§ On the order of the day for going into a committee on the above acts,
before the Speaker left the chair, wished to have an opportunity of expressing what he felt as to the course now pursued. The question to be considered was one of great importance, upon which the House ought to have had some information beforehand. In his opinion, the right hon. gentleman had stolen rather an unfair march upon them. On the first day of the session he had given notice of a motion upon the subject generally, which was to come on at an early day. On a subsequent day, the right hon. gentleman had explained more fully that his motion would go to a consideration of the Bank charter acts in a committee of the whole House. On Monday last the right hon. gentleman came down, and moved that the acts respecting the Bank charter and promissory notes should be entered as read. They now passed at once to the order of the day for going into the committee. The objection which he had might appear technical only, but it comprised something very essential to the order of their proceedings. The House might be very willing and very right in agreeing to go into the committee; but, as the case stood, they had been led into an admission, which perhaps they might not have made upon a more regular discussion. He, for one, was not at all prepared for the discussion of the measures to be proposed in the committee. He was without that degree of information which was necessary. If, indeed, the right hon. mover would, on the question that the Speaker do leave the chair, detail his plan, and show clearly the nature of what he intend- 166 ed to propose in the committee, his objection would be obviated. But, if he required the House to go first of all into the committee, then would the House be treated most unfairly. And this was one of the inconveniencies arising from the practice which now prevailed of voting an address in answer to the speech on the first day of the sessions—that they found themselves pledged to the measures of government, in a degree which restrained them afterwards. He well remembered that several gentlemen protested against being pledged by that address to the support of the measures which might be proposed upon the various subjects to which it referred. This objection of his was not a mere matter of form, but a point of substantial importance. The House ought certainly to be in possession of what was intended to be brought, before they went into the committee; for it might turn out, that there was no reason for going into the committee at all.
The Chancellor of the Exchequer
said, that the term used by the noble lord, that he had stolen a march on the House, could not be justly applied to him. That which he was now doing was the usual practice of the House. With regard to the notice of the motion, he had found that it was incorrectly expressed. The consequence was, that his intentions had been much misunderstood. He had moved that the House should resolve itself into a committee this day, to take into consideration the Bank Charter, and Promissory Notes Acts. He apprehended, supposing that some measures were by general admission necessary, that the only proper course was a discussion of the whole subject in a committee. Not the smallest idea was conveyed to his mind, that any gentleman would adopt a step which must thwart altogether, if persevered in, any measure of any description, however urgent the necessity for proceeding. Now that, and nothing less, would be the effect of the noble lord's objection. There would, in fact, under these circumstances, be no consideration of the Bank-charter acts. The objection would, in limine, stop the discussion, and frustrate the measures which he had to propose on the part of government. The course which he had taken was the usual course, and that which was the most convenient. He should, in all probability, be called upon to answer questions and explain matters of doubt, not once or 167 twice, but repeatedly. If he wore driven to the course which the noble lord wished him to take, he must lay open his plan so as to meet all objections which would be brought against it, without any sufficient opportunity for clearing away such objections; as he would be precluded from addressing the House more than once.
complained of the inexpediency of the mode adopted. If the statement which they so anxiously expected would meet the difficulties of the country according to the estimate formed of those difficulties by ministers, undoubtedly the right hon. gentleman was going to propose something upon a subject of the deepest importance, concerning which the House was called upon to deliberate with a total insufficiency of information. The course taken was only suitable to subjects of a common and obvious kind. If they were about to consult on a subject of the most insignificant nature, they could not proceed with greater levity: whereas this was a subject which should have been preceded by every possible means of intelligence. Many papers and documents ought to have been produced, Rome of which had been actually moved for no doubt with a view to their usefulness on this occasion. But, at the same time, so urgent was the whole subject, so sensitive was the whole country, so anxiously did they wish to know what the government were gong to propose, that he could wish his noble friend to wave his objection. If they found themselves not to be in a condition to go on with the discussion they might report progress and ask leave to sit again.
said, his only wish was, that the House might know upon what they were to deliberate, before pledging themselves to deliberation. They ought to have the subject adequately explained; and his view was, that if not done before, at any rate it ought to have been done while the Speaker was in the chair. The effect of the present motion was, to pledge the House to an alteration of the Bank acts, without knowing that there was any necessity for alteration. However, as the feeling of the House was against the mode of proceeding which he proposed, he would not persevere in it.
said, the noble lord was right in his objection to the course taken; but it would not have the effect of precluding objections to the plan. For one, he protested now against any alteration of the 168 said acts, unless where ministers proved such alteration to be indispensably necessary.
§ The Speaker having left the chair,
The Chancellor of the Exchequer
then rose. If, he said, he did not feel that he was acting in the discharge of a great public trust, however unworthily or unfortunately imposed on him, he should be appalled at the magnitude and importance, if not at the difficulty, of the subject on which he had now to address the House. He was well aware that much criticism would be applied, that many objections would be brought against him, both on the principle and the details of the measure which it would be his business to submit. He was well aware, that, notwithstanding the impression on his own mind was clear as to the real causes, and the proper remedy for the evils which had lately visited the country, he was likely to meet with no light hostility to his propositions. He perfectly understood the feelings which actuated the minds of some individuals on the agitation of topics of this nature; and to any observations which might flow from him in the course of this discussion, he was prepared to meet no small degree of misunderstanding, as to the principles and grounds on which he proposed to rest the projected measures. One source of reliance at least he found in himself: he came to this deliberation with a good conscience; and he hoped he might venture to ask the House for their gravest attention. He invoked their patience more particularly, because he felt a fear within himself, that he could not contrive to compress within those limits which the House usually expected its members to observe, the various parts of so intricate and interesting a subject. He entreated the indulgence of the House, therefore, to the extent of a patient hearing; not deprecating any hostile observations, in whatever spirit pronounced; but only asserting his claim to that forbearance and attention which the subject demanded, and without the exercise of which, it would be utterly impossible for him to discharge the duty which he owed to the government, to the House, and to the country.
Before he stated in detail the views of the government, or gave any exposition of the facts connected with the case, or the grounds of the measures which he had to propose, and which, according to the, conviction of ministers, the best interests 169 of the people and the safety of the country required, he trusted he should be allowed to make a few observations, which he would not have made but for something which had fallen from various quarters, and which seemed to justify him in doing so. He was aware that one objection of a very general kind awaited him; namely, that it would have been more prudent and more advisable in all respects, if government had altogether abstained from making any decided allusions to the causes of the late general distress. He wished those who were of that sentiment would do him the favour to reflect on the situation in which ministers were placed, and to reflect, not only on their situation as to the present question, but also—which was a consideration of a thousand times more importance—on the situation in which the country was placed. If they had not taken this course, it would yet have been impossible for them to have refrained from some other mode of interference. If they had abstained, and had held themselves aloof, would they have been sure of silence in other parts of the House I would many gentlemen, whom he now saw before him, have been silent? Would the public have been silent? Would ministers not have been loudly called upon to state explicitly, and distinctly, whether, considering the situation of the country, they meant to propose any new measures, and what those measures were? Good God, what answer could they give to these calls? Could they say that they would give no answer—that they would be silent? If they had adopted that course, they would have occasioned evils of much greater magnitude than any that could arise from the most complete publicity; they would have aggravated the feelings of public difficulty and distress, in a degree of which he did not wish to incur the responsibility. Whether their measures were right or wrong, it would be for parliament and the country to judge; but altogether silent respecting them, they could not have been. On that score they were entirely free from blame, and the objection, he conceived, was utterly unfounded.
In order that the House and the country might be able to form a proper judgment; first, whether any thing should be done to prevent the recurrence of those evils which had been viewed by all with such apprehension, and which had been, in fact, attended with incalculable 170 misery and distress; and, secondly, whether the measures which his majesty's government had determined to bring under their consideration, were the most fitting and proper to produce the desired effect, it was, in his opinion, a matter of essential necessity that they should satisfy their minds as to the immediate causes of that particular evil to which they were about to apply a remedy. Because, if they did not set out with a clear understanding of the case in all its bearings—if they did not thoroughly understand the disease to which they were about to administer a cure—they would legislate in the dark—they would aggravate the distress, and create still greater mischiefs than any they had yet experienced, by fallaciously leading both themselves and others to the belief, that they were applying infallible remedies. Infallible, in his belief, they could not be: for no man, he hoped, would suppose he could flatter himself with any idea of applying any thoroughly effectual remedy to all the fluctuations of trade; the rise and fall of prices; or the ebb and flow of public and private confidence. It was manifest that in all societies, constituted like ours—in all great commercial countries, where activity, enterprise, and speculation, formed as it were the very elements of existence, there must be great and sudden changes—periods of long-continued prosperity, and seasons of temporary and trying adversity. All history produced instances of these extraordinary fluctuations in every country, which had applied itself to commercial pursuits. He could well understand how the argument arising out of that proposition could be turned against him, and how the very knowledge of the continual recurrence and universality of the evil should leave it to work out its own cure. What legislative measure, he knew it might be asked, could remedy that which seemed to be a natural consequence of situation; or why proceed upon the mistaken assumption, that you could check that which seemed to arise out of the nature of things? There did seem an inconsistency in this; but he thought he could reconcile it to that idea of our commercial situation which he wished to impress upon the House. In all countries, where refinement and civilization had made any progress, credit, as their necessary attendant, had introduced a currency, in some cases, decidedly or theoretically metallic, in others partly metallic and partly paper. 171 Take the first of these—a country, where I the currency or circulating medium was either decidedly or theoretically metallic. In that country, he thought there could be no question that great fluctuations might take place from various causes, not difficult to be explained, both in trade and in prices. Suppose, that after many years of uninterrupted prosperity in agriculture, during which the prices of produce remained almost permanent, there should come, as they had seen in their own country, a succession of unfavourable seasons—and supposing still further, that the supply which might naturally be expected from other countries to fill up the deficiency, either by the state of the laws at the time affecting their intercourse, or by some peculiar circumstances in their own situation, could not be afforded. Would it not be allowed, that the prices of agricultural produce might, by a grade almost imperceptible, when they had once acquired this tendency to rise, reach a much higher remunerating return, than the farmer had been accustomed to receive? Might not, then, this increased benefit to be derived from the culture of the soil very probably tempt the application of new capital to the culture of a species of soil, which the price of agricultural produce would not have enabled the grower of com to till before? This, he believed, would be allowed to be a very probable consequence of the increased demand: but, that very demand carried the matter still further. As the price of the produce of inferior lands must always regulate the price of that obtained from a superior soil, the holders of these better grounds were, from the increased demand, and greater remunerating price, tempted to extend their speculations, to increase their stock, to force their culture; and, as the speculations and extended operations of one class almost necessarily affected all other classes, by consuming an increased quantity of the produce of those classes, and a consequent drawing an addition of capital to forward their labours, it followed that the original speculation of the holder of land may have given a stimulus to, and have been the cause of, the speculations of all others, and have had a natural tendency to produce the speculation and over speculation which may ultimately prove the cause of great disasters. For although this unnatural state of things may continue for a space of time, the course of years brings round again the same series of fa- 172 vourable seasons, as they before had unfavourable, and then comes the termination of over-speculation. They knew—indeed sad experience could tell them—the enormous difference between the profits of agricultural produce at one time, and at another not very remote from the first. The effect of that difference of profit goes to throw those lands out of cultivation, which have been tilled in the time of high prices; and to render unavailing all the lavish expenditure which had been encouraged by the expectation of additional remuneration. The agriculturists were thrown back; those who had expended capital on all other speculations dependent upon them (and few were not in some degree dependent upon them) were thrown back along with them, and that fluctuation which had proved so ruinous became the inevitable consequence.
But, if these fluctuations were certainly incidental to a country whose circulation was exclusively metallic, they were still more likely to occur in a country like this, where the circulation was partly metallic and partly composed of paper convertible into metallic money. There was a facility given both to the borrower and the lender; the inevitable tendency of which was a quicker rise of prices; and, upon any reverse, to a more precipitate downfall. He repeated, that in a country so situated—and such was exactly the case of this country—whatever the legislature might do, it must still leave it exposed to the chances of these fluctuations. Nothing within even the omnipotence of parliament could prevent such fluctuations; its utmost efforts could only tend to moderate their effects. But, if that was the nature of the evil—for an evil in its results he must call it—if the evil was of such serious magnitude, it appeared very likely to be greatly aggravated, although not caused—he begged they would recollect the distinction; it would be aggravated in a high degree by the state of the circulating medium. For it appeared from all they had learned by experience, that when the circulation of a paper money was not confined to notes of a larger species than one or two pounds, the distress, whenever it did take place, was increased by the existence of that species of circulating medium, more than by any other, and the insecurity of those from whom it issued.
Gentlemen had said—and he believed those who knew a great deal about country banks, some of them, indeed, if he was 173 not mistaken, connected with such establishments—that they did not care a farthing for the power to issue one and two pound notes—that they were not of the slightest importance to them; and one hon. gentleman (Mr. H. Gurney) had even protested, that he was anxious to get rid of them—that he wished with all his heart there were no such things in circulation—that they were a positive nuisance—but that if the power to issue them was vested in every petty firm which might think proper to take upon itself the name of a bank, establishments of credit and respectability were obliged to send them forth, from the competition which was necessary for their protection. If, then, they were neither a source of profit, nor an object of necessity; and if they had a direct tendency to increase the circulating medium beyond the point it would be likely to reach without them, by the mode in which they operated upon the currency, affecting the exchanges, and rendering the Bank of England, and the country banks themselves, unable to meet their payments upon any sudden demand, or any extraordinary alarm, he thought they were still further to be deprecated, as directly controverting the tenor of the act of 1819; an act which no man could deny was passed, if ever any act in that House was, with the unanimous approbation of all the parties of which it was composed—an act which had been solemnly resolved upon, as the only measure which could enable the country to meet any future danger, by placing the circulating medium upon a permanent and stable footing. That those notes did counteract the tendency of that act was not to be disputed; still less was it to be insinuated by any man, that that act was not the result of the deliberate conviction of almost every individual of every party in that House. And if so, where was the new principle—where was the innovation—where was the departure from former practice—where was the new and untried theory which some gentlemen had accused ministers of wishing to press upon the House? Was it not merely carrying into more rapid practice the very system under which the country had flourished for ages? If they were to be met in that manner—if they were to be accused of new theories or visionary attempts—he would say, that it was the hon. gentlemen opposed to them who were the theorists. They were the speculative men who were opposed to that 174 system, which, he declared to God, he considered of such absolute necessity for the well-being of the country, that he could not contemplate any derangement of it without the plea of the most overpowering necessity—a plea which should even then be received with the greatest caution. Let the House look how the state of things, in a country like this, and in such circumstances as they had lately witnessed, might be affected by the issue of these one pound notes from provincial banking establishments. Who, in the first place, were the persons among whom these notes were generally circulated? Why, the poorer classes of the community—those to whom the possession of a one pound note was comparative wealth. And when, from the scanty earnings of hard labour and persevering economy, they had amassed three or four pounds in that kind of money, in what could they lay by these savings of industry but in country bank notes? They had been told, and told truly, that the only circulating medium of whole districts were composed of these notes. In them, therefore, must the poor man trust for the relief against the evil hour—in them must he deposit his hopes. He must take paper; and what was the consequence? When, from over-speculation, or over-issues, or any other causes, an alarm or panic arose, who was the person first to press forward and secure his property? Why, the poor man. He hears of distrust—he hears of failures: and, was it not natural that he who had invested his little all—to him of an importance of which it would not be easy to form a conception—should be the first to press forward for the payment of his demands—the first to guard against consequences which would to him be absolute ruin. That very anxiety on the part of the poor man necessarily commenced a run on the banker. Example was contagious. Then came the holder of the five or ten pound notes. He says to himself, "what is the meaning of this? there must be something wrong here; there must be something rotten; I must take care of myself while I may." He follows the torrent; he increases the difficulty; he adds to the distrust; and thus they might trace the progress of a great portion of the late disastrous events. The man who did not entertain the least doubt of the solidity of his banker—who was not agitated by the busy speculations of the day, became influenced by the contagion of example; 175 and, though his, superior information and more extended knowledge might prevent him from being the first to feel the distrust of credit, yet in the end he became unable to resist the temptation of grasping at that which further forbearance might endanger.
It did appear, therefore, that the power of issuing these notes was one great source of the insecurity of country bankers. Men placed in such situations, and liable to such influences, could not be said to hold their credit upon such permanent foundations as those who were not subjected to them. The absence of such a description of paper would add to their solidity; and though it might, in a slight degree, diminish their profits, it would save them from the consequences of such evils as they at present deplored. For it was not even in such relations, extensive as they might be, that the evil terminated it was felt, in its re-action, by men of whose wealth and resources it was impossible to doubt—by men who fancied themselves beyond the reach of any thing short of a total convulsion of society. They, it was true, were not immediately dependant upon the effect of the issue of small notes; they were only to be affected by securities of a different description; but every man must know—indeed, it had been before every man's eyes—that the exposure of the small banks to chances such as he had described, eventually endangered the existence of banking establishments, who fancied themselves placed beyond the reach of the utmost violence of the storm, from whatever quarter it might be directed. He repeated, that the security of these, the security of all, required some remedy to be applied to the present circulation of one and two pound notes.
