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Chapter 08 - Testbank

Student: ___________________________________________________________________________

1. A loan provided by a group of FIs as opposed to a single lender is called:

A. a joint loan.
B. project finance.
C. a syndicated loan.
D. a multiple loan.

2. Which of the following statements is false?

A. Default risk is the risk that the borrower is willing but unable to fulfil the terms promised under loan contract.
B. Default risk is the risk that the borrower refinances the loan before maturity.
C. Default risk is the risk that the borrower is able but unwilling to fulfil the terms promised under loan contract.
D. Default risk is the risk that the borrower is unable and unwilling to fulfil the terms promised under loan contract.

3. Which of the following statements is true?

A. Zero-coupon corporate bonds are bonds without any intervening cash flows between issue and maturity and thus these
bonds typically sell at a large discount from face value.
B. Zero-coupon corporate bonds are bonds with semi-annual cash flows between issue and maturity and thus these
bonds typically sell at a large discount from face value.
C. Zero-coupon corporate bonds are bonds without any intervening cash flows between issue and maturity and thus these
bonds typically sell at a small discount from face value.
D. Zero-coupon corporate bonds are bonds with annual cash flows between issue and maturity and thus these bonds
typically sell at a large discount from face value.

4. Besides reducing credit risks, an FI has an incentive to sell loans it originates for all of the following reasons except to:
A. geographically diversify.
B. decrease core deposits.
C. lower reserve requirements.
D. lower capital requirements.

5. Which of the following is not true of a loan that is sold without recourse?
A. The loan is removed from the FI's balance sheet.
B. The FI has no explicit liability if the loan eventually goes bad.
C. The FI that originated the loan bears all the credit risk.
D. The buyer can put the loan back to the selling FI.

6. Which of the following is true concerning loans sold with recourse?

A. Most loans are sold in this manner.
B. The buyer cannot put the loan back to the selling FI.
C. The FI has no explicit liability if the loan eventually goes bad.
D. The FI that originated the loan retains a contingent credit risk liability.
7. Which of the following observations is not correct?
A. Most loans are sold with recourse.
B. Loan sales are a primitive substitute for securitisation.
C. Selling of a loan creates a secondary market for loans.
D. Ownership of the loan is always transferred to the loan purchaser.

8. What are the two basic types of loan sale contracts or mechanisms by which loans can be transferred between seller
and buyer?
A. participations and assignments
B. participations and originations
C. syndications and originations
D. transfers and assignments.

9. Currently, this basic type of loan sale contracts comprises the bulk of loan sales trading.
A. participations
B. originations
C. syndications
D. assignments

10. Loan participations are:

A. riskier than loan assignments.
B. less risky than loan assignments.
C. always sold without recourse.
D. always sold with partial recourse.

11. In a loan participation the holder (buyer):

A. is not a party to the underlying credit agreement, so the initial contract between the loan seller and the borrower
remains in place after the sale
B. is a party to the underlying credit agreement, so the initial contract between the loan seller and the borrower remains in
place after the sale.
C. can vote only on material changes to the loan contract such as changes in interest rate or collateral backing.
D. is not a party to the underlying credit agreement, so the initial contract between the loan seller and the borrower
remains in place after the sale and the holder (buyer) can vote only on material changes to the loan contract such as
changes in interest rate or collateral backing.

12. Loan participations are typically sold to correspondent banks because:

A. they are insiders and can be trusted.
B. they offer the best prices.
C. the ongoing relationship offers the greatest monitoring opportunities.
D. this is a regulatory requirement.

13. A buyer of a loan participation is exposed to:

A. risk exposure to the original borrower defaulting.
B. risk exposure to the failure of the selling bank.
C. moral hazard problems because the borrower is no longer monitored by the seller.
D. risk exposure to the original borrower defaulting and risk exposure to the failure of the selling bank.
14. What is NOT true of loan assignments?
A. All rights are transferred on sale.
B. The loan buyer holds a direct claim on the borrower.
C. Ownership rights are generally much clearer in a loan sale by assignment.
D. Contract terms are unrestrictive from the seller's perspective.

15. Assignments:
A. are common in loan syndications.
B. do not have buyer restrictions.
C. comprise less than 30 per cent of the US loan sales market.
D. involve extremely high monitoring costs.

16. The move toward market value accounting:

A. increases banks' incentives to sell loans to avoid reporting capital losses.
B. decreases banks' incentives to sell loans to avoid reporting capital losses.
C. increases banks' incentives to sell loans since all assets will automatically be marked to market.
D. decreases banks' incentives to sell loans since all assets will automatically be marked to market.

17. In Australia, a securitisation program must have:

A. a specifically created SPV, which is resident in Australia and which is not required to provide data to the Australian
Prudential Regulation Authority (APRA):
B. a specifically created SPV, which may or may not be resident in Australia and which is not required to provide data to
the Australian Securities and Investment Commission (ASIC) under the Financial Statistics (Collection of Data) Act;
C. specifically selected assets (e.g. mortgages, receivables, etc.) backing its liabilities in the form of debt securities.
D. a specifically created SPV, which is resident in Australia, which is not required to provide data to the Australian
Prudential Regulation Authority and have Specifically selected assets (e.g. mortgages, receivables, etc.) backing its
liabilities in the form of debt securities.

18. This propensity to prepay means:

A. realised coupons/cash flows on pass-through securities would conform to expected cash flows.
B. realised coupons/cash flows on pass-through securities can often deviate substantially from the stated or expected
coupon flows.
C. realised coupons/cash flows on pass-through securities are prepaid.
D. None of the listed options are correct.

19. As coupon rates on new mortgages fall:

A. individuals are inclined to sell off their mortgages.
B. there is a decreased incentive for individuals in the pool to pay off old, high-cost mortgages and refinance at lower
rates.
C. there is an increased incentive for individuals in the pool to pay off old, high-cost mortgages and refinance at lower
rates.
D. there is no effect on mortgage payments.
20. Assumable mortgage is a mortgage contract that is:
A. transferred from the seller to the buyer of a house.
B. assumed to be paid off.
C. transferred from the buyer to the seller of a house.
D. non-transferrable.

21. Transferable mortgage is:

A. a mortgage contract that allows a change of asset to be sold.
B. a mortgage contract that does not allow a change of asset to be mortgaged.
C. a mortgage contract that allows a change of asset to be mortgaged.
D. None of the listed options are correct.

22. Collateralised debt obligations:

A. Can be created either by packaging and securitising whole mortgage loans.
B. by placing existing pass-throughs in a trust off the balance sheet.
C. can be created either by packaging and securitising unsecured loans, or by placing existing pass-throughs in a trust
on-balance sheet.
D. can be created either by packaging and securitising whole mortgage loans and by placing existing pass-throughs in a
trust off the balance sheet.

23. Z class is:

A. an accrual class of a CMO that makes a payment to bondholders only when preceding CMO classes have been retired.
B. the residual class of a CMO, giving the owner the right to any remaining collateral in the trust after all other bond
classes have been retired plus any reinvestment income earned by the trust.
C. a bond that has some prepayment protection and expected durations of five to seven years depending on the level of
interest rates.
D. a bond that has the shortest average life with a minimum of prepayment protection. They are, therefore, of no interest
to investors seeking short-duration mortgage-backed assets.

24. R class is:

A. an accrual class of a CMO that makes a payment to bondholders only when preceding CMO classes have been retired.
B. the residual class of a CMO, giving the owner the right to any remaining collateral in the trust after all other bond
classes have been retired plus any reinvestment income earned by the trust.
C. a bond that has some prepayment protection and expected durations of five to seven years depending on the level of
interest rates.
D. a bond that has the shortest average life with a minimum of prepayment protection. They are, therefore, of no interest
to investors seeking short-duration mortgage-backed assets.

