The objection to such transactions in a banking point of view is that the promissory notes of these persons and their securities are not available to the banker in case he is pressed for money.

Moreover they are barren, isolated transactions, which lead to nothing: whereas a discount account promotes commerce, and grows more profitable as the business of the customer increases.

There is also a very important point to be considered in the shares of many companies which are offered as collateral security, that by the deeds of the companies, no property in the shares passes, except by the registration of the name of the holder in their books. Now while the customer is in good circumstances there may be no danger: but if he becomes bankrupt, the banker is not entitled to retain the shares against the other creditors. If the bankrupt is the registered owner of the shares, his creditors are entitled to them: hence if the banker means to complete his security, he must have himself registered as the owner of the shares, and thereby becomes a partner in a multitude of joint stock companies, of whose condition he can know nothing. Then perhaps, calls are made, and the banker finds that instead of buying a security, he has bought a liability, and he must pay up the calls or forfeit the shares.

All such advances, therefore, should be made very sparingly, and only with such surplus cash as the banker may not be able to employ in buying good bills: and they should only be made to such persons as he believes to be perfectly safe without the deposit of the security. No banker would make such an advance if he really believed that he would be obliged to realise the security to repay himself, as such proceedings will always make a soreness between himself and his customer, who will be averse to seeing his property sold at a sacrifice as he may call it.

Advances on Dock Warrants and other similar securities, are also liable to many similar objections, and should be very sparingly done, as they subject a banker to much trouble beyond the line of his proper business, and are indications of weakness in a customer. Some customers will expect to have loans upon leasehold or freehold property left as security; but these are most objectionable as collateral security. The process of realising freehold property is so long, uncertain, and tedious that it is perfectly unavailable to a banker in case of necessity. In fact we believe the best rule in all cases of loans with collateral security, (except in such instances as public stock) is to avoid, as much as possible, making them to any one who is not perfectly good without them.

The objection to cash credits on the part of London bankers is exactly similar to that against advances on mortgage, that in time of pressure it is very difficult to call up the advances, and the securities are not generally realisable. But if cash credits are objectionable, still more are purchases of foreign securities, such as stock in foreign railways. Several of the joint stock banks which failed in 1857 and 1866 sinned grievously in this respect of locking up their funds in foreign securities.

If temporary loans on real property are objectionable as securities to city bankers, much more so are mortgages, which are intended by their nature to last for years. Such transactions are, therefore, chiefly confined to country bankers, and those at the west end of London, whose connections lie more among the landed than the commercial interest, and who are not liable to be called upon so suddenly for cash.

Besides these operations, all of which are founded upon personal liability - all of which contain personal obligations to pay fixed sums of money and are therefore dealings in "currency" - bankers usually invest part of their funds in public securities, which are supposed to be more readily convertible into cash than others. Public securities are of two descriptions - the one "Currency, or Securities for money," such as Exchequer bills - the other "property, or convertible securities," such as the Funds: the former being an engagement on the part of the Exchequer to pay a certain sum of money, like any other bill; and the latter being no engagement to repay any fixed sum at all, but only a fixed rent, or sum, for its use.

Each description of public securities has its advantages and disadvantages. The interest on the Funds will be found, in the long run, to be higher than those on other descriptions of public securities. But there is this serious consideration, that the value of these stocks is very fluctuating, and when any public crisis comes, and bankers wish to sell their stock, they may sustain very great loss. In the week of the great crisis of 1847, when many banks had to sell stock to provide for contingencies, the losses were immense when they bought in again to replace it;

and this danger is greatly aggravated by the Bank Act of 1844. Another disadvantage regarding stock is, that all transactions of bankers must become known, as they have to transfer it. Exchequer bills have this advantage, that a banker can deal in them without its being known to any one but the broker. Exchequer bills being like any other promissory notes, an engagement of the government to pay a definite sum of money, it is not probable that the banker can ever lose so much on them as on stock. In order to prevent Exchequer bills falling to a discount, they always bear interest, and, in consequence of this, are usually at a premium: and when by the change in the market rate of interest, they fall to a discount, the interest upon them is usually raised. From the circumstance of their greater steadiness in value the profit of investing in Exchequer bills is less than that from stock.

Bankers collect money from those who have it to spare, and advance it, or its equivalent, to those who require it. They may sometimes themselves be in a similar predicament. Sometimes they may have more by them than they have employment for: sometimes from unusual demands, they may be in want of temporary advances. There is a class of persons who undertake this equalising process - the bill brokers. They go the round of the bankers every morning, and borrow from those who have to lend, and lend to those who want to borrow.

At the present day, the principle of association has been developed to a much greater degree than ever it was before: companies are formed for all manner of purposes. When these companies apply to open an account with a banker, it will generally be found that they want accommodation. But a banker should never accommodate a company of whose affairs he can know very little: he should only grant accommodation on the personal liability of the Directors. He should require from them a joint and several note, payable on demand, reserving his right against the company, only as a collateral security. If anything goes wrong with the company, he has an immediate remedy against the Directors. Whereas if the company goes into the winding up Court, it will be a long time before his claim can be settled: and then there may be some technical objection. The contributors may say that the Directors had no right to draw bills by the constitution of the company; or that they may have exceeded their power: and then he may have to contest his claim through several different courts bringing him nothing but vexation and anxiety.