Was he, then, proposing any thing new? Would any man say, that the restriction of the paper issue was not necessary to the support of public credit? that it was not necessary to the welfare of our commerce, the prosperity of our manufacturers, the security of our speculations? Quite the contrary. Every man had confessed its propriety. What was the general law of the land? He knew quite well that sixty or seventy years ago the law of the land prohibited altogether the issue of these small notes. Not long after the reformation of the currency, which took place, he believed, in the year 1773, an act was passed to restrain the issue of notes under 20s. nominal value. 176 This took place in the year 1775. In the year 1777, the legislature, not satisfied with what it had done two years before, and still asserting the public detriment which had arisen from the circulation of these small notes, always complaining of it as an evil, prohibited the issue of any bank-notes under 5l.; and this proposition was justified upon the ground, that the prevailing practice of issuing these notes tended to much inconvenience and embarrassment, and was not necessary for conducting the commercial concerns of the country. The act of 1777 was, however, temporary in its duration; but the same feeling of its necessity continuing, it was prolonged from time to time, until, in the year 1787, it was made perpetual. This constant feeling of the legislature was at least a pretty good proof, that those who had preceded them in conduct-ting the affairs of the country, though called by some the wisest of their generation, and by others regarded as imbecile and absurd, were yet consistent in their notion, that the suppression of these small notes was essential for securing a useful circulating medium for the country.
When the Bank Restriction act of 1797 was passed, it was then quite clear, that unless the prohibition was withdrawn from the circulation of the smaller notes, the country would be altogether deprived of the means of carrying on its business. It was however clearly intended, that the suspension of the old law, which suppressed the small notes, should be always commensurate with the duration of the Bank Restriction act; and in the year 1819, when the Bank Restriction act was under discussion, were not then the strongest opinions pronounced, were not the united declarations of the parliament and of the whole country proclaimed, that as soon as possible cash payments should be restored on the ancient basis? They would also bear in mind, that the committee which had last sat upon the subject, composed as it was of men of different political opinions, entertaining adverse notions also upon the principles on which the currency ought to be governed—they would bear in mind, that in the very report, framed by men such as he had described, not one word could be shown, nor in the evidence on which it was founded, could a syllable be found, to establish the enunciation of an opinion, that the circulation of these small notes was a thing so necessary as it was now 177 asserted to be, for the agricultural interests of the country, for its commerce, or essential in any way for its real transactions. Not one word had escaped that committee to sanction the opinion, that the suspension of the old law ought to be made perpetual. He could not, therefore, have dreamt, that any gentleman would have taken the ground of opposition which was taken by some, to his proposition. It came upon him quite new and unexpected When his right hon. friend (Mr. Peel) had brought in his bill, than which there never was a more important measure under discussion, or one which had been snore ably considered in all its details—even then the parliament, in making provisions for the resumption of cash payments two years afterwards, namely, in 1825, never dreamt of the possibility of allowing the circulation of these notes for a series of years after the Bank were allowed, or compelled, to pay their notes in cash. With respect to the subsequent act of parliament, in 1822, which allowed the circulation of this class of small notes, he now confessed, as he had indeed admitted the other night, that he had always felt regret, and still did regret, at the step taken on that occasion by parliament, which had the effect of circulating these small notes for a greater length of time. But, notwithstanding that act, be would repeat that it was always understood in the different communications that had taken place between the government and the country bankers, and more particularly in those which had occurred on the subject of their making deposits, that though they the bankers objected throughout most positively, and in the strongest manner, to the deposit of stock, they dwelt with comparative indifference upon the value to themselves of the issue of these one and two pound notes. In fact, the great scope of their objection was to the plan of their being compelled to make the deposit to which he alluded, but absolutely nothing of stress was laid upon the privilege of the issue of small notes. So far as they were concerned, then, they could not now turn round and affect to set a prominent value upon that which they had, on all former occasions, treated so lightly.
As the law now stood, these notes might be issued till the year 1833. Was he proposing any new principle in his mode of dealing with the last act of parliament? He must deny that he was; for ail he con- 178 templated was, to revert earlier than the year 1833 to the system which was sanctioned and enacted in the year 1819, as the future basis on which the currency was to rest. Those, then, who were prepared to argue, that the circulation of these small notes was essential to the country, as the lion, member for Cricklade (Mr. Gordon) had done, and that the rents of the landed proprietors could not be paid without them, were driven to this position—if their arguments were right, they were bound not, to stop with opposing his proposition, but to call for an eternal continuance of the circulation of these small notes. Then who would be the parties calling for a change? Not, as he had said before, the government, but those who, contrary to the repeatedly established principle, demanded a perpetual duration of a different sort of currency. He confessed he was quite astonished at what had fallen from his hon. friend, when he talked of the connexion between rents and these notes: he wondered what new light, had broken in upon him: he was quite surprised to learn whence the flash came, for no ray to form it had sparkled in any of their previous discussions. His firm belief was, that, so far from the continuance of this species of circulation assisting in the maintenance of the country gentleman's rent-roll, it would bring nun upon it if unfortunately it was perpetuated.
It was very possible, however, that the argument to which he alluded might not be pushed to its extremity by all the gentlemen who were opposed to his plan, but that other opponents would be found, who would say, "You ought not to press this plan of yours, on account of the great difficulty that must attend its execution—on account of the manner in which it must practically cramp your circulation, lower the price of produce, and produce embarrassments, which must affect your agriculture, and your commerce, and paralyze the industry of the people." Now, he would reply, that these apprehensions, alarming as they sounded, were, nevertheless, of the must visionary kind. Indeed, the experience which could be quoted against in, was decisive of the argument; for in the year 1819, it became indispensably necessary for the Bunk of England to take immediate measures to meet the operation of the then approaching law, which provided, within a short period, for the payment of their notes in 179 cash on demand. The only obvious mode which they could take was, as speedily as possible, to contract their issues, so as to bring the foreign exchanges, which were running against this country, round to a more favourable point, thus to lower the price of gold, and then to bring it into the market, and keep it there. He would state how the measures of the Bank were brought into action. It appeared that since the year 1819, there was coined at the Mint a sum not less than 25,236,000 sovereigns, and he would give the periods when this coinage took place; from which it would be seen, that a very large proportion of it was in the three years that immediately succeeded the passing of the act of 1819, which compelled the Bank to take necessary steps to resume cash payments. In the year 1820, there was coined at the Mint, 949,516; in 1821, 9,520,758; in 1822, 5,356,787. So that in three years, the Bank had succeeded, in the first place, in righting the foreign exchanges, in the next, in reducing the price of gold, and in the third year, in having coined fifteen millions of sovereigns. This was the process which was conducted by the Bank. He did not mean to say that it was throughout unattended with distress. In the year 1819, considerable distress certainly prevailed, and also in 1820; again in 1821; but still, upon turning to the prices of commodities, which indicated more activity in trade, and greater capacity in the people to purchase, they would find that, in 1822, notwithstanding this mighty operation respecting the currency, things had greatly mended; and this was apparent, while the paper of the country banks and of the Bank of England had become greatly diminished—the latter necessarily, for otherwise they could not have carried their contemplated measures into effect. This diminution was apparent from the following returns of the Bank circulation within the period he had mentioned. In the year 1820, the Bank paper circulation was 23,875,000l.; in 1821, 21,759,000l.; and in 1822, 18,000,000l., when the pressure was less than in the two preceding years, notwithstanding this reduction of the circulating medium. No doubt the paper withdrawn by the Bank was, in some degree, supplied by the gold, for which it had been exchanged; but after that substitution, did things fall down, and was every man looking at his neighbour and asking, "What is your con- 180 dition, how long can you bear up against this depression? How long can I myself endure its operation?" No such want, of confidence prevailed—no such interrogatories were interchanged. On the contrary, every thing went on smoothly and advantageously—a clear proof, in his mind, that the formidable danger apprehended by some, from the substitution of gold for the one and two pound notes, was most exaggerated, and that by far too much importance was attached to the operation of that process.
Still it might be said, that however practical might be the convertibility of this paper circulation into specie, it was an operation of such magnitude, as could not be carried into effect, without a great pressure upon the existing interests and demands of the country. Now, to a certain degree he was quite ready to admit that these apprehensions were not groundless. Some interests must always suffer in these important arrangements; but to estimate the nature of the operation, they must look a little at the actual state of the gold at present in circulation; and how far they were in a condition to substitute the necessary quantity of gold for the country Bank paper to be withdrawn. In making this calculation, they must always consider, that the present case was not like that of 1819, in which the basis of the metallic circulation had to be laid. And that consideration naturally suggested the lesser difficulty which must attend the enlargement of a basis already formed, as compared with the work of its original formation. It was one thing to lay the foundation, and another to raise a superstructure upon a basis already formed. The quantity of gold in the country could not be less than 17,000,000l. upon any reasonable calculation. The gold coined at the Mint amounted, in the manner he had mentioned, to 25,236,000l. There had been, within the same period, exported of British gold, 7,269,000l.: what part of that sum consisted of coin it was difficult to say, as no returns of that nature were presented at the Customs. However, it was a notorious fact, that within the last half year the foreign exchanges had become favourable, and a proportion of the gold so exported, not in ingots, but in the real gold coin of the realm, had come back to the amount of 1,000,000l. sterling: so that, subtracting this 1,000,000l. so returned from the 7,000,000l. exported, 181 the total loss upon the export of gold might be taken at 6,000,000l. Deduct this from the 25,000,000l. and 19,000,000l. would remain for the uses of the country. But, as it was possible, that some coin, of which no accurate returns could be made, must have gone abroad in the pockets of individuals, and also in the payments of specie in carrying on a trade which he and his right hon. friend near him (Mr. Huskisson) were so anxious to put down, if he estimated these at 2,000,000l., it would still leave no less than 17,000,000l. of gold available for the country at the present moment. The exchanges were now so favourable as to prevent any of this stock in specie from going out; and it was, in point of fact, profitable to import gold into England.
Taking this general estimate into view, the committee would see, that they had a pretty large basis to superinduce their more enlarged structure upon. They had a solid ground to work on; and if they then turned to the state of their paper currency, they would see with tolerable accuracy, the nature of what they would be required to perform. What, then, had they to look to as far as related to their paper currency, and contemplating the amount of gold, which, in the course of three years (the time to which he meant to restrict the circulation of the one and two pound notes), it might be necessary to employ to fill up the vacuum which must arise from the withdrawal of the small Bank notes from the national circulation. There was some difficulty in ascertaining with any positive accuracy the amount of country bank paper now in circulation, but they could approximate to a conjecture or estimate on which they could safely act. And here he spoke not of the general aggregate paper circulation of the country, but merely of that of the notes of smaller denomination. Estimating, then, from the Stamp-office the number of these notes which were stamped from the yearsl820 to 1825 inclusive, and this while the Bank of England was withdrawing its small paper currency, he found that in January, 1821, the amount was 1,683,000l. in January, 1822, 2,214,000l.; in January, 1823, 1,888,000l.; in January, 1824, 1,969,000l.; in January,1825,2,501,000l.; and up to the 5th of January, 1826, 3,172,000l. He believed that if they estimated the amount of the country bank paper in circulation by trebling the amount stamped in one year, they would greatly 182 overrate it. The fairest way, as it seemed to him, would be, to take the average amount stamped in any three years, and calculate the circulation at treble that amount. Taking, then, the amount of three years, he would call the average 2,300,000l., or estimate the small note circulation for 1825 at six millions; but, although he was willing to admit that that might have been the amount of the small note currency during the greater portion of that year, there could at the present moment be no doubt that the amount had been recently considerably reduced, particularly from the events which had occurred during the latter half of the year, beginning indeed so early as last July, when, owing to the interposition of some difficulty by a Bristol banker, in the payment of a one pound note in specie, a considerable sensation of uneasiness on one side was created, and of caution on the other—he meant that prudential caution, on the part of solid and solvent bankers, who foresaw, that in such a state of things, it was desirable to control their issues judiciously, and who evinced an unwillingness to go beyond the amount which a provident view of their affairs would warrant, and in fact, made silent arrangements for the gradually withdrawing the small notes which they had issued. When great apprehension became afterwards more general, though not in contemplation of any intention of the government to alter the law, but because these notes were found to have been issued by country bankers to a greater amount than they ought to have been, the consequence was a re-action, before which some bankers failed, and the convulsion of public credit in its turn affected the confidence of the solid and solvent bankers. These latter bankers, therefore, immediately controlled, as well as they could, their issues. Referring again to what had taken place in the committee of 1819, they should remember, that the solvent bankers were in the habit of cautiously guarding their issues of 1l. and 2l. notes; for it appeared, that they were in the practice of having a great number of the newly stamped ones by them, and not putting them into circulation, until the old ones were called in, for which they were to be substituted. Supposing that in 1825, 6,000,000l. was the total amount of these notes in circulation, the number now must be greatly less, and could not be estimated at much more than 4,000,000l.
183 In this view, the utmost effect of the operation of his proposition in the course of the next three years, would be to supply that vacuum with gold to an equal amount. Now, if he was at all right in I supposing—what nobody could, be thought, question—that in the years 1824; and 1825 a greater abundance of this paper was in circulation than was consistent with the stability of the currency, it of course followed, that the years 1822 and 1823 were much safer times; the quantity not then being at so high a rate. He conceived, therefore, that all the notions which prevailed of the difficulties and obstacles that must, it was said, at tend the filling up of this paper vacuum, would be found in the end visionary and groundless. Surely, they were not to be terrified by the conjecture of dangers, when they had a great public object of admitted benefit to pursue. Were they to startle at the mere sound of difficulties? Were they afraid to look their situation in the face? Were they so pusillanimous, because their path might have difficulties, to refrain from treading in it, and to leave things as they were, blinking the whole danger, for fear of meeting those apprehensions which wavering minds might suggest? Instead of doing so, he implored the House to brave this imaginary danger; and as they must take sound principles for their rule of action, to take them in a time of peace, when sound principles were, if they were worth a farthing, proper to be acted upon; and not postpone their trial till a less favourable moment, when dangers might thicken upon them, and when success was less attainable.
Something had been said, in the course of these discussions, with respect to other causes which had contributed to that excess of paper circulation in the years 1821 and 1825, to the circumstances which had carried off a portion of the gold previously imported, and to oilier matters, the tendency of which was said to aggravate the pressure of the limes. It was further said, that the panic was not at an end, and that it must still be the lot of the country to bear up against great difficulties. He would not deny the existence of those difficulties, though he could not think them of that permanent character that ethers did. He knew that there were other causes alluded to, besides the excess of paper currency, arising out of various measures adopted by the Bank of 184 England, some of them adopted on their own account, and for which they were alone responsible and others with the direct concurrence, and in furtherance of the object, of government. In looking at the Bank circulation, as it appeared from papers which had been just laid on the table, the average amount of Bank of England notes in circulation in 1823 was 19,137,4192l. The country banks, in the same year, maintained much the same circulation as they did in the preceding one. In the year 1824, the Bank of England circulation was 20,616,010l.; but in 1825, it fell to 19,751,015l. The considerable increase which was apparent in 1821', was partly charged as creating the difficulties which it was asserted belonged to an over issue of paper, and the turning of the exchanges against this country; for the bank circulation and the country circulation were assumed as having a concurrent operation. Now, it by no means followed, that the paper issue by the Bank had, as was supposed, that effect on the foreign exchanges which war, attributed to it, for that year; because, it would be found, on a reference to facts, that there was an impossibility of assuming any direct relationship between the amount of Bank of England notes in circulation, and those of the country banks; for, singularly enough for such calculation, it frequently happened when the former were great, the latter bore no relative proportion in magnitude, and vice versa; and what was supposed to be an existing connexion between them was erroneous.
But, it was supposed, that assuming this increase to have taken place, it was owing to the arrangements between the Bank and the government. So far as regarded the arrangement for the advance on the half-pay and pension list, and the payment of the 4 per cent dissentients, it might or it might not be true, that those arrangements had led to an increase of the Bank issues; and he now spoke of that circumstance, without reference to the Bank advance upon mortgages, which was about 1,200,000l. Still, the arrangement alluded to between the Bank and the government could not, upon a fair comparison of all the circumstances, have raised the amount of Bank issues more than 200,000l. or 300,000l., comparing the years 1824 and 1825, and including the effect of the mortgage advance. So that the arrangement alluded to could not 185 in itself have caused that excessive issue of paper. In making these remarks, he begged not to be understood as having the slightest wish that the government should screen itself, by throwing any blame on the Bank which it ought to bear, or by skulking under any miserable shifting of responsibility from one side to the other; for if the government had done wrong, it ought to abide the consequences. Nor would he stop now to enter into a laboured vindication of measures unconnected with the present question. Let the thing be examined; and, if its principles were found erroneous, let them profit by the example, and hereafter abandon the precedent. If he could but flatter himself that the government had acted rightly, then he could have no motive for wishing to retrace his steps. If, on the contrary, that his course had been erroneous, let them do what they pleased in adverting upon it, and make him the object of their censure. This was, after all, so insignificant a subject of inquiry as compared with the great object to which they ought at present to apply themselves, that he would not weary the House by going into details which were so irrelevant. If government had done the mischief complained of, let the parliament take care it should cot be done again. It was the business of the legislature to prevent a repetition of error.