25. Benefits of securitisation include:

A. increased liquidity of bank loans
B. enhanced ability to manage the duration gap.
C. if off-balance-sheet, the issuer saves on reserve requirements, deposit insurance premiums and capital adequacy
requirements.
D. All of the listed options are correct.
26. Which statement is not true with respect to loan sales?
A. Are one way used by FI managers to restructure their balance sheet.
B. Can change the interest rate sensitivity of the FI's balance sheet.
C. Can be used to manage FI's interest rate risk.
D. None of the listed options are correct.

27. Which is of the statements below is true?

A. An FI will earn fees when arranging a large loan, even if it sells part or all of the loan later.
B. Like reserve requirements, the capital adequacy requirements imposed on FIs are a burden as long as required capital
exceeds the amount the FI believes to be privately beneficial.
C. In addition to credit risk and interest rate risk, holding loans on the balance sheet can increase the overall illiquidity of
an FI's assets.
D. All of the listed options are correct.

28. The profitability of securitised assets is largely determined by the special purpose vehicle's:
A. debt to equity ratio.
B. credit rating.
C. ownership.
D. timing insurance.

29. The credit rating agency is:

A. a legal party to any of the securitisation arrangements and is usually listed on all documentation.
B. not a legal party to any of the securitisation arrangements and is usually listed on all documentation.
C. a legal party to any of the securitisation arrangements but is usually not listed on all documentation.
D. not a legal party to any of the securitisation arrangements and is usually not listed on all documentation.

30. Fully amortised means:

A. periodic repayment on a loan that reflects only principal over the life of the loan.
B. a repayment on a loan with varying amounts, that reflects part interest and part principal over the life of the loan.
C. an equal periodic repayment on a loan that reflects part interest and part principal over the life of the loan.
D. None of the listed options are correct.

31. The key feature of a loan assignment is that all rights are:
A. negotiated at the time of sale, meaning the loan buyer can opt to hold a direct claim on the borrower.
B. are transferred on sale, meaning the loan buyer now holds a direct claim on the borrower.
C. are not transferred on sale and can be sold later.
D. None of the listed options are correct.

32. With over $1200 billion in doubtful and troubled loans on their books in the early 2000s, _________ banks presented a
huge potential market for the sale of distressed loans.
A. Australian
B. US
C. UK
D. Japanese
33. Choose the correct answer:
A. Regulatory taxes such as reserve requirements create an incentive for banks to remove loans from the balance sheet
by selling them without recourse to outside parties.
B. Regulatory taxes such as reserve requirements create an incentive for banks to offer low rate mortgages.
C. Regulatory taxes such as reserve requirements create an incentive for banks limit their lending to large corporates
only.
D. None of the listed options are correct.

34. Creating mortgage-backed pass-through securities:

A. can largely resolve the duration and illiquidity risk problems for a FI.
B. would not have any effect on the duration and illiquidity risk problems for a FI.
C. can worsen the duration and illiquidity risk problems for a FI.
D. None of the listed options are correct.

35. Burn-out factor is the aggregate percentage of the mortgage pool that:
A. has been prepaid prior to the sale of the loan.
B. will be paid after the month under consideration.
C. has been prepaid prior to the month under consideration.
D. has defaulted.

36. The ___________ is an accrual class of a CMO that makes a payment to bondholders only when preceding CMO
classes have been retired:
A. A Class
B. B Class
C. Z Class
D. R Class

37. Choose the correct answer:

A. While pass-throughs and CMOs remain on banks and building societies balance sheets, mortgage-backed bonds
(MBBs) remove mortgages from balance sheets as forms of off-balance-sheet securitisation.
B. While pass-throughs and CMOs help banks and building societies remove mortgages from their balance sheets as
forms of off-balance-sheet securitisation, mortgage-backed bonds (MBBs) normally remain on the balance sheet.
C. Pass-throughs and CMOs are the same as mortgage-backed bonds (MBBs).
D. None of the listed options are correct.

38. Pass-throughs, CMOs and mortgage-backed bonds have been used for:
A. car loans.
B. credit card receivables.
C. commercial and industrial loans.
D. All of the listed options are correct.

39. Collateralised debt obligation (CDO) is:

A. an asset-backed bond issued in multiple classes or tranches.
B. a mortgage issued in multiple classes or tranches.
C. unsecured notes issued in multiple classes or tranches.
D. commercial paper issued with collateral.
40. Correspondent banking is a relationship between:
A. banks in two different countries.
B. a commercial bank and an investment bank in which the investment bank provides a number of deposit, lending and
other services.
C. a small bank and a large bank in which the large bank provides a number of deposit, lending and other services.
D. a large bank and non-banking financial institution.

41. Costs of securitisation include:

A. costs of public/private credit risk insurance and guarantees.
B. costs of over-collateralisation.
C. valuation and packaging costs (the cost of asset heterogeneity).
D. All of the listed options are correct.

42. Asset securitisation is where:

A. existing securities are sold to create a pool of funds for investment in income assets.
B. securities are created based on house loans and income payments from the house owners are then paid to the
investors.
C. securities are created based on a pool of underlying assets and the value and income payments of the securities are
derived from the underlying assets.
D. All of the listed options are correct.

43. Timing insurance is a liquidity support provided to the special purpose vehicle to cover mismatches of cash flows:
A. from its accounts receivable and accounts payable to all stake holders.
B. from its investment income and current liabilities.
C. between the underlying mortgage pool and those required to be paid on the securitised assets.
D. None of the listed options are correct.

44. A normal bond values fall with interest rate increases but the following bond often has a negative duration and
therefore it is potentially attractive to banks and non-bank FIs seeking to hedge their regular bond and fixed-income
portfolios.
A. A Class
B. B Class
C. Z Class
D. R Class

45. Illiquidity is a problem to an FI because while FI:

A. liabilities tend to be highly illiquid; its assets usually are not.
B. assets tend to be highly liquid, its liabilities usually are not.
C. liabilities tend to be highly liquid, its assets usually are not.
D. None of the listed options are correct.

46. When current mortgage rates fall sufficiently low that the present value savings of refinancing outweigh the cost of
prepayment penalties(and other fees and costs), the mortgage holders are said to have a valuable:
A. put option.
B. call option.
C. forward agreement.
D. futures contract.
47. Which of the following is not a factor that may tend to increase loan sales in the future?
A. There is an increased trend to apply credit ratings to loans offered for sale, increasing the attractiveness to secondary
market purchasers.
B. Because of their special credit monitoring skills, FIs have a comparative advantage in making loans to
below-investment grade companies and then selling the loan.
C. The trend toward marked-to-market accounting for assets makes bank loans more like securities so they may be easier
to sell.
D. The risk-based capital requirements of the Bank for International Settlements give banks a strong incentive to sell
housing loans to decrease their amount of risky assets.

48. The implementation of BIS capital requirements may be expected to:

A. increase the downward trend in loan sales because of higher required capital levels.
B. increase the downward trend in loan sales because of the use of risk adjusted assets.
C. decrease the downward trend in loan sales because of the use of risk adjusted assets and because of higher required
capital
D. decrease the downward trend in loan sales because of the use of risk adjusted assets and because of lower required
capital levels.

49. Which of the following is true concerning loans sold without recourse?
A. The loan sale is technically removed from the balance sheet ..
B. The buyer cannot put the loan back to the selling FI.
C. The FI has no explicit liability if the loan eventually goes bad.

50. Mortgage-backed bonds (MBB) differ from pass-throughs and collateralised mortgage obligations (CMOs) in which of
the following ways?
A. The MBB bondholders have a junior claim to assets of the FI.
B. There is no direct link between the cash flow on the mortgages backing the bond and the interest and principal
payments on the MBB.
C. The assets backing a MBB issue are normally removed from the balance sheet of the FI.
D. Tranches of a MBB are treated equally with respect to prepayments on mortgages backing the bond issue.

