RENEWAL OF THE BANK CHARTER.

HC Deb 31 May 1833 vol 18 cc169-204

Lord Althorp moved, that the Order of the Day for the House resolving itself into a Committee of the whole House on the Bank Charter Act be read. It was read, and the House resolved itself into Committee.

Lord Althorp

addressed the Committee as follows:—I believe. Sir, that on former occasions of the renewal of the Bank Charter, it has been the practice of the persons who have held the situation which I now occupy, to move resolutions in consequence of a previous application from the Bank of England, for a renewal of that Charter. On all these occasions—although that has been the form in which the Bill has appeared to commence in this House—I apprehend that such propositions have not been introduced without a previous communication taking place between the Government and the Directors of the Bank of England, and without some kind of negotiation first occurring as to the nature of such propositions. I did not think that this mode of proceeding was more than a question of mere form, and I did not, therefore, consider myself bound strictly to adhere to it. I have thought it better to make the proposition from my own suggestion, without the form of first obtaining a demand from the Bank of England. The question which I am now about to bring forward, is one of the greatest importance to the commercial interests of this country—it is one on which the value of the property of every person in this country—not merely of those engaged in commerce, but of all others—must very much depend. And therefore, in considering this subject, I felt fully sensible of the importance of the matter; and I endeavoured, to the utmost of my power, to introduce such a proposition as should be productive of general satisfaction, and should give the most ample security to the monetary concerns of the country. During the last Session, it will be recollected, that for this purpose I moved the appointment of a Select Committee to consider of the subject. That Committee sat for a considerable space of time; and though they did not conclude their examinations, so as to be able to lay a full Report before the House, yet such have been the examinations, and such the extent of the inquiry into which they entered, as to make me think the subject had been sufficiently sifted, and, therefore, that it was not desirable that that Committee should be renewed. In the progress of that Committee, information was given which had not previously been placed before the public, especially information with respect to the subject of the management of the Bank affairs, and the state of their accounts, and that information has, I believe, changed the opinion of those who heretofore considered the subject, and from that moment the public have been more inclined to look favourably on the management of the Bank of England than they did before that inquiry. As I fear that I shall have to detain the House a considerable length of time in staling the propositions I have to make on this subject, I think I shall best consult the convenience of the House if, without further preface, I proceed to make the statement to which I wish to call their attention. With respect to the principle to which banks in this country and elsewhere, must first attend, it is the convertibility of the paper issued by such banks into money. It is only on that principle that they can pretend to say, that the paper issued by them is valuable as a medium of exchange, and as every departure from the principle of convertibility always has produced, as it always must produce, the most fatal effects to the manufactures and commerce of the country in which it has taken place. This, therefore, in the consideration of every such question, must be the point to which the House and the public must first direct their attention. The next great point is to secure the solvency of the banks which issue the circulating medium. Those two points require no lengthened arguments on my part to prove the necessity of attending to them. All men are convinced of the necessity of preserving the easy convertibility of paper into money, and all, I believe, are equally convinced that whatever means you adopt to secure the solvency of the bank which issues that paper, must be most important. But there is another part of this question which is scarcely less important, and that is, that you should obtain some security against an undue circulation with reference to its amount. I say that this is scarcely less important; for although the ruin that follows the want of solvency in a bank is immediate and extensive, it is only little less to be dreaded when it arises from an irregular and fluctuating circulating medium. If the circulating medium has been improperly increased, it may appear for a time to be a benefit, by encouraging speculation; but it only encourages that speculation at the moment to destroy it afterwards, for destruction must follow on the first fluctuation of the funds that have supplied the circulating medium. It is almost impossible in any paper circulating medium to prevent entirely these fluctuations. The only reasonable object of the Government, therefore, is to adopt such a system as will render these fluctuations as infrequent, and as Utile injurious as possible. The amount in circulation must depend mainly on the demand in the country; but in case of a great increase of the circulating medium so as to produce a depreciation in the value of the currency, the only safe and possible remedy is the effect of the foreign exchanges on the country. So long as you have a complete convertibility of paper into coin, the foreign exchanges will rectify the depreciation by the drain of bullion they will create, and by the change of currency consequent upon it. It is therefore most desirable, that in any arrangement that may be made, as little interruption as possible should be given to the effect of the foreign