He had gone into a greater length of discussion upon principles, than he had at first intended; but he had been led into it from an understanding that it was upon these principles that the more serious ground in dispute would be taken. He would now proceed as shortly as he could to detail the plans by which the government proposed to effect the withdrawing of the small notes from circulation, and the currency safer and more solid for the public. There were two modes by which this alteration could be carried into effect. The one was by at once declaring, that no small notes should be circulated after a given period. The other was by permitting those already in circulation to run their course, and allow no new ones to be issued; at the same time assigning a positive cessation to their currency. The first mode appeared undoubtedly liable to this great objection—that at the end of three years, (taking that as the time of cessation), the country would be left in a state extremely embarrassing and incon- 186 venient for the execution of the plan itself. This must be obvious; for if, during these three years, the country banks could accumulate their stamps at will, then there would be the same difficulty in carrying into effect the main object as was now interposed, and could again, ad infinitum, be urged against it. The most proper, the most effective, and at the same time not inconveniently expeditious mode, would be to adopt the plan already communicated; which was, that no new small notes should be issued from the opening of the present session of parliament, or any of those now in existence, be allowed to remain in circulation after the end of three years from that time. The resolution, therefore, which he had to submit to the House, and on which the bill that would be subsequently introduced would be founded, was, "That it is the opinion of this committee, that all promissory notes payable to the bearer on demand, issued by licensed bankers in England, or by the Bank of England, for any sum less than 5l. bearing a date previous to the 5th of February 1826, or which may have been stamped previously to that day, shall and may continue to be issued, re-issued, and circulated, until the 5th of April 1829, and no longer."
The principle of this resolution would refer solely to England, and the measure founded upon it would contain a clause to that effect. As to the particular details of this plan, he did not know that at present, he had any thing further to state. It was, however, important to inform the House what was intended with respect to the future application of this principle to other parts of the united kingdom. He had been asked the other evening by a noble lord (Archibald Hamilton), what measure lie intended to propose with respect, to Scotland, as to this extension of the banking system: and he had been asked a similar question as to Ireland. He had not gone into any detailed explanation on either point; because he thought the whole ought to be given at one and the same time. It was well known that the general law on the subject of banks was different in Scotland and Ireland from what it was in England. In Scotland this difference existed since the year 1777. Before the year 1765, there existed no prohibition there as to notes under 5l., but in that year an act passed prohibiting the issue of notes under 20 shillings. This continued in force till the 187 year 1785, when it was repealed, and the issue of notes under 20 shillings allowed, and no general restriction took place, as to the issue of notes of any description under 5l. In Ireland it was generally the game as to the circulation of small notes; except in some parts of the north of that country, where there was a particular objection to small notes, and where, being refused as payments for rent, their circulation was opposed, and gold was in more general use; but, in the other parts of that country, paper was the general circulating medium. In the year 1799, the Irish parliament adopted a principle the very opposite to that which was followed by this country after the restriction of cash payments; for an act was passed there prohibiting the issue of small notes, while they were allowed with us; and one effect of that act was, to keep gold in circulation there for a longer period than it remained with us. But, in the year 1804, an act was passed, assimilating the laws on the subject of paper issues in both countries, and they had since continued the same. It should be observed, that the whole system of banking in Scotland was quite different from that in England. In the first place, there was no restriction to the establishment of banks, as far as respected the number of partners. There were three chartered banking companies in that country, but none of them had any exclusive privilege: there were in them very many partners, each of whom was liable to the amount of his shares; but they possessed no exclusive privilege. In Ireland, in the year 1822, an alteration took place in the law respecting banks, as far as related to that part of the privileges of the Bank of Ireland which prevented the establishment of other banks with more than six partners, and banks of that description were allowed to be established; but at distances not less than fifty miles from Dublin. Now, supposing that an issue of small notes was not to be allowed as a permanent system, he could not see, in reference to such a system, the grounds why Scotland and Ireland should not be put on the same footing as England; and though it might not be advisable to make such an alteration at the present moment, yet, as a prospective regulation intended to be permanent, he did not see why a difference should be allowed to remain between one part of the united kingdom and the other [hear, hear]—giving however, a sufficient time, by naming a period 188 during which the change in the system might be effected. At the present moment, the circulation of Scotland was exclusively paper, and in Ireland it was almost entirely so; and in neither had it its basis in a metallic currency: it would therefore be evident, that such a plan as that now before the committee could not be made applicable to either of those countries, at the present period. It was not his intention on this occasion to submit any specific resolution on this part of the subject. He would, however, take an early occasion of calling the attention of the House to it; and then he would state in detail his reasons for any alteration. But he must confess, whenever the permanent system might be proposed, that he could see no grounds for having different parts of the kingdom placed on a different footing.
He was not aware that he had any thing else to offer to the committee on the general question, except a word as to what had fallen the other evening from the hon. member for Cricklade. That hon. member had said, that he could not consent to a restriction of the issue of one pound notes, because he felt convinced that it would have an effect extremely injurious to the landed interest; and he had called upon the country gentlemen, in their own defence, to come forward as a body to defeat the plan. No doubt the hon. member stated correctly what were his own sentiments on this question; but, with every respect for him, he must say, that he had not given the subject due consideration; for he would contend, that if there was any class of persons in the country more interested than another in preventing the circulation of small notes, it was the country gentlemen. Now, he would ask any man who had lately had an opportunity of witnessing the scenes that had taken place in some of our small towns, where crowds were seen daily running to the country banks to procure an exchange of their one and two pound notes for gold, or Bank of England notes—he would ask any such man of property, what security he could have for the payment of his rents? And a great deal of this panic was about the period of rent-day. He would ask him, what security he had, that his own tenants were not, to a considerable extent, the holders of such notes? What security he had, that they might not suffer. Or what security he had, that he could get any rent at all? It was one of 189 the evils of the small note system, that an alarm among the holders of one and two pound notes (and they were, for the greater part, of that class who were most likely to be affected with sudden panic, without ever considering whether it was well or ill founded) was calculated to excite fears respecting the security of the larger notes; and thus it frequently happened, that a sudden run was made on banks for the payment of their larger notes in gold, or Bank of England paper, the security for which was otherwise as firm as that of the Bank of England. From such causes as this, many most respectable houses had been obliged to suspend their payments, with more than assets (though not at the moment available) to meet all demands on them. It was, he thought, and he said it with great respect for those who held the contrary opinion, almost absurd to suppose that the interests of the country gentlemen could be upheld by an unrestricted issue of small notes, or that the restriction of such issues in the way he proposed, would be attended with effects injurious to those interests. The country gentlemen were, he thought, bound to support the present proposition. They would be running blind to their true interests in opposing a measure calculated to benefit themselves and every other class of the community.
He would now beg to call the attention of the committee to the second part of this subject. He meant the propriety of limiting the exclusive privileges of the Bank of England, so far as to allow the establishment of private banks with more than six partners. He confessed, when this measure was first suggested as one which would considerably tend to the relief of the country, he did not expect any serious objection to it; as he did not see how the concession could act injuriously to the interests of the Bank. When the Bank of Ireland was, in 1822, requested to concede a part of its privileges, for the attainment of an object similar to that now proposed, it did not seem to be considered by that body, that the concession would be injurious. On the contrary, it was looked upon rather as a source of greater security to all parties. This was the general impression in that country; and, indeed, so greatly did that feeling extend among the members connected with Ireland, that when, in the last year, a bill was introduced for the purpose of giving greater efficacy to the former measure, it had been 190 his endeavour to prevent gentlemen from carrying the principle further than was intended by the act of 1822. He was afraid, lest, seeing the advantage that had already arisen from the plan, speculation might be carried on by it, so far as to curtail the privileges of the Bank of Ireland, more than had been contemplated and agreed upon, when the privilege was first conceded. It was clear, from what he had stated, that the concession on the part of the Bank of Ireland had been productive of considerable advantage; and he confessed he did not see why the same principle should not be extended to this country. In Scotland, the principle had been long in operation, and the effect there was, that the bank-failures were unknown.
It might be said, that this plan would not prevent speculation to any great extent, or be an effectual check to over-issues. He did not say it would; but he contended, that the issues would be rendered more secure by a species of banking conformable to that in Scotland. He knew it was objected, that the mere permission to have more partners than six in a bank would not necessarily cause more than that number to associate as partners in one concern, for that though six partners were allowed, yet, in the great majority of banks, the number of partners did not exceed three or four. That might be true. He knew there was no magic in the number six. Six partners might be too many for some purposes, as it would be too few for others. All he contended for was, that there should be an opportunity, by an extension of partners, in cases where it was required, to give that security, the benefits of which had been so much felt in Scotland. He saw nothing in the number six, or in any other particular number. He merely wished the power of extending the number, where such extension would be useful. He had already stated, that the effect of the extension of the Bank privilege, as to the number of partners to private banks, had been productive of great benefit. Since the passing of the act of 1822, the greater part of the banking business of that country had been carried on by banks of that description. In one establishment the number of partners was sixty or seventy, and in the provincial bank the number was even larger; and it was admitted, that the business was conducted in a prudent and satisfactory manner, which gave confidence and security to those who had trusted 191 their deposits with them, and to those who had availed themselves of the notes they issued.
He would now observe, that though he would move a resolution declaring the utility of such establishments in England, it was not his intention to propose a bill on the subject to that House. It was the intention of government, that a bill should be introduced for the purpose, but it was deemed advisable that it should originate in the other House. Of course, it would be for this House to reject or adopt it when it came down; but it was considered a matter of public convenience that it should originate as he had stated. He had been asked the other evening, whether, if this measure should be adopted by the House, ministers had fixed any time when it might be carried into execution—that was, whether any period would be fixed, before which it would not be competent for any of the new partnerships to commence their issues of notes? And it was thrown out, that sufficient time should be given, for the purpose of allowing the present bankers to connect themselves together in new partnerships, or adopt other plans for their future regulation. He would now say, that he did not see any inconvenience which could arise to existing interests, from the immediate establishment of the proposed banks; or from an immediate grant of permission to establish themselves. He could not perceive what any existing respectable bank of good credit, and conducting its business on a solid basis, could have to fear from an immediate permission for the establishment of the new banks, and therefore he should be reluctant to postpone their operation to any distant day. To him it appeared, that the apprehensions entertained on this ground were altogether without foundation, and on that ground it would not be thought advisable to protract the new plan to any remote period. It would, however, be obvious, that in the nature of things, some considerable time must elapse before the plan could be put in practice. He therefore had no objection to fix the 5th of next July, as the period before which it should not be competent to any of the new companies to issue their notes. This he thought would be going as far as was necessary to the general security of the present establishments, or to the practical management of those proposed.
He was not aware that it was necessary 192 for him then to go into any further detail on the subject. If there was any part of his propositions in which he had not made himself clearly understood, he should be happy to answer any questions, or give any explanation in his power. Having given this detail of his plan, he must say, that if the House should refuse to entertain it, or, having entertained it, should negative its enactment as a legislative measure, it would be giving countenance to a serious evil, by leaving the country at all times exposed to those fluctuations in credit and confidence, the effects of which had, on a recent occasion, been productive of so much distress—to an evil which must become greater every day that its remedy was delayed—to an evil which, unless parliament interfered, would give encouragement to speculations of the most dangerous kind. The system to which he now proposed a remedy had already given encouragement to many such speculations, and though a great portion of the recent speculations had arisen from causes over which parliament had no control, yet they were greatly aggravated by imprudent issues of notes from many private banks. Whatever might be the result of the present motion, he should feel satisfied that in proposing it he had done his duty fairly. The rejection of it he should consider as a step fraught with great danger to the country. Should the House reject this measure, he would not envy any man who might have to fill the situation which he had then the honour to hold, the responsibility that must attach to him, in endeavouring to struggle against difficulties which must daily increase on him, from the present system, in proportion as some efficient remedy was delayed. The only remedy which, in his view of the case, would meet the evil he had now explained to the House. It would be their duty not to blink the question—not to imagine, that by deferring any remedy, the evil would of itself pass away. They must meet it boldly, and if they did, they would show to the country that they possessed the means by which it might be remedied. By coming boldly to the discussion of that remedy, it would be seen that the difficulties of the plan which he had suggested had been considerably overrated, and that the fears of the country bankers had been carried to an extravagant length. And when he mentioned the country bankers, let him not be misunderstood. He condemned the law under which they 193 acted, but he did not condemn them. It was to the system, and not to the men, that he alluded; and it was that system which he was anxious to alter. As to the individuals connected with the present private banks, he believed firmly that generally they were entitled to the highest praise for honour, integrity, and stability. It was the system under which they acted, that produced the evil; and he felt convinced, that the alteration in that law which he now submitted to the committee would not have the effect of shaking that confidence which the country was disposed to place in them. He would now move,
"That it is the opinion of this committee, that all Promissory Notes payable to bearer on demand, issued by licensed Bankers in England, or by the Bank of England, for any sum less than 5l., bearing a date previous to the 5th of February 1826, or which may have been stamped previously to that day, shall and may continue to be issued, re-issued, and circulated, until the 5th day of April 1829, and no longer."
rose to address the committee. He said he wished to preface the observations which it would be his duty to make, by requesting of the right hon. gentleman to state whether the resolution which he had just read was the only one which he meant to submit to the House.
The Chancellor of the Exchequer
replied, that he had no other resolution to propose on that specific part of the question.
said, that if that was the case, the resolution before the committee did nothing at all. It went only to say, that all the small notes now in circulation should continue to circulate till the year 1829, and no longer; but it made no provision for any new notes which might be issued in the interim. There was no objection, he supposed, that the small notes now in existence should continue to circulate till 1829; but not a word was said about any new notes that might be issued between this and that period. This, he thought, was a point on which the right hon. gentleman ought not to have omitted to touch. The right hon. gentleman had deprecated any observations as to the time when this matter was introduced by government. He could not see why this should be so. His majesty's ministers, instead of excusing themselves for the introduction of this measure now, were rather to be 194 blamed for not having called parliament together sooner, for the purpose of devising some remedy. The right hon. gentleman seemed to expect some hostility to his measures from the opposition side of the House.