51. Collateralised Debt Obligations (CDOs) were responsible for significant damage and disruption to global financial
markets as:
A. investors accepted the recommendations of CDO arrangers and rating agencies.
B. many investors were unable to assess the fairness of prices.
C. the securities' cash flow was based on cash flows from other financial securities and not the cash flows from real
assets.
D. the CDOs' cash flows were based on cash flows from real assets and not from other financial securities.

52. Banks have been partially responsible for big corporate collapses such as Enron.
True False

53. Credit card facilities is a revolving loan product.

True False
54. When a portion of a loan is sold from a large bank to a small bank, it is often called a participation.
True False

55. A bank loan sale occurs when an FI originates a loan and sells the loan with or without recourse to an outside buyer.
True False

56. The buyer of a loan participation benefits because the only risk exposure is to the borrower.
True False

57. One way to boost the capital to assets ratio of an FI is through loan sales.
True False

58. Securitisation removes assets (such as loans) from the balance sheets of FIs, similar to loan sales.
True False

59. Interest rate swaps are used to assist in interest rate risk management of the securitised assets.
True False

60. While collateralised mortgage obligation (CMO) is still the primary mechanism for securitisation, the pass-throughs are
second and growing vehicle for securitising bank assets.
True False

61. Collateralised mortgage obligation (CMO) is a mortgage-backed bond issued in multiple classes or tranches.
True False

62. When an FI sells a loan without recourse, the credit risk of the loan is completely eliminated.
True False

63. When a Special Purpose Vehicle (SPV) creates asset-backed securities, the SPV retains ownership of the original
assets.
True False
64. Graphically show the basic structure and the movement of cash flows in a simple securitisation program.

65. What are four reasons why an FI may prefer the use of either pass-through securities or CMOs to the use of MBBs?

66. What is prepayment risk? How does prepayment risk affect the cash flow stream on a fully amortised mortgage loan?
What are the two primary factors that cause early payment?
Chapter 08 - Testbank Key

1. A loan provided by a group of FIs as opposed to a single lender is called:

A. a joint loan.
B. project finance.
C. a syndicated loan.
D. a multiple loan.

Difficulty: Easy
Learning Objective: 08-01 Discover why FIs sell loans.

2. Which of the following statements is false?

A. Default risk is the risk that the borrower is willing but unable to fulfil the terms promised under loan contract.
B. Default risk is the risk that the borrower refinances the loan before maturity.
C. Default risk is the risk that the borrower is able but unwilling to fulfil the terms promised under loan contract.
D. Default risk is the risk that the borrower is unable and unwilling to fulfil the terms promised under loan contract.

Difficulty: Medium
Learning Objective: 08-03 Understand how FIs use loan sales and securitisation to manage interest rate risk.

3. Which of the following statements is true?

A. Zero-coupon corporate bonds are bonds without any intervening cash flows between issue and maturity and thus these
bonds typically sell at a large discount from face value.
B. Zero-coupon corporate bonds are bonds with semi-annual cash flows between issue and maturity and thus these
bonds typically sell at a large discount from face value.
C. Zero-coupon corporate bonds are bonds without any intervening cash flows between issue and maturity and thus these
bonds typically sell at a small discount from face value.
D. Zero-coupon corporate bonds are bonds with annual cash flows between issue and maturity and thus these bonds
typically sell at a large discount from face value.

Difficulty: Medium
Learning Objective: 08-06 Be able to identify the different forms of securitisation available to FIs.

4. Besides reducing credit risks, an FI has an incentive to sell loans it originates for all of the following reasons except to:
A. geographically diversify.
B. decrease core deposits.
C. lower reserve requirements.
D. lower capital requirements.

Difficulty: Medium
Learning Objective: 08-03 Understand how FIs use loan sales and securitisation to manage interest rate risk.
5. Which of the following is not true of a loan that is sold without recourse?
A. The loan is removed from the FI's balance sheet.
B. The FI has no explicit liability if the loan eventually goes bad.
C. The FI that originated the loan bears all the credit risk.
D. The buyer can put the loan back to the selling FI.

Difficulty: Medium
Learning Objective: 08-03 Understand how FIs use loan sales and securitisation to manage interest rate risk.

6. Which of the following is true concerning loans sold with recourse?

A. Most loans are sold in this manner.
B. The buyer cannot put the loan back to the selling FI.
C. The FI has no explicit liability if the loan eventually goes bad.
D. The FI that originated the loan retains a contingent credit risk liability.

Difficulty: Medium
Learning Objective: 08-03 Understand how FIs use loan sales and securitisation to manage interest rate risk.

7. Which of the following observations is not correct?

A. Most loans are sold with recourse.
B. Loan sales are a primitive substitute for securitisation.
C. Selling of a loan creates a secondary market for loans.
D. Ownership of the loan is always transferred to the loan purchaser.

Difficulty: Medium
Learning Objective: 08-03 Understand how FIs use loan sales and securitisation to manage interest rate risk.

8. What are the two basic types of loan sale contracts or mechanisms by which loans can be transferred between seller
and buyer?
A. participations and assignments
B. participations and originations
C. syndications and originations
D. transfers and assignments.

Difficulty: Medium
Learning Objective: 08-02 Learn about the types of loan sales contracts.

9. Currently, this basic type of loan sale contracts comprises the bulk of loan sales trading.
A. participations
B. originations
C. syndications
D. assignments

Difficulty: Medium
Learning Objective: 08-02 Learn about the types of loan sales contracts.
Discovering Diverse Content Through
Random Scribd Documents
 He offered money for Philip's claim--a large sum. Philip and his
mate shook their heads. Mr. Hart would have been glad to sell his
share; if he had one-eighth of what William Smith offered, the white
sails should spread for him over the seas, for Home, dear Home! But
he decided that it would be base to sell; it would be like deserting
Philip. "I'll wait yet a little while," he thought. "A few months will
soon pass."

William Smith tempted him. Philip stood by.

Mr. Hart declined, and saw in the look of joy which flashed into
Philip's face what pleasure his refusal had given the young man.

The largest retorted cake of gold that had been produced for
many a score of miles round was produced from a great crushing
out of Philip's claim. It weighed no less than two thousand two
hundred ounces. It was exhibited in the principal gold-broker's
window on a Saturday, which was the busiest day in the township.
On that day all the gold-diggers and their wives and children came in
from the hills and gullies, and made their purchases. A more bustling
scene of its kind could not be witnessed in any other part of the
world. All day long the diggers and the women poured in, from east,
from west, from north, from south. Where a storekeeper took ten
pounds on another day, he took fifty on a Saturday. You should have
seen the theatre on Saturday nights.

The people stood round and about the gold-broker's window, and
those who were nearest stared and stared, and those who were
farthest away peeped over their neighbours' shoulders, at the great
beautiful cake of gold, duly labelled. Two thousand two hundred
ounces It made every one's mouth water.

But on the Monday morning following this splendid exhibition,

Philip arriving at his claim--he had spent the Sunday with Margaret--
found the miners standing about in idleness: which was not the way
of the men. A part of the shaft had fallen in, and they were waiting
to know what to do.

"Do!" exclaimed Philip. "Go down, of course."

And down he went, and made an anxious and critical

examination. When he came up again he decided to get the
Government mining surveyor to report upon the condition of the
shaft. This was done, and the surveyor gave certain directions. The
shaft would have to be slabbed round all its sides for fifty feet from
the surface--boxed in as it were. Until then it was not safe to work
below. The slabbing was done; it occupied a week, and cost some
money.

Philip fretted at the delay, and no one was glad but William Smith.
He rejoiced. He had not one particle of malice in his nature, but he
said quietly to himself, "I'd like that shaft to cave in from top to
bottom. Perhaps they'd sell it to me then."

Margaret heard of the disaster--from William Smith's lips, I think.

She turned white, and clung to Philip on the night she heard the
news. He was annoyed that she knew, but what was there to be
frightened at? he asked.

