bills. In the same capacity it was expected to main-
tain a supply of gold, not merely for circulation, but
in anticipation of any sudden drain which might cause
a run upon the other banking institutions of the coun-
try. It was obliged, therefore, to purchase at a fixed
rate all the oold brought to its counters. Thus as a
bank of discount it held the exclusive privilege of dis-
counting government paper; as a bank of deposit it
held the public balances; as a bank of issue, its circu-
lation alone passed through the hands of the govern-
ment as well as of the public. Its notes, when not
issued in loans on Exchequer bills to the government,
or in payment for the precious metals, could pass into
circulation only through discounts furnished to mer-
chants. At no time has the Bank had other than
these three means of issuing its paper; and as no
notes could be paid for bullion which did not rep-
resent their equivalent in bullion brought in, the
only modes of issuing an excess of paper were
either by loans to the government on security of Ex-
chequer bills, or in regular and legitimate commercial
discounts.

All foreign and most provincial payments were ulti-
mately settled by drafts on London; but the country
merchants and others, who had occasion to extend
their connections beyond the limits of a district, found
it convenient to deal through the local bankers of
their neighborhood rather than to draw upon corre-
spondents of their own. In 1797 about three hun-
dred and fifty such country banks existed in England

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