often due to a want of decision and firmness on the part of the banker. The latter is perhaps assailed by an influential customer, who so presses his proposal for such a loan upon him, that, being unable to answer with an emphatic "No" when necessary, he allows himself, in a moment of weakness, to be persuaded to agree, and the mischief is then, in the majority of cases, done. For it is easier to get into a large loan than it is to get out of it, and when a loss is once made it requires a great amount of strength of mind to look it in the face and submit to it. The temptation is to throw good money after bad on that things will all come right some day. this, of course we do not mean to imply that in every case it is inexpedient to "nurse an account." This is frequently done with the best results; but the determination to attempt it must be governed by circumstances, and in view of the fact, as experience has proved, that it is always a dangerous movement, and that the chances are always . very much against the success of the result.

the off-chance When we say

To locks-up of the kind above alluded to, the failure of the City of Glasgow Bank was largely due. We have seen who were its principal debtors, and it only remains to say that these gigantic totals were built up by degrees, and in the hope that the additional supplies would enable the debtors to ultimately wipe off the whole. As an example let us take Smith, Fleming, and Co.'s account. It transpired at the trial that that firm were indebted to the bank in 1870 to the extent of £150,000 only, which sum was entirely covered by securities. But in consequence of a serious loss by their Liverpool correspondents, Nicol, Duckworth, and Co., about that time, they determined to stop payment. In an evil hour, however, both for themselves and the bank, they communicated their intention to the latter, who, not liking the prospect of a possible loss,

pressed them to go on, and offered them further help. This is an instance-not, perhaps, of the principle of nursing an account, but of the foolishness of nursing such an account in the way they did. Granting the propriety at this stage of carrying them on in the hope of setting them on their feet again (for it must be remembered that Smith, Fleming, and Co. had an enormous commission business which brought them in nearly £100,000 per annum), it altered the matter altogether when this could only be done at the cost of advancing them other £500,000. Unfortunately the bank did this, and thereafter they were compelled from time to time for years to add to their advances, until at the date of the stoppage they amounted to nearly two millions. The securities the bank took against this debt were of the most heterogeneous description, and embraced tea-garden property, and shares in steam, telegraph, oil, cotton, and tool-factory companies, besides debts of several failed firms. It is obvious how unsaleable many of these securities were, and consequently how exceedingly dangerous it must have been to have advanced against them.

in

The debts of the other large debtors were built up much the same way, except that in their cases the debts were already in 1870 immeasurably beyond their legitimate requirements; showing that the business of the bank was utterly rotten many years before it was ever suspected. The securities taken for these debts were even less of a proper banking description than those taken from Smith, Fleming, and Co., and consisted chiefly of property in New Zealand and Australia, shares in the New Zealand and Australian Land Company, liens upon wool, &c., all thoroughly unmarketable.

In addition to holding these securities for money advanced, it will be scarcely credible that the bank also

actually purchased land in New South Wales, Queensland, and New Zealand, as investments. They deliberately minuted resolutions in 1876 and 1877, authorizing a sum of half a million to be spent in this way. This they did in the expectation that they would thus recoup themselves the large loss which had already accrued on J. Nicol Fleming's debt, and they based their expectation on the calculation that they could finance the purchases at a cost of 6 per cent., and that the investment would bring them in 16 per cent.

In this way, in addition to their own absolute holding of land, the bank were interested, directly and indirectly, in the New Zealand and Australian Land Company, to the extent of nearly a million and a half, out of a total capital of two and a half millions.

But to go back to the events which took place immediately after the stoppage of the bank on the 2nd of October. We have shown the effects that followed the event in Scotland. In London, the centre of the monetary world, and in the country generally, the effects were farreaching and serious, although not generally disastrous.

One of the first effects of the shock to credit was seen in the eagerness with which all the banks in London and the provinces, and in Scotland, strengthened their hands in case of emergency. During the first three weeks of October the "other deposits" (those of the banks and the general public) of the Bank of England increased over seven millions-thus showing the determination of the banks to keep themselves strong. During the same period also the reserve decreased nearly four millions, thus showing the extent of the preparations of the banks to meet with notes and hard cash any immediate demands upon them. It thus appears that the banks throughout the country strengthened their hands by eleven millions of

pounds, and as this sum must have been provided chiefly by calling up loans, and by declining fresh loans and discounts, it measures to a certain extent the inconvenience imposed upon the general public by the deprivation of their wonted accommodation.

This sum of eleven millions, although large, is by no means so large as might have been expected considering the gravity of the position. The crisis was simply a banking one, brought about by a specific cause, but it was not aggravated by any widespread commercial distrust, or any scarcity of money.

When money was scarce at the end of 1873, when no panic prevailed, we have seen that the bank was charging 9 per cent. for discounts and 12 per cent. for advances; while at the period we are now speaking of, when money was plentiful, the bank was only charging 6 per cent. for discounts and that only for a few weeks-notwithstanding the existence of a serious crisis which for a time daily threatened to become more serious.

It will easily be understood that one of the first effects of the bank failure, and the consequent contraction of accommodation, would be seen, as was the case, in numerous failures all over the country. It is, however, only right to say that in crises of this kind, well-conducted and sound firms rarely suffer very materially by restriction of accommodation. It is only firms whose credit is of an inferior description, and whose conduct is not all that could be desired, who first feel the effects of periods of discredit. Bankers never refuse legitimate accommodation to the customers in whom they have faith, even in the tightest of times. This accommodation, however, must necessarily be governed by the banker's means, and it happens-and this is one of the many drawbacks of a banking crisisthat the soundest firms are often put to serious incon

venience from the restrictions which their bankers in selfdefence find it necessary to impose. On the other hand, however, a crisis always presents this advantage-and it is, perhaps, the only advantage that it does present-it most certainly searches out the weak and ill-conducted and speculative firms, and roots them out of the field as so many tares, and leaves the ground free for the proper development of healthy concerns which previously had been handicapped by the competition of speculative enterprises, the persons interested in which had everything to gain and nothing to lose.

As a direct consequence of this period of suspicion and restricted accommodation many such firms did fail. On the 11th also, the firm of Heugh, Balfour, and Co., warehousemen, of London and Manchester, in the East India trade, failed, with liabilities of about a million. This firm at one time was of the highest respectability, and in the best of credit, and possessed of large means; but of late years, in consequence of paying out partners, and endeavouring to do the same large business with a diminished capital, it became little more than a mere rotten nut, and had to succumb to the inexorable law which in seasons of pressure stamps out all such invertebrate concerns.

Although the acute stage of the crisis may be said to have terminated by about the end of October, there were too many disquieting rumours afloat after that period to allow it to pass away completely. No sooner did things appear as if they were about to settle down again, than fresh anxiety was raised by adverse reports as to the stability of the West of England Bank in Bristol. These reports were circulated with more or less persistence all through November, and they were accompanied by rumours affecting the position of several other banks, chiefly in the coal and iron districts. Fortunately the worst fears were