"Frightened at!" she cried. "Oh, Phillip! how can you ask? The
shaft will fall in again----"

"How do you know that?"

"I know it--I feel it! And you will be underneath, perhaps!----"

She could not proceed for her terror. He could not but feel glad at
this solicitude for him, and he used lover's arguments to prove that
there was no danger. These arguments were sweet and delicious to
her, but they had a contrary effect from that which he intended.
Making her love him more, they made her more anxious for his
safety.
 "Promise me not to go down," she begged. "Promise me to work
at the top.

"And let another man be crushed in my place?" he said proudly.

She shuddered, and held him closer to her. "Not if I know it!"

"Then you don't value my life?" she cried, with womanly tact and
womanly unreason.

"Your life, my dearest! not value your life, when a single hair of
your head is more precious to me than all the gold in Silver Creek!"

"No," she persisted, "you don't value my life, when you are
determined to risk it in this way."

"What are you talking about, Margaret? I risk your life!"

"Yes," she cried, "you are about to do it. For if anything happens
to you, I shall die."

To pacify her he was compelled to promise that he would not go

down below, but he did not keep his word. It was not often he broke
it, but here his manhood was in question. He was not going to shirk
his fair share of risk. He did not deceive Margaret long, however. She
coaxed Mr. Hart to take her to the Reef one day, and did not scruple
to say that Philip expected her. When they arrived at the shaft, she
was told that Philip was below. White from apprehension, she
walked a few yards away, and sat down upon a trunk of a tree, while
the workmen from a distance gazed at her lithe and graceful form
with respectful admiration.

"Phil Rowe's a lucky fellow," they said.

Mr. Hart passed the word down for Philip to come up, and up he
came, strong and handsome, with the veins standing out on his bare
arms and throat: a fair sight for a woman who loved him. But
Margaret turned from him, and repulsed him, secretly admiring him
all the while for his courage.

"This is the way that men deceive women," she said--"promising

one thing and doing another!"

Had she been a scholar, she might have flung at him the proverb,
"False in one thing, false in all," but she was only a woman in love.
Besides, she would have known that there would have been no truth
in the proverb, in this case. Perhaps that would not have mattered,
though. Women are queer logicians; their logic comes from the
heart, not from the head.

"What can I do?" he asked, after listening to her reproaches. "You

don't want people to think me a coward, do you?"

"If they dared to say so!" she exclaimed, with a motion which
implied that she would defend him.

"They will say so if I do as you wish," he said; her hand was in his
now: he did not mind the workmen seeing. "No, no, Margaret. Your
word shall be law in everything but this, Women don't understand
these matters." She tossed her head disdainfully. "Besides, don't I
want to get rich for my Margaret's sake?"

"Rich!" she exclaimed. "Why, you have thousands of pounds!"

"I want thousands more to throw into your lap."

She wavered a little, for just three seconds.

"No," she said then. "You don't want thousands more, if your life
is to be risked in the getting of them, Philip," and she looked at him
earnestly, "if you were a beggar, I should not care."

"Do you mean to say you would love me all the same?"
 "Yes; and work for you, if it was necessary."

She meant it. However, she did not persuade him to act as she
wished. But things were working in her favour.

Within a few hours of this conversation, Philip, still working below,

made a disheartening discovery. They were preparing for a blast. He
was holding the gad, while a workman was striking it on the head
with his hammer. Half an inch this way or that, and Philip would
have been maimed for life, but it was seldom a man was so unskilful
as to cause an accident in this way. The hole for the gunpowder was
two feet deep, and Philip lifted up the gad and spooned out the
dust. It came up in a liquid state; Philip looked anxious, and more
anxious still, when the whole was cleared, to see water bubbling up.
They had struck a small stream. It was not very serious at first. They
continued working during the day, and fired the blast the last thing
in the evening, before knocking off work. When Philip went down
the shaft the next morning, he stepped up to his waist in water.
They set to manfully, and baled it out; more than half the working
hours of the day were lost in this necessary labour. They dug a shaft
within the shaft, to serve as a well, and so managed to keep
themselves tolerably dry; but the water came in faster and faster.

William Smith smiled and rubbed his hands. The claim was
already as good as his; he began already making bids for other
claims, north and south. In his mind's eyes he mapped everything
out. He saw himself king of this great range. He saw a happy village
springing up. Here should be this; there should be that. Tents for the
gold-diggers here; a wooden house for himself there. On this spot
should be a church; on that a school-house. He saw a well-dressed
and happy congregation, his workmen and their families, walking
from the church on the Sabbath day, smiling and talking together:
he saw the children trooping out of the school-house after school
hours, and the schoolmaster standing in the porch, with his cane
under his arm: joy stirred in his heart as he fancied these things,
and as he heard the shouts and hurrahs of the youngsters. There
should be gardens too; yes, every tent should have its garden. He
saw the cabbages and peas coming up; flowers also. He went to the
highest point of the range, and folding his arms, looked down upon
his kingdom. It had been a pleasure to him hitherto to make money,
but he had not thought much of it. He had made it so easily, that his
heart had scarcely been fluttered by the success of his speculations.
But now, as he contemplated the realisation of his pet scheme,
money was really sweet to him for the first time.

The quartz-crushing machine hammered away as steadily as ever,

the water in Philip's claim increasing in volume every day. It served
one good purpose. A race was made from the shaft to the dam, and
a continual stream of water was running down it.

"You ought to pay us for the water," said Philip's mate.

"You ought to pay me for taking it," said William Smith.

Matters were growing serious. Out of every twelve hours they

could work in the quartz but three.

Yet I do not think that William Smith would have obtained the
claim, if it had not been that a woman was on his side.

CHAPTER XIX.

MR. HART DECIDES TO WAIT A LITTLE LONGER.

 Margaret had a tender, yielding nature, but she was firm withal. It
is surprising how determined these soft weaker vessels can be! And
they generally get their way. If men, in addition to their naturally
greater strength of character, possessed woman's delicate cunning,
great results would be accomplished. But men are deficient in
finesse. The nature of many a great diplomatist has assimilated
closely to that of a woman. A clever man can do fine things, but a
clever woman with the same opportunities would beat him hollow.

William Smith, then, found an ally in Margaret. She ran up her

colours by the side of his, and declared war against Philip. Innocent,
unsuspicious Philip knew nothing of the confederacy; and this is the
way his treacherous Margaret undermined the fortress of his
resolution.

On one day, "Am I not growing pale?" she asked of him, in a

plaintive tone.

Philip, gazing at her in tender solicitude, saw that she was a

shade paler than usual.

"And thin, Philip. Feel my arm." He obeyed her. "I'm wasting

away," she said.

Now, that Margaret was a little paler than usual is not to be

disputed. She had contrived it; by what means, I am not sufficiently
in the mysteries to state.

That she was any thinner, I deny. Yet Philip thought differently
from me. But he was in love with Margaret; while I---- No, I must
not write what was about to glide off my pen. The pen tells many
untruths, and I will not add one to the number on this occasion. I
also love Margaret.

"You are working too hard," said Philip.

"No, it is not that," sighed she.

 "You want a rest, my darling."

"It would do me no good, Philip."

"You are worrying yourself about something."

She sighed. It was a most eloquent affirmative. Then Philip

paused. He felt that he had touched dangerous ground. Seeing that
Philip did not speak, she used her tongue.

"Yes, I am indeed worrying myself about something. It will be the

death of me, Philip."

"Nonsense, my darling, nonsense."

"I should not speak of your death in that way, Philip!"

The ground was crumbling beneath him.

"You are in low spirits, Margaret. You must rouse yourself for my
sake."

She shook her head. "I would do anything for your sake, Philip.
But I seem to have no strength left."

"Ah! that's it," he said eagerly, catching at a straw; "you are weak
and low; you must eat strengthening things."