The Chancellor of the Exchequer
begged to assure the hon. gentleman, that he did not allude to any opposition as that of party, but he deprecated such opposition as that which he had been led to expect from the remarks of one or two hon. members on a former evening.
observed, that opposition as a party, was at present that which the right hon. gentleman had no cause to apprehend. If there was any one thing on which the country might congratulate itself in the present period of difficulty, it was that of the absence of all party feeling from discussions of public affairs. The present practice was very different from what they had seen on former occasions—on the treaty with France, the Irish question, and other subjects, where a strong opposition was made from his side of the House to the measures of government; but at no period of modern times was there less of party feeling evinced in the discussion of matters proposed by ministers; and he was certain that, if the right hon. gentleman was not at present convinced of that fact, he would be so before the conclusion of the present session. There might be some gentlemen in the House who were disposed to legislate for our present difficulties on the pure principles of political economy; some whose remedies would have reference to the protection of the agricultural interests; some who would look chiefly to the commercial, and others to the banking, interests, but he did not believe that there were any who would offer a remedy for the evils under which we suffered, with a view to party purposes. The country was at present in too enlightened a state to allow its distresses to be made a handle for party purposes. At the same time, it must be admitted, that if any party were disposed to make a stand as a party against ministers, they never had a better opportunity than the present moment offered. The right hon. gentleman and his colleagues had, by their recent proceedings, and particularly by their correspondence with the Bank, laid themselves open to the most just censure, as being ignorant, at this interesting crisis, of the real situation of the country. What man, 195 he would ask, could read the paper which had lately appeared, addressed by the right hon. gentleman and his noble colleague at the head of the Treasury, to the Bank of England, without being convinced, that if it were wished to oppose them as a party, there was a most important ground on which to found an opposition? That paper, he would venture to say, betrayed an ignorance of the real situation of the country, which could not be expected from any man who had paid common attention to the passing events of the last few months. Was it not most astonishing that any set of men, who had their eyes open to what was passing around them, much more those men who had the advantage for two or three months past, of almost daily interviews with the governor and deputy-governor of the Bank of England, should send into the world a paper in which they said, "now that the distress has subsided, it is fit that some remedy should be applied to prevent a recurrence of the evil?" Why, did any man in the country, except the right hon. gentleman and his colleagues, believe that the distress had subsided? Did any man believe that the danger was over? He was sure that no man who really knew what was passing in the country could subscribe to such an opinion: and he was equally certain, that any remedy against the recurrence of the distress, founded upon the assumption, that that distress had passed away, would be altogether inoperative. The speech of the right hon. gentleman, and the remedy which he now proposed to the House, did absolutely nothing. The remedy was milk and water, and would tend rather to aggravate than relieve the distress; and if ministers were to appeal to any body of commercial men—to men who really did know the state of the country—they would be told, that the authors of the paper he had alluded to, were altogether unfit men to propose a remedy for the evils which did really exist in the country. The remedy now proposed by the right hon. gentleman was quite shallow: it was really unworthy of men who ought to know what was the situation of the country. He said this without meaning the slightest disrespect to the right hon. gentleman, for whom he had the greatest esteem; and he could assure him, that he had no wish to see any other occupy his place, but he must tell him, that in his speech and his resolution 196 he had not touched the evil. He had scarcely gone more than skin-deep; but, an effectual remedy for the evil he certainly had not proposed. It was a very different thing to suggest what might be sufficient to allay a temporary disorder, from that of providing for the permanent system under which the country should hereafter be placed, with a view of preventing the recurrence of that disorder. The permanent state in which it might be desirable to place the country, was very different from that which the exigency of the crisis might demand. It was for not making this difference that he blamed the right hon. gentleman. There were, in all cases, to be found men so wedded to theory, that when a particular emergency arose, they immediately recurred to their books and to the adoption of a certain set of rules there laid down, without ever considering, that it would be necessary to adapt the remedy to the actual situation of things, and not to what might be their more perfect condition. Such men cared not what interest they rode over, provided they arrived at a given point in any manner. He was not indifferent to the general principles to which the right hon. gentleman had that evening adverted, or to the end he proposed to attain; but he thought that to attain that end, general principles alone would not be sufficient. Those principles must, if possible, be fitted to present circumstances. A man must go round to his object according to the obstacles which were interposed, and not attempt to get at it as straight as the crow flies. This was an error which had defeated many well-intended and really good projects, because they were not adapted to the circumstances under which they were to be called into operation. He remembered another instance of this attachment to theory in that House. When the report of the bullion committee was discussed a large party in that House were so convinced of the abstract expediency of resorting to cash payments, that because the House had resolved, that it would be desirable to resort to such payments, they moved as an amendment, that it would be desirable to pay in gold in the succeeding January, and he believed of this number were the right hon. the Secretary for Foreign Affairs and the President of the Board of Trade.
said, he had not intended I to apply it to the right hon. Secretary, whose sound mind would lead him to take a more clear view of the question. But, he had mentioned the fact, that such an amendment had been proposed at the time, as an illustration of his argument, that the perfect theorist made for his object at once, and without reference to the particular circumstances by which he was surrounded. Now, what he wished to impress on the House was, that they must approach the end in view according to the difficulties which opposed themselves; and the first step necessary to be taken was, to acertain what was the nature and the cause of those difficulties. As to the latter, he agreed generally with the right hon. gentleman, except that he had rather studiously kept out of view the share which the government had in their production. If he were asked his opinion on the subject, he would say, that the Bank of England—(and when he spoke of the Bank, he begged to repeat what the right hon. gentleman had said of the country banks—that it was not the individuals, but the system of which he complained; for the individuals who composed the directory of those establishments, he had personally the highest respect, from his recollection of the time when he was associated with some of them, and from his intimate acquaintance with their private worth)—had, in some degree, contributed to the present difficulties. He did not mean, of course, to say that they did so intentionally, but that such was the result of part of the system on which they had acted. One cause amongst others of that distress, was the great facility which existed at the end of the war of obtaining a metallic currency. There was at that period a facility of obtaining gold and of returning to a metallic currency, which had not existed to the same extent since; but it did not follow, that because there was a facility of procuring gold, it would therefore come into the country. They who reasoned thus would greatly deceive themselves. Gold and silver would not come unless we had something to give for them, and unless that something was in demand with those countries where it was in plenty. It had been a favourite theory with some to say, that by contracting its issues the Bank could cause gold to come into the country; but that alone would not be sufficient, for unless we sent commodities for it, we could not procure it, 198 and they who acted upon the mere principle of a contraction of its issues by the Bank, as a means of bringing gold in, would find those issues might be very inconveniently contracted, without producing that effect. However, to return: gold was in great plenty on the continent at the end of the war, and might have been very easily obtained in this country; because, at that time, there was a demand for our manufactures, which, he was sorry to say, did not exist at the present day. Every country almost was now rivalling us in some branch of manufacture. It was particularly the case with America; and, day after day, we were excluded from a market in some one article or other of our former trade. At the end of the war, he repeated, we could easily have got gold; and he was sorry we bad not at that period made an effort to restore our currency to its true basis. If asked, why the House of Commons had not taken some step at that period to restore the currency, he would answer, that if any blame was to be attributed on that account, it was to be attributed to his majesty's ministers, who had not submitted such a proposition. No doubt they would have then met with a strong opposition from the country banks; but if they had taken a bold, decisive step, it was certain they would have succeeded; for that was the time to settle the currency on its true basis. From the facilities he had mentioned of procuring gold, the Bank of England, in the years 1823 and 1824, had accumulated a large store of gold and silver in their coffers. They had increased their dividends from eight to ten per cent, (though they had since reduced them to eight), and had divided a large bonus. Upon the circumstance of agreeing to so large a dividend as ten per cent, he would just observe, that it was, at the least, improvident to undertake that which they might not hereafter be able to continue. As to the bonus, he would say nothing. They had, of course, a right to add to their capital if they possessed the means; but, such was the secrecy observed towards the public with respect to the real grounds of many of their proceedings, that any observations upon them by persons out of doors must, for the greater part, rest on conjecture. They had, as he had observed, at the beginning of 1823 and 1824, an immense accumulation of gold. They had at this period made large issues of paper, and at the same 199 time the country paper issued to an extent nearly in proportion; for though it would not appear at first, the issues of the latter were considerably affected by the former. One consequence of this excess of circulating medium was, that the rate of interest of money fell. Mortgages fell from five to four and three and a half per cent: and such was the anxiety of most capitalists in the country to get any interest, that they placed their capital out of their reach, and took for it securities which, though valuable, were not available in case they required the capital again. The Bank saw and felt what was going on: for in cases of over-issues on their part, they were certain to receive a check by the reaction in other quarters; which check they well understood. They saw that the system was drawing the gold out from them, and they began to fear for the consequence. The therefore, all at once gave a sudden jerk to the horse on whose neck they had before suffered the reins to hang loose. They contracted their issues to a considerable extent. The change was at once felt throughout the country. A few days before that, no one knew what to do with his money: now, no one knew where to get it. He did not mean to say that the Bank had acted with a want of good faith to the public. They, no doubt, felt justified in the course they adopted; but, the effect was not the less felt by the public. The London bankers found it necessary to follow the same course towards their country correspondents; and these, again, towards their customers; and each individual towards his debtor. The banks in town and country, by advancing money on mortgages and other inconvertible securities, had put it out of their reach; and now they all sought to supply its place by every means in their power. Each man feared to let the capital with in his reach go from him, for any other purpose than to meet his own unavoidable engagements. The consequence was obvious in the late panic. Every one desirous to obtain what was due to him, ran to his banker, or to any other on whom he had a claim; and even those who really had no immediate use for their money took it ' back, and let it lie unemployed in their pockets, thinking it unsafe in others hands. The effect of this alarm was, that houses which were weak, went immediately. Then went second-rate houses, and, lastly, houses which were solvent went, because 200 their securities were unavailable at the moment. The daily calls to which each individual was subject put it out of his power to assist his friend; and this added to the general difficulty. All confidence was lost; and, in this country, commercial confidence was carried to an extent never exceeded in any nation. Scarcely one man could be found to trust his neighbour, every one endeavouring to husband his own resources for himself. Such a state of panic had hardly ever before existed amongst us. It might perhaps be said, that the weak and worst ought to be left go to the wall, and that others better would supply their places. If the effects of the panic had been confined to such only, that might be true, in a great degree; but the fact was, that the many who were really substantial, suffered in the general alarm. Men were known to seek for assistance, and that, too, without effect, who, on an examination of their affairs, were proved to be worth 200,000l.—men, too, who held themselves so secure, that, if asked six months before, whether they could contemplate such an event, they would have said it would be impossible, unless the sky should fall, or some other event equally improbable should occur.—With respect to the principle of the issue of small notes, he admitted, that as a permanent system, they ought to be called in. He knew that they were of great and in some instances almost indispensable use in the country; at the same time, if the mere circumstance of the misery which had been occasioned by such issue among the poorer classes of the community were to be taken into consideration, it was a sufficient reason why this nuisance should be abated. They had objected to the small notes of the Bank of England, on account of the numbers which the forgery of them had led to the gallows. They ought now to object to the small notes of the provincial banks, on account of the numbers whom they consigned to the poor-house and to all the miseries of a living death. Every gentleman who had seen the calamity which the failure of a country bank occasioned in provincial towns, must have seen numerous cases of the most heartbreaking description. It was therefore, in his opinion, a great pity that the House had not got rid of this deluge of paper at the time when it had the power to do so, and that it had not resisted, as it ought to have resisted, the importunity of the 201 country bankers. As goon as they could get rid of the present system with perfect safety, he agreed that they ought to do so; but at present they ought to recollect, that the house was on fire, and that the persons who were trembling for their lives in the garrets ought to be got out of it as soon as possible. When the fire was extinguished, and their safety provided for, then, and not till then, might the House set about legislating for them upon general principles. He could not help giving it as his opinion, that of late the Bank had lost sight, in a great degree, of that to which it ought to be instantly recalled; namely, a true sense of the system on which its affairs ought to be conducted, to entitle it to a charter of any kind whatever, and without which it ought not to be permitted to enjoy any privileges of an exclusive character. The main cause of the difficult situation in which the Bank was now placed was, that it had choked up its resources too much, in consequence of its connexion with government. For, let them just consider what the position of the Bank was, not only at present, but also at the time when these commercial disasters first came on. In the first place, the Bank had to provide for what was termed the "dead weight," which he believed now required 8,000,000l. Now, if there was ever any plan founded upon an absurd principle, it was this plan of the dead weight. As some gentlemen might be imperfectly acquainted with it, he would observe, that it was a plan by which certain long annuities, for forty-four years, were created, for the purpose of showing we had a sinking fund of 5,000,000l; when no thinking man, who had his eyes about him, could see a sinking fund to any thing like that amount. The plan, he had before said, was most absurd; but even had it been as politic as it was foolish, the inconvenience of the Bank mixing itself up with it was equally the same. The Bank had now to advance somewhere about 8,000,000l.—a circumstance which arose out of its too intimate connexion with the government. In addition to this, the Bank held Exchequer-bills to the amount of 7,000,000l. He would not pretend to assert it as fact, but he must say, he was rather apprehensive that the Bank had bought Exchequer bills in the market for the purpose of putting its money out to the best advantage, and had found it impossible to recall that money in due time when it was wanted. Besides these 202 8,000,000l. locked up in the dead weight—and the ingenuity of man could not have devised a better name for this absurd plan—and these 7,000,000l. in Exchequer bills, the Bank was bound to advance 7,000,000l. more for the government on what were technically called deficiencies—a measure which, he believed, was one of lord Bexley's sapient contrivances. For though he had a great respect for lord Bexley in his private capacity, he must be permitted to say, with all due deference to that noble lord, that in that contrivance he had not only stultified himself, but the whole House. It was a contrivance which was above all others singularly absurd. It seemed as if the noble lord had been desirous of rendering the Bank utterly incompetent to perform its functions. The Bank had now 7,000,000l. to advance for these deficiencies.
—He did not wish to overstate the matter, and would take the sum to be that which the right hon. gentleman had stated. It was advanced by the Bank to enable the government to pay the dividends. The practice was, for the Bank to advance the sum necessary to pay the dividends, before the government received it; and then to have it repaid shortly afterwards, when the government had received it. Now, the misfortune of this system was, that the advances were again called for in so short a period after they had been repaid, that no advantage was reaped by the Bank from the employment of the money in the interim. The reimbursement was so quick, that the Bank had no time to lay it out; and, what was worse, it was liable to all the inconvenience of having a large quantity of its paper in circulation. Besides these three items, the Bank had undertaken to pay off 2,000,000l. on the 4 per cents; so that altogether, what with the dead weight, what with the Exchequer bills, what with the deficiencies, and what with the 4 per cents, it had 22½ millions locked up by the demands of government. Further than this, the Bank had lent one and a half million to the country gentlemen on the mortgage of their land; a measure which he held, upon principle, to be most improper and impolitic. The sum, it was true, was not large; but it aggravated the case against the Bank, as it added to the amount of its unconvertible capital.—He 203 had now shown, that of the capital of the Bank twenty-four millions were rendered utterly inapplicable to its general purposes, as a commercial establishment. The Bank was less able to meet any casual demand that might be made upon it, in consequence of its holding, what it was in the essence of all banking establishments, to avoid, a large number of unconvertible securities. The principle on which all banking establishments were conducted, was, to employ as much of their capital as they possibly could, but always to employ it upon available securities. He could conceive circumstances under which the right hon. gentleman opposite might feel himself justified in thus clogging the resources of the Bank. If the right hon. gentleman, from the political state of the country, had been in a situation of difficulty, he might be justified in saying, "True it is, I have put the Bank to some inconvenience by my measures, but it was only because I could not get the money elsewhere; and I thought it better to put it to a small inconvenience, than to run the risk of putting the country to a great one." But, specious as such language might appear in a season of difficulty, it could not be tolerated for a moment at a time when the country was at peace abroad and in a state of tranquillity at home. He must say, that, considering that stocks were at 95 and 96, and that the right hon. gentleman had the power of making any arrangement that he thought fitting, he never had heard of a clumsier arrangement than that which the right hon. gentleman had made with the Bank, on the part of government. He did not intend to introduce into the question of the Bank any criticism upon the plan of finance adopted by the right hon. gentleman further than was necessary to elucidate his view of it. But this he must repeat, over and over again, as a great fault in it, that the right hon. gentleman had, as it were, compelled the Bank to have twenty-four millions of unconvertible capital. The Bank, it ought to be further recollected, had at present no capital of its own: It was all lent to government, upon security, it was true, that was unexceptionable, but still it was lent to it; and yet the government, without any necessity for it, either real or alleged, proceeded to choke up its further available resources, in the manner in which he had above described. It was the custom upon all questions—and it was very expedient 204 upon this—to consider what had occurred in former times. The year 1783 was a period of great commercial embarrassment. The Bank was all but stopping payment, in consequence of its dealings with government; and yet, all that the government then owed was only seven millions. In the year 1797, another period of distress, the Bank attributed to its transactions with the government the necessity under which it laboured of applying for a suspension of cash payments. However that statement might once have been disputed, he believed there was nobody who would now deny it. The government undoubtedly did cause that suspension. It had been anticipated for some time previously to its occurrence; but the coup-de-grace was given to it by that Austrian loan which they had recently seen brought to so pitiful a termination. He did not mean to say that, with such a war as that in which the country was engaged in 1797, the country could have avoided coming, sooner or later, either to that suspension of cash payments or to a peace. No such thing. What he meant to say was this—that that result was hastened by the manner in which the government had locked up all the available resources of the Bank. And yet, with all this experience before it, the government still persisted in its former objectionable measures: though, in the years 1783 and 1797, when the Bank was obliged to play the pranks it had done, it had not been mixed up with it to any thing like the sum of twenty-four millions. One of the first measures which, he thought, the government ought to adopt to make the Bank efficient to the public, was to set it at ease in this respect, and to give it elbow-room, if he might use such an expression, for its future operations. He considered that such a step would be advisable as a permanent measure; but he was well aware, that it could not give immediate relief to the evils which at present sat heavy on the country. He had heard it suggested in some quarters, that the issuing of a quantity of Exchequer-bills would be of great effect in mitigating the existing distress; but it was his opinion, that such a measure would inflict more unsparing ruin on the community, than any which had yet been inflicted upon it. Sure he was, that the funding of those bills would aggravate the present evil, and spread alarm and confusion in every direction. The Bank, as 205 it was managed at present, was the heart of all the circulation of the country; and it was evident that if that circulation was not perfect, a derangement must ensue in all its subordinate functions. The derangement which existed at present in all the relations of commerce, had arisen from the unsteady conduct of the Bank acting suddenly upon the country bankers, and had been much assisted in its operations by the mania for wild speculation which had spread over the country like a whirlwind, of which nobody knew whence it came or whither it was going. For he would say, that, unsatisfactory as the state of the circulation was, it never could have given rise to such evils as now pressed upon the country, if it had not been attended with such an unprecedented excess of speculation.