exchanges upon the currency of the country. Every endeavour to interfere with the exit of bullion from the country must be of mischievous consequence, and so must every attempt not only to prevent it altogether, but even to delay it; for the only consequence of that delay must be, to prevent the operation of the check upon a too depreciated currency, and to make the fluctuation greater and more lasting. The question, therefore, that the House has to decide will be, in what manner, for the future, the mode of supplying the paper currency of the country shall be carried into effect. It is perfectly well known, that the Bank of England, possessing as it does a monopoly of the circulation of the metropolis, has possession of the market at that point from which all the circulation of the country must flow. Whenever the foreign exchanges are against us, it becomes the interest of a party to send bullion abroad; and when such has been the case, what is the place to which be has gone to get bullion in order to send it abroad? Why, to the Bank of England. The question, therefore, for the House to decide is, whether it is most desirable that the management of the circulating medium of the country should be conducted by a single body, as a bank of issue, or by the competition of different banks. It appears to me, on looking at this question, that there are advantages undoubtedly in both systems, but that those of the former preponderate. It must be the interest of banks, assuming that they are in a state of solvency, to issue as much of their own paper as it is in their power to convert into money, when called on to do so; and it will be said that, in doing so, they will check one another in the amount of their issue. It may be perfectly clear, that no one among a number of rival banks would, on this account, be able to issue more than its due proportion. But if there should be a state of things in which speculations have become most extensive, it will be the interest, and it will be in the power of these banks, to increase the amount of paper in circulation considerably, although each may not issue more than its own proportion of the whole amount. And when, in consequence of the increase of the circulating medium, and the depreciation of the currency, and a failure of credit, and of the Exchanges turning against this country, each of these banks, looking only to its own interest as compared with that of others, shall feel it necessary to contract its issues, this must produce a sudden contraction in like manner, in the general circulation and general business of the country. That is a most important point, and requires to be most carefully considered. It appears to me that there would be considerably more danger from the effect of such a competition, than there would from the power being placed in the hands of a well-regulated municipal bank. There is one other point in favour of the large municipal bank, and that is, that in times of sudden distress, it will be able to give considerable assistance to commerce. It is perfectly well known, that at such a moment the exchange is in favour of this country. It is not then the object of the municipal bank to increase the issue at such a time; but if there were several banks in competition with each other, no one among them could, under such circumstances, come forward to give its assistance to trade, in consequence of the fear that each would entertain of the competition of its rivals. All that I have said necessarily assumes that the principles upon which a single bank is conducted are sound—that the single bank does not take advantage of the power placed in its hands, in order to make undue profits—that it acts upon the true principles of banking, looking to the state of the foreign exchanges for the regulation of its issues, and does not keep up the circulation of its notes by artificial means, but accommodates it to the state of the currency of the country. Its interest, undoubtedly, like that of any other party, is to keep as large an amount of notes in circulation as possible; and I therefore feel, that it is placing a power in the hands of a body of individuals, who certainly, under certain circumstances, have an interest in abusing it; it is certainly placing in the hands of one set of individuals a very great power; but I do not put forward either of these two pro-positions—the competition of different; banks, or the existence of only a single bank—as entirely free from objection. We are bound to look to a comparison of objections on the one side, and of ad-vantages on the other, and to form, a judgment from that comparison. My opinion is, that if you can contrive an adequate check upon the conduct of a single bank, it will be more advantageous that such single bank should manage the circulation of the country, than that it should be left to the competition of different and rival establishments. Various modes of effecting this check and control upon the conduct of the bank have been taken into consideration. I have spoken hitherto generally of one bank of issue; I have not stated whether it should be a commercial body, or one under the direct control of Government. It is certainly a question of great importance whether it is desirable to trust such a power in the hands of persons not legally responsible, or in the hands of a Government which is responsible; and another point is, whether the profits necessarily to be derived should belong to the Government, or be allowed to the Company, The advantages, and the only advantages, I have been able to discover in a Government Bank, instead of a private Company, are the responsibility of the managers and the profit to be derived from the undertaking; but, it seems to me, that they are much more than counterbalanced by the practical evils of such a system. I think the effect of having the Government the great bankers of the State, having the command of the circulating medium in