(Soft-minded fellow! as if, in her languid condition, she was not

stronger than the strongest man!)

"Strengthening things!" she echoed, in a tone of soft reproach.

"And you must drink bottled stout. A bottle every day," he said
uneasily.

"Bottled stout!" she echoed, in the saddest of tones, which,

although she did not say so in as many words, conveyed a distinct
denial that bottled stout was a cure for a breaking heart.

On another day it was--"I had a dreadful dream the night before

last, Philip."

"There! there! frightening yourself with fancies."

"They are killing me, Philip. I dreamt about you and the shaft. You
were working at the bottom. I don't know where I was standing, but
dreams are such curious things you know, Philip. I was standing
there, and saw you below, and I saw the men at the top, also,
working. I saw right down the shaft, Philip, and all at once there was
a great crying and screaming, and the men flew wildly about. The
shaft had fallen in, and you were buried beneath tons and tons of
earth. I could see you even then, holding out your hands to me, and
crying to me to help you!"

Margaret's eyes were full of tears, and she shivered and cowered.
And I declare I do not know how much of this was acting and how
much was genuine.

What could a man do under this sort of persecution? What can he

do but yield?

"But, Margaret," said Philip, "we are young, we are strong. It

would be folly to go away from Silver Creek, where we are making
so much money."

"I don't want to go away from Silver Creek," she replied, her heart
beating a little more quickly. "I love the place; if it had not been for
Silver Creek, we might never have met, Philip. I can show you a way
to make more money than you are making at the Margaret Reef. Ah,
how good of you to name it after me! Yes, I can show you how to
make more money."

"You show me a way how to make money, little woman! Why,

what is there in that pretty little head of yours?"
 He took it between his hands and kissed her lips.

"Look straight into my eyes, Philip. Don't they sparkle?"

"Sparkle, my dear little woman! They are the stars in my heaven!"

"But more than usual, Philip? Are they not brighter than usual?"
(She made them so.) "Well, now, what makes them so bright just at
this moment? I'll tell you without asking. I know you are going to
say yes to what I shall propose, and that fills my heart with joy. My
heart is in my eyes, because--because, Philip---- Turn yours away,
sir! I don't want you to look at me---- Because, I think we might be
married next week."

He caught her in his arms, and tried to raise her face to his; but
she hung her head, and murmured that she would never be able, for
shame's sake, to look at him again if he did not consent at once to
what she was about to propose.

"Well, what is it, Margaret? What is it?" he asked, in a rapture of

happiness.

"I can't tell you, Philip," she murmured, with her lips close to his
ear, "unless you say 'Yes' beforehand."

"Yes, then," he cried. "Yes, a thousand times over!"

Who was the weaker vessel? Margaret or Philip! Really, we have

accustomed ourselves to believe in some very fine delusions.

"Well, then," she said, "buy Mr. Smith's hotel and theatre. You will
make more money in twelve months than you can get out of your
claim in three years."

He was staggered at the suggestion, and was not displeased at it.

But after a little consideration he said he was sure that Mr. Smith
would not sell a property so valuable. Margaret knew better. All the
while William Smith was dropping quiet hints to her as to the
dangerous condition of the shaft in which Philip was working, the
eyes of Margaret's mind were piercing him through and through.

William Smith himself would have been surprised if he could have

heard her summing-up of him. But it is the way of this kind of
woman--and let me tell you her name is legion. You and she are in
the same room for five minutes, and she never raises her eyes to
your face, and when you go out she can make an inventory of you,
from the way you part your hair down to the style of your shoe-
strings. She knows a great deal better than you whether your
clothes fit well or ill, and whether your hands and feet are nice, and
I do not think you would care to consult her physiognomically. If you
knew what was going on within that little head while her eyes are
directed demurely towards the carpet, it might make you
uncomfortable. How she gained the power of discovering occult
things is a deep unfathomable mystery.

Margaret was one of this kind of women. She had read William
Smith through and through, and she talked and talked to Philip until
he said he would consult Mr. Hart. Mr. Hart was called in. He thought
the idea a fine one; he was filled with grave doubts of the safety of
the shaft in which Philip was working, and in a lesser degree shared
Margaret's apprehensions. He also thought that William Smith would
be willing to come to an arrangement.

Suddenly Philip said:

"I'll do it on one condition, supposing it can be done. Mr. Hart

must join us, and become a partner. You want to go home, I know,
old fellow, but if you will stay with us for six months and see us fairly
afloat, I'll put you on the ship myself at the end of that time with a
clear four thousand pounds in your pocket, and wish you good-bye
and God speed, and in less than two years Margaret and I will be
after you, and we'll all settle down together in a spot I know of, you
and your darling, and I and mine."
 Margaret clapped her hands in delight.

"I say 'Yes' for him!" she cried.

"I say 'Yes' for myself," said Mr. Hart, without hesitation.

He knew that the share of gold he had received out of the claim
would be required in the transaction of the business, and he
considered that Philip had a right to dispose of it.

He was appointed agent to moot the proposal to William Smith,

and carry it through if it was well received. Philip had not a
sufficiently calm head for the transaction. Mr. Hart did his work well;
William Smith entertained the scheme, chuckling quietly while it was
being propounded, and of course made a good bargain. There was
no delay. In four days (William Smith having bought out Philip's
mate) William Smith was master of the quartz reef, and Philip was
the proprietor of the Rose, Shamrock, and Thistle Hotel and
Restaurant and the Theatre Royal, Silver Creek. As Mr. Hart had
supposed, his money was required for the completion, of the
purchase. Philip entered into his property free from debt, and with a
good stock in hand, but with very little ready cash. William Smith,
had swept it all into his pocket. But it was a fair bargain. The hotel
was doing a famous business, and money began to tumble in the
first day. On that day the name of the hotel was changed. The new
sign-board hoisted up had on it the words,

"The Silver Flagon."

And the place was crowded with friends and acquaintances drinking
success to it.
 So for the fourth time during the last seven years, Mr. Hart,
having saved sufficient money to carry out the project nearest to his
heart, decided to stay a little longer, and make a little more, before
he took ship for home. But in this last instance, he could scarcely
help himself. Gratitude called upon him to act as he had done, and
he was satisfied that he would be well rewarded for his patience. It
was a consolation and a pleasure to reflect that the date of his
departure was fixed. He had only six months to wait, and he would
carry with him a well-filled purse. He counted the days, and, making
his calculations, he wrote home to his daughter that, in such and
such a month he hoped, with God's blessing, to fold her to his heart,
and that he would never leave her again.

Within a few days of Philip's taking possession of the hotel, he

and Margaret were married. I leave you to imagine the festivities on
the occasion; how handsome, strong, and brave Philip looked upon
that happy morning, and what a fairy vision burst upon his gaze
when Margaret appeared before him in her bridal dress. Margaret's
mother--a short pale woman (what lovely daughters many of these
small thin women have)--was there, approving of everything. She
had also been an actress in her time, and, having had her ups and
downs, was glad to see her daughter well and comfortably settled in
life. But Margaret was a prize which any man might have been proud
to win. The ceremony was a quiet and sober one, but there was
plenty of feasting afterwards. In the hotel there were well-spread
tables during the whole day, free to all comers. There was a private
breakfast, at which Margaret's mother shed tears, and William Smith
and Mr. Hart made fine speeches. Philip, in his speech, broke down
most ignominiously; he could not utter six words in smooth order.
But his face was eloquent, if his tongue was not. The bride was
radiant. A handsomer pair never was seen. They drove away amid
the cheering of a thousand gold-diggers.

In the evening they sat together on the banks of a beautiful river,

rather low in its bed at the time because of the heat. On the distant
hills cattle were browsing and smelling for water. The only sound
that reached their ears was the sound of the woodman's axe. That
came through the air sharp and clear, although the woodman was a
long way off. The lovers, now man and wife, talked in low tones of
their future, and laid their plans. All was smooth before them. No
rough roads, no sickness, no misfortunes. Sunshine was in their
hearts, and there was no shadow in the bright clouds that floated
above them.

