the bill-broker cannot afford to keep much money unemployed.  He has become a banker owing large sums which he may be called on to repay, but he cannot hold as much as an ordinary banker, or nearly as much, of such sums in cash, because the loss of interest would ruin him.  Competition reduces the rate which the bill-broker can charge, and raises the rate which the bill-broker must give, so that he has to live on a difference exceedingly narrow.  And if he constantly kept a large hoard of barren money he would soon be found in the ‘Gazette.’

The difficulty is aggravated by the terms upon which a great part of the money at the bill-brokers is deposited with them.  Very much of it is repayable at demand, or at very short notice.  The demands on a broker in periods of alarm may consequently be very great, and in practice they often, are so.  In times of panic there is always a very heavy call, if not a run upon them; and in consequence of the essential nature of their business, they cannot constantly keep a large unemployed reserve of their own in actual cash, they are obliged to ask help of some one who possesses that cash.  By the conditions of his trade, the bill-broker is forced to belong to a class of ‘dependent money-dealers,’ as we may term them, that is, of dealers who do not keep their own reserve, and must, therefore, at every crisis of great difficulty revert to others.

In a natural state of banking, that in which all the principal banks kept their own reserve, this demand of the bill-brokers and other dependent dealers would be one of the principal calls on that reserve.  At every period of incipient panic the holders of it would perceive that it was of great importance to themselves to support these dependent dealers.  If the panic destroyed those dealers it would grow by what it fed upon (as is its nature), and might probably destroy also the bankers, the holders of the reserve.  The public terror at such times is indiscriminate.  When one house of good credit has perished, other houses of equal credit though of different nature are m danger of perishing.  The many holders of the banking reserve would under the natural system of banking be obliged to advance out of that reserve to uphold bill-brokers and similar dealers.  It would be essential to their own preservation not to let such dealers fail, and the protection of such dealers would therefore be reckoned among the necessary purposes for which they retained that reserve.

Nor probably would the demands on the bill-brokers in such a system of banking be exceedingly formidable.  Considerable sums would no doubt be drawn from them, but there would be no special reason why money should be demanded from them more than from any other money dealers.  They would share the panic with the bankers who kept the reserve, but they would not feel it more than the bankers.  In each crisis the set of the storm would be determined by the cause which had excited it, but there would not be anything in the nature of bill-broking to attract the advance of the alarm peculiarly to them.  They would not be more likely to suffer than other persons; the only difference would be that when they did suffer, having no adequate reserve of their own, they would be obliged to ask the aid of others.