their hands, might be most mischievous. In the first place, I refer to the temptation of the Government to abuse its power, and to the impossibility, or to the extreme impolicy in that case, of permitting any assistance to be given to the commercial interests of the country in periods of difficulty—a course hitherto frequently pursued by the Bank of England. If once Government were at liberty to assist those whom they thought fit in times of difficulty and distress, it appears to. me, that it would be such an enormous power ill the hands of the Minister of the day as would be almost destructive of the Constitution. On the other hand, if Such a bank as I have spoken of were to be tied down to any fixed and strict rules, from which at no time it was to be permitted to depart, though you might avoid one evil, you would fall into another. It would be almost impossible to estab-lishany precise rules, and when established, they might interfere with the grant of assistance at a time when it was most needed. Therefore, I apprehend, that we should throw aside any question whether it is fit to establish a Government bank for the management of the paper circulation of the country. Then another point has been much urged upon some occasions—that although a private company, or a mercantile corporation, ought to have the management of the circulation of the country, yet that Government ought to have a direct control over its affairs. I do not myself think, that this control would be very effectual, and to a certain extent it would be liable to the objection already stated; but I do not know what great objection there would be to adding to the practical experience of the Directors the opinion of the Minister of the day. I must say, that if we look to past experience—to the cases in which the Directors of the Bank of England have been supposed to have mismanaged their own property—if we look to the years 1797, 1822, and 1825 (without now meaning to give any opinion whether the Director son those occasions were right or wrong), we shall see, though their conduct has been liable at those three periods to suspicion of mismanagement, yet no man, I believe, is prepared to say, that the Government was not entirely cognizant of the conduct of the Bank on those occasions, and indeed, that it was not quite as much to blame as the Bank. Therefore I do not think, that establishing a Government control would be of any very great advantage; it might be of some advantage, but not to such a degree as, in my opinion, to make it desirable. The only remaining check (and I admit it not to be a perfect one), to which the attention of the public has been directed—the only check which, during the whole inquiry of the Committee last year, was stated as at all likely to be efficient, is the publication of the accounts of the Bank. I think, that this although, as I have said, not a perfect check, would be adequate to the purpose. The principle on which the Bank of England has managed its concerns during the five or six last years, has been fairly given to the public; the ground on which the Directors adopted that mode of management have been approved, and I believe may be justified on principle. Having decided that a proper proportion of bullion to be kept in its coffers was one-third of its liabilities, the great and main principle of the Directors has been to allow the public to act upon the currency of the country—not to force out any circulation by artificial means—but to allow the trade in bullion, which may take place by reason of the foreign exchanges being adverse, to act upon the circulating medium—contracting it as the bullion is withdrawn, and increasing it as the bullion returns. This is the principle on which the Bank has professed to act: and it seems to me the best possible principle, because it prevents sudden changes, and allows those circumstances that cannot be avoided to act gradually and naturally on the circulation. We have also experience of what has been the effect of this mode of management on the part of the Bank during a period of considerable difficulty. The House is aware, I believe—at least all who have attended to the subject are aware—that the exchanges were against this country from August, 1830, to February, or to the beginning of the year 1832. During all that time there was a constant drain on the circulation—a constant contraction, amounting to nearly 7,000,000l. sterling. I do not mean to say, that during this period there was not considerable pressure upon and distress among different classes, produced, no doubt, by the contraction of the circulation; but there was no general convulsion; and allowing the drain of gold to act gradually on the currency, the consequence was, that after a long trial, the Exchanges turned in our favour, and since the spring of 1832 they have been continually in our favour, increasing the circulation of the country and the amount of bullion in the Bank. It, therefore, appears to me, that this system is not only capable of being defended by reasoning, but that it is justified by experience, as far as experience can be applied to it. Publicity of accounts will enable all men to judge whether the Bank continues to act upon this wholesome principle or varies from it. It may be said, that the Bank Directors are not legally responsible for their conduct, and that they cannot be punished if they depart from their former practice. This is true, but we must admit, that there is a responsibility to public opinion, and that it will have its control upon men in every situation. I feel confident, that persons standing so prominent as the Bank Directors will be as completely controlled by public opinion as if they were acting under a legal responsibility. Therefore I am prepared to propose the continuation of a single bank of issue in the metropolis, subject to the control of publicity. I should hold this the wiser course, even if we were now, for the first