"All your acting days are over now," said Philip. "Well," replied
Margaret, "I must act at home."

"All right," responded Philip; "one stipulation, though. No more

than two characters in any of our pieces."

She laughed at this.

"Philip, I hope you love mother!"

"I do love her; she is a dear little woman."

"Do you know that when she was young she was the most
beautiful creature that ever was seen?"

"How could she have had such a lovely daughter if she had not
been lovely herself?"

"Nonsense, Philip; but she was. She has the remains of it now.
Have you noticed her teeth? They are like pearls. And her hands?
Much smaller than mine. She must have been a beautiful actress,
too; she has had verses written about her in the papers. She acted
in the Plymouth and Exeter theatres and was a wonderful favourite.
She had dozens and dozens of offers, and what do you think one of
her lovers was, Philip? Well, but you would never guess. He was a
Jew, and I really think mother was fond of him a little, little bit, from
the way she talks about him. He must have been a god man, but of
course mother couldn't marry a Jew. Wasn't it a mercy she didn't,
Philip, for then what would have become of me--and you? I want
you to love her very, very much; more than you do me, Philip."

"I can't do that, my darling; but I do love her, and will, both for
her own sake and yours, my dearest, dearest! And so we are man
and wife, darling! can scarcely believe in my happiness. You'll not
melt away out of my arms, will you, Margaret?"

"Not if you're very good to me, Philip," she replied, with a tender
nestling motion. "Look at that beautiful cloud, dear."

"It's coming over us, and it is shaped like an angel. I want to hear
you say you love me, Margaret."

"Philip!"
 CHAPTER XX.

THEY FLEW LIKE MADMEN INTO THE TOWN.

Mr. Hart took some interest in home politics--that is to say, in the

politics of the old country; Philip took none, not from lack of
sympathy, but because he had no room. Every nook and corner of
his mind was filled by one idea, which presented itself in a hundred
different shapes; that idea was Margaret.

The Overland Mail came into Silver Creek once a month, pretty
regularly, with letters and papers from home; and if you had seen
the post-office on the day the four-horse coach brought the mails,
you never would have forgotten the sight. Crowds stood around the
doors and windows of the wooden building, for up to the present
time every building in Silver Creek township was either drill, calico,
or wood. There was some talk of a stone building, and when this
was once up, you may be sure that others would soon follow. Well,
around the wooden post-office, hundreds and hundreds of men and
women were assembled when the Overland Mail arrived, waiting for
the windows to open so that they might receive their letters. If the
mail came in somewhat later than usual, the clerks at the post-office
would be kept at work until late in the night sorting the letters and
the newspapers, to allay the anxiety of the people. News from
home! Ah, you who have not been a wanderer, and parted from
friends and relations and all whom you love, do not know what those
words mean! For many hours after the arrival of the Overland Mail,
Silver Creek was filled with tender memories. The faces of those who
received letters from home through the little window lit up with joy;
they laughed at the well-known handwriting and their eyes filled
with tears. Ah! this is from mother. Dear old mother! What a queer
hand she writes! And this from the old boy! And this from Jim! And
this from Arthur! And these from Mary, and Fanny, and Nelly, and
Kate, and Maggie, and I don't know whom all besides! God bless
them every one! There was electricity in the very envelopes, which
went from the tips of the fingers, when the paper was touched, into
the palm of the hand--where hers, and hers, and hers, lay once
upon a time--up the arm, straight into the heart, and illumined faces
there. Very plainly illumined them, I can tell you. Old faces, young
faces, wrinkles and cheeks of peach, eyes dim and bright, parched
lips and lips sweetly fresh, horny fingers and soft, white hair and
brown--all were plain and visible, looking, smiling, speaking to those
who held their letters in their hands. They did not take their letters
home to read; they opened them there and then, and stood about
reading; and their eyes sparkled, and they grew sad, and tender,
and joyous, and pensive, as the news moved them. Those who
received no letters walked slowly and mournfully away.

Always for two or three days previous to the arrival of the mail Mr.
Hart became restless and anxious and impatient. Perhaps it would
come in a day or two earlier, and he was always hoping that it
would. The coach stopped at the hotel, and Mr. Hart would run to
the door, and cry out to Levy the driver, "Brought the mail, Lee?"

He was in that state now, some six weeks after the marriage of
Philip and Margaret. The mail really was due, and the coach had
come in without it. When Levy, who had driven all the way this time,
left town for Silver Creek, the mail-ship was not signalled at the
Heads. It was a great disappointment to Mr. Hart.

Everything was going on well. Since Philip had bought the hotel,
the business had increased, as it would have done under William
Smith's management. Silver Creek was growing more prosperous
every day, and these things were natural. Philip was a favourite; so
was Mr. Hart. As for Margaret, the gold-diggers would flock to the
hotel, and hang about, and talk, and drink, only on a chance of
catching a sight of her; and Margaret knew this, and did not
disappoint them. "There she is!" they would say. The sight of her did
them good. And when she walked out, admiring eyes followed her at
every step. No lady in the world was more genuinely respected and
more highly thought of.

I was almost forgetting to state a little incident. Upon Philip's

return from his honeymoon, he said to Mr. Hart, when they two were
alone together:

"I want you to take care of this packet for me, and to promise me
one thing."

He handed Mr. Hart a sealed envelope, on which no name or

address was written. There was an enclosure in it, somewhat bulky.

"What is the promise, Philip?" asked Mr. Hart, taking the

envelope.

"That you will not, under any consideration, give it to me until we

meet in the old country. I don't want to be tempted."

These singular questions caused Mr. Hart to ask questions, but

Philip would not answer them.

"I want you to accept this trust unconditionally," he said; and as

he was evidently very anxious in the matter Mr. Hart gratified him,
and placed the envelope in a safe corner of his pocket-book.

Philip had commenced business on a straight plan, of which Mr.

Hart fully approved. He took no credit, and when he sent an order to
town he sent the money with it. Being desirous to make money fast,
he cast his eyes further afield than selling grog and beer retail to the
diggers. Why should they not become wine and spirit merchants! He
consulted Mr. Hart; the old man was satisfied to leave everything to
Philip, who went to work with the spirit of William Smith. In a very
short time a great wooden shell was built, and large orders were
sent to town for wines and spirits. On the day the mail was
expected, a long string of bullock-drays wound its way slowly along
High Street, Silver Creek, and stopped at the great wooden shell,
which was the new wholesale wine and spirit store, belonging to
Philip and Mr. Hart. The bullock-drays contained the stock, the
invoices of which had totted up to no less than eight thousand
pounds. Philip had been sending money through the post every day
in payment of this fine stock of goods; about one thousand pounds
remained to be paid, and on the day following the arrival of the
bullock-drays, a draft for this amount was sent to the merchants.
Every shilling in the place had to be scraped together to make up
the sum.

"Now we're all right," said Philip cheerfully; "we don't owe a
shilling in the world, and we have at least eleven thousand pounds
worth of stock in hand. The hotel, theatre, and goodwill are worth
another ten. We'll open the new store to-morrow. Maggie, my dear!
in twelve months we'll be on our way to Devonshire."

That evening the mail from home arrived at Silver Creek. Mr. Hart
was soon at the post-office. There was a letter for him from his
darling child, a letter which made his eyes run over. William Smith
had sent in during the day from the Margaret Reef, asking Mr. Hart
to inquire if there were any letters for him at the post-office. There
was one from William Smith's mother, and Mr. Hart started off to the
Margaret Reef to deliver it to his old friend. He called in at the hotel
to ask if there was any message for William Smith.

"Tell him," said Philip blithely, "that I think we've got the best of
the bargain."

