matters very little to the Bank what claims are made upon it. The Chancellor of the Exchequer is, Lowever, in a very different position. He finds that the onus of the insufficiency of the cash reserves of the banks devolves upon him, and in an extremity he is called upon to authorise a violation of the law. His opinion of the present system, therefore, materially differs from that of the Governor of the Bank. He expresses himself as follows:-"I say it is a false system and a dangerous system to rely simply upon the aid the Bank of England can give in a crisis, and to take no thought whatever to meet the difficulties which might arise, except by such action as the Bank of England may possibly take as they think, with the Government behind the Bank of England."

For this reason it devolves upon the Government to find means by which they will protect themselves as far as possible from being "squeezed," as a last resource, in the future. Mr. Goschen referred to the position of the Government in the matter as follows:-" In the most friendly spirit I would indicate to the banks of this country that the public have an enormous interest in the proportion of the reserve which they hold to deposits. They all hold together; and you have this re

markable fact, that the soundest and strongest banks may be making the smallest dividends, whilst the more imprudent banks, who invest the depositors' money, leaving a small reserve, are able to show much larger dividends to their shareholders. Why are the latter able to take this course? Because they have the conviction that the failure of any one of these big banks would be such a disaster to the whole community that the other banks would be compelled to come to their assistance, and to rescue the offending bank from the consequence of its offences by themselves undertaking a part of their liabilities. The more imprudent banks will say, 'There is no imprudence. We shall never be allowed to fail; our fellow bankers must come to our assistance, and, if not our fellow bankers, then the Bank of England; and if not the Bank of England, then the Government.' I say that gives us a locus standi, and in the same way as the Government has had a locus standi with regard to shipping, and has said that excessive cargoes shall not be carried because they are dangerous to the safety of the public, the question may arise whether the public might have the right to say that no excessive cargo shall be carried by banks receiving public

money that business shall be conducted in a manner which shall be considered safe by the community at large."

In this chapter we have presented the difficulties of the problem; in the next we shall see what use Mr. Goschen proposes to make of his locus standi in the matter.

CHAPTER V.

THE PUBLICATION OF ACCOUNTS.

IN the course of Mr. Goschen's speech he suggested four methods of dealing with the deficiency of the banks' reserves, and in the following order. In the first place he referred to America, where the State compels the banks to retain 25 per cent. in reserve against their deposits, and declared that he would "never propose to impose such an iron system upon the great banking institutions of this country." In the second place he said there were suggestions that "if there was an excess of deposits and liabilities, up beyond a certain line, then that should be done which is done in some foreign lands, they should have to pay a certain tax upon the excess of their deposits"; and with regard to this he said, "I will not say what view I hold upon such a suggestion." Thirdly, he said "there is one measure which I think may fairly be taken, and which the public would have a right to demand, and that is, the more frequent publication of accounts." And fourthly, he said if there was an effort made

in the direction of co-operation as to the publication of accounts, he could see that "measures might be taken to establish what I have indicated as a second reserve for the country at large,' realised by the issue of £1 notes.

The two suggestions which are within measurable distance of being acted upon are the two last. The first of these, the one proposing a more frequent publication of the accounts of the jointstock banks, has already been taken into consideration by the London joint-stock banks, and they have decided to publish monthly accounts. The result which is anticipated by Mr. Goschen is thus explained:-"The public have the advantage of the publication of the Banks' return. It is a barometer-an important barometer to all you men of business. But a barometer is fallacious. At the same time, you are able to check and control the results which you will draw from those barometrical readings, by your studying the position of these great institutions, as mighty in their way as the Bank of England, holding great deposits, the condition of which is of such vast importance to every trader, to every manufacturer, to every commercial centre in this country."

The Governor of the Bank of England, at