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JOINT-STOCK BANKS . —INTEREST ON DEPOSITS . It is of * great importance to avoid mistak , es _ as to the source of the success of the 'London jointr stock banks * and therefore we inust endeavour to show the incorrectness of a statement made last week by Our respected contemporary , the Economist . " The great feature , " it said , " which distinguished the business of these banks froni the priTate banks and the Bank of England was the practice which they introduced for the first time the
into London of allowing interest on deposits , and at the same time without ( as is the case with country banks generally , which allow interest ) charging a . commission for business done . They , however ,, made a distinction between the balance of accounts currently operated upon from day to day , and deposits placed with them for specified periods of time . That these banks , in thus modelling their business , supplied a great want in the business of London is best shown by the wonderful success which , has attended their operations . "
Now , in opposition to one part of the statement , we must mention that as early as 1645 " the goldsmiths or bankers of London began to receive the rents ' of gentlemen ' s estates , and . to allow them , and others , who put money into their hands , some interest for it it it reniained ! but a single month in their hands , or even a lesser ; time . This was a great allurement for people to put money intotheir ftands , which would bear interest till the day they wanted & . "^( 'L Annals of Commerce , " 1645 . ) "In 1665 , the money , " it is recorded , " came so fast into the hands of bankers- in London from people to whom they paid a moderate interest : for the same , that all the public demands fell short of employing their whole cash ; This made them run into the
business of lending money on private pawns , ' &c . — ( Ibid . y So in 1670 , " we read of men , as soon as they can make up 50 L or 100 / ., sending it to the goldsmith ' or banker , ' allowed interest for a time to people who brought their money to them . ' —( Ibid . ) The Bank of England adopted the same practice ; and in 1698 , soon after it was established , it was recommended that the Bank should be restrained by law from allowing interest on running cash , for the case of having 3 or 4 per cent . " was supposed to be a continual bar to industry . Again , in 1703 , " the Bank borrowed a laree sum , beaririff interest , in order to keep up
its credit , "—( Ibid ) Although the Bank of England—af ter all other companies composed of more than sis ; persons were prohibited from borrowing money on interest for less than bLx months-r-ceased to pay interest on deposits , no person can suppose that this practice ceased altogether amongst private banks in London . In fact , from that period till our own time , bankers in London have taken in money on sale , and have used it to discount bills ; so that the practice , described by our contemporary as " in ? trpduced into the metropolis for the first time " by the jbint-stock banks , has existed more or less for upwards of two centuries . Never since that time has it ceased to be avowed by the Scotch banks
and the provincial banks of . England , and neveV has it ceased to bo the practice of discounting bankers and others in London . What the jointstock banks really did in this respect was to avow their intention to allow interest on deposits and to allow it on small sums , such as . the private banker would not think of receiving on such a condition . That the practice till they were established was only carriou on almost secretly , and on a smftll scale , was one of the most injurious consequences of the Bank monopoly ; and the great success of the joint-stock banks was undoubtedly partly duo to the rivalry they introduced of that enormous establishment .
At the same time that the joint-stock banks allowed intercut on small sums deposited with them , they also announced the intention of allowing interest on current accounts , and of transacting banking business on commission for thoso persons who might desire to have the advantage of banking without always possessing a suflioieut sum on hand to make keeping their- accounts x'tanunorating to a banker . By theso moans—allowing deposits on small
sums , allowing interest on running accounts when the deposits were large , and transacting banking busi ness for a regular charge—they extended , in a manner totally unprecedented for its rapidity , the business of banking . Not hundreds , but thousands of people in the metropolis have since then been induced to keep a banking account who never before thought of it . The partial freedom , of which theur establishment was the consequence— -for our bankino- business is yet but partially free—called into life an immense mass of new transactions . They took nothing from private banks , but probably increased their business . Then" competition
certainly made the private banker more cautious ; and , with the exception of the dishonest proceedings of Sir J , D . Paul and Co ., since they were established , there have been no failures amongst the London banks like those of the Rowland Stephensons and Poles of former periods . Banking accommodation was urgently wanted in the metropolis , where it was far less than in Scotland . They supplied the want , but not by first introducing the practice of allowing interest on deposits , though they continued and extended this old practice ; and the small extension of freedom by which they were allowed to exist has . been as advantageous to the public as to the banks
themselves . . :, ,: ; . ; . Differing from our contemporary on the . historical point mentioned , we must express our cordial acquiescence in his opinion that the practice Of allowing interest on deposits has not fostered tinwise speculation . The joint-stock banks are under no obligation to take money which they do not want , or to allow interest on money when they cannot use it . The managers of them are-persons intimately acquainted with all the means of employing capital to advantage , and they can , as we have already stated , procure a considerable profit on an aggregate of small sums , which the individual owners could not possibly get . By at all times affording a ready means of obtaining interest for money , though occasionally the rate be
low , individuals are prevented from engaging in unwise speculations , or investing then- spare cash in bubble companies . The success of these banks —continued now for several years , and to the latest period , through some times of severe trial , like those of 1847 and 1857—is as complete a proof as can be required , that they have conducted their own business ably , and have not lent themselves to encourage unwise speculations . The bank which did that to the greatest extent was the Western Bank of Glasgow , which had a large paid-up capital , a great multitude of rich proprietors to fall back on , and consequently had reckless managers . Between it and the London joint-stock banks the . chief difference is found in the managefnaent . All equally allowed interest on deposits , but the latter Ixtul only a small capital paid up , and relied for success exclusively on their integrity and careful conduct .