"At all events," said Mr. Hart, "I shall tell him that you are quite
satisfied with it. Any message, Margaret?"
 "Give him my love," replied Margaret, "and say we're all coming to
dine with him next Sunday, and that he's to get something nice for
dinner."

Mr. Hart nodded and walked away. He was in a tender and serious
mood. The letter from his daughter had somewhat disturbed him. Its
tone was as affectionate as usual; but hidden in its words, like the
scent of a flower in its leaves, was a confession of unhappiness. It
was not expressed in so many words. The writer told him this and
that, as she was in the habit of doing, and a stranger reading it
would have said, "It is a happy girl who wrote this letter." But Mr.
Hart read with the heart of a father, and he saw what would not
have been visible to others. He seemed to hear his daughter whisper
to him to come home and counsel and advise her--to come and love
and protect her. It made him terribly uneasy.

"When the six months are up," he thought, "I will not wait
another day. Father and daughter should be together; she is just of
the age when a girl most needs a father's love and care. Thank God,
there is not long to wait; in a little more than four months I shall
turn my back on Silver Creek."

And yet the thought brought a certain regret with it. Silver Creek
had been a good place for him, and he had cause to bless the day
he entered it, with his company of actors and actresses and his
weak-kneed horse. He paused at the foot of the Margaret Range,
and thought of the first day he had seen it, and how he had debated
whether he should ascend it or not.

"The happiness of our lives hangs upon chance," he said. "If I

had not ascended this hill I should not have made the acquaintance
of Philip in the way I did. We should not have been together now,
and I should not have had the means of joining my child and making
her life happy. Four thousand pounds! Aha! Gerald! Fly away, time!"
 He called it out to the hills, as a light-hearted boy might have
done.

He found William Smith in all his glory. The hill was alive with
men. Philip's claim was in full work; a steam-engine was at the top
of it, puffing and blowing day and night, pumping up the water. The
William Smith quartz-crushing machine was thumping away merrily.
New veins of golden quartz had been discovered, and were being
worked. Some of the workmen's slab huts were already erected, and
the plots for kitchen-gardens laid out. Two or three score of goats
were scampering about; in the fowl-houses roosted five hundred
head of poultry; women were hanging clothes on the lines to dry;
children were running after one another and playing. William Smith
was supremely happy and satisfied with himself. He stood there,
dusty and brown, with his sleeves tucked up, a king. He conducted
Mr. Hart over the ground, and showed him what he had done, and
told him what he intended to do. Everything was planned and
arranged in an admirable way. William Smith, in this carrying out of
his ambition, was an enthusiast, but he was no dreamer. He was a
practical man to the edges of his nails.

"I will ride back with you," he said to Mr. Hart, "and sleep at the
Silver Flagon to-night, if you will stop with me till ten o'clock."

Mr. Hart consented, and went among the workmen, and talked
with them while William Smith read his mother's letter. They had
supper together, and a pipe afterwards, and sat outside William
Smith's wooden house, which had a fine broad verandah all round it.

"See this place in twelve months," said William Smith, "and you'll
not know it."

"I shall be away then," said Mr. Hart, "and shall be hearing one
day that you are at the head of the Government."

It was not by any means a wild supposition. William Smith would

not have been the first working man who was gazetted prime
minister in the colonies.

Night came on. The day-men were at home enjoying their ease;
music was heard in various tents. Their was no moon. At a little
before ten o'clock it was dark. No part of Silver Creek township could
be seen from the Margaret Range. Exactly at ten o'clock Mr. Hart and
William Smith were in the saddle.

They rode slowly. Over one range, over another, along a valley, up
another range.

"We shall see the township soon," said William Smith. "What are
you stopping for?"

Mr. Hart had reined up suddenly.

"I don't know," replied Mr. Hart; "something in the air. Look
yonder; what is that light in the sky?"

A pale red light was coming in the clouds.

"The moon rising," said William Smith.

"There is no moon to-night."

"Ah! no; I forgot."

They rode up the range; it was steep and stony, and their horses
stepped carefully; the light in the sky became stronger--more lurid;
up they toiled; they were nearly at the top. They spoke not a word
to each other, but their anxious eyes were fixed upon the sky.
Deeper and deeper grew the colour, wider and wider it spread; and
a sound like a muffled roar came to their ears.

"Now then," cried William Smith to his horse, and gently touching
it with his whip. "Up with you, my lad!"
 The horses leaped onwards, and when they reached the top of
the ridge, stopped suddenly, in obedience to the action of their
riders.

"Great God!" cried Mr. Hart; "the township is on fire!"

They saw now the meaning of the lurid sky. A vast sheet of flame
was before them extending this way and that, licking up everything
before it. They could hear the dull roar of the fire and the cries of
the people, who were rushing wildly about. They paused but for one
instant. The next they were galloping madly towards the township;
their horses needed no urging, they flew like the wind.

"Are you insured?" shouted William Smith.

"Not for a penny," answered Mr. Hart, with a spasm in his throat.

"The stores will burn like tinder," muttered William Smith between
his clenched teeth.

They flew like madmen into the town.

CHAPTER XXI.

DRIVEN BY LOVE INTO THE JAWS OF DEATH.

By the time Mr. Hart and William Smith reached the township,
there was a straight sheet of fire, more than a mile in length. At
least three hundred stores were in flames. Silver Creek could boast
of a volunteer fire brigade, and the brave fellows worked at their two
small fire-engines with the perspiration pouring down their faces in
streams, but they might as well have pumped water into the creek
for all the good they did. However, they worked away, approaching
as close as they dare to the immense body of flame; those who
were closest to the burning stores directed their hose towards the
blazing rafters, whilst their comrades pumped upon them to prevent
their catching fire. The shouting, the screaming, the confusion were
terrible; loud cries ran along and about the crowd with the rapidity
of the flame itself, and every few moments another store on each
side of those already on fire caught light. Strange to say, no attempt
was made to stop the fire by pulling down the buildings on either
side, and so create a gap across which the flames could not leap.
The only thought that people had was to save their goods; but even
as it was, very little was preserved from destruction.

When Mr. Hart and his companion plunged into the crowd, their
first thought, of course, was of the hotel and theatre.

"Ah," said one and another, "here's Mr. Hart! Here's William
Smith!"

They made way for these two men, who ran rapidly along, and
found that the hotel had just caught fire.

"Where's Margaret? Where's Philip?" cried Mr. Hart, with anxious

glances around.

At that moment he cared not one pin for the destruction of his
property; he saw the flames beggaring him, but he paid no heed to
them. Time to think of that afterwards. All that he cared for now was
the safety of Margaret and Philip.

"Where's Margaret? Where's Philip?" he cried.

Some man among the crowd answered, that Margaret had last
been seen going into the hotel before the fire had reached it, and
that she had not come out.
 "Good God!" groaned Mr. Hart, and would have plunged into the
flames but that they held him back.

At that moment Philip, who had been working half a mile away,
saving life and property with the strength of a young Hercules, was
running towards the hotel. Amidst the excitement of rushing into the
blazing stores, and pulling sleeping children and weak women out of
the jaws of death, he had not thought of his own property, and did
not know that it was on fire. Indeed, no man would have conceived
it possible that the flames could have reached the hotel in so short a
time. Now, Philip said to himself, he must get to his own place, and
see what was best to be done. He was a little bit concerned about
Margaret. "I must get her away from this," he thought. "When I see
her in a place of safety, I can come back and do my work." But as he
ran towards his hotel, the rumour ran from it that it was burning.

"The Silver Flagon's caught!" shouted the gold-diggers, one to

another, and the news was carried along past Philip, who received it
as he ran.

"Ah!" he muttered, with a great sigh, "there's an end to that. We

are ruined men. Poor Mr. Hart, poor Mr. Hart! And I persuaded him
to stop."

The thought that he himself was ruined scarcely disturbed him.