—The hon. member then proceeded to argue, that, independently of the danger to which the Bank was necessarily exposed by the choking up of its resources, there was a political evil arising out of it which it was the grossest folly, on the part of government, to tolerate. In the time of peace the object of a wise government was, to have its monied institutions, like the ships of war at Portsmouth, ready for a start on a moment's notice. Now, from a Bank which had twenty-four millions of its capital choked up in the support of silly conceits and idle devices, the government had taken away the means of a start; if such a start became necessary. In such a contingency the government would find, to its detriment and disgrace, that it had not only choked up the resources, but paralyzed the powers of the Bank. If they supposed, that because they had got a return of all the ships of the line at Portsmouth being in a sea-worthy condition, they were therefore in a situation to go suddenly to war, they would find, when it was too late, that they were mistaken, and that the state to which their impolitic measures had reduced the Bank, had deprived them of the means of carrying it on. The power of this country was well known to be in its Treasury. It was far beyond any thing to which its military force entitled it to aspire; it rested not upon its bayonets, but upon its money. The last contest in which it was engaged was decided entirely by its money. Forty or fifty thousand men were the largest army of Englishmen which were ever upon the continent, under the command of that great and illustrious captain, who had 206 delivered Europe from the thraldom of Napoleon. The rest of our military force consisted of the natives of other countries, and principally of Germans. The powers of Austria, Russia, and Prussia, were all successively put in motion by our money. The great arm of our country—its power, its influence, its consideration—was in its Treasury. Those, therefore, who had left the country in such a state, that it would be impossible for it to avail itself suddenly of that arm of its strength, had acted as absurdly as it was possible for any set of men to act, who arrogated to themselves the name and character of statesmen.—The hon. member remarked, that before the House came to the conclusion, that the present system of banking was inefficient, and did not work well to the community, it ought to see it act in the unfettered command of all its resources, and not with those resources choked up as they were at present by the proceedings of government. He said, first of all, that they ought to relieve the Bank from its present difficulties, and then, when that was done, make it understand, that it ought always to be ready with four, five, six, or even eight millions for the service of the country. It was his opinion, that if the first lord of the Treasury had recently sent to the Bank, and, after informing the directors that Treasury-bills were at a considerable discount, had desired them to buy up from four to eight millions of Exchequer-bills, it would not have been in the power of the Bank to have acceded to his request. He believed, that if the Bank had been unincumbered with the government, it would have been relieved from the difficulty, or, as some called it, the liberality of making the issues it lately had done. If it had possessed more elbow-room to turn itself about in, it would have come forward with alacrity to assist the public; and thus the difficulties which had recently occurred would have beer obviated. Three-fourths of those difficulties arose entirely from panic; a fourth of them might, perhaps, have arisen from actual distress. Like people in a theatre, who sometimes crushed one another to death, in the alarm occasioned by imaginary and not by real dangers, the members of the community had hurried one another into distress and bankruptcy, by the violent efforts they had individually made to avoid them. The Bank, it ought to be recollected, was the banker of the government. In private life, any individual who 207 Wanted a temporary pecuniary aid, applied to his banker for it, and in general his banker allowed him to have it. The government, like a private individual, might often be in want of similar assistance, and should always be able to procure it, without leaving the Bank an opportunity of saying, "We cannot give it you without choking up our resources, and becoming less independent of you than we ought to be," especially in a time of peace, and with the three per cents at 94 and 95. His own private opinion was, that the Bank, if it were relieved from its difficulties, would be fully able to discharge all the functions for which it was intended, and would soon relieve the country from the panic which, now prevailed, as to its sufficiency to maintain the currency. If the Bank, were conducted upon proper principles.—if it would not drive such hard bargains, and would be content with less profits than it sought to obtain at present—if it would be satisfied with a profit of five instead of eight per cent—and if, when its charter expired, it would adopt some prudent and liberal measure to limit the emoluments upon its capital, he was convinced that the system would soon stand upon a better footing, than it did now, and that some preventive would be found against the recurrence of such evils as had lately befallen the country. He was well aware, that ever since the resumption of cash payments, doubts had existed in the, minds of very respectable persons; as to whether there was a capacity in the country to maintain invariably such payments. He was well aware, that many persons apprehended that the pressure of our national debt, of our taxation, and of various other circumstances, would render the continuance of such, a system-impossible; but, for his own part, he had never participated, neither did ha participate now, in those apprehensions. He thought that if the Bank were properly administered, it would be capable of giving full and permanent effect to such a system; but, at the same time, he must in candour confess, that he should like to see the Bank rendered more perfect than it now was. If any bank could be formed upon such principles as would give greater security to the Bank of England, not only in respect of securing the commercial interests of the country, which had recently been in, considerable jeopardy, but also in respect of advancing, its political interests abroad, he, for one, should be very glad of 208 it. The desideratum for such a bank was, to erect it on a wider basis. It might be done, when the charter of the Bank expired, either by extending its capital, or by raising rival banks; for which there were not wanting several specious projects. He should listen with great attention to any thing upon that subject; because, though he thought that the present system might be made efficient, if it were fairly and honourably carried into effect without any tricks, contrivances, or paltry meannesses, still he was free to confess, that he should have no objection to improve and strengthen it. The first plan which he had heard mentioned was to erect a second bank. Now, if the erection of any establishment in rivalry to the Bank of England was meditated in the metropolis, he must say, that he knew of no plan on which it could be erected without augmenting the present confusion. If they had one bank in the east and another in the west, it would bring the country into confusion, in a shorter time than any other measure which could be possibly devised. One bank would be jealous and fearful of the other, and would take every opportunity of acting against it. Neither the public nor the banks themselves would know precisely what they were about. At present, the Bank of England was perfectly acquainted with the nature of its transactions: it knew the risk which it ran, and the. responsibility which it incurred; but, if a rival bank were established by its side, the competition would create confusion, and in the eagerness for profit, the recollection of its liabilities would be lost. He conceived that no arrangement of that kind could be made with perfect safety. But, if they strengthened the old establishment by widening its basis and extending its capital, he was of opinion that they would confer a very substantial benefit upon the community.—He had been in hopes, that the right hon. gentleman opposite was going to usher in that evening some plan, better than any which had hitherto been devised; but, a speech of greater promise and of less performance he had never heard in the whole course of his parliamentary experience. The object of the right hon. gentleman's measure was contained in the simple annunciation, that the Bank had agreed to concede that part of its privileges by which any banking establishment was prevented from; consisting of more than six members. He must tell the right hon. gen- 209 tleman in the outset, that he had made his own answer to his own scheme, though perhaps he did not think so, quite conclusive against it. For, though at present the members of a banking establishment might consist of as many as six persons, it appeared that only twenty-six out of the seven hundred banks which now existed had availed themselves of that privilege. For his own part, he saw nothing magical in the number six; and if six persons could not now be found, except in a few instances, who were willing to trust themselves together in banking establishments, he did not conceive it very likely that more than six persons would be found anxious to associate themselves together for such purposes, when the privilege of doing so was given them by law. If any country gentlemen should avail themselves of that privilege, he should say that it was the greatest act of folly they could possibly commit. If the right hon. gentleman had allowed persons to combine together on condition of depositing their capital, and of limiting their responsibility to that capital, he would have found plenty of individuals ready to engage in such associations. Landed gentlemen would put down their five, their ten, or their twenty thousand pounds, as might be convenient; and banks would then be formed all over the country on the very best principles. He saw no objections at present to such a system; but, if it were sifted as it ought to be, it was probable that some objections might be discovered. He thought, however, that they would be of a trivial nature, and would be more than counterbalanced by the advantages to which such a system would give rise. He was sure that by adopting it, solid establishments would be created all over the country, in which prudent men with families would be very willing to connect themselves. They might be created on the principle of a joint-stock company. In that case, he would make it incumbent on all persons who joined it to make a public record of their capital, and to balance their books once a year. Then, if any partner owed any thing to the bank, and touched his capital, he should be made liable for all the debts of the establishment—a regulation of which he could not complain, as he would not be involved in them without his own direct participation.—There was another point on which he wished to express his sentiments to the 210 committee. It was one of extreme importance to all banking establishments, and contained a principle, which, if adopted, would put them out of all apprehension of such danger as they had recently incurred: he meant the propriety of making silver as well as gold a legal tender. He was not going to state any novelty upon this subject. Silver was a legal tender in every country but our own; and in point of law, up to a very late period, it was even a legal fender here, when of a fixed fineness. The proportions having been ill regulated in this country, it became the interest of the debtor to pay in gold rather than in silver, and thus a practical tender of gold was established among us. We had now had it so long, that we had almost forgot how we came by it; but, what he had stated was matter of history, and not of speculation. The question, when it was determined in that house at the time of the Bullion committee, was determined too much in accordance with the views of philosophers and theorists, who looked to a fanciful perfection in the standard of value, and lost sight of a consideration which they ought always to have had before them; namely, not to establish a more imperfect, in their anxiety to establish a more perfect standard. If one point was better established than another, it was this—that the perfection of a standard consisted in its invariableness. Gentlemen might say, "If that be so, how can the standard boast of its invariableness, when it consists of two different metals, and when, to the general mutability of each, is added the mutability between gold and silver? Surely, instead of diminishing, such a plan will increase the variableness of the standard." Now, if he could show that by admitting the two, the currency, as distinguished from the standard of value, would, in point of fact, be rendered less variable, they would have a less variable standard to measure all commodities by. In the first place, the Bank of England, if it had the power to pay in silver, would be able to get it out of every country in the world. Gold, on the continent, was an article of merchandise, whereas silver was not so, and was always to be procured. If a man had a bill of exchange upon Hamburgh, Amsterdam, or Paris, he might get either gold or silver for it; but if he got silver, and with that was obliged to buy gold, it was evident that by rendering gold scarce, he would create a 211 difficulty in procuring it. He contended, that in proportion to the facilities afforded to the Bank of England for making tenders, would be its power to assist its customers. He had no doubt that if they could get at a knowledge of the operations of the Bank, it would appear that the Bank had sent silver to the continent to procure gold. Now, if the Bank had been possessed of the power to pay in silver, it would have had no occasion to resort to any such measure. The evil of a single standard was clearly preceptible. The Bank, obliged to pay in a metal which was not the currency of any other country, but a matter of merchandise, was liable to be speculated against in every direction; and nothing would be easier than for a person with very inferior capital to stop the Bank from getting even a single ounce of gold. It might be said, perhaps, that the present system had worked well in former times. He denied it. The country did not go on well with it. We were obliged to terminate the American war, because, if we had continued it, the Bank must have stopped its payments in gold. When the French war came, it was of such a nature that we could not stop it, because the French would not make peace. The Bank in consequence suspended its payments in cash, and the country went on with the war. The system, therefore, did not work any better for us in former times, than it did at present. The whole history of the past proved it beyond dispute. He did not like to say all that he knew upon the subject; but, if he was rightly informed, much of the present difficulties of the country depended upon other countries and upon other powers. The country was now in a state of embarrassment, in which it would not have been placed, if it had possessed the same metallic standard with every other country in the world. Its present difficulties arose from its taking a metallic standard which no other country took. Why was this country the only sufferer? Because the variableness of our standard depended on the variableness of a currency of paper and gold mixed; whereas the variableness of the standard in other countries depended on a currency of silver and gold mixed; and it had always been found that paper and gold mixed were more variable than silver and gold mixed. Take, for instance, the case of France, where gold and silver lived together in perfect 212 harmony, and where there was seldom more than a variation of 10 centimes between them. They sometimes differed from 10¼ to 10½; but he was told that now, for the first time since the establishment of the gold and silver currency, the difference had increased 1½ per cent in consequence of the demands of the Bank for gold; and that, in consequence of our wish to have this beautiful and philosophical standard, the price of it had risen in every country of Europe. Against this variation of ten centimes, he would place the variation of 20 or 80 per cent. which existed in the value of commodities in England, and even in that of the pound sterling. He contended, that this variableness in the standard cramped the measures of the Bank, but in a tone of voice which was occasionally so low that it did not reach the gallery.—After apologizing for the length at which he had trespassed on the attention of the House in explanation of his views of the expediency of adopting a double standard of silver and gold, he proceeded to state the manner in which he would carry it into execution. Some persons imagined, that there would be considerable difficulty in establishing this double currency; but he knew others, on whose judgment he could rely with confidence, who thought that it could be established with ease and safety, and that it was absolutely necessary to relieve the country from its present difficulties. His plan was to leave the smaller silver coins in circulation, as the half-crowns, the shillings, and sixpences; to call in the crown-pieces, which at present were little used, and could well be spared from the general circulation; to recoin them, and to make the crown-piece a legal tender to any amount, not taking it at the present value of silver, for that would be depreciated, and he should be sorry to propose any depreciation in the standard. The proportion of gold to silver was in England 15 to 1, and in France 15½ to 1; but he trusted that by making both legal tenders, they would approach nearer together, and that the disproportion between them would ere long cease to be so great as it was at present. He was quite sure that the smaller coins which he should leave in circulation, would not be injurious to the success of his plan. It might, perhaps, be objected, that with ten sixpences of the current coin he could buy twelve of the present standard, and that 213 a depreciation of it would consequently ensue. But that was the case even now, as silver could be bought in the market. The standard of the one pound sterling, however, would remain the same, and the Bank would have greater facility than it had at present for protecting itself against danger. Gentlemen might, perhaps, suppose that they would be incumbered by the difficulty of carrying about such a medium; but they would find that they would be able to get 100l. of gold for 100l. of silver for an agio of two shillings; as in France it was now done for an agio of two francs. He had one observation more to make. Gold went out of the country much faster than silver. Most things in life were attended by their disadvantages as well as by their advantages. They had now got a beautiful coin of peculiar fineness, which, as the exportation of it was permitted by law, went with great rapidity out of the country. The old principle was, that the moment the exchange turned ¾ or 1 per cent against England, the gold was exported; but now the case was entirely altered. Formerly, it could not be exported without considerable fraud, and some risk; for when it was once out of the country, it was liable to seizure by the officers of the Customs. Now, it could be put openly into a bag, and carried away; and, in times of difficulty like the present, a man would prefer taking coin abroad with him to taking a bill of exchange, as there was risk with the one and not with the other. It was exported, too, in infinitely larger sums than it was heretofore; for it was now sent out in hundreds of thousands of pounds by men of large capital, who formerly refused to export it, as it was contrary to law, and so left the trade to Jews and the smaller dealers in contraband commodities. Thus, the Bank had formerly a greater power of protecting itself against danger than it had at present; and it was therefore requisite to furnish it with fresh powers for its security and preservation. A further advantage of establishing a double standard would be, that if the gold went out of the country, the Bank could pay in silver; and if the silver went out, it could pay in gold; so that, admitting that there might be some imperfections in this system, the advantages of it would far more than counterbalance them. It would be the best method of relieving the country from its 214 present embarrassments; and if it would prevent, as he maintained it would, the recurrence of similar distress, there was no sacrifice which we ought not to make for the adoption of it. No slight difference in the standard ought to deter us from taking measures to prevent the recurrence of events similar to those which had recently convulsed the country.—With respect to the amount of the issues which the right hon. gentleman now proposed to call in, he must observe, that a considerable diminution had taken place. On a recent occasion, the right hon. gentleman had stated them to be 6,000,000l. Now he called them 4,000,000l.; and not long since they were said to be 8,000,000l. They had been proceeding in this inverse ratio with so rapid a declension, that it was not improbable they might at no very distant period, be rated as nil. Now, although the sudden calling in of any of these sums, whichever amount might be ultimately fixed on, would be the cause of great distress, yet that must not be considered with reference to the effect which the measure might produce in the metropolis. What would scarcely be felt here would be the cause of infinite mischief in the country; because the scale upon which it would be applied would be so much larger. Here such a sum would be nothing. In the country it would be every thing. He would further suggest to the right hon. gentleman, that it would be prudent to pause before the plan which he had proposed should be adopted; for this reason—that although the issue of the small notes had already been partly restrained, it had been done at the price of increasing the existing distress. The country bankers had already begun to dun their debtors, and to call somewhat clamorously for all that was owing to them. It was true that the right hon. gentleman meant to give three years for the completion of his plan; but it was obvious, that for what was to be done three years hence preparations would be begun now. That period might be sufficient for the object which the right hon. gentleman contemplated; but although the country bankers had that time for the regulation of their own affairs, and for adapting them to the alteration which was to take place, it did not follow that they would afford that time to others. This circumstance, among many others, convinced him that the right hon. gentleman had not fully considered the in- 215 tensity of the distress which prevailed, nor the, urgency which required an efficient remedy. He knew very well, that when the proposed scheme should be effected, we should come back to sound principles, upon which there would be no danger in acting; but his anxiety was to know what was to be done in the mean time; and unless this should be ascertained, he thought the House could not safely proceed. He thought that the right hon. gentleman had given the House an opportunity of considering what they ought to do; and he thought too that his motion that the small notes should not be out for more than three years to come would be wholly inefficient, unless accompanied by a provision, that no more notes should be stamped than those which were now actually in circulation. He knew that no effort which he might make would be available in preventing the measure, if it had been finally determined upon; but this conviction would not induce him to relax in the earnestness with which he represented what to him appeared very forcible objections against it. He wished the right hon. gentleman could be prevailed upon to postpone his measure for another year, or to leave it alone altogether. He was not less anxious than any man that a remedy should be applied to the distress which now prevailed universally, and he was ready to discuss it at that moment if it should be proposed; but he could not bring himself to see that remedy in the plan which the right hon. gentleman had suggested. On the contrary, he thought that the right hon. gentleman was going too fast, if not too far, in his present motion. It could not be just, and he was sure no man could believe that it was judicious, to set at work that screwing operation when that system of grinding was going on which the country could not bear. If, on the contrary, things should be let alone, the distress would certainly not be aggravated, and the people would probably find out that three-fourths of it had been the result of mere panic and alarm, which was, in many respects, unfounded. He was not too sanguine in believing, that the storm, amidst all the mischief which it had produced, would blow away many of the evils that had prevailed, and disperse the noxious influences under which the country had so widely suffered. Those measures which he wished to see adopted, and which were recommended by their 216 obvious expediency and safety, were, that banks should be established either upon the principle of joint-stock companies, or in such other way as might induce persons of capital to go into them; that a silver currency should be resorted to; and that ministers should relieve the bank of England from that incumbrance which its present connexion with the government occasioned.