time, instituting the system; but it is an additional, and as I take it, no mean advantage, that it is the least change that can be adopted. Unless we can distinctly see some paramount advantage in making a great change in the monetary system, nothing can be more foolish than to try the experiment. Therefore, my proposition is, that the Bank of England shall continue to have the monopoly of the circulation, and that that monopoly should be secured to the Bank by the same means as have hitherto existed—that is to say, not to allow any bank with more than six partners to issue paper within sixty-five miles of London. As to the precise distance I do not lay any great stress upon that—I believe that, were it much smaller, it would effect the object equally well: either way I do not think the public materially interested, but as in my communications with the Bank Directors, I found their wish strongly expressed in favour of sixty-five miles, I did not oppose it. The next point to which I shall call the attention of the Committee is the duration of the new Charter to be granted to the Bank. I certainly must feel, that it is not desirable to tie up the Government for too long a period, while, on the other hand, it is most expedient not to let the question float at large unnecessarily. I propose, therefore, that the usual Charter shall be continued to the Bank of England for the period of twenty-one years, subject, however, to this condition—that if at the end of ten years it should seem fit to the Government, the Charter may expire at the end of one year. By this means Government will not be entirely tied up, if at the end of the first ten years it shall see reason to alter the terms or condition of the Charter, al-though the subject will not necessarily be brought forward at that period, or at an earlier period than twenty years. As to the next point, to which I have already alluded—the publication of the accounts of the Bank—I propose, that a weekly account of the amount of bullion and securities on the one hand, and of the paper in circulation, and deposits on the other hand, should be presented to the Treasury, and that, at the end of the quarter, the averages of the preceding quarter should be published in The Gazette. I do not suggest, that the publication should take place weekly for this reason—that it might lead, on many occasions, to false impressions. It may frequently occur, from circumstances not at ail connected with the state of the currency, or with the State of the exchanges, that a large sum of bullion may be drawn out of the Bank at one period, which, if the account were published every week, might have an effect upon the public mind, neither just nor desirable. By taking the average of the preceding quarter, and allowing it to be published, the effect will be to prove to the public whether the Bank is continuing the system of management it ought to continue, and which experience shows will not be productive of evil consequences. I now come to a point on which I feel that there will, perhaps, be considerable difference of opinion. I have said, that it is most desirable, that no interference should take place, either by the Bank or the Government, to prevent the drain of gold from this country, should the Foreign Exchanges be against it. This, I apprehend, is necessary, in order to regulate the currency of the country; but it is not desirable, in my judgment, to give any peculiar facility or encouragement to an internal drain of bullion from the Bank. I have said, that the convertibility of bank paper into bullion is essential to the whole principle of a banking establishment; but having secured that—having secured also the publicity of the accounts of the Bank—having given every security that can be devised (and I should most readily apply any other security beyond what I have mentioned, if it could be pointed out), I do not see the danger of giving the Bank of England every power which can justly and fairly be bestowed upon it. Therefore, it is my intention to propose that the Bank of England paper should be legal tender excepting at the Bank itself, and any of its branches. Gen-men may feel, that it is making an alteration tending to produce depreciation; but I cannot think, that such would be the case, when we recollect the immediate convertibility of notes into gold at the Bank and its Branches, and the present rapidity of communication between different parts of the country. If we look at the consequences of such a change in the case of a panic or run upon the different banking establishments, I think the House will admit, that the plan has considerable advantages. In ordinary times, I do not think it will have any effect either one way or the other. One objection to this alteration is, that the effect will be to deprive the country of the circulation of bullion altogether. I do not apprehend, that this can possibly take place; it is perfectly well known, that paper and bullion of the same denomination cannot circulate together, and if you are to issue notes of the value of a sovereign, there is no doubt, from experience and reasoning, that sovereigns could no longer continue to circulate; but as the notes will not be of a lower denomination than 5l., I do not apprehend that the effect will be to drive gold out of circulation. Another objection has been stated, which I admit is an objection—that as the effect of the measure will be to render the evil and danger of a panic, and general run on banking establishments less detrimental to the Bank of England, the Directors will become less careful in adopting their issues to their own means, and to the wants of the country. I cannot, however, believe, that this will be the case to any extent, and it certainly does not, in my mind, counterbalance the advantages of the change. The chief advantage to be derived from it is, in the first place, that the Bank will be secure against any other drain upon it but