SECTION III. JOINT-STOCK AND BANKING COMPANIES. The London and Westminster Bank, the London Joint-Stock Bank, and the Union Bank, being the three oldest of the jointstock banks established in London, we may briefly revert to their formation. I.-The London and Westminster Bank. In the Act for renewing the Bank of England Charter, passed in 1833, it was declared to be the law that companies or partnerships consisting of more than six persons might carry on the business of banking in London. Immediately after the passing of this Act, a prospectus was issued, proposing to form the London and Westminster Bank. The shares, however, were taken up but tardily, and the bank did not commence business until March 10th, 1834, and then only with a paid-up capital of 50,0007., and of this capital a large portion is said to have been subscribed by shareholders who resided in the country. As the Bank Charter Act did not prescribe the way in which companies of more than six persons were to sue or be sued, the directors of the London and Westminster Bank brought a bill into Parliament, in the session of 1834, to authorise them to sue and be sued in the names of their public officers, in the same manner as those banking companies that were located beyond sixty-five miles from London. This bill was carried by large majorities through the house of Commons, although opposed by the influence of the Bank of England and by Lord Althorp, then Chancellor of the Exchequer. The bill, however, was lost in the Lords. In consequence of this failure, the bank followed the plan of suing and being sued through the medium of trustees. Previous to the commencement of business, the directors applied to the Committee of Private Bankers for admission to the Clearing House. This was refused. The directors also applied for permission to have a drawing account at the Bank of England. This, too, was refused. At the commencement of the year 1835, the Bank of England instituted legal proceedings to prevent the London and Westminster Bank accepting bills drawn at less than six months after date. Supported, however, by the legal opinions of Sir John Campbell, Sir William Follett, and Mr. Pemberton, the trustees continued to accept such bills, and resisted the proceedings of the Bank of England. In the beginning of the year 1837, the suit brought by the Bank of England was terminated, by the Master of the Rolls granting an injunction to restrain the London and Westminster Bank from accepting bills at less than six months after date. The country joint-stock banks then adopted the practice of drawing upon the London and Westminster Bank" without acceptance," in the same way as the Bank of Ireland draws upon the Bank of England. No practical difficulty was experienced, and the London and Westminster Bank lost none of its connexions in consequence of this adverse decision. At the end of the year the directors declared the usual dividend of 5 per cent. In the year 1841, Mr. Gilbart, the general manager, was examined for four days before a Select Committee of the House of Commons, at the request of a meeting of deputies from the joint-stock banks. In the report of March, 1844, we read— "As the speech from the throne has called the attention of Parliament to the state of the law with regard to the privileges of the Bank of England and to other banking establishments, the directors have co-operated with the representatives of other joint-stock banks in bringing under the consideration of the Government the defects of the laws relating to banking companies, which they feel confident the Legislature will not refuse to remedy." In this year the bank obtained the power to draw, accept, or endorse any bills of exchange not payable to bearer on demand, and immediately commenced accepting the bills drawn by its country connexions, and issuing circular letters of credit for the use of travellers and residents on the Continent. In the same year the bank obtained the power of suing and being sued in the names of its public officers, and accordingly registered the names of its trustees for that purpose. II.-The London Joint-Stock Bank. The Joint-Stock Bank was formed in the year 1836. That year was one of great excitement in favour of the principle of joint-stock banking both in London and in the country. The shares of the new bank were readily taken by a very respectable proprietary, most of whom were resident in London. The bank had also from its commencement the advantage of an influential commercial directory. A new feature in London banking was announced. The bank agreed to allow interest at 2 per cent. on the minimum balance of a current account, and at the end of each month interest was allowed on the lowest balance that had appeared to the party's credit at the close of any day during the month. The capital of the bank was fixed at 3,000,000l., divided into 60,000 shares of 50%. each. III.-The Union Bank of London. The Union Bank of London was formed in 1839, chiefly by gentlemen who were, by birth or otherwise, connected with Scotland. The capital was fixed at 3,000,0007., in 60,000 shares of 501. each. The bank adopted the principle of allowing 2 per cent. interest on the minimum balance of a current account:-" Parties keeping current or drawing accounts will be credited on the first day of every month, on the smallest balance at the credit of their account at the close of business on any day during the past month, provided that such balance shall not be less than 1007. The total amount of interest will be passed to account every six months." [We gladly borrow from Mr. Macleod's elaborate and learned work, the following sketch of the history of Joint-Stock banking, and, with the greater satisfaction, on account of the testimony it bears, by implication, to the merits of the late Mr. Gilbart, and the 66 enormous difficulties" talent and energy such as his alone could have surmounted : An attempt in 1823 to gain the consent of the Bank of England to give up the privileges of their Charter, so far as to permit joint-stock banks to be formed in the country, having failed, even though a bribe was offered, nothing further took place till 1826, when the disasters of the preceding year being very generally attributed to the improper management of the country banks, the Ministry were powerful enough to compel the Bank to give up its unjustifiable monopoly, and at length agreed to permit joint-stock banks to be formed beyond sixty-five miles from the metropolis. The Statute 1826, c. 46, was passed for this purpose. This Act made no provisions regarding the constitution or capital of these companies. Each one was allowed to