HC Deb 14 April 1826 vol 15 cc236-44

On the order of the day for going into a committee on this bill,

Mr. Hudson Gurney

said, that at the commencement of the session they had been informed, that the banking system, now liable to, and productive of, very serious evils, should be placed on an improved and solid foundation. Towards the fulfilment of that promise, nothing had been done save the introduction of this unhappy bill, which had come to them from the Lords; under which, it was next to impossible, that any banking establishment could be set on foot; and, if such were the case, it would be a public nuisance. The bill was copied from the Irish bill; and the Irish bill only-worked by the contradiction of its clauses giving opportunity for evasion. The notes of the Irish banks were not to be payable in Dublin; and they were not to draw upon Dublin for sums under 50l. for so stipulated the bank of Ireland. But, under a clause introduced by the hon. member for Limerick, the Irish banks were allowed an agent in Dublin; and the agent in Dublin paid the notes, though not there made payable on the face of them. If a bill were wanted for 50l., the provincial banks could not draw it, but the baker next door could draw it for them. The whole was a proceeding which the Bank of England should have done any thing rather than have imitated.

These joint-stock banks were to be eminent in their solidity; and the first announcement of the formation of these solid banks, he held in his hand, as issued by Messrs. Wilks and Verbeke, of Broad-street in the City. Their prospectus declares, that "towards carrying into effect the bill introduced by lord Liverpool, there is to be a provincial bank for England and Wales; the capital to be real and not nominal: the shares to be 2l. each. To issue their own notes payable only where the bank is established, and the depositors to be safe from losses arising from speculations in the trade of private bankers."

The letter addressed with the prospectus, to ministers, members of parliament, and other men of weight, concludes in this inviting manner:—"To you we apply to become one of the vice-presidents of this national association. You will connect yourself only with some of the most respectable and influential individuals; and you need not at the same time, by your acquiescence in this request, take any shares. The company will have a patron, presidents, vice-presidents, governor, deputy governor, directors, and probably a committee of management." P. S. "The appointment being merely honorary, will not require the least sacrifice of your time or attention."

So much for "solid banking!" It was possible, indeed, that the chancellor of the Exchequer might not accept the invitation, though he believed that right hon. gentleman had been one of the individuals to whom it had been addressed. These same Messrs. Wilks and Verbeke bad, amongst other joint-stock concerns, been solicitors for an Eastern rail road, subscriptions also two pounds each. The wise men of the East, however, were not enamoured of the project, and consequently lost nothing by it. But, unless he was very much misinformed, there had been great men of the West—honourables, and right honourables—who had not been so fortunate. The first knowledge he had of these gentlemen, was, that one of them, Mr. Wilks, had done him the honour to write him a letter, in 1822, which he also held in his hand— proposing the institution of a joint-stock Sunday Society, with a committee, half of clergymen of the Established Church and half of Dissenters, for the persecution of apple women who prophaned the Sabbath; for "remedying the deficiency of 'the laws" on the subject; for "soliciting bills in parliament;" but, above all, for "inviting general attention by means of parochial subscriptions."

Mr. Gurney

said, it was possible the Bank directors might have come down to the House prepared to admit such alterations in the bill in the committee, as might render it operative; which, in its present state, it certainly was not. The clause preventing any bill being drawn on London for a less sum than fifty pounds, was equally absurd and inconvenient; and a greater evil than inundating the country with notes not payable in London he could not conceive. He was well aware the Bank of England, on this point, stood stiff on its charter; but there never was so petty a jealousy in the world as this.—Mr. G. said, that all the bankers notes from his part of the country were made payable in London, and he would appeal to any Bank director in the House, if any portion of them were ever known to be circulated in London, or even out of their own districts. The fact was, if a country bank issued more paper than was necessary for the commercial circulation of its districts, and the paper was made payable in London, it found its way to the bankers in London in remittances, and was immediately returned on the issuers. If the Bank persisted in refusing to consent to a more practicable bill than this, the safer way for the House to pursue, would be, not to attempt legislating on the subject, but to suffer it to remain over until the expiration of the Bank charter, when their hands would be unshackled.

The House resolved itself into a committee. On the clause, which enacted the equal liability of all the partners,

Mr. Pearse

addressed the committee, but in so low a tone as to be altogether inaudible.

