HC Deb 07 June 1827 vol 17 cc1149-55
Sir J. Wrottesley

rose, in pursuance of notice, to move for the production of the letter alleged to proceed from the Bank of England, and tending to cast doubts on the solidity of the country bankers. Perhaps the House would think he ought to be satisfied with the unequivocal denial of one of the directors of the Bank, that the letter in question had originated with their body. Certainly he would have abandoned his motion, had it not appeared to him, that the letter was intimately connected with other circumstances, which induced him to believe, that, although that letter was not the result of any consultations of the Bank directors, it was still written and circulated, with their knowledge, by one of their number; who, having been employed to inspect the branch banks in the country, had shown it to several persons in his travels, and that it had thus found its way to the public. Under the present circumstances of the country, he hoped the House would examine into the motives which had produced that letter; for he could not conceive that, at a time when there was every hope of a progressive amelioration in the prospects of the industrious classes a more mischievous event could have happened, than the publication of a letter, which tended to cast discredit upon a class of persons, on whom the manufacturing operatives must depend for the advance of those wages which the promising condition of trade would soon enable them to earn. Another reason for bringing forward the motion was, that the extraordinary conduct of the Bank of England was not confined to the production of this solitary letter. There appeared in their proceedings a rooted determination to keep up a circulation of their notes equal to that which prevailed during the war. It had been difficult; nay, almost impossible, for them to accomplish that object; but, because they could not keep up their circulation to its former extent, and no longer realize the large profits which they formerly enjoyed, it was not justifiable in them to attempt to bring into disrepute other establishments similar to their own, and to build their own credit upon the ruin of that of their competitors. In the course of last session, he had endeavoured to bring the condition of the country bankers under the notice of the House; but at that time such irritation prevailed throughout the country respecting them, that they had no chance of meeting with that fair play to which they were entitled. The attack which was made upon the country bankers last year was founded on the power which they possessed to issue 1l. notes. In order to show the House how unfounded that attack was, he thought it right to state the grounds on which those notes were first introduced into the circulation of the country. Originally, the country bankers had certainly no right to expect that any such indulgence would be extended to them. Previously to the Bank restriction in 1797, they issued nothing less than 5l. notes. It was not from any solicitation on their part, but in consequence of the misconduct of the Bank of England, with respect to the amount of its issues, that the country bankers were allowed to issue 1l. notes. Temporary acts were passed, from time to time, to continue to the country banks the privilege which they had thus obtained; and for this reason, that the Bank of England continued to issue similar notes, and there was no other currency. At the end of the war the country bankers naturally expected to be called upon to pay their 1l. notes in cash. The House, however, continued the restriction for some years. The country bankers were at that time prepared to meet their 1l. notes by payments in cash; and had no wish to continue them in circulation. If they had any difficulty upon the point, it was completely removed by the bill which the late marquis of Londonderry carried through parliament in 1822. In consequence of the agricultural distress which then pervaded the country, many petitions were presented to parliament; and it was found necessary to reduce our establishments, and take other measures to give relief to the agriculturists. If hon. gentlemen would take the trouble to refer back to the speech which the late marquis of Londonderry made in May, 1822, they would find that one of the modes of relief suggested for the agricultural distress was the continuance to country banks, for ten years longer, of the permission to issue 1l. notes. Now, if the country bankers were prepared to give up the circulation of their 1l. notes at the close of the war, and were then permitted to carry it on for three years longer, and were then again at the end of that time led to believe, that they should be permitted to issue their 1l. notes for ten years longer, was it just to call upon them, on a sudden, to give up that which had been offered them, and to give it up at a time when considerable irritation was excited against them, and when doubts prevailed as to their solvency and credit? There was another very strong reason why he wished the House to look with attention to this part of the subject. On the first day of the session of 1826, ministers proposed to abolish the circulation of 1l. notes. They never deigned to make any inquiries into the manner in which that circulation was carried on, and in which it operated upon the various classes of the community. They carried their proposition—such were the prejudices of the House against the system—by one of the largest majorities ever known. What, however, was the course pursued with respect to Scotland? As soon as the determination of government was known in that country, the table of the House was loaded with petitions from it against the measure. A committee was appointed to examine into the allegations of the petitioners. The petitioners had a fair hearing; and, subsequently to it, no proceedings were taken,—a circumstance from which he inferred, that they had made out a case, which prevailed on the House not to alter the system of banking in Scotland. Now, it was rather a hard case upon the bankers of England, that no such inquiry was granted to them. He would venture to say, that if any gentleman wished to know the system of banking in England, he had only to look to the evidence given by the Scotch bankers, and to change the word Scotland for England wherever he found it. There was, however, a strong exception in favour of the English bankers; their system was much more cautious than that of their Scottish rivals; they never dared to advance so far as the bankers of Scotland. With regard to this particular letter, if the Bank of England had confined itself to proposing to the country banks to take its notes, he could have no objection. Even if the letter had been private, no one would have had a right to interfere; but it tended to throw great and undeserved discredit on the country banks. The proposal contained in the letter was founded upon certain doubts, which it appeared to entertain of their solidity, Now, as twelve months had elapsed since the existence of the panic, during which time not a surmise had been made to the discredit of the six hundred country banks which existed at present, it was most unfair and unjustifiable in the Bank of England, to scatter doubts in the public mind, as to the solvency of such establishments. The letter began as follows:—"Assuming it to be desirable to retain a paper-money currency convertible on demand, the great question for consideration is, how that paper-money can be so regulated as to afford the greatest security for receivers, both as regards the solidity of the issues and the power of obtaining coin for the same on demand." Now, if this was the real object to be attained by a paper-currency, it behoved the House to consider narrowly the transactions of the Bank of England itself; inasmuch as the great mass of paper which was now in the country originated from that body. The circular then proceeded:—"In order to obtain those objects, it is necessary, in the first instance, to free the paper-money as far as may be possible from the effects of what has been termed panic." It, therefore, became necessary to consider what was the cause of that panic. The first intimation of it proceeded from the President of the Board of Trade, who gave a caution to the Bank of England, as to the way in which it was going on with respect to its issues. The Bank being then in possession of a large quantity of Exchequer-bills, felt itself obliged to bring them into the market; which, being an unusual thing, caused considerable dismay amongst monied men. This, he looked upon to have been the origin of the panic. One or two private banking-houses failed in the first instance, which spread the alarm; and, consequently, every person who had placed his money in bankers' hands, hastened to call it in; and thereby a run was created on the Bank of England. It was, he believed, in reference to that event, that the letter from the Bank had been published. Before the holidays he had cautioned the then chancellor of the Exchequer (lord Goderich) of the danger of increasing the unfunded debt. He warned him, that on the first moment of alarm, the government would be called on for payment of its securities. He did not mean to say, that, in forming the financial plan of the year, it would be wrong to resort to an issue of Exchequer-bills. On the contrary, he thought it might be very useful to adopt such a proceeding; but what he objected to might be more properly called a permanent increase of the unfunded debt. So long as the Bank continued to be a large holder of Exchequer-bills, the currency must, in case of any panic, remain in an insecure state.—He might be asked, what was the remedy he proposed? He would answer, none. He had no system of his own to advocate; but merely threw out these hints for the consideration of others. The proposed issue of Exchequer-bills, although he regretted it, was, after all, only a temporary measure; and, in the circumstances in which government was placed, was perhaps the best that could be resorted to. He was only apprehensive, that some of those untoward events (which set all human calculations at defiance) might arise, which would cause a sudden demand for the payment of the government securities. He was desirous of seeing the Bank free itself from all the trammels in which it was placed with regard to the government. The directors ought to be able at once to meet all demands upon them—to do that which they were pledged to, on the face of an instrument which he hoped every gentleman carried in his pocket—they ought to be ready to fulfil the simple promise on the face of their own note, "I promise to pay on demand," so and so. If the Bank would confine itself to that plain line of conduct, it would be infinitely more respected than it was at present. But the Bank had become so intimately connected with government, that it was no longer satisfied with conducting its own affairs, but had an itching after managing those of other persons. So long as the Bank confined itself to its own affairs, it was all very well; but, when it travelled out of its sphere to direct the affairs of other people, it seldom exhibited a great degree of enlightenment. He was desirous that some measure should be adopted by the House, which would restore confidence to those persons who had taken great alarm at the paper put forth by the Bank. In his opinion, it would be extremely unwise to stop the circulation of country bank paper; which was, in most instances, the representative of houses, land, and other available property. That, he knew, was a sentiment in which most country gentlemen participated. It was well known; that the Bank already possessed the power, by its operations on the currency, of dimi- nishing or augmenting the value of property twenty or thirty per cent. He knew many instances of persons who had purchased estates being completely ruined by these sudden fluctuations of the currency. If these mischievous effects had taken place whilst the Bank of England paper formed only part of the circulation of the country, what evils might not be anticipated if the whole circulation were placed under its control? The property of the agriculturists and manufacturers would thus be placed at the mercy of the twenty-four Bank directors, whenever it should please them to contract or extend their issues. It appeared to him, that there existed a determination, on the part of the Bank, to get rid of all competitors. He, however, I acquitted the government of all participation in such a scheme. He would take that opportunity of saying a few words, with respect to the recent change in the government. His majesty could not have appointed any persons to be his ministers, towards whom he could feel more regard than towards the persons who now held those offices. He represented a large manufacturing county; and in giving his support to the administration, he was sure he should be acting up to the wishes of his constituents.—The hon. baronet concluded with moving, "That a select committee be appointed to inquire whether the Governor and Company of the Bank of England, or any Director of the said Bank, had circulated a Letter, tending to cast doubts on the solidity of Private Banks issuing paper, and thereby injuring the commercial and manufacturing interests of this country."