that which is produced by the state of the Foreign Exchanges. The private banking establishments of the country will not be under the necessity, at a period when they expect a run upon them, to draw bullion from the Bank. When a country bank expects a run upon it, it provides itself with all the means of meeting that run which its resources can furnish; therefore, country bankers now call upon the Bank of England, not merely for the amount of bullion absolutely necessary, but for a much larger sum to meet the whole extent of their engagements. The effect therefore is, when a run takes place upon the country banks, there is through them a run upon the Bank of England; because they call upon it, not merely for the amount of bullion which is absolutely necessary to meet the run made upon them, but in order to guard themselves to a much larger amount. If the country banks were not required to make such drains,—as they will not be under the plan which I propose,—the Bank of England will be secured against these sudden internal drains, while the country banks will be themselves greatly benefited. I think, therefore, that these are very strong arguments in favour of the proposition which I submit in this respect. The next alteration I propose to make applies not merely to the Bank of England, but to all other banking establishments, and generally to the commerce of the country. It is most desirable that when the Bank of England wishes to diminish the amount of its notes in circulation, it should be able to effect that object. At the present moment they have the means of doing so; they can raise the interest at which they will discount; but the time is not long past when the interest of money being higher than the legal rate, the Bank had no means of checking the amount of its issues, but by refusing to discount. I intend to suggest to the Committee an alteration to a certain extent of the provisions of the Usury-laws. I propose that all bills not having more than three months to run should be exempted from the provisions of the Usury-laws. Hon. Gentlemen who have been long Members of the House, know that I have entertained no great partiality for the Usury-laws. For many years I supported an hon. and learned Member, not now in the House, in the various Motions which he made for the entire repeal of those laws. I am aware, however, that there are strong objections, and some of them may be reasonably urged, against the total repeal; but I do not think that the class of persons generally most inclined to make the greatest objections to the abrogation of the Usury-laws need object to the change suggested, relating, as it does, to bills only for short dates. I know that the provision may be open to evasion, but now abundant means of evading the Usury-laws exist, and the addition of one more opportunity is perhaps of little consequence. That portion of the capital of the country usually lent upon mortgage is not likely to be employed in the discounting of bills. At the present moment it can have no possible effect, the interest of money being scarcely half the legal rate; but the period when it is desirable that the Bank should have the power of checking its circulation is just the period when the interest of money is rising and when the Usury-laws come into operation and have a pernicious effect on trade. It is hardly necessary for me to state, that this alteration will be advantageous not merely to bankers, but to the commercial world in general. No one can doubt that the effect of bills which cannot be discounted, excepting at a certain rate of interest, does frequently very prejudicially interfere with the commercial interests of the country. Having stated these points I come now to that part of the subject which applies to the actual bargain with the Bank. At present the debt due from the public to the Bank amounts to 14,600,000l., or rather more. I think it must be evident to any person who considers the subject, that it is not at all necessary that so large an amount of capital should be locked up for the security of the Bank. The fact is, that the capital has accumulated not so much to give security to the Bank, as by advances made at different periods by the Bank to Government, on the renewal of the Charier, and for the concession of other privileges, It was originally never contemplated that so large an amount was essential to be deposited as a security, and I should certainly feel very little apprehension from a considerable reduction. But we must not fail to consider that though not calculated for that object, credit is a thing of such a nice nature—so susceptible—that it would be most imprudent in an arrangement of the kind to do anything which might even be suspected of affecting the credit of the Bank of England. I, therefore, do not propose to reduce the amount to any considerable extent, but the House will not fail to recollect that such an amount of capital being tied up makes the expense of management much greater than it would otherwise be. The Directors of the Bank state, though I am not inclined to go to that extent, that their loss in this respect amounts to one per cent. They undoubtedly lose something, and the consequence is, that they put this as part of the charge against the public, which the public is obliged to pay. Another point which ought to be taken into consideration is this:—That if at a future period, when the present arrangement expires, the interest of money should be high, the Bank would possess a powerful control over any new arrangement. Although at this moment part of the debt may be paid off without much inconvenience, the inconvenience might be great when the rate of interest is high. I propose to reduce twenty-five per cent. of the capital, leaving somewhat under 11,000,000l., as the debt due from the public to the Bank. I am certain no man will say that such an amount of capital, in addition to the other funds of the Bank, amounting