said, it appeared to him that the right hon. gentleman had come to the House with a proposal for applying a remedy to an evil, the nature of which he had not yet ascertained. He thought he did the right hon. gentleman no injustice in this belief; because, no man who looked to his speeches, and to those of his colleagues, could doubt that they appreciated the difficulty and danger which prevailed at much too low a rate. For his own part, he thought that the present crisis was much more serious, and the consequences with which it was fraught much more injurious than his majesty's ministers seemed to imagine. The revulsion which had taken place had produced universal calamity. The property of private individuals was ruined, the most important interests of the country impaired, and its commerce going to decay. Melancholy as the prospect was at this moment, there was no certainty that it would improve. The right hon. gentleman was wholly mistaken if he thought that he (lord Folkestone) was not anxious to prevent that fluctuation which had lately been experienced. On the contrary, he was most anxious to do so, seeing that he attributed to that fluctuation most of the disasters which they had now to deplore. Upon this, as well as upon many other points, he had to assure the right hon. gentleman that he was mistaken. He agreed with his hon. friend who spoke last, that the right hon. gentleman, in the plan which he had suggested, was proceeding too fast. The only remedy which he proposed was, in fact, to repeal the measure of 1823, which was a cabinet measure, and to which, as the right hon. gentleman was then a member of the government, he must be supposed to have given his assent. Although he (lord Folkestone) did not disapprove of that repeal, he must beg leave to trouble the House with a few observations upon it. It would be remembered, that the bill to which he had just alluded was first proposed in 1822, 217 after several years of intense pressure, and when a wide-spreading calamity had prevailed over the whole of the country. The distress, he must remind the House, had been most severely felt in 1819, 1820, and 1821, and it had then pressed most heavily upon the manufacturing interests; but it was not until 1822 and 1823 that the agriculturists suffered, and then it was stated, that the bill was brought in to assist the circulating medium of the country. And what was the consequence? Why, that prices immediately rose, and had continued at a high rate from that period to the present. In 1819, that measure, which was commonly called Mr. Peel's bill, passed, which enacted that, after the year 1823, no small notes should be issued by the Bank. The consequence of this was, that the Bank began collecting gold; of which they got a large quantity in a short time at a considerable expense. By this operation an immense difference was effected in the currency, which began to be felt in 1820 and 1821; and long before the time limited by the act all the small notes of the Bank of England had been withdrawn from circulation. The country banks were, upon this, compelled to follow the example as far as they could, and to narrow their issues, to remedy the distress consequent upon which the bill of 1823 was passed. Prices immediately rose, and the distress was thus relieved. It was now proposed to repeal that bill. But he would ask, whether the present circumstances of the country afforded the least reason for believing that to do so would not bring back again the distress? It was impossible to doubt that this must be the result of such a measure. In his opinion, nothing could be more injurious to the country than that eternal fluctuation of prices which had now been going on for several years. In 1815 and 1816 there was a cry of distress. In 1817 and 1818 that distress was relieved by the large issue of bank-notes. Then came Mr. Peel's bill, and after that a fall of prices. Then the bill of 1823 was passed, and then the prices went up. Now, it was proposed to repeal that bill; and the consequence must inevitably be another decline of prices. The most mischievous of the many evil consequences which attended these fluctuations was, the loss which they occasioned to the poor man; not only because they caused him to lose whatever little property he might have 218 laid up, but because they bore heavily upon him in every article of necessary consumption. He considered this point worthy of the most serious attention of the House; and although it had, upon some other occasions, been treated, as he thought, with unbecoming levity, he must remind the House that, in all these changes of property, the poor-rates had gone on increasing, and, consequently, the sufferings of the poor. He contended, that the poor man was now in a worse and more degraded state than he was in twenty-five years ago. He had examined the returns of the allowances made to the poor in the county of Berkshire, and he found, that at the period to which he alluded, the weekly allowance had been two loaves and 1s. for a man; one loaf and 1s. for a woman; and one loaf and 6d. for a child. Now, the allowance was only one loaf and 1s. for a man; one loaf and 6d. for a woman; and one loaf only for a child. The condition of the poor man was, therefore, worse now than it was twenty-five years ago; and he was convinced that, whatever effect the fluctuations might produce on other classes of society, the lower orders always suffered.—With respect to the other measures which formed a part of the right hon. gentleman's proposal, he protested that he did not see much good which could, by any possibility, result from them. He was aware they were open to many objections, but he did not think the House was prepared to decide upon them at present. He was quite convinced that the establishment of joint-stock banks would not do much towards relieving the present or preventing future distresses. It was generally supposed, and for his own part he believed it, that the existing evils arose, in a great measure, from the immense quantity of paper which was in circulation; and as these banks must, in any case, have a greater power of forcing paper into circulation than those now in operation, he did not see the vast benefit which was to be produced by them. On the contrary, he saw that a power would be granted which might prove injurious to the country.—A great deal had been said respecting Scotland, where such banks existed; but, it did not appear, from what he had learned on the subject, and from that book which had been so much read and commended, that the distress in Scotland was much less than that which prevailed in England. He could 219 not help believing, that the right hon. gentleman, in proposing the measure which he had that night brought down to the House, had not examined into the extent of the calamity which prevailed, nor of the remedies which it required. These facts were evident to him, not less from the language which had been addressed to the House on the first day of the session, than from that notable document which had lately been made public in the shape of a correspondence between the Bank of England and the lords of the Treasury. He did not mean to insist upon the necessity of the chancellor of the Exchequer, or the first lord of the Treasury, or any of the members of his majesty's government being acquainted with the rules of grammar, or that they should, in all their correspondence, observe the ordinary laws of the English language; but, without being too critical, he might be permitted to express his surprise at the manner in which the paper was written, when he considered the hands out of which it came. A more extraordinary document as to its language, he must say, he had never seen: but he considered the opinions which it advanced to be infinitely more singular. It began by stating, that the difficulty was all over, and that the pecuniary transactions had reverted to their accustomed course. Then, after having laid all the blame of the distress on the rash spirit of speculation which had prevailed, it proceeded to say, that the remedies must be so and so. It was true that his majesty's Speech told us, that the remedies were out of the reach of parliament; but this was only another of those inconsistencies which characterised the conduct of the right hon. gentleman in so many respects. He did not intend to offer any opposition to the measures now proposed; but he wished the House to be much better informed than they were at present, before they agreed to them. Every one must be astonished that only a year had elapsed in that state of brilliant prosperity about which so much had been said, and, at the end of it we found ourselves plunged in the deepest distress. It might be true, that a wild spirit of speculation had been one of the causes of that distress; but he must remind the right hon. gentleman, that no one had encouraged that wild spirit more than himself, and that the speeches which he had delivered in that House had promoted it far more than any other 220 circumstances could have done. The contrast was indeed striking which his speeches now presented, echoing, as they did, the universal complaint of distress, from those of triumphant congratulation which he had indulged in formerly. When the last session of parliament opened, the king was made to congratulate the country on the prosperity which had so certain a prospect of enduring. The right hon. gentleman opened his budget in the same tone; and any one would have been scouted who had been hardy enough, at that time, to suggest that there might have been any thing hollow or unsteady in his glowing predictions. But the right hon. gentleman himself knew very well that they were hollow: he had the means of knowing it; his situation must have acquainted him with it; and yet, notwithstanding this knowledge, the right hon. gentleman continued to predict, and to argue, until the whole of the country believed all that he represented. The events which had since happened were the best commentary on those predictions; and the measure which the right hon. gentleman now proposed, as a remedy for the distress which had ensued upon the dream of prosperity, was the best proof that could be given of its emptiness. The noble lord concluded by expressing his conviction, that we should soon be again reduced to the same distress, from which the present measure was intended to relieve us.
observed, that he concurred most fully in all the points which had been laid down in the very able speech of his hon. friend, the member for Taunton, excepting one. He certainly thought that the conduct which the Bank of England had pursued during the recent crisis entitled it to the gratitude of the country; and but for the very liberal assistance which it had rendered during the tempest, he should almost have been tempted to accede to any proposition for disjoining the connection between it and the government. What he objected to in his hon. friend's speech was, his advocating the establishment of two standards of currency, a gold and silver one. With respect to the substitution of a silver and gold currency, instead of that which at present existed, he should have no objection to its being adopted, if it were in the nature of a silver currency, to advance as that of gold might happen to recede; but as he believed that no such effect could possibly be produced, he should 221 hesitate to approve of it, though he might do so at the risk of being classed in that sect of philosophers of whom the hon. member was once a member, but on whom he now cast his censures whenever an occasion for doing so presented itself. Let hon. members look at the connection of this country with South America; let them consider what had been advanced by all Europeans who had travelled in that country, and more particularly by baron Humboldt, who had stated, that that country was intersected throughout with rich veins of silver; and, such being the case, would it be politic to take that metal as a standard of currency with which the country might at any time be inundated, to the unhinging of all its trading regulations, and the altering at once of the relation between debtor and creditor—consequences which ensue from the constant fluctuations of a silver standard. Having touched slightly on that question, he would proceed to the subject before the House. He regretted, in common with the hon. member for Taunton, and the noble lord who had preceded him, that the causes to which the present mischiefs were mainly attributable, bad not been more clearly pointed out by the chancellor of the Exchequer. Among those persons who were best informed on this subject, two opinions prevailed as to those causes: the first was, that it had been occasioned by the connection between the Bank and the government; and the second attributed it to the overtrading, and to that mania for speculation, which had existed in so extraordinary a degree. He declared himself to be of this latter opinion; and, while he stated the grounds which confirmed him in that opinion, he should endeavour to point out the considerations on which he thought the other erroneous. It had been stated that the low rate of interest had been the chief cause that had promoted these speculations, and this low rate of interest was attributed to the over-issues of the Bank; but these over-issues, as they were called, had existed for a year and a half before they affected the rate of exchange. Now, he put it to any gentleman who understood this subject, whether an over-issue could take place without its having the immediate effect of returning the paper upon the Bank, and causing the exportation of gold. If he had time he could convince any one, even among those who had never given the 222 least attention to the subject, that it was impossible but that the effect he alluded to must have been produced. There was, on the Royal Exchange, a most acute and intelligent body of men, whose interests were inseparably connected with these affairs, and who were constantly watching them. If any such over-issue had taken place, these persons would have known and instantly taken advantage of it, and that they had not done so was a proof that there could have been no over-issue. To this important point he called the attention of the House; and he begged it to be recollected, that the alleged over-issues took place in 1823, while it was admitted that no change had taken place in the rate of exchange until 1825. In his opinion, the principal cause of the late distresses was the measures adopted in 1822 and 1823, by ministers, for reducing the rate of interest. The low rate of interest led to speculation. At the end of 1823, and the beginning of 1824, speculations of the wildest nature were set on foot. Persons who had derived a small income from the interest of their money, were unwilling to lose the comforts which they had previously enjoyed, and readily embarked in speculation as a means of augmenting their now-reduced income. Mr. Tooke, in his excellent pamphlet, had pointed out other causes which operated with the spirit of speculation to produce the recent convulsion. That writer had stated, that about the end of 1824, the stock of manufactures of almost every description on hand was shorter than usual. The inference which the manufacturers drew from this circumstance was, that the rate of consumption had increased. The consequence was, that immense speculations took place in various articles. Cotton and silk were imported in immense quantities. To such an extent was the speculation in cotton carried, that it increased in price from 150 to 200 percent. All seemed to go on well until towards the end of 1825, when a reaction suddenly took place. Every thing indicated that this re-action was approaching; and it came followed immediately afterwards by a panic—an unreasonable and senseless panic—a panic falling directly on the bankers, who were suddenly called on to pay all they owed, when it was notorious that bankers were a class of men who ought never to be called on at once to pay all they owed, whose business would never answer if 223 they were obliged to pay all they owed, and whose only chance of profit was in an uninterrupted continuance of credit. Of this panic no man could tell what might have been the consequences, if the Bank had not stepped in, and by their timely and liberal interference, saved the country from destruction. All this panic and all this distress, he attributed to over-trading and its natural results. This was a short history of the recent distress. He attributed it entirely to over-trading. It was an evil to which no legislative remedy could be applied. It could be cured only by the experience and example of those who had suffered. It was, to be sure, a sad lesson to those who had suffered; but it was to be hoped that it would have the effect of preventing them from embarking in such mad speculations in future.—The two measures brought forward by government had, he believed, very little reference to the causes of the late distress. The first measure, as the hon. member for Taunton had justly remarked, would prove inefficient. If there were now only twenty-six banking establishments in England which possessed the full number of partners allowed by law, by what magical charm did ministers expect that their measure would be able to raise up banking establishments composed of a still greater number of partners? Besides, the evil was not that the present banking establishments wanted solidity. This was proved by the fact, that the number of bankers who failed who were unable to meet all their engagements was very small. The evil in our present banking system was, the imprudence of bankers in the carrying on of their business—their want of knowledge, in fact, of banking.—With respect to the second proposition of the right hon. gentleman; namely, that which enabled the bank of England to establish branch banks, it met with his hearty concurrence, and he sincerely hoped it would be carried into effect. Those establishments would naturally be more cautious with respect to the amount of their issues than country banks. One of the measures which ministers had in contemplation was, the putting a stop to the issue of one and two pound notes. The reasons which ministers gave for this measure were to be found in the correspondence which had lately passed between the first lord of the Treasury and the chancellor of the Exchequer on the one hand, and the Bank on the other. 224 In one of the papers composing that correspondence, the right hon. gentleman, and the noble lord his colleague, say, "It appears to us to be quite clear that such a measure would be productive of much good; that it would operate as some check upon the spirit of speculation, and upon the issues of country banks; and whilst, on the one hand, it would diminish the pressure upon the Bank and the metropolis, incident to an unfavourable state of the exchanges, by spreading it over a wider surface; on the other hand, it would cause such pressure to be earlier felt, and thereby ensure an earlier and more general adoption of the precautionary measures necessary for counteracting the inconveniences incident to an export of the precious metals." The allusion to the state of the exchange, in the paragraph which he had just read, was, in his opinion, quite beside the question. The unfavourable state of the exchanges was the effect of over speculation.—It was, he understood, part of the plan of the government to invest commissioners with the power of regulating the issue of small notes. To that he most decidedly objected in a political point of view. When he saw the manner in which commissioners of the sinking fund were schooled by government—how they were at their beck and call, purchasing and selling only as government pleased—he must object to any arrangement which would give ministers the power of interfering directly with the currency. On this political ground, therefore, he would oppose the measure. He did not anticipate from a metallic currency those advantages which some persons seemed to think would be derived from it. He was of opinion, that such a currency as we possessed, before the suppression of the one-pound notes, was good, and might again be adopted with advantage. Money had been happily compared by Adam Smith to the high roads of a country, which did not produce one blade of grass, or one stalk of corn; but which were the means of circulating all the corn and all the grass produced in the country. Gold and silver, however, might be exported, and purchasing something else might add to the effective capital of a country, and set more labour in motion. The more the effective capital of any country was increased, the more was the means of its prosperity augmented. By substituting a paper circulation, therefore, for a metallic currency, we 225 were saved the expense of maintaining the gold and silver in circulation, and production was augmented in proportion to the additional effective capital thus obtained. By persisting in maintaining gold and silver in circulation, a tax was, in fact, levied on the country, equivalent to the amount of all the profit which might be obtained by means of the additional capital. This was, he thought, a serious consideration, when applied to the proposal for suppressing the one and two pound notes. If this were satisfactorily made out, it could not, he thought, be advantageous to the country to substitute a metallic for a paper currency. It would change the relations of the country; it would cause the destruction of property; and it had not the support of any practice. It was at least an onerous remedy for the present distress, to suppress the one and two pound notes. He would, he repeated, deny that there was greater security to be found in a metallic than in a paper currency. The right hon. gentleman had himself destroyed that proposition by the sentence which immediately followed the one which he had already quoted from the correspondence upon the table. The passage to which he alluded was this:—"But though a recurrence to a gold circulation in the country, for the reasons already stated, might be productive of some good, it would by no means go to the root of the evil." The right hon. gentleman went on to say, in the same document, "We have abundant proof of the truth of this position in the events which took place in the spring of 1793, when a convulsion occurred in the money transactions and circulation of the country, more extensive than that which we have recently experienced. At that period, nearly a hundred country banks were obliged to stop payment, and Parliament was induced to grant an issue of Exchequer bills to relieve the distress. Yet, in the year 1793, there were no one or two pound notes in circulation in England, either by country banks or by the Bank of England. We have a further proof of the truth of what has been advanced in the experience of Scotland, which has escaped all the convulsions which have occurred in the money-market of England for the last thirty-five years, though Scotland, during the whole of that time, has had a circulation