The Chancellor of the Exchequer

said, that he could not enter into any of the views of the hon. member, with respect to the probability of the country being deluged with paper, or to that of the new banks being managed with improvidence. He could not believe that the country would be placed in any such jeopardy, because it might be the pleasure of parliament to modify the existing Bank charter, or hereafter to decline continuing the privileges of the Bank, by putting the law on a more extended scale than that on which it now stood. It was not necessary to argue either of those questions; for the passing of the bill through its former stages sufficiently-proved that the House was desirous that some facilities should be given to the formation of banks upon a more extended scale than that which the present state of the law allowed. He could not believe, that the only safe system of banking was identically that system which happened to exist in England at the present moment. Every person must see the utter incapability of the Bank to carry on all the banking concerns of the country. They had not the means to help the whole country, as they had done the county of Lancaster. The question, therefore, to be considered was, whether it was necessary to continue the law with respect to the number of partners? What peculiar magic there was in the number six, he could not conceive; nor could he possibly imagine, why that number should be held to be perfectly safe, and a greater number to be replete with danger. The hon. member for Newton had alluded to an extravagant project for establishing a bank with a capital of one million, to be subscribed in shares of two pounds each. That such a project had been entertained, and proposed to the public, was undoubtedly true; and he had himself received a circular letter, which invited him to become one of the honorary members. The proposal was, that if he would allow himself to be set down as an honorary member, he might, if he pleased, dispense with taking any shares, and he might have nothing to do with the concern. He must confess, that this latter part of the proposal was the only part which he approved of. It was completely applicable to his views, and he accordingly had had nothing to do with it. But surely, because there were persons wild enough to entertain most absurd and mischievous projects, it was not to be argued that such schemes should deter the legislature from endeavouring to give the wholesome and ordinary facilities of trade to the banking system. Absurd combinations were not impossible under any system. If the termination of the Bank charter and privileges had left the government the opportunity of doing as they thought fit, he certainly would not have proposed some of the limitations which clogged the present bill. The arrangement as to the limited amount for which parties were allowed to draw, was certainly a very great defect. But the government had been obliged to be content with what they could get. He should have been glad if the Bank had been prepared to waive their exclusive rights, to a greater extent than they had done; but that not being the case, he and his colleagues could only propose to parliament the utmost he could obtain from the Bank. He thought it right of the country to avail itself of the facilities as far as they went; for they were calculated to place the banking system upon a much better footing than that on which it had hitherto stood.

Mr. Hudson Gurney

wished to direct the attention of the committee to the clause prohibiting co-partnerships "from borrowing, owing, or taking up any sum or sums upon their bills or notes within sixty-five miles from London, or at any place not exceeding the distance of sixty miles from London; and prohibiting such co-partnerships from having any house of business, or establishment as bankers in London, within the prescribed limits." He wished to ask the Attorney-general, whether these bankers, under this clause, could or could not discount and re-discount, bills through their agents in London?

The Attorney General

said, that considering that the discounting of bills was a principal branch in the business of banking, and that the bill prohibited any company, consisting of more than six persons, from carrying on that business in London, or within the prescribed limits of sixty-five miles, it was his opinion that such co-partnerships were precluded the right of having an establishment in London for the purpose of discounting bills.

Mr. Hudson Gurney

said, that that answer was final as to the bill. Any banker so circumstanced must necessarily stop payment. The Bank of England itself could not assist such establishment; and the bill must necessarily be given up altogether.

Mr. Denman

said, that nothing could be less satisfactory than the shape ilk which this measure came before the House. It had been promised, in the beginning of the session, that it would be the result of the wisdom of parliament; but, after it had passed through the Lords, and had been discussed, of course, in the cabinet, it contained provisions which it was impossible to understand or agree to. He thought, therefore, that the shortest way of disposing of it, as well as the most satisfactory, would be to throw it out at once.

Mr. Leycester

thought, that the greater the number of partners in banks, the less security there would be for the respectability of their character, or the solvency of their circumstances. He considered the present bill objectionable in every point of view.

Mr. Monck

considered the bill, not as a benefit to the country, but as a positive nuisance. Under the present condition of the Bank restrictions it was impossible for the joint-stock companies to meet with success. It was not sufficient that a paper currency should be safe; it was essential that it should be issued in the most convenient manner to the public, and in every respect be made to represent all the qualities of a metallic currency. The mischief of the present bill was, that it destroyed all universality, and made the new notes to resemble the local tokens. It was impossible, under the present system, to assimilate the country notes to those of the London Bank. If they got out of their peculiar jurisdiction, the holders of them would be put to great inconvenience to get rid of them. The greatest inconvenience was now felt from these local notes. The poor who happened to hold one of them in a district in which it was not issued, were often put to the greatest inconvenience, and obliged to submit to a loss, in order to induce coachmen or travellers to convey it to where it was payable. He thought it would be much better to give up the present measure, until the expiration of the Bank charter.

Mr. Spring Rice

was surprised to hear the hon. Bank director say, that private banks were preferable to the Bank of England. One great objection with him to the present measure was, that it gave a monopoly of local circulation to the Bank of England; as its branch banks would be established free from the difficulties which the joint-stock banks would have to contend with. He recommended that publicity should be given to the amount of local issues of paper.