Mr. Pearse

said, that the author of the letter was a director of the Bank. He was certain that individual would be extremely sorry, if any mischief had resulted from the publication of it. A more honest or well-intentioned person did not exist. With respect to the plan itself, when its author had asked him his opinion of it, he had told him he thought it a very foolish one. The manner in which the letter got into circulation was this.— The person who drew it up caused about a dozen copies of it to be made, for the purpose of giving to his particular friends; and one of those copies found its way into a public journal. He could assure the House that the plan had met with no encouragement from the directors; to whom, indeed, it had never been submitted in any shape whatever, The hon. member had charged the Bank with being desirous of accumulating profits, without regard to the means which they resorted to for that purpose. He could take upon himself to say, that the Bank had never been actuated by such a selfish feeling. Upon this point he might refer the House to the testimony of the late Mr. Horner, who, though he disapproved of the power possessed by the Bank, declared himself satisfied with the discretion and prudence with which it had been exercised. On all occasions, the Bank was desirous of carrying on its business as much as possible for the benefit of the public. The appointment of a committee would be perfectly useless; as it would be impossible to obtain any other information than that which he had given, without any reservation whatever.

Mr. Canning

said, that after the explanation which had been given by the hon. Bank director, he felt it unnecessary to do more than to state, that the plan of which the hon. baronet complained had not proceeded from any suggestion of government.

After a short conversation, the motion was withdrawn.