of one pound notes; and the small pecuniary transactions of 226 of the united kingdom have been carried on exclusively by the means of such notes. The issue of small notes, though it be an aggravation, cannot therefore be the sole or even the main cause of the evil in England." He did not require a stronger proof of the insufficiency of a bullion currency to afford security than the statements contained in the right hon. gentleman's own paper; from which it appeared, that in 1793 the greatest convulsion took place under a bullion currency, whilst Scotland, which had possessed a paper currency for the last thirty-five years, had never experienced any convulsions whatever. He was willing to rest his argument in favour of a paper currency entirely on the document to which he had referred. To look, however, to the present period—it would be evident, that no greater advantages resulted from a currency of bullion than from a currency of which paper formed a prominent part. Compare the situation of Liverpool, London, and Lancashire, which possessed a metallic currency, with other parts of the country where a currency of paper prevailed, and it would be seen, that the former had been exposed to greater fluctuations than the latter. He did in his conscience believe, that the whole of the recent distresses had been caused by over-trading. Such periods of speculation were not of very frequent occurrence; but still they had sometimes existed, and were recorded in the page of history. The period of the South Sea scheme was distinguished by speculations far more extravagant than any which the country had recently been witness to. Those speculations, as described by a person who was an eye-witness to them, appeared so enormous, so wild, so unsure, that, compared with these recent schemes, they were as a drop of water to the ocean. A very interesting description of the period to which he alluded was given in Macpherson's "Annals of Commerce." "From morning till evening," said the writer, "dealers in speculations appeared in continual crowds all over Exchange-alley, so as to choke up the passages through it. Not a week passed without fresh projects, recommended by pompous advertisements in all the newspapers, which were now swelled enormously, directing where to subscribe to them. On some, sixpence per cent was paid down; on others, a shilling; and some came so low as one 227 shilling a thousand at the time of subscribing. Some of the obscure keepers of those books of subscription, contenting themselves with what they had got in the forenoon, by the subscriptions of one or two millions (one of which the author particularly well remembers), were not to be found in the afternoon of the same day; the room they had hired for a day being shut up, and their subscription books never more heard of. On others of those projects, 2s. and 2s. 6d. per cent were paid down; and on some few 10s. per cent was deposited; being such as had some one or more persons of known credit to midwife them into the alley. Some were divided into shares, instead of hundreds and thousands, upon each of which so much was paid down; and both for them and the other kinds, there were printed receipts, signed by persons utterly unknown. Persons of quality of both sexes were deeply engaged in many of these bubbles; avarice prevailing at this time over all considerations of either dignity or equity; the males coming to taverns and coffeehouses to meet their brokers, and the ladies to the shops of milliners and haberdashers, for the same ends. Any impudent impostor, whilst the delusion was at its greatest height, needed only to hire a room at some coffee-house, or other house near that alley, for a few hours, and open a subscription book for somewhat relative to commerce, manufacture, plantation, or of some supposed invention, either newly-hatched out of his own brain, or else stolen from some of the many abortive projects of which we have given an account in former reigns, having first advertised it in the newspapers the preceding day, and he might in a few hours find subscribers for one or two millions (in some cases more) of imaginary stock. Yet many of those very subscribers were far from believing those projects feasible: it was enough for their purpose, that there would very soon be a premium on the receipts for those subscriptions; when they generally got rid of them in the crowded alley to others more credulous than themselves: and in all events, the projector was sure of the deposit-money. The first purchasers of those receipts soon found second purchasers, and so on, at still higher prices, coming from all parts of the town, and even many from the adjacent countries: and so great was the wild confusion in 228 the crowd in Exchange-alley, that the same project or bubble has been known to be sold, at the same instant of time, 10 per cent higher at one end of the alley than at the other end. Amongst those many bubbles, there were some so bare-faced and palpably gross, as not to have so much as a shadow of any thing like feasibility. The infatuation was at length so strong, that one project was in the newspapers advertised thus: 'For subscribing two millions to a certain promising or profitable design, which will hereafter be promulgated.'" He would only mention two or three of the extraordinary speculations which were at this period set afloat. Amongst them was a scheme for improving malt liquors, and for breeding silk-worms. For this purpose 20,000l. were actually subscribed, and several large buildings erected. There was likewise another scheme, which must have been peculiarly attractive, that of making salt-water fresh; and another, which appeared somewhat extraordinary, was to bring fresh fish to London by sea. To such an extent did the spirit of speculation then prevail, that 60l. was frequently paid for permission to subscribe to an undertaking. He would beg the attention of the House to a passage in which the author described the termination of the frenzy: "The frailty of the whole South Sea scheme now too plainly appearing to all, the stock on the 29th of September had fallen to 175 per cent, and their bonds were at 25 per cent discount; whereupon there appeared great uneasiness and. clamour amongst the monied men, which produced a great run or demand for cash at the Bank, and a greater one on the private bankers, who had generally lent out much of their cash on South Sea stock and subscriptions; in consequence of which several very substantial ones were obliged to stop payment for some time. And now, just when drowning, all people began seriously to reflect on the calamities brought on people in France but a few months sooner by the famous Mississippi stock or bubble; and, to draw a melancholy parallel, which reflections, made a few months sooner, would have saved many a worthy family from distress. Great clamour was also raised on account of contracts at high prices, for the third and fourth money subscriptions performable on delivery of the company's receipts, although no re- 229 ceipts had ever been issued for them." Was not this account enough to prove, that the spirit of wild and ungovernable speculation was sufficient to produce a state of things such as existed at the present moment? He had hoped that he should have been able to give his support to the measures proposed by ministers on the present occasion. On all questions of commercial policy, however he might differ from them on other subjects, he had desired to concur with them. He believed in his conscience, that the right hon. gentleman and his colleagues had adopted a system by which the commerce of the country would be fostered and extended. That system was not perfect at present; but he was convinced that it was that only just and substantial basis, which reason had long claimed and advocated, and which national greatness had long imperiously required.
§ Mr. Huskisson
said, that, although he could not concur with all that had fallen from the hon. member who spoke last, as to the causes of recent events, he was bound to acknowledge that he had made a very clear and luminous statement on the subject. The noble lord opposite, and his hon. friend (the member for Taunton), had, in the course of their addresses to the House, made some observations which would afford him an opportunity of giving an explanation upon a point which appeared to be misunderstood. His hon. friend, the member for Taunton, had indulged in animadversions, harsh and unsupported, on what he was pleased to call the insensibility of the first lord of the Treasury and of his right hon. friend the chancellor of the Exchequer, in respect to the present distresses of the country. He was not sure, indeed, whether his hon. friend had not included the whole of the members of government in his censure. It was not necessary to vindicate the noble lord at the head of the Treasury from the imputation of a want of feeling, either for the difficulties of the country, or the distresses of individuals. He was sure that the noble lord must be aware of the extent of suffering, from the course of his official duties, and the daily intercourse which he must have had with those who were most competent to inform him of the state of affairs in the city. Both the noble lord and his hon. friend had commented very strongly on a passage in the correspondence between government and the Bank, without dis- 230 tinctly understanding, as it appeared to him, the way in which it applied. The passage to which he alluded, was that commencing with the words, "the panic in the money-market having subsided," &c. He need not ask his hon. friend, who, he believed, was in London about the middle of December, and was a witness of what was passing, whether there did not exist at that time, for two or three days, such a state of affairs in the money-market, such a complete suspension of all confidence, as, contradistinguished from commercial distress, rendered it impossible to procure money upon the most unobjectionable security? He appealed to every gentleman present connected with the city, whether it was not a fact, that, during forty-eight hours, it was impossible to convert into money to any extent at least, the best securities of the government? Persons could not sell Exchequer bills; they could not sell Bank stock; they could not sell East India stock; they could not sell public securities on the funded debt of the country. That difficulty did not arise from any rational idea of the insolvency of the government, or of the Bank, or of the other great corporate body, but from that panic to which his right hon. friends the chancellor of the Exchequer and the first lord of the Treasury alluded, in the passage which had been referred to, as having existed and being removed. Was the statement not true, then, that the panic—that state of things which he had just described—had been removed? No one now heard of two or three London bankers stopping every morning. It was no longer impossible to convert good public securities into money. The operations of the Royal Exchange had resumed their ordinary course. Did lord Liverpool suppose that, when the panic in the money-market was over, the commercial transactions of the country would not be affected? No such thing. In the conversations which he had with lord Liverpool, his noble friend had stated, that the convulsions in the money-market must inevitably derange the ordinary transactions of commerce, and involve them in difficulties. The hon. member who last addressed the House seemed to be aware of the distinction which existed, between the operations of the money-market and those of commerce. If the difficulties which existed in the money-market a short time since had continued for only eight and forty hours longer, he 231 believed the effect would have been, to put a stop to all dealings between man and man, except by means of barter. It had very truly been observed, that the Bank, by their prompt and efficacious assistance, had put an end to the panic, and averted the ruin which threatened all the banking establishments in London, and through them the banking establishments and monied men all over the country. The conduct of the Bank had been most praiseworthy, and had, in a great degree, saved the country from a general convulsion. He would take upon himself to say, that the Bank, throughout their prompt, efficacious, and public-spirited conduct, had had the countenance, advice, and particular recommendation of the first lord of the Treasury and his right hon. friend to assist them. Therefore he had a right to say, that his colleagues in their communication to the Bank, alluded to the state of the money-market only. It should be recollected, that his colleagues were addressing persons with whom they had been in constant communication from the commencement of the panic. They knew the extent of the distress which existed in the commercial interest; but they did not allude to it, because it was not immediately connected with that part of the subject to which they were directing the attention of the Bank. His hon. friend had inferred from what appeared in the correspondence, that government was ignorant of what was passing in Scotland. Could it be supposed that his noble colleague and his right hon. friend were so ignorant of the state of the country, as not to know that the greatest commercial distress at present existed in Scotland, and that the Scotch bankers, by their mode of affording discounts, were aggravating that distress? It was, however, quite consistent with that fact, that the system of Scotch banking afforded greater securities than the English system, and therefore it was desirable to introduce the former into this country. He did not know whether the noble lord opposite intended to subject the whole of the members of government to the charge of insensibility to the distresses of the country, but he could assure the noble lord, that there was no part of his speech in which he so cordially and entirely concurred with him, as that in which he had stated, that a system of currency which produced great and violent fluctuations in the price of commodities, was one which, however 232 it might affect the opulent merchant or the man of landed property, was most to be deplored, on account of the manner in which it operated to aggravate the distresses of the labouring classes. That was the opinion which he had uniformly maintained. It would be found recorded in the report of the bullion committee of 1810, and it had been stated by him whenever he had been called upon to deliver his sentiments on the subject. There was no part of the system of the currency at which he looked with greater anxiety, than the manner in which it prejudiced the interests of labourers, and particularly those employed in agriculture. It would take up too much of the time of the committee to enter into an exposition of the grounds of the opinion which he had formed on this point; but he conceived it to be one which the course of events had proved to be but too well founded. His hon. friend, the member for Taunton, had observed, that he had never heard a speech so calculated to create disappointment—so inadequate to the occasion, as that of his right hon. friend. His hon. friend had followed up that remark by a dissertation—a very able one certainly—to which he had listened with great attention and in some parts with great satisfaction—on the general system of banking, in the abstract. His hon. friend then entered upon a statement of the difficulties under which he supposed the Bank to labour on account of the advances on Exchequer bills, and other advances, more or less of a permanent nature, made by the Bank to government. As the question was one of fact, it was material that it should be set right. His hon. friend was considered a great authority; and a statement going forth from him was likely to produce considerable effect. He wished therefore that the matter should be fairly stated. His hon. friend had stated the advances made by the Bank on account of the half-pay annuities at eight millions, forgetting that considerable sums were paid by government to the Bank, twice a year, on account of that transaction, which, if deducted, would reduce the amount advanced by the Bank to 5,400,000l. He was not then going to discuss the prudence of that arrangement; he was only desirous, that the matter should be correctly understood, because it was a little hard that his hon. friend, who had himself contracted for loans with government, should endeavour 233 to throw on government the odium of having imposed on the Bank in the arrangement. The arrangement was a voluntary one on the part of the Bank; it was, in fact, a description of loan. The Bank, perhaps, had not pursued precisely the same course as his hon. friend would have adopted, under similar circumstances. He, perhaps, would have doled out the loan piece by piece; selling it to the public when he saw an opportunity of doing so to advantage. With that, however, he had nothing to do. The Bank were the best judges of their own interests. He could take upon himself to say, and no Bank director present could contradict him, that there was nothing done, on the part of government, to prevent the Bank from disposing of the contract, in any way they might think proper, at any period. He was sure that his hon. friend would not wish, particularly at the present moment, when he must be so fully aware of the danger of misrepresentation, to state any thing but the fact. He must say, however, that, in his statement of the manner in which the capital of the Bank was locked up, by its advances to government, he was not correct. His hon. friend said, that the whole of the capital of the Bank was lent to the government. If he meant, that the whole at' the capital which the Bank possessed at the period of its foundation was lent to government as the price paid for their charter, he would not dispute the truth of that proposition; but his hon. friend ought to distinguish between that capital and that which had been accruing to the Bank, in consequence of their profits, and with which they were at liberty to deal as they pleased. His hon. friend had stated, that the Bank were in the habit of issuing 7,000,000l. upon Exchequer-bills, at one time, and 9,000,000l. at another, and that those advances swallowed up all their capital, and left them without any means at their disposal. In the first place, did any one suppose that the 7,000,000l. which constituted the charge on the consolidated fund, became all demandable on one and the same day? The money was drawn out in separate portions at different periods. At the same time, the accruing receipts of the new quarter were daily paid into the Bank; so that, after all, the alarming statement made by his hon. friend respecting deficiency bills, which he was surprised he should have put forth at a period of such general excitement, 234 amounted to nothing more than this—that the Bank was in the habit of paying daily to, and receiving daily from, the government, in the same way as a private banker would deal with his customer. Instead of the Bank advancing 24,000,000l. to government, as his hon. friend had stated, they advanced only the sum he had mentioned on account of the half-pay (which they might get rid of if they thought proper), and about 6,000,000l. on Exchequer-bills; for, with respect to the deficiency bills, he considered it no advance at all. He was not a little surprised at another part of his hon. friend's speech. His hon. friend had stated, that at an early period after the conclusion of the war, the market which existed on the continent for our manufactures afforded a favourable opportunity for obtaining a supply of gold, which would have enabled government to have got rid of the one and two pound notes. But did his hon. friend recollect the state of distress in which the continent was placed by the operation of the tremendous war of which it had been the theatre for a quarter of a century? The continent had not then the means of paying for our manufactures. In fact, there was at the present moment, a much greater export of manufactures than at the period to which his hon. friend had alluded. Talk of the principles of trade—he was surprised to hear his hon. friend argue, that, in order to obtain a supply of bullion, it was necessary that the goods exported should be paid for directly in metallic currency. The quantity of exports last year was greater than in any previous year in the history of the country. Their total value was greater than in any previous year. What signified it to him, whether those exports went to Cuba, or the United States of North America, or the New States of South America. Did not his hon. friend know how bills sometimes travelled about through the world? It had come under his own knowledge, that bills given in payment for goods exported had travelled from South America to India, and had ultimately been returned to this country in the shape of bullion. To talk, then, of our having been shut out from the continent, and having lost the opportunity of obtaining bullion, shortly after the peace was a misrepresentation of facts. The acquirement of bullion depended on our exports. The hon. member who spoke last had imputed to his right hon. 235 friend, that he had not gone into the real causes of the distress of the country. The real cause had been stated by his right hon. friend. It was a spirit of speculation and overtrading. He agreed with the hon. member in thinking that the immediate cause of those distresses, and the feverish state in which the country had been recently placed, was to be attributed to overtrading; and the anxiety of his majesty's ministers was, not only to relieve the country at present, but to take such steps as would prevent the recurrence of those distresses—distresses which went to the extent of producing a stagnation and want of confidence in our trade, to a degree unparalleled in the history of this country—distresses, which rendered unsaleable and inconvertible into money, all the usual articles of trade and commerce. Let the House but consider for a moment what had been the immediate effect of this overtrading. It produced a rise in prices, so rapid that it had never been equalled. And, what was the consequence? Why, a fall as rapid and as unequalled as the rise had been. If he were that night asked to give documentary proof of the causes which led to those reverses in our commercial transactions, he should beg leave to read an extract or two, pledging himself, that they should be much shorter than those quoted by the hon. member who had just preceded him. Mercantile and trading men were, of course, aware that there was published, twice a week, in London, an account of the price current of the different articles on sale in the city; and to this the editor was in the habit of giving, at the end of the year, a summary of the rise and fall of prices, adding his own opinions of the manner in which the markets had been conducted during that period. The paragraph which he was going to read from that paper, had reference to the year 1825. The writer, after