to about 3,000,000l. will not be a perfect security for the solvency of the establishment. As I have no doubt that the plan I have detailed will be very considerably advantageous to the Bank Proprietors, I have felt that I had a right to call upon them to pay some equivalent for the proposed advantages. I, perhaps, may previously have asked them a larger sum than they thought I had any title to demand; but I have now to state that the Directors of the Bank have consented to what I consider a beneficial bargain for the public. They are prepared to give 120,000l. a-year, to be deducted from the amount paid to the Bank for the management of the debt, which I think a considerable sum, though some Gentlemen may perhaps think that we ought to obtain more. On former occasions, the Bank has paid for the renewal of the Charter, by lending money at a lower rate of interest than that given by the public—at one time at three per cent, when the general interest of money was five per cent. There were two modes of proceeding which I might have adopted. I might either have insisted upon a fixed share of the profits of the Bank, the amount of course varying from year to year, or I might have adopted the plan I have just presented to the House. I thought, taking into consideration the circumstances of the two parties, that it would be much better for the country to receive a stipulated sum than a speculative advantage. Spread over the whole length of time the Charter is to continue, the total sum saved to the public will somewhat exceed 2,500,000l. which is a larger amount than the Bank has paid on any former occasion for the renewal of the Charter. I know that this subject cannot be generally interesting, and I endeavour to state as briefly as I can, the principles I propose that the House should sanction. I now come to another part of the subject—namely, that which relates to the other banking business of the country. I suggest that the definition of a Joint Stock Company should remain as at present; every Banking Company, consisting of more than six partners, is to be taken to be a Joint Stock Company; and for reasons I will now state, I propose that all Joint Stock Companies shall, in future be established by Charter. By this regulation I do not wish, in the least degree, to interfere with the establishment of Joint Stock Companies, but, in order that those establishments should be properly regulated, I think it desirable that the conditions should be fixed by Charter. I do not, of course, apply this provision to Joint Stock Companies already existing: I would give them a certain period to decide whether they will or will not apply for a Charter; nor is it my intention to impose any conditions, by Charter, other than those which shall be beneficial to the establishments themselves. There can be no worse policy than to pursue a contrary system. I should state that the House must recollect that there are two classes of Joint Stock Companies, one issuing their own notes, and the other trading only with the notes of the Bank of England. I propose that no joint stock bank of issue shall be established within a less distance than sixty-five miles from the metropolis. At present country banks are prevented from drawing bills upon London, and issuing notes payable in London for a less amount than 50l. These restrictions I propose to remove. The only object I have in view is to prevent competition with the Bank of England; and as I am satisfied that they never can enter into competition, I have no objection to repeal these restrictions. I propose, however, to give the Crown a right to refuse the grant of such Charters, and it is by no means desirable that such a Charter should be granted as a matter of course. Joint Stock Banks issuing the paper of the Bank of England may be established of course within a shorter distance of the metropolis. I propose that a Charter shall be given to these companies under certain conditions. The first of these conditions will be, that in the case of a Joint Stock Bank of issue, half of the subscribed capital shall be paid up and the amount deposited in Government securities. I further propose that the partners in a Joint Stock Bank of issue shall be liable to an unlimited extent: and that the Corporation of the Bank of England as such shall not hold any shares, so that the public may not be deceived as to who are the partners. I will suggest also that the accounts of these banks should be periodically published. In the case of Joint Stock Banking Companies not issuing their own notes, I propose that one-fourth of their subscribed capital should be paid up, and vested in securities and that the shares in such banks shall not be less than 100l. each, and that the partners shall be liable or responsible only to the amount of their shares. It will be seen by this latter proposition that I give an advantage to the banks not of issue over those which are of issue, and this I think highly necessary. In a case where a charter is to be granted, it must be left to the discretion of the Government to decide whether the amount of capital subscribed is sufficient for the locality in which the bank in question is situated. The amount of capital which would be sufficient in an agricultural district, it is obvious, would not be sufficient in a great manufacturing district, and consequently it must be left at the discretion of the Government to determine whether the amount subscribed is sufficient, and whether the charter asked for shall be granted. He hoped, however, that every proper facility would be given to the establishment of such banks. I do not intend, with respect to private banks, as contradistinguished from joint-stock banking companies, to interfere in any way in the management of their concerns. It appears to me indeed very desirable, that by some means or other a better mode for estimating the circulation of the country banks should be established than