manded in that shape at the option of the owner, will sometimes be pressed. In certain states of trade, or under certain contingent circumstances, the holders of cheques require gold, and bankers who have become accustomed to consider metallic reserves as almost superfluous, find themselves suddenly in a difficult position. Such, as we shall see in Chapter XXIV., is the real cause of the present instability of the English money market.

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CHAPTER XXII.

THE CHEQUE BANK.

THE Cheque and Clearing System, so far as we have hitherto considered it, is mainly restricted to the arrangement of considerable payments. No one can enjoy its advantages unless he keeps a banking account, and for this purpose he must be able to command a certain sum of money, and must have a sufficiently good position and credit to be entrusted by a banker with a cheque book. The result is that the larger part of the population is entirely outside the banking system, and must either use coin, postage stamps, or post-office orders in making payments.

A very ingenious attempt is now being made to extend the area of banking to the masses by the institution of the Cheque Bank. When preparing materials for this book, I was so much struck by the way in which this new bank seems to be adapted to complete the cheque and clearing system in a downward direction, that I applied to Mr. James Hertz, the able inventor of the scheme, for information upon the subject, and have been enabled to inquire minutely into it.

The weak point of the present ordinary cheque book is, that a person once getting a book full of blank cheques, can fill them up for any amounts, irrespective of the balance against which they are supposed to be drawn. Here is an opening for easy fraud, if cheques were generally received from strangers without inquiry. The Cheque Bank proceeds on the new principle of issuing cheques which can be filled up only to limited amounts, as shown by printed and indelible perforated notices upon the forms. These cheques, too, are only to be had in exchange for the utmost sum for which they can be drawn, which sum is retained as a deposit until each corresponding cheque has been presented. It follows that each cheque, when duly filled up and signed by the owner, is as good as a bank-note issued against a documentary reserve. It is true that cheque books or forms may be lost or purloined, and then fraudulently signed and issued; but, being drawn to order and crossed, these documents are very dangerous to meddle with in a criminal manner, and, in the only instance in which fraud has yet been attempted, swift punishment followed.

Relation of the Cheque Bank to other Banks.

We have seen how much has been accomplished by establishing relations between banks, as branches, agents, or correspondents of each other. The Cheque Bank carries out a similar system to the utmost extent by establishing relations with almost all the banks of

the United Kingdom, as well as with most foreign banks of importance. Already 984 English, Irish, or Scotch banks, have entered into relations with the Cheque Bank, and 596 colonial or foreign banks cash the cheques. One advantage of this arrangement is, that the sphere of the cheque system can be greatly extended without any equal increase of trouble and risk. Whenever a bank opens a new account with an individual, that account has to be kept apart in the ledger, and constantly watched. But a bank can sell Cheque Bank cheques to any amount, without opening separate accounts with the purchasers, and may also pay such cheques when presented without risk. The Cheque Bank thus aims at becoming a great institution of accountants, operating for the most part through other banks, but relieving them of much of the risk and trouble of small transactions. The Bank of England is a bankers' bank in the sense that it holds the reserves of other banks, and makes those final payments of cash which close the general balance of transactions. The Cheque Bank seems to be a bankers' bank in the opposite sense of making deposits in all other banks and employing them as agents.

A peculiar feature of the Cheque Bank is that it entirely abstains from using, or even holding, the money deposited. All money received for cheque books is left in the hands of the bankers, through whom they are issued, or transferred to other bankers, as may be needed for meeting the cheques presented. The interest paid by these bankers will be the source of profit, and as the

money thus lies in the care of the most wealthy and reputable firms in the kingdom, it could not be lost in any appreciable quantity, except by the break-down of the whole banking system of the country. It would hardly be true to say that these cheques correspond to notes issued on the deposit of government funds, because each agent-bank can use at its own discretion the portion of the funds of the Cheque Bank in its possession. Nevertheless, as the portion in the hands of any one bank will usually be a small fraction of the whole, and there is, moreover, a guarantee fund of consols in the background, the system of issue is more closely analogous to that of a documentary reserve than any other.

The Cheque Bank as a Monetary Agent.

The Cheque Bank appears to aim at becoming the medium for the accomplishment of an immense mass of small payments. Small pensions and annuities, small dividends, small disbursements by officers of departments, by agents, clerks, or even domestic servants are made through it. A book of the Cheque Bank cheques can be safely trusted to almost any servant or agent who can write, and the cheque when presented forms a record of the way in which he has applied the money. No one can venture in like manner to give signed blank cheques to a servant, as they may be filled up for unlimited. amounts, and the Cheque Bank cheques are evidently better than a sum of metallic money, which may be more readily misapplied, purloined, or lost.