bankers" balances at the Bank of England would at first sight seem to be a deposit singularly stable.
Indeed, they would seem, so to say, to be better than stable. They augment when everything else tends to diminish. At a panic, when all other deposits are likely to be taken away, the bankers" deposits, augment; in fact they did so in 1866, though we do not know the particulars; and it is natural that they should so increase. At such moments all bankers are extremely anxious, and they try to strengthen themselves by every means in their power; they try to have as much money as it is possible at command; they augment their reserve as much as they can, and they place that reserve at the Bank of England. A deposit which is not likely to vary in ordinary times, and which is likely to augment in times of danger, seems, in some sort, the model of a deposit. It might seem not only that a large proportion of it might be lent, but that the whole of it might be so. But a further a.n.a.lysis will, as I believe, show that this conclusion is entirely false; that the bankers" deposits are a singularly treacherous form of liability; that the utmost caution ought to be used in dealing with them; that, as a rule, a less proportion of them ought to be lent than of ordinary deposits.