Mr. J. P. Grant

contended, that, although government had probably made the best bargain they could with the Bank of England, yet they had not done enough for the permanent advantage of the country. There could not be, in his opinion, any danger of over-issues, which were apprehended on the part of the country banks; because, as long as they were compelled to pay their notes in notes of the Bank of England, and those were payable in gold, there must be an effectual check upon too great an extension of credit in that way. In remarking upon the clause which prohibited the chartered banks from discounting bills or issuing notes in London, he begged to ask, whether it was intended that they should not have any agent or correspondent in the metropolis? If they were allowed an agent, he might, in the ordinary performance of his duties, violate the law in that respect, without any intention of offending against the provisions of the act; and he therefore thought it highly necessary that the clause should be so worded as to leave no doubt upon the subject. He also objected to the clause which prevented chartered Banks from issuing notes payable in London, under the sum of 50l.; and to the clause by which these chartered banks of six persons were at once to be put in possession, without any act of the legislature, of a power enjoyed by no other corporation or company in the kingdom, unless under the authority of an act of parliament—he meant the right to sue and be sued, in the name of their manager or director. That right, thus conferred, seemed to be a little invidious towards other companies, to whom the same power had been refused. The hon. gentleman concluded, by expressing his conviction, that the bill, with all its imperfections, would be highly beneficial to the country; and declared, that while the with drawings of the exclusive privileges of the Bank of England could not be attended with any loss to that establishment itself, it would be the means of producing results the most important to the community.

The Chancellor of the Exchequer

said, that a similar clause was inserted in the Irish Banking act, and it was only on the insertion of such a clause that the Bank of England consented to waive the privileges of its charter. He could not undertake to answer for the exact legal effect of the words of the clause; but if there was any obscurity in the words, or if there was any thing contained in them which would practically prevent the formation of these co-partnerships, such was not the intention either of the Bank or the government; and these words might be so altered as to remove the objection entertained against the clause. As to the attack which the learned gentleman had made upon the bill, it was directed against the measure generally, and not against this clause. If the learned gentleman had read the correspondence between the Bank and government he would have seen that the substance of this clause had been insisted upon by the Bank.

Mr. Denman

said, there was not a word about discounting bills in the correspondence.

Mr. P. Grenfell

asked, whether the operation of this clause would be to prohibit any number of country bankers from applying capital which they had in the hands of their London agent in discounting bills.

The Attorney General

said, that, as he understood, the principal business of a banker consisted in discounting bills, he certainly thought that the clause, as it now stood, went to prevent any number of bankers, exceeding six, from discounting bills in London.

Mr. P. Grenfell

said, that that being the case, this clause must have the effect of preventing the formation of large joint-Stock companies.

Sir M. W. Ridley

wished to know whether this clause would have the effect of preventing a country firm of less than six from discounting bills in London.

The Attorney General

said, he did not think that a firm consisting of less than six was prohibited by this clause; but he thought that one consisting of more than six, was prohibited.

Mr. Home Drummond

said, it had long been the practice in Scotland, where the banking firms consisted of more than six partners, to draw bills upon London, and to have them discounted as often as it might be necessary. Whether this was legal or not he did not know, but he was sure it could not be done in future under this clause.

The Chancellor of the Exchequer

said, it had never been the intention of government, or of the Bank, to prevent joint-stock companies from applying their capital in discounting bills in London. However, if the words were so obscure as not to give to those companies the privileges which, by this bill, were intended to be granted to them, there could not be, on his part, any objection to introduce, at a future stage, such words as would give legal efficiency to the concessions made by the Bank.

Mr. Attwood

thought, that if the word "bills" were left out, and the prohibition limited to the promissory notes of the companies, there would be no objection.

Mr. Pearse

said, that any alteration would require great care. In order to give time for properly considering it, he thought it would be better that the chairman should report progress.

The Chancellor of the Exchequer

thought it would be better for the committee to proceed to the other clauses, on which no difference of opinion was likely to prevail —reserving the present clause for future consideration.

Mr. Hume

said, he had never seen such a mass of absurdity as this bill presented. It was said to be an Irish act; and he could believe it from the number of absurdities it contained. He had been often charged with committing blunders in the House, and perhaps he might have done so; but if ever he could be justly accused of such absurdities as were contained in this bill, upon which the whole strength of the administration had been employed for a considerable period, he was content that the right hon. gentleman should set him down for a fool.

The Attorney General

said, that unless gentlemen would take the trouble to read the clause, they could not understand it. The clause had been copied verbatim from an Irish act, which had been in force for some years.

The consideration of this clause was postponed.