devise a constitution for itself, to name its own capital, and to make any public announcement regarding it that it pleased. The formation of joint-stock banks under this Act pro ceeded very slowly at first, not more than four or five being formed in as many years. In fact, such banks could only be successfully formed by influential persons, and, of course, each of these had already his own bank, which he would naturally be unwilling to injure by the formation of so powerful a rival. The first joint-stock bank was formed at Lancaster, the next at Bradford, and another at Norwich, before any one was formed at one of the great manufacturing towns. It was not till the prosperous years of 1833-34-35-36, that any very remarkable increase took place in their numbers. In these years, however, they multiplied rapidly, more especially in 1836, when upwards of forty were established in the spring. On the renewal of the Bank Charter in 1833, it was determined to take off the vexatious restriction of preventing banking companies making their bills and notes for less than 507., payable on demand by their agents in London. And they were required to keep weekly accounts, to be verified on oath, of the amount of their notes in circulation, and make a return to the Commissioners of Stamps of the average amount in circulation every quarter. It was at this time that the discovery made in 1822 by Mr. Joplin, that the Bank Charter did not prohibit joint-stock banks being formed in London, and carrying on their business on the method then adopted by the London Bankers, attracted attention, and, on the case being submitted to the law officers of the Crown, they confirmed this view. The flank of the monopoly of the Bank of England, as we may say, being turned in this extraordinary and unexpected manner, excited much consternation and alarm in that body, and they requested to have this omission rectified, but Lord Althorp decidedly refused anything of the sort, and told them that the bargain was that their privileges should remain as they were, and he would not consent to any extension of them. To remove all possible doubts on the subject, a declaratory clause was inserted in the Bank Charter Act, expressly permitting joint-stock banks to be formed, provided they did not borrow, or take up in England, any sum or sums of money, on their bills or notes payable on demand, or at any less time than six months from the borrowing thereof. This declaratory clause was not long in being acted upon; and soon after the Act was passed, measures were taken to constitute a joint-stock bank in London. This was the London and Westminster Bank, which has since been managed with such distinguished success. The enormous difficulties which must have attended the successful organisation of this great establishment may be conceived when we remember that it was not formed under the Joint-Stock Banking Act at all, which had no force within sixty-five miles of London, but that it was nothing but an ordinary partnership at common law. One of the least of the inconveniences of this was that it could not maintain an action at law for the most trivial debt, without enumerating all and each of the partners, and the slightest mistake in the spelling of a single name would at that time have vitiated any proceeding. This bank was the largest common law partnership which has existed in England; and all the London jointstock banks which were formed before the Act, Statute 1844, c. 113, are nothing but common law partnerships. The excessive inconvenience attending this state of things led to a bill being brought into Parliament to enable the London and Westminster Bank to sue and be sued in the name of its chairman. This was warmly opposed by the Bank of England, and by Lord Althorp. Nothing could be more paltry than the reasons alleged by him in opposition to it, but he was beaten by a majority of 141 to 35. The Government, however, had influence enough to have the bill thrown out in the Lords. The Bank being thus defeated, adopted the plan of making all contracts through the medium of trustees, and all the London joint-stock banks had to adopt this plan, till the Joint-Stock Banking Act of 1844. The other banks formed on a similar plan to the London and Westminster, are, the London Joint-Stock Bank, founded in 1836; the Union Bank, in 1839; the London and County Bank, in 1839; and the Commercial Bank, in 1840, which afterwards wound up its business. A question, however, of very great importance soon arose. It was a settled question that no partnership or corporation consisting of more than six persons could accept bills, at any less date than six months, no matter whether they were a banking partnership or any other. It was clear, therefore, that the bank could not itself directly accept bills. But it did not appear that the words of the Act prohibited trustees accepting bills for a less date, on behalf of the company. Nor, if trustees could accept, was there anything to prevent them accepting by procuration. Consequently, there appeared to be this method open, of circumventing the monopoly of the Bank of England. On the 21st of February, 1835, the Bank of St. Albans drew a bill for 251. upon the London and Westminster Bank, payable 21 days after date; which, on the 23rd, was presented for acceptance at the London and Westminster Rank, and was accepted in the following form: Accepted, At 36, Throgmorton-st., per procuration of the trustees of the London and Westminster Bank, The Bank of England moved for an injunction to restrain the bank from accepting bills in this form, and the case having been argued, the Court of Common Pleas held that it was an infraction of the Bank Charter Act of 1833, and the other Acts then in force respecting the Bank of England. Accordingly, the Master of the Rolls granted an injunction, restraining them from accepting bills at less than six months' date. The only result was, that the bank paid the bills drawn upon it without acceptance. The London and Westminster Bank being defeated in this manner, the London Joint-Stock entered the lists against the Bank of England in another form. It agreed with a bank in Canada, that the latter might draw upon Mr. George Pollard, who might accept in his own name, and the London Bank agreed to find the funds to meet Mr. Pollard's acceptances, and such transactions were to be matters of account between the two banks. Mr. Pollard was not a shareholder in the London Bank; but he was their manager, and the transaction was substantially an acceptance by the bank. The House of Lords, however, declared this ingenious device to be illegal, as it was merely doing |