It was obviously inevitable that business of the magnitude and widely extended responsibility that modern banking has assumed should fall into the hands of the joint-stock system; the regular practice which dictates, or ought to dictate, the policy of banking, naturally lends itself to joint-stock organization, as was pointed out more than a century ago by Adam Smith, and further, the necessary maintenance of a uniformly high level of business ability and prudence is attained with some difficulty under a system which practically works by the hereditary principle. The old private banking firms were largely family businesses, being passed from father to son or from one relative to another almost as a matter of legacy. It was inevitable that the younger generations which succeeded to a business would be unlikely to devote the same unremitting attention to its conduct as was displayed by those who were building it up, and as the profits of banking led to rapid accumulation of wealth, it was still more natural that those who inherited great wealth should, at least in England where the outlet for a man's energies is so wide and varied, prefer to give much of their time to other occupations outside the business.

The private banks thus made but a weak resistance against the competition of the joint-stock institutions worked in the interests of shareholders by a set of trained officials whose career depended to a great extent on the success with which they managed them. Gradually the private banks were absorbed into the joint-stock companies, and in 1896 a large number of the old private firms were amalgamated under the joint-stock principle under the title of Barclay & Co., so named from one of the principal

private firms included. The functions that they perform are, as has been said, similar in essence to those conducted by the joint-stock banks, and differences between them, even in degree, are so small as to be quite insignificant. The remnants of them form, with the merchant firms and accepting houses, a kind of aristocracy in the city of London, and it is contended that their survival gives, from the high traditions and dignity which they have derived from their exceptional position, a certain high ideal of conduct in business, which is of great value. It is also occasionally asserted that their customers find them more easy to deal with, since the managers of the joint-stock banks are alleged to be unable to depart by a hair's breadth from the strict rules under which they conduct business without an appeal to their board of directors which may probably cause delay; and also, that the private banks give a good deal more attention to the question of finding suitable investments for their customers, and in general are enabled to take a more close and personal interest in their business connection with them. But these are obviously matters of minor detail, and in general it may be said that the business and the functions conducted by the private banking firms of Great Britain have already been described when we enumerated those of the joint-stock banks.

(E) THE MERCHANT BANKERS AND ACCEPTING HOUSES.

The most important function of the merchant bankers is not that of banking, but of accepting. Banking, in the strict sense of the term, they do not engage in-that is to say, they are not prepared to meet claims upon them by an immediate payment of cash or legal tender over the

counter, but by payment of a check on one of the banks in the stricter sense of the term. Their function is that of bringing into being the interesting and important credit instruments known as bills of exchange. A bill of exchange, originally drawn on a merchant by a correspondent, from whom he had bought goods, directing him to pay the consideration for them at sight or at date named, has in recent years widely extended this function and has become an instrument by which credit can be raised against any form of security or collateral, or in some cases against no security at all but the credit of the parties named upon it.

It need hardly be said that there is an immeasurable difference between one bill of exchange and another. Since the bill is an order by one party to another to pay a sum of money, generally at a subsequent date, the ability of the party on whom the bill is drawn to meet it at the due date is a question of overwhelming importance. When the bill arrives the party drawn on "accepts" it by signing his name across the front of it, so intimating that he is liable to pay the sum named at the date specified, and becoming the acceptor of the bill. It is clear that a bill accepted by a small tradesman has no value outside his own street, if there, while one accepted by a great merchant house of unquestioned standing is an easily negotiable credit instrument and also an ideal form of investment for bankers and others who have to keep their resources liquid, since it can easily be discounted or turned into as much immediate cash as its prospective value at the due date makes it fetch, and at maturity it has to be met by its acceptor. The importance of the acceptor's name on a bill thus led merchants of first-rate standing to specialize in this form

of business. They gradually left off or reduced the amount of their actual mercantile business and confined themselves to accepting bills, for a commission, for others whose credit was less well established. Out of bills of exchange, originally drawn against merchandise actually shipped, grew the finance bill drawn sometimes in anticipation of produce or merchandise to be shipped, sometimes against securities, and sometimes against the credit of the parties to it.

The business of acceptance has thus grown up as an important and separate function which is largely in the hands of the leaders among the old merchant firms, whose acceptance of a bill stamps it at once as a readily negotiable instrument. By the service that they perform in the creation of this great mass of paper, the merchant firms, or accepting houses, as they are generally called, facilitate the trade of the world in a most useful and in fact indispensable fashion by providing credits against mercantile transactions which have not yet matured. When the wheat of America is harvested, but has not yet reached its market, the ultimate purchaser of it can not be expected to pay for it in cash, but arrangements can be made by which a bill can be drawn against it on a first-class accepting house, and this bill being readily negotiable and easily discounted in the London market provides the cash, or a considerable proportion of it, which the wheat will ultimately realize when it has been shipped to its destination and passed into the hands of the consumer. The same process can be repeated with many articles of manufacture which are still in an inchoate condition, and the world's com

mercial activity, which would be immeasurably lessened if each transaction had to wait maturity before cash could be raised against it, is thus enabled to proceed with the remarkable velocity which modern conditions make possible. Nevertheless the function of the London accepting houses, though of enormous importance, is still to a certain extent subordinate to the judgment of the English banks. They finally decide whose paper is most readily negotiable, and, in times when the credit machine is felt to be somewhat out of gear, the bankers occasionally discriminate against the paper of firms which they consider to have been giving their acceptance too freely. In this respect, as in so many others, the Bank of England remains the final arbiter, since the paper of an accepting house which is questioned by the other banks can be negotiated at the Bank of England through a discount house, and the Bank of England has before now intervened with effect when it considered that questions raised concerning certain acceptances have been without justification.

This business of acceptance is one into which the other banks have themselves recently intruded with considerable effect, accepting bills for their customers, home and foreign, for a commission; and there is a certain apparent anomaly in the position which makes them guardians of the volume of acceptance created by the private firms and acceptors themselves on a steadily increasing scale. Nevertheless, this anomaly has little or no untoward effect in practice. The bankers are naturally extremely cautious in raising any question as to the security of general credit in London, and they are in many ways closely connected