some observations and comments on the general state of the markets, went on to say, that such was the mania for speculation, which at this period (March and April 1825) had taken hold of persons of all classes—not confining itself to speculators, but extending itself to steady and respectable merchants and traders—that even in article of nutmegs alone, the price rose, in the space of one month, from 2s. 6d. to 12s. 6d. per lb. He added, that the speculation in other spices had the effect of producing a Corresponding rise in their prices. But the mania was not 236 confined to these articles. In cotton, coffee, sugar, and tallow, the rage for speculation was equally great, and merchants, traders, shopkeepers' clerks, and apprentices, partook equally of the phrenzy of vying with each other in their endeavours to secure a monopoly in each different article; so that the prices were raised higher than ever could have been expected, and higher certainly than they could be long expected to continue. And this state of things, be it observed, was not included in those wild, insane, and bedlamite schemes, with which the market had been inundated; but had its rise amongst those, who were considered the sober, steady merchants and traders, of the metropolis. These speculations attached themselves to every staple commodity of our imports, for the purposes of manufacture, as well as to the foreign articles of our consumption:—cotton, wool, timber, wine, tobacco. In fact, every article which it was necessary to draw from foreign countries, became the object of this species of speculation. And when, he would ask, did all this take place? It took place at a period when the exchanges were against this country, and when gold was necessarily going out of the country. For he said again, and he was anxious to submit his statement upon this point to any set of practical men—that an unfavourable state of the exchanges had the effect of encouraging an increase of our exports to, while it checked our imports from, foreign countries. Well, then, if any set of practical men saw that, at a period like this, when our coin was of itself finding its way out of the country, that every corner of Asia and America was ransacked for cotton and for wool; and if, at such a period, money was found so plenty in the country, as to be hawked about, and offered at a depreciated rate of interest, was it not a convincing proof, that there was something wrong in our currency? And if so, he would ask any sober man,—certainly there were not many sober men in the city at the period to which he alluded—but he called upon any sober man to say to what such a state of things, if unchecked, must come at last? As to the state of the currency, there had been, unfortunately, much difference of opinion upon it. But the Bank felt called upon to provide for its own safety, by narrowing its issues. And, what was the result? The spirit of speculation was checked; 237 and as a necessary result, those country banks which had been most rash and immoderate in aiding those speculations by advances, were ruined. But the evil did not stop here; for the ruin of a few bad and unstable banks, involved in difficulties many establishments of a similar nature, which were otherwise placed upon the most stable footing. A panic was spread throughout the country. The country banks, amounting to seven or eight hundred, applied to the Bank of England as their only reservoir, so that the Bank of England was assailed upon every side. Seven or eight hundred drains were at once opened through her—gold was to flow from her into the country. The Bank of England was, in consequence, placed in a state of the greatest difficulty and embarrassment. He would ask whether this was a situation in which the country banks ought to be allowed to stand? whether it was safe or convenient that they should remain upon such a footing? He maintained that it was not. It was his opinion—an opinion not hastily formed, but the result of long and anxious observation—that a permanent state of cash payments, and a circulation of one and two pound notes, could not co-exist. He would put his argument into the form of a simple proposition—If there were in tiny country a paper currency of the same denomination as coin, the paper and the coin could not circulate together: the paper would drive out the coin. Let crown notes be made, and we should never see crown pieces; make half-crown notes, and a half-crown would not remain in circulation. Allow one-pound notes to circulate, and we should never see a sovereign. It was very well known, indeed, that in 1821 and 1822, when the Bank of England felt a very laudable anxiety to establish a gold circulation, and had actually endeavoured to saturate the country with gold, such was the indifference for the precious metal, that the parcels of gold coin which they sent down by one mail were returned by another. If this, then, was a right and just description, to what inference did it lead? He did not speak it to the disparagement of the country bankers, when he said, that they had endeavoured, and very naturally, to put out as much of their paper as they could. They might have had gold by them to some extent; but if cautious and prudent—and he was sorry to say, that some of them had shown themselves not to be so, 238 although he believed that the country banks in general were managed with a great deal of prudence and discretion—but if prudent and cautious, they always placed their chief reliance on the Bank of England. And not only did the provincial banks of England thus rely on it, but even the banks of Scotland, and the national bank of Ireland, looked to it as their security. He would ask, then, any reasonable person, if it was fair or just that the Bank of England should be expected to provide gold for those various applicants, no matter under what circumstances they should seek for it—no matter whether the exchanges were favourable or not to this country? So long, indeed, as the national bank had the advantage of having an exclusive trade, perhaps something in the way of a sacrifice might be reasonably expected from it: but after having, in the most disinterested manner, surrendered a part of its monopoly in which it was greatly interested, the Bank naturally expected to be relieved from a liability which tended greatly to embarrass, if not to injure it. It was, under any circumstances, unnatural to require that the Bank of England should be the means of protecting and securing all the country banks which, if persevered in, might one day have the effect of involving the establishment of serious difficulties. Why, he asked, should the Bank of England be obliged to insure all the other banks in the country? Why not, on the contrary, oblige each country bank to insure itself, by having in its possession, or at its command, a certain portion of coin of the realm, to answer the demand which might be made upon it, in cases of emergency? Allusions had been made, in the course of the discussion to the effects of unfavourable harvests, both with reference to our gold currency, and to our interference with the corn laws. He would ask, on the other hand, what must be the nature of a system, which, with a favourable harvest, and at a period of profound peace, was capable of producing such pain and distress as had been lately experienced? The House had gone far in their endeavours to restore a sound metallic currency to the country; and he would ask, whether they were prepared to hazard the disgrace of stopping short in their career, by continuing the circulation of the one and two pound notes? He trusted that the measures brought forward by his right hon. friend would be felt deserving the support of 239 those gentlemen who were not generally in the habit of voting with his majesty's ministers. This was a question of the greatest magnitude, of the most vital interest, to the country; and his right hon. friend was well warranted in saying, that in the event of its being negatived, he should not envy the responsibility of any person placed in his right hon. friend's situation, who would have to manage the finances of the country, while the state of their currency was left to the chapter of accidents. One of the great evils which they were called upon to correct was, the excessive issue of paper. This had been productive of the greatest distress. It had been the destruction of confidence between all classes of society. It had caused the ruin of thousands of innocent individuals. It had given rise to fluctuations in our currency which were sometimes in favour of the debtor and sometimes of the creditor; but frequently involved both in misery and distress. Nothing but disgrace and danger would attend a deviation from the correct principles of currency which parliament had solemnly recognized. They should consider, then, the continuance of the circulation of one and two pound notes, as by no means fair. Neither could it be considered safe or advantageous, in a time of war. And he begged to ask, whether, when it was found that such a system was productive of so much general and individual suffering, there was any particular branch of our commerce which could justify its continuance. He was surprised to hear his hon. friend over the way assert, that if this measure was carried, it would involve the whole of the agricultural interests into distress equal to that which they had before experienced. If he was not aware that the hon. member had spent the recess in the country, he should have thought, from what he had said, that he possessed no knowledge whatever of recent events. He would ask, whether the hon. member had passed through any country town or district, in which a country bank had not failed? He would ask him, whether he had not seen the effect produced, not only on the shopkeepers and traders, but also on every class of farmers, by such failure? Where did the farmers themselves transact their business but with the country bankers; and how many gentlemen had been obliged to postpone the collection of their rents, in consequence of the losses sustained by their tenants, by the failure of country 240 banks; not only in towns, but even inv villages where the wages of labour were paid in the notes of the country bankers. What, then, must be the overwhelming misery of those persons who were visited by the sudden privation of the means of supplying their weekly wants and necessities? This distress had overtaken the farmer and labourer, and in a still greater degree the manufacturers and artizans of the country. And here he would advert to an expression used by a noble lord opposite, that the proposed measure would have the effect of bringing back again the agricultural distresses which existed before the year 1822. Need he tell the noble lord or his hon. friend, that there was a necessary connection between those who consumed and those who supplied agricultural produce? Was it necessary that he should point out the fact, that a fall in the demand for the labour of manufacturers must necessarily produce a decrease of consumption; and that the one must of necessity regulate the other? What was it that occasioned the revival of the agricultural interests in 1822? He maintained that it arose principally from the revival of the manufacturing interests, and from the employment of thousands, who had, for a considerable time, been deprived of an opportunity of supporting themselves by their labour. The increased means with which they were furnished necessarily brought about the increase of consumption; and, looking to the opposite side of this argument, he felt convinced, that the manufacturing distresses which were now so generally felt, must have the effect of diminishing the demand for the agricultural produce of the country. It was the natural course of things; that, in such a fluctuating state of our currency, all classes of society must, in their turn, be affected by it; and therefore the sooner we got rid of that fluctuation, and returned to a sound, healthy, and permanent circulating medium, the better would it be for the community at large. If they wished to prove the value of a steady unchangeable currency, they had it in the example of France. That country had been twice invaded by a foreign army; her capital had been twice taken possession of, and she had been obliged to pay large sums to foreign countries for corn; but she had a steady metallic currency, and however such visitations might have affected the great—however the extensive contractor might 241 have been injured or ruined—the body of the population remained unmolested—The storm might have uprooted the forest tree, but it passed over without injuring the humble reed. This was to be attributed to the permanent footing upon which the currency of that country had been established. If the object of his right hon. friend was carried into execution, it would have the effect of making the country banker as sensitive on the subject of the exchanges, and as watchful of any unfavourable turn which might take place in them as the Bank of England now was. He would be obliged to watch the circumstances calculated to bring gold into, or send it out of the country; and this caution being timely impressed upon him, the danger would be passed; there would then be no fear of any convulsion or agitation in the country, as the interest of each banker would compel him to provide himself for any coming emergency; or, in other words, every country bank would feel an equal interest with the Bank of England in watching the state of the currency, and guarding against its fluctuations—If, then, it was necessary for the best interests of the country, that the currency should be established on a sound and solid foundation, and that the country banks should be prevented from drawing the metallic currency out of the kingdom, by the issue of these small notes, the next question was, whether this was a proper time for carrying the measure into execution? But before he touched upon that, perhaps it would be proper that he should make one preliminary observation respecting the country banks. He was far from being hostile to these banks; on the contrary he thought they would be of great service to the country if placed under proper regulations. He wished to relieve these banks themselves from the consequences of their own proceedings, from the liability of each, to be ruined by the failure of others. But they must be prevented from issuing paper as low as the highest denomination of the metallic currency of the country. They must not be permitted to issue these one-pound notes—the one-pound corresponding to the sovereign, the highest denomination of metallic currency. Such issues amounted in reality to the assuming the powers of the prerogative. Let them continue to issue paper, and to extend and act upon their credit; but they must not be allowed to issue these small notes, 242 which was trenching upon the prerogative. Then he came to the point, whether this was the proper time for providing, by law, for the gradual and progressive withdrawing of these small notes? Some gentlemen had contended, that this was not a fit time. Now he contended that this was the most proper time, when so much of this sort of currency was actually afloat, and the bankers were smarting under the consequences of their over issues. Was it when a drinker of ardent spirits was intoxicated, that you could persuade him to give over that habit? No; but when he was sober, and when he was suffering under the effects of his previous intemperance. Those notes were at present already greatly curtailed by the failure of a hundred country banks and from other causes. The country banks had, at this time, a large stock of gold in their hands drawn from the Bank of England. They had found it necessary, for their own safety, to lay in stores of gold and Bank of England notes. Now, therefore, was the most convenient time for providing, by law, for the gradual extinction of this small note circulation. If they waited until the present difficulties were passed, they would soon find that these notes, which were at present withdrawn, would soon be issued again. Now they had actually got the gold in their coffers: it was in the country; and this was the moment to provide that it should not again be so readily exported. They must also remember the difficulties they would have to experience from these country banks, in any attempt to intermeddle with their notes and profits, in case the issuing of these small notes were, to a great extent, resumed. If they postponed the commencement of this measure, would any hon. gentleman assure him that they would ever begin at all? They could not expect a more favourable opportunity for commencing the good work than the present. If they allowed it to escape, and these notes were again extensively issued, it would be said, why did they not resort to this measure when the issues of these notes were so much curtailed? If the adoption of measures for putting the currency upon a sound and solid foundation were to be resisted by such arguments as he had heard that night, there was an end of all hope of securing a proper coinage and standard of value. When these country banks had only such a small number of partners, they were 243 naturally led, by views of private interest, to neglect the just principles of banking. But if a bank consisted of, suppose two hundred partners, they would be tied down by rules which would not admit of these ruinous speculations, and their affairs would be conducted on the genuine principles of banking. He allowed that it would be a great improvement, if, under a proper system, chartered banks were established, with only a limited liability. It would, no doubt, induce many persons of great credit and fortune, to invest their money in shares of such banks. But the Bank objected to the extension of this limited liability, and had stipulated that the banks of Scotland and of Ireland should not possess this privilege. His hon. friend, the member for Taunton, had recommended the giving to England a metallic currency on a more extensive basis than could be obtained by the recall of the one and two pound notes. He agreed with his hon. friend, that it would be desirable that the currency should be rested on a firm and secure basis; for himself, he was bound to confess that he entirely differed from his late friend, Mr. Ricardo, as to the basis upon which the currency of the country ought safely and properly to rest; and he believed that if that gentleman, ingenious as he was, had been the sole director of the Bank of England, the country would, before this, have witnessed the stoppage of that establishment. He had paid much attention to the subject of currency generally, and he did think that Mr. Ricardo's view of the question had been a wrong one; and, while he was upon the subject, he might as well observe, that he should be glad to pursue, and would pursue, some further inquiry, perhaps before the Board over which he presided, into the best mode of improving the suggestion thrown out a few nights since by the hon. member for Taunton, and introducing, in some shape or other, silver as a legal tender, so as to give an additional security to the currency of the country.—An hon. member had said, in rather sweeping terms, that for much of the late wild speculation which had been carrying on throughout the country, ministers were chiefly to blame. Now, the House would recollect when it was that the great bulk of these speculations first commenced. It was in the spring of last year. To refer, standing where he did, to what had been said by lord Liverpool in another place, 244 would be contrary to order; but he had taken the trouble to refresh his memory as to the precise terms of what he had said himself. In February last—in the very commencement of those speculations—he had used this particular expression in speaking of them; "that the lottery was a safe adventure, compared with the mass of those in which persons were then engaging." Again, in the month of March, speaking of the speculations, he had distinctly declared it to be his opinion, that those who engaged in them would find themselves disappointed. Unfortunately, those to whom this advice had been addressed had disregarded all warning. They had rushed, in contempt of all caution, on to their own destruction. But, although it would be irregular in him to refer to the precise terms in which lord Liverpool had spoken upon the subject of those unfortunate speculations, yet he might say, the opinions delivered by that noble lord had neither been less unfavourable to them, nor less strongly expressed, than his own. So far from having adopted any measures calculated to foster or assist dealings of that hazardous character, he did most distinctly affirm, that government had done every thing in its power to discourage the speculations, and remove the infatuation.
Mr. R. Gordon
begged to remind the House, that the right hon. gentleman, who now so fiercely attacked the one and two pound notes, had been, in the year 1822, a member of that very cabinet which came down to the House and introduced them. All parties then were making complaints, especially the agricultural interest. Persons were declaring that they could not pay their rent, their labourers, and their taxes; and then ministers had come down, and proposed, as a remedy for the evil, that very measure which they now desired to abrogate. He was charged with having got some new lights upon the subject. That was a mistake; it was the hon. gentleman opposite whose views had been changed. He had chosen to remain in a very small minority upon the question of passing Mr. Peel's bill; because he thought, as he thought still, that it would be impossible to pay in gold what had been borrowed in paper: and therefore he wished ministers to pause, and reconsider the steps which they were taking. He was glad to hear the right hon. gentleman speak in the terms in which he had expressed himself of country bankers; 245 but certainly, all those who sat near him had not treated that class of individuals quite so fairly. So far from the present distress having arisen from the issue of one and two pound notes by the country banks, he thought the country had derived very great relief from that issue. The observation which had been made about prerogative, seemed to him wholly unintelligible; for certainly, he could not perceive how the royal prerogative was a jot more endangered by a country banker's issuing a one-pound note than a five-pound note. He greatly regretted the measure which was to reduce the circulation of the country banks. After the failure of nearly eighty of those establishments had withdrawn a million and a half of notes from circulation, his firm opinion was, that any farther diminution would embarrass the country.
§ Mr. Canning
said, that as the night was far advanced, and a number of gentlemen were understood to be still desirous of expressing their sentiments, he thought it would be most convenient that the question should be adjourned to Monday.
§ This motion being agreed to, the House adjourned.