This is the rationale of Accommodation Paper; and here we see how entirely it differs from Real Paper. Because with Real Paper, and bona fide customers, though losses may come, still directly the loss occurs there is an end of it. But with Accommodation Paper, the prospect of a loss is the very cause of a greater one being made, and so perpetually in an ever-widening circle, till at last the canker may eat into a banker's assets to any amount almost. It is also clear that if a man, having got a good character, may sometimes do so much mischief to a single banker, the capacity for mischief is vastly increased, if from a high position and old standing, he is able to discount with several banks, for he is then able to diminish greatly the chances of detection. It would not be suitable to the limits of this work to enter into particular details of these cases, but those who wish to have more information we may refer to our Theory and Practice of Banking.

18. From these Accommodation Bills to forged bills there is but one step. It is but a thin line of division between drawing upon a man who is notoriously utterly unable to pay, and drawing upon a person who does not exist at all, or forging an acceptance. In practical morality, and in its practical effects, there is none. Traders sometimes do not even take the trouble to get a beggar to write his name on their bills, but they invent one. The case of traders dealing with a number of small country connections affords facilities for such practices. They begin by establishing a good character for their bills. Their business gradually increases. Their connections gradually extend all over the country. The banker, satisfied with the regularity of the account, cannot take the trouble of sending down to enquire as to the acceptor of every bill. The circle gradually enlarges until some fine morning the whole affair blows up. The ingenuity sometimes exercised by traders in carrying out such a system is absolutely marvellous.

It is in times of speculation in great commodities that Accommodation Paper is particularly rife. In a great failure of the harvest, when large importations are required, and it is expected that prices will rise very high, every corn merchant wishes to purchase as much as possible. But if no sales have taken place there can be no real trade bills. They therefore proceed to manufacture them in order to extract funds from bankers to speculate with. No banker in his senses would actually advance money for them to speculate with, with his eyes open. Nevertheless, they must have the funds from the bankers, and this they do by means of cross acceptances, which they go and discount with their bankers. They then perhaps buy a certain amount of corn, or any other goods, and many bankers will discount their bills with the collateral security of the Bill of Lading. And this they may repeat many times over, till the quantity of credit created is something astonishing. In the Crimean War there was a great demand for shipping, and there was an enormous amount of accommodation bills manufactured by the Liverpool shipowners and discounted all over the kingdom. The results were frightfully disastrous.

The. insurmountable objection, therefore, to this species of paper, is the dangerous and boundless facility it affords for raising money for speculative purposes. And there is much reason to fear that this pernicious system prevails to a much greater extent than is generally supposed. The Legislature has imposed bounds upon the issue of Notes by banks, but there is much greater reason that some attempt should be made to curb the extravagant magnitude to which this detestable practice has been developed. The Bank of England is strictly forbidden to issue a single £6 note of accommodation paper, and is it to be tolerated that any set of adventurers may set afloat many hundred thousand pounds' worth of their accommodation paper?

To deal however legislatively with Accommodation Paper, is the most perplexing commercial problem of the day. The difficulty consists in determining what is really an Accommodation Bill. An Accommodation Bill is denned to be a Bill to which the acceptor, drawer, or indorser, as the case may be, has put his name, without consideration, for the purpose of benefiting or accommodating some other party, who is to provide for the bill when due. But the whole difficulty turns on the consideration. The consideration may be of many sorts, and does not by any means denote a sale of goods at the time. Moreover, a bill may be an Accommodation Bill at its creation, but if any consideration be given during the period of its currency it ceases to be an Accommodation Bill.

Moreover the consideration may be of many sorts. If A draws a bill upon B, who accepts it for A's accommodation, for the express purpose of enabling him to go to the Bank and get money for it, that is a pure Accommodation Bill, and manifestly fraudulent. But if B draws an exactly similar bill at the same time on A, and A accepts it for the accommodation of B, then neither of the Bills are Accommodation Bills; but both are given for a good consideration.

This perhaps may seem somewhat strange to an unlearned reader: it is nevertheless firmly established law. In Rolfe v. Caslon (2 H. Blackstone p. 571) A and B being desirous to accommodate each other, each drew a bill upon the other, and accepted one in return, the two bills being precisely alike, in the date, sum of money, and times of payment - neither party having any effects of the other in his hands. The Court were clearly of opinion that the two bills were mutual engagements constituting on each part a Debt, the one being a consideration of the other. This doctrine was repeated and confirmed in Cowley v. Dunlop (7 T.R. 565) in which Grose, J. said the instant the bills were exchanged each was indebted to the other in the sum which was the amount of their respective acceptances, for the counter acceptances were a good consideration to found a Debt upon either side respectively. In the case of a single accommodation acceptance there is no debt to the acceptor; the Debt accrues only by payment of the money. The acceptor, qua acceptor can never be a Creditor: his acceptance imports the admission of a Debt from him to another, and when he has paid as acceptor, if he paid for any other person in consequence of any request from that other, he becomes a creditor, not on the face of the bill, but by a contract collateral to the bill. "When two persons exchange acceptances, each becomes the debtor of the other upon his accepted bills. But when a man accepts without consideration, he is never a creditor of the person for whom he accepts till he pays: from that payment arises the Debt, but when the acceptance was exchanged, the debt arises from these acceptances. This doctrine was repeated and confirmed in subsequent cases when it was adopted by the whole Court of King's Bench.

Stated in the above form, no doubt, the doctrine may appear somewhat startling to some: but when we consider the principle and not the accidental circumstance that the persons who may do it are insolvent, the difficulty disappears. It is just what happens every day in banking. It is by no means unusual for the customer of a banker to ask him to discount his promissory note. If the banker does so, and gives him a Deposit, or Credit, or his own Notes, this is an exchange of securities. It is precisely the same in the other case. Supposing that the holders of these bills are enabled to purchase goods with them, they may be paid off at maturity: if they cannot do so then the re-exchange of the securities is the mutual payment of each Debt, precisely in the same manner as when two bankers exchange notes: or as when a merchant pays his own acceptance to a banker in the banker's notes. The two contracts are extinguished.