expected to increase, while the attendant mischiefs will disappear. It will be a useful task to explain the dangers, expose the frauds, and devise and proclaim the precautions that may guard against those dangers and prevent those frauds, and, at the same time, to point out those cases in which the Limited Liability Act can be used with success. Whether it can be prudently used in the formation of banking companies, as permitted by an extension of the Act, is still a matter open to dispute. The large sums which such companies owe to their depositors may make the failure of a bank to be ruinous to its shareholders. This risk may deter those men of capital whose prudence, if they were shareholders, would be the best guarantee for the successful management, and therefore for the permanent solvency of the bank. But the same risk would have the effect, in case of the insolvency of any bank, of reducing the dividend to be paid to the depositors to a very small sum, unless they are permitted to resort to the assets of the shareholders. This may prevent men from depositing their money with banks of limited liability, and without deposits no bank can carry on a successful business. Thus the probability of the general application of the principle of limited liability to banking does not depend upon those questions of political economy on which abstract reasoning can arrive at a certain result. It depends on the relative effects of the same feeling on different bodies of men. But it may be permitted to form a conjecture as to the result. That apprehension of risk to which I alluded is in reality not very strong in any class. The dread of unlimited liability does not prevent capitalists from being bankers or from holding shares in well-conducted banks, nor do depositors show much unwillingness to entrust their money to corporate banks, or banks in which the debts are not secured by the wealth of the shareholders. But, as to become a shareholder in a new bank calls forth more deliberation than merely to become a customer, it is probable that the feeling of risk will have more weight in the formation than in the subsequent success of the bank, and that therefore ultimately the principle will be generally adopted. This adoption might be considerably delayed by accident; for if a bank of limited liability should fail, and give very small dividend to the creditors, before the system came into general use; such an event would for a long time throw discredit on the principle of limited liability, and prevent other banks from adopting it. Credit is useful to all mercantile establishments, but to a bank it is the very breath of life. A further extension of the principle of limited liability remains for the consideration of this Department. At present the law is applicable only to partnerships consisting of seven or more members. Ought it to be extended to firms containing fewer members? It does not appear that there would be any great danger in extending it even to cases where there were no partners; but, on the other hand, the reasons which call for a departure from the old law do not apply to mere private partnerships, or apply with much less force than to joint-stock companies. Many of the subjects brought before this Department are of such a nature that to be fully discussed they require a statement of details that would be far from interesting to a mixed assembly. A course has been adopted very suitable for such topics. They may be brought before the Department in a manner just sufficient to show their importance, and then referred to a sub-section, which will be attended only by those who take a peculiar interest in the matter. In this manner the law of general average, and other commercial laws, may be settled in such a manner as may lead to their adoption by other nations. This adoption may take place if Great Britain takes care that her commercial laws shall be wise and just, and wisely and justly administered, and that nothing partial to British subjects or prejudicial to foreigners can be discovered, either in their enactment or administration. Her justice, not her strength, will be the best preservative of peace. Until lately, the chief danger appeared to consist in her colonies, which might furnish other countries at once with a pretext and a temptation for a war. This danger is fast disappearing. The larger colonies are growing into independence, and able with very little assistance from the parent country to resist any foreign invasion. They know that they are free to become independent States, as soon as they find it suitable to their interests, or agreeable to their feelings, to exchange the tie of dependency for that of friendship. The smaller colonies, if foreigners are permitted to trade with them and to settle in them on the same terms as British subjects, will be merely under the guardianship of Great Britain, for the good of all mankind. To invade them would not injure Great Britain more than any other nation, and perhaps the feeling of common interest may devise some scheme by which their perpetual neutrality may be secured by international law. L |
