Its course would be very simple, and be analogous to that of other public bodies in the country.  The Metropolitan Board of Works, which collects a great revenue in London, has an account at the London and Westminster Bank, for which that bank makes a deposit of Consols as a security.  The Chancellor of the Exchequer would have no difficulty in getting such security either.  If, as is likely, his account would be thought to be larger than any single bank ought to be entrusted with, the public deposits might be divided between several.  Each would give security, and the whole public money would be safe.  If at any time the floating money in the hands of Government were exceptionally large, he might require augmented security to be lodged, and he might obtain an interest.  He would be a lender of such magnitude and so much influence, that he might command his own terms.  He might get his account kept safe if anyone could.

If, on the other hand, the Chancellor of the Exchequer were a borrower, as at times he is, he would have every facility in obtaining what he wanted.  The credit of the English Government is so good that he could borrow better than anyone else in the world.  He would have greater facility, indeed, than now, for, except with the leave of Parliament, the Chancellor of the Exchequer cannot borrow by our present laws in the open market.  He can only borrow from the Bank of England on what are called ‘deficiency bills.’  In a natural system, he would borrow of any one out of many competing banks, selecting the one that would lend cheapest; but under our present artificial system, he is confined to a single bank, which can fix its own charge.

If contrary to expectation a collapse occurred, the Government might withdraw, as the American Government actually has withdrawn, its balance from the bankers.  It might give its aid, lend Exchequer bills, or otherwise pledge its credit for the moment, but when the exigency was passed it might let the offending banks suffer.  There would be a penalty for their misconduct.  New and better banks, who might take warning from that misconduct, would arise.  As in all natural trades, what is old and, rotten would perish, what is new and good would replace it.  And till the new banks had proved, by good conduct, their fitness for State confidence, the State need not give it.  The Government could use its favour as a bounty on pmdence, and the withdrawal of that favour as a punishment for culpable folly.

Under a good system of banking, a great collapse, except from rebellion or invasion, would probably not happen.  A large number of banks, each feeling that their credit was at stake in keeping a good reserve, probably would keep one; if any one did not, it would be criticised constantly, and would soon lose its standing, and in the end disappear.  And such banks would meet an incipient panic freely, and generously; they would advance out of their reserve boldly and largely, for each individual bank would fear suspicion, and know that at such periods it must ‘show strength,’ if at such times it wishes to be thought to have strength.  Such a system reduces to a minimum the risk that is caused by the deposit.  If the national money can safely be deposited in banks in any way, this is the way to make it safe.