LIMITED LIABILITY OF BANK SHAREHOLDERS.
2511s January 1858.
SIR—I do not ghite agree with the reviewer of M'Culloch's book in last Spectator about limited liability. No doubt, as regards the same individuals, it is better to have their unlimited than their limited liability—I mean, better for the creditors ; but the fallacy lies in assuming that the indivi- duals are the same. Suppose two persons shareholders in a bank, each to the amount of a thousand pounds. A. is worth ten thousand, B. a million— are they on equal terms? A. can but lose ten thousand pounds by the failure of the bank, while B. will lose a million. This difference will keep B. out of the bank. It is in vain to say that increasing the danger will increase the caution : where it acts at all in this way', it acts to keep the cautious man out of the concern ; but when he is' in it, unless he is a Director, he has no practical way of exercising his caution, and when he es a Director we see how much he is in the hands of the manager. 'What I should propose, on the contrary, would be, that liability, divi- dends, and votes, should all be restricted to the paid-up capital of each shareholder; that the amount of paid-up capital should be blazoned in the banking shop, so that every customer could see i that, as in France, the. Directors or Girona should be liable without limit, and that their qualifi- cations should be such an amount of paid-up capital as would put them on a footing, of great substantiality.
The power of the shareholders should be limited to that of electing the Directors and appointing Auditors. In case of failure, the affairs would be wound-up, as in a common partnership : the shareholders, having lost their
capital, would have nothing more to do with the matter. L.
27th January 1858. One more last word on the subject of Banks. In yobs remarks on M'Culloch's recommendation of [ objection to) li- mited liability, have you quite hit the right nail on the head ? You wind up- with saying—" That customers would be more careful, we can readily believe. Gullible as is the public, we think they would be so careful, that liability would be by no means the only thing 'limited' in the concern." But if so, does not this very circumstance supply the strongest possible sup- port to Mr. Hankey's modification of Mr. Headlam's original motion ?—i. e. to the argument for allowing freedom of choice both to the proprietors of a bank and to its customers?
But is it not the fact, that very few customers have in reality a freedom
of choice in this matter, except perhaps in London ? In to which sup- port more than one bauk, parish and corporation politics fUld trade connexion, to say nothing of expected "facilities," mainly decide the question. In towns not large enough to support more than one bank, or not possessing a bank of each description—and in all country places—people who deal at all with a bank must of necessity do so with the one that is nearest or moat
accessible. T. C. H.
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