A great part of the proprietors, when they paid in their first instalment, opened a cash account with the bank; and the directors, thinking themselves obliged to treat their own proprietors with the same liberality with which they treated all other men, allowed many of them to borrow upon this cash account what they paid in upon all their subsequent instalments.Such payments, therefore, only put into one coffer what had the moment before been taken out of another.But had the coffers of this bank been filled ever so well, its excessive circulation must have emptied them faster than they could have been replenished by any other expedient but the ruinous one of drawing upon London, and when the bill became due, paying it, together with interest and commission, by another draft upon the same place.Its coffers having been filled so very ill, it is said to have been driven to this resource within a very few months after it began to do business.The estates of the proprietors of this bank were worth several millions, and by their subscription to the original bond or contract of the bank, were really pledged for answering all its engagements.By means of the great credit which so great a pledge necessarily gave it, it was, notwithstanding its too liberal conduct, enabled to carry on business for more than two years.When it was obliged to stop, it had in the circulation about two hundred thousand pounds in bank notes.In order to support the circulation of those notes which were continually returning upon it as fast they were issued, it had been constantly in the practice of drawing bills of exchange upon London, of which the number and value were continually increasing, and, when it stopped, amounted to upwards of six hundred thousand pounds.This bank, therefore, had, in little more than the course of two years, advanced to different people upwards of eight hundred thousand pounds at five per cent.Upon the two hundred thousand pounds which it circulated in bank notes, this five per cent might, perhaps, be considered as clear gain, without any other deduction besides the expense of management.But upon upwards of six hundred thousand pounds, for which it was continually drawing bills of exchange upon London, it was paying, in the way of interest and commission, upwards of eight per cent, and was consequently losing more than three per cent upon more than three-fourths of all its dealings.
The operations of this bank seem to have produced effects quite opposite to those which were intended by the particular persons who planned and directed it.They seem to have intended to support the spirited undertakings, for as such they considered them, which were at that time carrying on in different parts of the country; and at the same time, by drawing the whole banking business to themselves, to supplant all the other Scotch banks, particularly those established in Edinburgh, whose backwardness in discounting bills of exchange had given some offence.This bank, no doubt, gave some temporary relief to those projectors, and enabled them to carry on their projects for about two years longer than they could otherwise have done.But it thereby only enabled them to get so much deeper into debt, so that, when ruin came, it fell so much the heavier both upon them and upon their creditors.The operations of this bank, therefore, instead of relieving, in reality aggravated in the long-run the distress which those projectors had brought both upon themselves and upon their country.It would have been much better for themselves, their creditors, and their country, had the greater part of them been obliged to stop two years sooner than they actually did.The temporary relief, however, which this bank afforded to those projectors, proved a real and permanent relief to the other Scotch banks.All the dealers in circulating bills of exchange, which those other banks had become so backward in discounting, had recourse to this new bank, where they were received with open arms.Those other banks, therefore, were enabled to get very easily out of that fatal circle, from which they could not otherwise have disengaged themselves without incurring a considerable loss, and perhaps too even some degree of discredit.
In the long-run, therefore, the operations of this bank increased the real distress of the country which it meant to relieve; and effectually relieved from a very great distress those rivals whom it meant to supplant.