’But in this very respect, joint stock banks have probably improved the business of banking.  The old private banks in former times used to lend much to private individuals; the banker, as Lord Overstone on another occasion explained, could have no security, but he formed his judgment of the discretion, the sense, and the solvency of those to whom he lent.  And when London was by comparison a small city, and when by comparison everyone stuck to his proper business, this practice might have been safe.  But now that London is enormous and that no one can watch anyone, such a trade would be disastrous; at present, it would hardly be safe in a country town.  The joint stock banks were quite unfit for the business Lord Overstone meant, but then that business is quite unfit for the present time.

This success of Joint Stock Banking is very contrary to the general expectation at its origin.  Not only private bankers, such as Lord Overstone then was, but a great number of thinking persons feared that the joint stock banks would fast ruin themselves, and then cause a collapse and panic in the country.  The whole of English commercial literature between 1830 and 1840 is filled with that idea.  Nor did it cease in 1840.  So late as 1845, Sir R. Peel thought the foundation of joint stock banks so dangerous that he subjected it to grave and exceptional difficulty.  Under the Act of 1845, which he proposed, no such companies could be founded except with shares of 100 L. with 50 L.; paid up on each; which effectually checked the progress of such banks, for few new ones were established for many years, or till that act had been repealed.  But in this, as in many other cases, perhaps Sir R. Peel will be found to have been clear-sighted rather than far-sighted.  He was afraid of certain joint stock banks which he saw rising around him; but the effect of his legislation was to give to these very banks, if not a monopoly, at any rate an exemption from new rivals.  No one now founds or can found a new private bank, and Sir R. Peel by law prevented new joint stock banks from being established.  Though he was exceedingly distrustful of the joint stock banks founded between 1826 and 1845, yet in fact he was their especial patron, and he more than any other man encouraged and protected them.

But in this wonderful success there are two dubious points, two considerations of different kinds, which forbid us to say that in other countries, even in countries with the capacity of co-operation, joint stock banks would succeed as well as we have seen that they succeed in England. 1st.  These great Banks have not had to keep so large a reserve against their liabilities as it was natural that they should, being of first-rate magnitude, keep.  They were at first, of course, very small in comparison with what they are now.  They found a number of private bankers grouped round the Bank of England, and they added themselves to the group.  Not only did they keep their reserve from the beginning at the Bank of