another writer who is intimate with the details of their working, it need only be said here that they have little or no practical power in regulating the manner in which the banks conduct their business. They meet to discuss questions of banking practice, but their power over those of their members who do not choose to follow the conclusions arrived at is practically nonexistent. The only regulating influence in English banking is that of the Bank of England, and it is only exercised occasionally and under exceptional circumstances. Occasions have been known on which the governor of the bank has summoned the manager of one of the banks whose action he thought fit to question and administered remonstrance and rebuke; but such an occurrence is extremely rare. Moreover, as has been shown in earlier portions of this memorandum, the Bank of England intervenes and regulates the price of money in London by means of measures which have already been described, namely, by borrowing in order to make its own rate effective, and raising that rate if it thinks it necessary in the interests of the market as a whole. These measures it has to take more or less frequently, but, nevertheless, they are only taken when the circumstances of the case require it, and at other times the London money market is left practically without regulation, with the result that the keen competition between the bankers causes them to create credit at rates which are barely remunerative to themselves and sometimes have an adverse effect in depressing discount rates and turning the foreign exchanges against London. This lack of cohesion and regulation is a necessary result of the enormous extension of the power and business of what are commonly called the clearing

banks, that is to say, the chief joint stock banking companies and the few private banks which survive as important factors in the London money market. They are now the chief manufacturers of credit and currency for London and for England, and since there is no legal restriction whatever concerning the proportion of cash to liabilities that they are obliged to hold, or any other detail of their credit-making business, it follows that they work entirely in accordance with the dictates of their own prudence, their large body of accumulated experience, and the fine traditions which influence the best of them.

The working of the English machine is thus distinguished by extraordinary ease and elasticity, the perfection of which is only marred by this lack of cohesion which makes the machine work perhaps rather too easily in normal times and in periods of pronounced monetary abundance. In times of difficulty, when the Bank of England is taking measures to obtain control, the clearing banks usually support it loyally, and work with a view to assisting the objects which it is trying to secure. But in normal times the lack of cohesion sometimes results in overfinancing, which has unfortunate subsequent effects. It is clearly desirable that the cooperation between the Bank of England and the clearing banks, which is generally found in times of difficulty, should be extended to the periods of more normal conditions. And it may also be said that some closer agreement with regard to the rates charged among the English banks is perhaps desirable on the lines of the Scottish model, but with less cast-iron inflexibility.

a Literally this phrase means the banks which are members of the clearing house.

(D) CONCLUSION.

In summing up the aspects of English banking, we may point, as its most obvious feature, to its complete freedom from restriction and regulation by the law of the country. English bankers are all agreed, and most critics who have studied the flounderings of Peel's Act of 1844 will probably agree with them, that this absence of legal restriction has been of very great benefit to English banking. By a fortunate coincidence the restrictions which Peel's Act attempted to impose actually assisted the banks to proceed along a higher line of development. Peel's Act laid down arbitrary restrictions on the issue of notes, with the result that English banking turned its attention to the development of the most perfectly flexible and adaptable credit instrument, the check. From the experiences of the English system the conclusion would seem to emerge that in a civilized and well-ordered community the less banking is restricted by the legislature the more satisfactory and adaptable its progress is likely to be. At the same time, from the great difficulty that has been experienced by the leading English bankers in inducing the smaller and weaker banks to follow a high ideal of business, it may be concluded that there is one regulation which legislatures could with excellent and wholesome effect lay down upon banking. For the smaller and weaker English banks have been tempted to follow principles which would be dangerous if adhered to by the banking community as a whole, by the complete absence of publicity under which they work. We have seen that the law only requires them to make a wholly unmeaning

declaration twice a year, and though they do in fact publish yearly and half-yearly balance sheets, many of them make these statements useless as a guide to their actual position by omitting to state separately the amount of their cash in hand or with other bankers. If the law obliged all bankers in England to publish a uniform balance sheet, or at any rate a balance sheet showing the amount of their cash in hand, and if at the same time regulations were made by which "window-dressing" operations for these balance sheets were impossible, there is no doubt that an important weak spot in English banking would be eliminated.

And the conclusion may thus be arrived at, from the experience of England, that the less the law does for banking the better, except that it is desirable that it should insist upon universal and genuine publicity being applied to the banking community, and that bankers should all be made to show their position, not only on a certain day, but by means of averages, throughout the period covered by the statement. The fear of external criticism among bankers is so great, and the fact that they depend upon the confidence of the public is so clearly grasped by them, that if the amount of publicity implied be only full enough, and if the tests applied to the genuineness of the statements are only sufficiently complete, there seems to be good reason to expect that bankers will, if otherwise left to themselves, take the best possible care of the business that they conduct for their own shareholders and for the community.

CHAPTER IV.

THE LONDON STOCK EXCHANGE.

(A) THE INSTITUTION OF THE JOBBER.

In several important respects the London Stock Exchange differs widely from similar institutions in other centers; but the most characteristic feature of its organization lies in the division of its members into two classes, brokers and dealers, the latter being more commonly described as jobbers. The broker, as such, buys or sells securities on behalf of another party, who is called his client and pays him a commission; the dealer or jobber provides the market to which the broker applies, the former being prepared to buy or sell any of a certain number of securities in which he specializes and trusting to cover his bargains at a profit by "undoing" them, as it is called, with another broker or jobber.

The broker, of course, is a constant feature on all stock exchanges. He executes the orders of the general public, buying and selling securities on its behalf, arranging their delivery when the bargains are real, or their financing when the dealings are speculative, and charging a commission for his work. The institution of the jobber is peculiar to London, and his existence makes the whole aspect and organization of London's business unique in this respect. In other centers the place of the jobber is supplied, to some extent, by "room traders," by members who specialize on certain securities; but as definitely organized into a separate group, the jobber is only to be found in London. The floor of the London Stock Exchange is divided into groups of these jobbers, who are always to