A subsidiary advantage of this organisation is that it would render the transition from private banking to joint stock banking easier, if that transition should be necessary. . Since the Franco-German war, we may be said to keep the European reserve also. To guard against a possible drain of gold abroad, a complicated mechanism has been developed which in the details of its working is peculiar to this country. The collection of these immense sums in one place and in few hands is perfectly new. Lombard Street is not only a place requiring to keep a reserve, it is itself a place where reserves are kept.
For the gold could have been kept in England by selling bills at a rate more advantageous than the par of exchange by about this amount. I shall not attempt any complete account of the activities of a typical Exchange Bank. But, until recently, no notes were legal tender outside their own circle, and were payable only at the offices of issue of the town from which they were originally issued.