exists at present. It is essential to the good management of those banks, on which the whole circulation of the country depends, that the amount of their notes in circulation should be accurately known. It is, for this purpose, and with a view to effect this object, that I propose that those country banks, instead of making a composition for the Stamp-duty payable on the gross amount of their notes issued, shall be compelled to pay 7s. per cent Stamp-duty upon the notes which they issue. It is desirable, that the country should know at all times the exact amount of country bankers' notes in circulation; and no real or substantial evil can happen in the case of any country banker from such an arrangement; and, further, I am of opinion, that it is desirable to know, not only the amount of each country banker's paper in circulation, but also the amount of his general assets to meet the demands upon him. I do not by any means desire to expose the affairs of individual bankers, for though I think it desirable to make the affairs of joint-stock banks known to the public, I do not consider it expedient to extend the principle to the case of private individuals keeping banks, who, with every certainty of ultimate solvency, might, nevertheless, be ruined by an exposure of their affairs under certain peculiar circumstances. I propose, however, that a statement of the accounts of each individual bank shall be sent up to London as a strictly confidential paper, which shall not be published in a separate form; but, the accounts being added together, the total result shall be given to the public periodically. These are the grounds of the propositions which I feel it my duty to submit to the Committee on this important subject. I will further observe, that the country banker may state the whole of his available assets. [Sir Robert Peel asked whether the statement included landed property?] Landed estates, although not immediately convertible, tend certainly to the security and ultimate solvency of the banker, and on that ground it may be matter for consideration whether the description of property referred to shall not be included in the account. These are the propositions which I have now to submit to the Committee. In the Resolutions which I shall lay on the Table, I have not thought it necessary to enter into details of various topics, many of which are likely to come under discussion and excite considerable difference of opinion; and I have confined myself to specific Resolutions, leaving the necessary details for a future opportunity. The tendency of my propositions is certainly to extend the issue of Bank of England paper. Undoubtedly, the principle which I stated at the beginning would, if followed out, lead to establishing only one bank of issue in the country; but whatever may be the opinion of any man on this subject in the abstract, I feel certain that in the existing circumstance" and state of the country it would be insanity to attempt to enforce such a system. I am ready to admit, that it would be a safer and more secure principle (if a banking system were now for the first time to be established), to have only one bank of issue; but in the present state of things that is impracticable, and the utmost extent to which any prudent man ought to go consists in encouraging the establishment of banks which shall not issue their own paper but that of the Bank of England. I have now stated all which I think necessary to trouble the House with. I informed the House last night that it is not my intention to ask for a vote on any of the Resolutions on the present occasion; I shall, therefore, content myself with placing them in the hands of the Chairman. The Resolutions were then read, as follows:—

1. 1.—"That it is the opinion of this Committee, that it is expedient to continue for a limited period to the Bank of England, certain of the privileges now vested by law in that corporation, subject to such conditions as may be provided by any Act to be passed for that purpose.
2. 2.—" That it is the opinion of this Committee, that provided the Bank of England shall be bound by law to discharge in the legal coin of the realm all such of its debts and liabilities as shall be demanded at the Bank of England, or at any of the branch banks thereof, it is expedient that the promissory notes of the said corporation be made a legal tender for all sums of 51. and upwards.
3. 3.—" That it is the opinion of this Committee, that provision be made by law during the present Session of Parliament, for the repayment to the Bank of England of one-fourth part of the amount of the debt now due by the public to that corporation.
4. 4.—"That it is the opinion of this Committee, that the rate of allowance and remuneration now secured by law to the Bank of England for the management of the public debt, and services rendered to the public, be continued to that corporation for the limited period to be affixed as aforesaid, subject to an annual reduction of 120,000l.
5. 5.—" That it is the opinion of this Committee, that the laws restricting the interest of money to 51. per cent shall be repealed, so far as they relate to bills of exchange not having more than three months to run before they become due.
187
6. 6.—" That it is the opinion of this Committee, that it is expedient to give facilities by the grant of royal charters for the establishment of joint-stock banks, at a certain distance from London; but that every such royal charter shall contain certain stipulations to be enforced with respect to all such chartered banks.
7. 7.—"That it is the opinion of this Committee, that all banks issuing promissory notes payable on demand, shall enter into a composition in lieu of Stamp-duty, at the rate of 7s. for every 100l. on the notes which such bank shall have in circulation.
8. 8.—"That it is the opinion of this Committee, that it is expedient to make provision with regard to joint-stock banking companies."

