of deposits, and against this they hold in the funds, securities of the best kind. But they hold no cash whatever. They have, of course, the petty cash about the various branches necessary for daily work. But of cash in ultimate reserve -cash in reserve against a panic-the Savings Banks have not a sixpence. These banks depend on being able in a panic to realise their securities. But it has been shown over and over again, that in a panic such securities can only be realised by the help of the Bank of England—that it is only the Bank with the ultimate cash reserve which has at such moments any new money, or any power to lend and act. If in a general panic there were a run on the Savings Banks, those banks could not sell £100,000 of Consols without the help of the Bank of England; not holding themselves a cash reserve for times of panic, they are entirely dependent on the one Bank which does hold that reserve."

This argument is of a purely theoretical character. It is all very well for Sir John Lubbock to say "they were dealing with what might happen in extraordinary circumstances." But facts are against him. Under no extraordinary circumstances which have ever arisen has there been a run upon

the Post Office Savings Banks. But this cannot be said of the other banks. The proposal to establish a second reserve is not made with a view to emergencies which have never occurred, but to provide against evils which have been experienced in the past, and which in all probability will recur in the future. The Savings Banks do not trade as the other banks do; they are banks of investment; and they have been in no way associated with the difficulties of the past, either as causing them, or adding to them when they have occurred. They have never required a reserve of cash to fall back upon in time of panic, nor to realise their securities, because of any extra demands made upon them; and there is no reason to apprehend that they ever will. There is an essential distinction between the business of the Savings' Banks, and of the other banks, which the public have always appreciated.

Moreover, the deposits of the banks and the deposits of the Savings Banks are not on all-fours. The liability is of an essentially different character. In a time of panic there could not be a run on the Savings Bank in the same way as has happened in the case of the other banks. Under the Act 24 Vic. cap. 14, sec. 3, it is sufficient if

the demand for repayment is complied with within a period of ten days from the day on which it is made. In the case of the other banks most of their liabilities are payable on demand. Cash reserves are required to meet sudden and unexpected demands payable at once, not to meet demands payable in the future. And the per cent. of cash reserve held by the Savings Banks against deposits not repayable until after the expiration of ten days' notice, is a more potent reserve than the 13 per cent. of the London and Westminster Bank against liabilities of which the repayment of a large portion can be required at a moment's notice.

For these reasons it would not be fair to expect the Savings Banks to contribute to the proposed banking reserve.

Sir John Lubbock also said, "It must also be remembered that, besides the English joint-stock and private banks, there were the large and numerous foreign and colonial banks which were established here. They also held very large deposits, and it might be said that it would be unfair to touch one set of banks and not another set." If these banks accept the responsibility of deposits repayable in London on demand, they

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should certainly be called upon to contribute to the central reserve proportionately. But these would not be large figures.

Without taking the deposits of the Savings Banks, or the deposits payable on demand in London of the foreign and colonial banks, into account, the total liabilities of the Bank of England and the other banks are estimated at £650,000,000. Of this amount there are no means of forming a reliable estimate of the proportion which the deposits payable on demand bear to those payable after notice. If those figures were forthcoming it would be better for the purpose of creating a central reserve, to base the calculation of the amount to be reserved upon the amount of the liabilities payable on demand, rather than the total amount of the liabilities. These particulars could be required. In the absence of those figures, it will be observed that a percentage of 2 per cent. of the total liabilities of £650,000,000 would produce a cash reserve of £16,250,000, which is substantially larger than the reserve of the Banking Department of the Bank of England. In this way a second reserve of £16,250,000 in cash would be created, and if safe notes were issued upon it (as Mr. Goschen suggests shall

be done with the second reserve he proposes to create by means of an issue of £1 notes) the total amount of available money would be largely increased. But the proposal to call into existence two classes of bank notes-one issued upon the cash reserve in the Issue Department, and the other upon the second reserve-is open to serious objection. And as a second reserve of £16,250,000 would, probably, be ample it is not worth while to discuss any currency schemes by which it could be increased.

The custodians of this banking reserve could be the Bank of England. The Bank now acts

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as managers on behalf of the public of the circulation of the country,"* upon lines laid down by the Bank Charter Act 1844, and the Bank in a similar way could be appointed the managers on behalf of the public of the banking reserve of the country.

The first condition to be imposed would be that the banking reserve should be kept wholly apart from the ordinary business of the Bank of England. It would frustrate the object of the creation of the second reserve if it was employed,

* See the letter of the Chancellor of the Exchequer of the 26th April, 1844, quoted on p. 44.