Ruined How could he be ruined, when he had Margaret? His heart
was almost light as he thought of his darling woman, but in the
same moment his hair seemed to rise from his head with horror as
he heard some one say:

"The Silver Flagon's down, and Mrs. Rowe's inside!"

"What what!" he muttered, dazed for a moment, and then he

screamed:

"O my God!"
 And, with a cry so terrible as to startle all who heard it, he
plunged madly towards the spot where he had last seen his beloved.

He reached it, hot, black, panting, with his hair streaming to his
shoulders, and his blue eyes gleaming wildly.

"Keep him back! Keep him back!" they shouted and laid hands on
him.

But he dashed them aside as though they had been so many

feathers, and, with knitted brows and lips tightly closed, and breast
that heaved as though it would burst, he ran with swift desperation
into the flames. A spasm of horror rose to the throat of every looker-
on, and kept him silent for a moment. During that brief moment,
which seemed an hour, their eyes were strained in the direction of
Philip's flying form. They could see him beating the flames away with
one hand, while his other arm was raised to save his eyes from the
fire. Only for a moment was their attention thus occupied; the sound
of a familiar voice fell upon their ears; they turned, and to their
amazement, saw Margaret moving among them. Her hair was
hanging loose, and she was seeking for Philip's face among the
throng of bearded men. She knew all the faces that were about her,
but she did not recognise one of them until she saw Mr. Hart's. To
him she ran, and asked if he knew where Philip was. The men still
had their hands upon Mr. Hart, and the look of horror in his face
answered her. Following the direction of his eyes, which were fixed
upon the burning hotel, she in her turn saw the outline of her
Philip's form struggling through the flames. All this was the work of
two moments.

"Philip Philip!" she screamed, and ran towards him.

It was useless now to attempt to hold Mr. Hart; he broke from the
prison of their arms as easily as Philip had done, and wound his
around Margaret.
 "O merciful God!" she screamed, tearing at the air. "Philip! Philip!
I am here! Margaret is here!"

All on fire as he was, her voice reached him; he made an effort to

escape, and by love's instinct in the direction where Margaret was.
But he fell among some falling rafters, and seemed to be of them;
and as he fell, a gasp of mingled anguish and joy escaped his
bursting heart; it sounded like "Margaret!" Then Mr. Hart, with swift
and furious action, resigned Margaret to the arms of the miners, and
flew into the flames towards his friend. All the strength and dexterity
of his youth came back to him; he had marked the exact spot where
Philip had fallen, and he darted to it with an eagle's keen sight, and
rushed out of the flames, dragging Philip's insensible form after him.
They were both on fire; but fifty blankets were flung over them with
lightning rapidity, and a hundred pitying arms were stretched forth
to bear them tenderly to a place of safety.

CHAPTER XXII.

"DEAR OLD FELLOW! GOD BLESS MARGARET AND YOU!"

THE sun rose next morning upon a sad sight. High Street, Silver
Creek, was nothing but a long line of ruins. More than five hundred
stores had been burnt to the ground. All over the gold-diggings work
was suspended, and the diggers flocked in to see the sight. They did
not stand idly by; they tacked up their sleeves, and every European
and American there gave a day's work for nothing. William Smith
sent orders to the Margaret Range; the William Smith quartz-
crushing machine was stopped, and all the workmen came in to lend
a helping hand. They did wonders under William Smith's directions;
he was to many what sound wine is to enfeebled bodies. He
strengthened, sympathised, encouraged, all in a breath, and set a
fine example by working as zealously as the most zealous. It was
not with him "Do as I say," but "Do as I do." The first duty of the
workers was a solemn one: to find the ashes of those who had been
burnt to death in the fire. Five persons were known to have
perished--among them Margaret's mother. Strangely enough, no one
had thought of her while the fire was raging; in the larger interest
that centred around Margaret and Philip this poor little quiet woman
had been forgotten. Very tenderly and gently were the remains of
the dead gathered from the ruins; they were but blackened cinders,
which crumbled almost at the touch; and awe and grief were on the
faces of the rough men as they deposited the sad heaps on ground
made sacred by its burden, and covered them over with blankets.
This duty performed, their thoughts turned to other and more
cheerful matters, and they bustled briskly about.

Before noon twenty canvas tents were up, at a little distance from
the street--the ground there was as yet too hot to build upon--and
twenty burnt-out storekeepers had recommenced business. So great
were the bustle and animation, that the sufferers really had no time
to be faint-hearted. Every man's example was an encouragement to
his neighbour; emulation was excited, and all strove to outvie each
other. But we must away from the scene--nearer ties claim our
attention. In a week Silver Creek township will seem scarcely the
worse for its terrible conflagration. Business will be carried on as
usual and the building of new stores will be going on from one end
of High Street to the other. None will be put up of canvas. Most of
them will be built of wood, and a few of stone. Thus cities are made.
Experience teaches.

In a large tent, on the Camp Ground where the Government

buildings are erected, are three persons. Mr. Hart, with his left arm
in a sling, is standing by the side of a low bed, gazing mournfully
down. So rapidly was his noble task accomplished, when he rushed
into the flames to save his friend, that he escaped with very little
injury. He was scorched and burnt, but not seriously, his left arm
being the part of him which had suffered the most. The physical part
of him, I should say; for all that was mental in him was quivering
with anguish.

At his feet, on the ground, sits Margaret.

Our Margaret? Yes; although you would not have believed, had
you only your own eyes to trust for confirmation. Her flesh is so
colourless that every drop of blood seems to have left her body; but
your imagination will supply a better picture of this hapless broken-
hearted young creature than my pen can draw. On the low bed by
which she is sitting, with misery and despair in her heart and face,
lies a blackened mass which once was Philip, which is Philip still for a
few brief hours.

For he was not dead when Mr. Hart dragged him from the flaming
walls; the life had not been quite burnt out of him; but he was dying
fast now. "Before the sun rises," said the doctors, with sad meaning
in their voices. It was most merciful that it should be so; for had he
lived the full span of man's life he would never again have seen the
light, nor could any person have looked upon his face without a
shudder of pain.

They could do nothing for him except to shed upon him the light
of their pitiful love; and blackened and burnt as he was, this sweet
and divine compassion, in some strange way, reached his senses,
and if his lips could be said to smile, they smiled in grateful
acknowledgment. "Poor Philip! Poor soul! Dear, dearest love!" they
murmured, and their words were not lost. They were to him as
water, cold and sweet and clear, is to a parched mouth. Even in the
darkness through which he was struggling blind, impotent, helpless,
glimpses of delicious light broke upon his suffering soul.
 A hundred times Margaret was on the point of giving way, but Mr.
Hart whispered to her:

"Be strong, my dear child, be strong! Your voice is to him as the

dew to a flower."

"As the dew to a flower!" she murmured. "My flower! The only
one! God pity him! God pity me! He was my life, and he is going."

"To another world, dear child," he said to her, in a beautiful soft

voice, "where we shall join him in God's good time."

And as though he had a thing to do which was necessary for

Philip's comfort, the old man went swiftly out of the tent, and
groaned and wept there, where Margaret could not see him. Then
raised his eyes from the earth, and mutely prayed that peace might
come to Margaret's troubled soul.

She, moistening Philip's lips with pure spring water, never moved
from her husband's side, and prayed that she might die with him. "If
God is merciful," she thought, "He will take me also."

William Smith came to the tent, but when Margaret saw him she
shivered, and held her hands before her eyes to shut him from her
sight. The man needed no other sign; straight from the tent he
walked and sat outside, talking to Mr. Hart. He was not angry with
her; his heart was very tender to her and Philip.

"It is natural that she should not wish to see me," he said to Mr.
Hart; "it was in the house that once was mine that Philip met his
death. If I had not wanted Philip's claim, they might have lived
together happily."

After this touch of sentiment he became practical. "Have you any

money?"

"A few shillings."

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