This brief history supplies another ^ illustration which has hitherto escaped notice , and wliioh , in fact , is only brought clearly to light by the success of the joint-stock banks , of the vast injury which the legislature unthinkingly inflicted on the nation by the monopol y it gave to the Bank of England . When the Bank was thoroughly assured against competition by the law , ononoy naturally became redundant in its coffers , and being , as its whole history shows , as greedy of gain as any trader , wlnlo it erroneously believed that it would inci * oaso its wealth by refusing its customers any share of its profits , it
refused to allow interest on deposits . It departed' — driven to this course by its monopoly—from the old and really natural and just practice of bankers . Wo now are thoroughl y convinced by the instructive example of tho joint-stock' banks , that its monopoly and its policy wore as injurious to its own interests" as to the interests of the nation . The growth of wealth was impeded ; and as on it depends the increase of population , the monopoly stifled to « some extent , the "continual growth of society . We now spe clearly , as minor conser quoncos , that tho monopoly impodod the stability
- » of trade , and fostered amongst traders excessiv e . greediness and impolicy , like those of the Bank .
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TRADE OF JANUARY . The trade of the first month of 1859 answers all expectations . The value of the exports exceeded those of 1858 by 2 , 371 , 823 / ., and those of 1857 by 535 , 318 / ., the increase being spread over the bulk of the articles exported , but especially great in the cotton and woollen manufactures . Most of the articles imported , too , have increased . But the only index we have to the total is the shipping entered with cargoes , which was 546 , 761 tons in January , 1859 , against 463 , 975 tons in January , 1838 ,
and 4 72 , 535 tons in January ^ 1857 . Our trade appears , accordingly , to have fully recovered from the late convulsion , and to promise a great extension in 1859 . Other countries must bu in a similar condition , and all , therefore , . may naturally be peculiarly sensitive to any political event which interrupts this pleasant prospect . Sovereigns and politicians of all kinds -should be careful what they do , for they cannot disturb the prosperity of society without endangering their own existence . ' ¦ ^
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At a meeting of the East Kent Railway Company on . Monday ,, a report was presented and carried , setting forth that the traffic receipts up to December , 185 S , were 9 , 320 / ., leaving , after deducting expenses , a balance of 1 , 458 ? . It was also suited that the entire line would be opened on the 1 st of ( Jcioijer , 18 G 0 , and it was proposed to alter the title of the line to the London , Chatham , and Dover Kail way . At the half-yearly meeting of the 51 id-lvent Itailway Company , a dividend of 2 s . Gd . per share for the . half-year was declared . . . The ordinary halfi-yearly meeting of the London , Tilbury , and Southend Extension , was held on Monday . The report was adopted , and after a short ; discussion , the resolution empowering the ilirociors
to raise the 10 , 000 * . upon debentures , improvements on the line , was carried without opposition . At the meeting of the Metropoljtun Wuilwuy Co ., Mr . Pearson entered into a long explanation of tiio great advantages which would accrue from the establishment of this line , not only to the general public ; Hut to those railway' companies who had expressed tliu-ir willingness to support the undertaking ' . The report was adopted , accompanied by a i'usoUuton to the effect that the directors be authorised to proceed with the bill for deviating tho line , or for t lie bill to abandon the undertaking , as they might " ' u < l it ( - ' " pedient after the 16 th March .
At the half-yearly meetings of the following companies , dividends were declared as under : — Ik ^ ton and Sleaford , 2 s . 6 d , ; North and South \\ csicm Junction , 3 s . 8 d . ; Hereford , Boss ,-and Ulbm . vHi . , 4 s . ; South Yorkshire and River JJun , _ 4 jut ivnt . upon guaranteed shares and 2 £ upon ordinary Htoclc ; Whitehaven and JTurness , 5 £ per cent , on tbc-inviuvenco shares , and 8 s . on the original h I wren ; >> | lll ° " haven Junction , 10 s . per share ; WjirriiiKttm nnu Stockport , 3 j per cent . ; Norfolk , 3 iis . ( id . jici-cvn . An extraordinary general meeting of tho Co } ion Railway Company is called for the 17 th insumi . ° give powers to the directors with reference tu ma receipt of money in anticipation of calls , cuM on other points .
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Pkojkoted RAiz . WAY .- —The prospectus of tho Tb 1 o of Wight Railway and TeloKrup li Company s issued . Thiarailway ia intended for tho luicommtjiiution of tho towns and villnges of RyJe , Jii-m . mK . Sundown , Shanklin , and Vontnor , on tho l i ; hU' " side of tho island . It will bo about \ o li ) Wli , ; length , and 5 s to be economically obnstmcHojJ , ^ ' » a single lino of rails . Tho capital is llxud at . >« ""' in shares of 10 / . oach , -with a deposit of l / ., ui wmi'i one moiety ia to bo returned in tbuevent ol imc -Vl-U not being obtained , ., iFuimoH Haimvays . —TIio workH Jui- "' J- ' ,. , "' strnetion of tho terminus of tho VIiu'uwk '* iiui" * have been commenced near the VUwu *»<• ' » U"H 1 ' . " Tho hbuaca at tho ontranco of tho Uuu do 'O 1 '"" 1 . ! , i boinff " takon doyvn to- make way for UiovoiiHinuii > of tho vhuluct for the Vinconuos llullwny . * rails have boon placed along tho on lire nn ; '" ' ., now railway in process of construction uawcwi
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3 *^ - •¦ ¦ - ¦ ¦ ¦¦ ¦ ¦ ^ -,. ' "¦¦ ' ¦ ¦¦ T . fejBI ^ ADER . [ Ko . 467 , March 5 , 1859
Commercial
;; COM M EEC I A lu .
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RAILWAY INTELLIGENCE
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Citation
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Leader (1850-1860), March 5, 1859, page 314, in the Nineteenth-Century Serials Edition (2008; 2018) ncse.ac.uk/periodicals/l/issues/vm2-ncseproduct2284/page/26/
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