Mr. Baring

said, that he fully concurred in the propriety of the course taken by the noble Lord in not calling for an immediate vote on his Resolutions, which it would be absurd to discuss without an opportunity of first hearing what the country at large thought of the plan. The late period of the Session presented an obstacle to going into so important a question with a view to its decision. The subject opened a wide field for discussion—Parliament being called on to consider, not only the nature of the bargain made with the Bank, but the whole question of the circulation. He should not attempt to follow the noble Lord in any connected series of remarks, but would content himself with throwing out such casual observations as occurred to him at the moment. The country bankers would be greatly deceived if they did not see in the noble Lord's Resolutions an attempt to get rid of their paper to a considerable extent, and substitute for it Bank of England notes. Whether that was a judicious plan or not, he did not pretend to say. However, that the principle had been favourably received by a number of country banks was clear from their present practice. Though the noble Lord deprecated the use of force towards the country bankers, he suspected that the noble Lord would not be unwilling to accelerate and extend Bank of England issues by a gentle shove, or a species of Quaker propulsion, which would effect the object the noble Lord had in view, and drive country bank paper out of circulation. He could not help again regretting that the Government, after keeping Parliament assembled for months without any effective legislation, except in the department of coercion, should now, at the extreme end of the Session, bring forward this important question, when there was not sufficient time for considering it in all its multifarious bearings. The noble Lord's Resolutions were of two kinds—the first regulated the banking system of the country; the other embodied the result of the Government bargain with the Bank of England. He admitted that the first duty of the Government was to put the general banking system of the country on a good footing, without reference to the advantages that might be conferred on the Bank of England thereby; but Ministers were, in the next place, bound to examine the nature of those advantages, if any, and demand, on the part of the public, a reasonable compensation from the Bank in respect of them. If, by extending the circulation of Bank of England paper, the noble Lord threw a considerable advantage into the hands of the Bank, it was only fair to expect a reasonable compensation for it. But the subject would be put in a clearer light by the correspondence and negotiations between the Bank Directors and the Government, to the production of which he took it for granted the noble Lord would have no objection. [Lord Althorp said, he had no objection to produce all written communications on the subject, but a great deal of the negotiations were verbal]. He should certainly wait for that correspondence, before finally making up his opinion. He certainly was not one of those who thought it advisable to make a very sharp bargain with the Bank, lest the Bank might have been driven to use all the artifices within their power to maintain their credit as a body, and the public would certainly have suffered in the end. He was glad, therefore, the Bank appeared satisfied; because, although an attempt towards driving a hard bargain was evident, still, at the first blush of the present proposition for a renewal of the Charter, he must confess he was disposed to believe that the Directors had had the best of the bargain. This might not appear when the correspondence was before the House, but at present he certainly thought that the noble Lord had not made a very advantageous bargain for the public. With respect to the details of the plan, he saw no objection whatever to pay off one quarter of the debt due by the public to the Bank of England, but with respect to the reduction of the sum paid to the Bank for the management of the National Debt, he must confess he did not clearly comprehend why that arrangement was made. The sum now annually paid to the Bank for this service was 248,000l., of which 120,000l. was in future to be annually deducted. Now the noble Lord did not state whether the charge for managing the public debt was so unreasonably large as to be fairly subject to this reduction, or whether this 120,000l., was to be looked upon as a compensation to the public for the grant of a fresh Charter. The late Mr. Pascoe Grenfell had, when in that House, made this annual charge the subject of a Sessional Motion, with a view to its reduction, and he (Mr. A. Baring) had always opposed this Motion, upon the principle that the sum paid was made a matter of bargain. When the Charter was renewed, it was unfair to depart from the terms of a bargain once made. He, therefore, took it for granted that the noble Lord did not look upon the 248,000l. as too large a sum paid for this service; and he must, therefore, consider the annual reduction in the light of a compensation for the renewal of the Charter; and then came the question of comparison between the compensation now paid by the Bank, and that which was paid at the time of the last renewal of the Bank Charter. The compensation then made by the Bank amounted to two per cent, on the whole amount of their capital of 14,600,000l., or, in other words, to the difference between three and five per cent, that amount being lent to the public at three per cent at a time when the Government would have been obliged to pay five per cent in the market, and two per cent on 14,600,000l., was not far short of 300,000l. a-year. Now, the present value of money in the market did not exceed two and a-half per cent.; three per cent was considered a large rate of interest, and yet the Bank were to be paid at the rate of three per cent for the capital lent to the public, although the noble Lord knew, that Exchequer Bills, which yielded an interest of two and a quarter, circulated at two and three per cent above par. It, therefore, seemed to him that the 120,000l. reduction on the annual payment to the Bank, was not tantamount to the compensation made by the Bank on the former occasion, and, in order to equalise the two, the rate of interest to be paid on the Bank capital ought to be reduced to one per cent. This was the view which he took of it at the first blush of the plan; perhaps a perusal of the correspondence might alter his views. The noble Lord had stated nothing as to the public balances in the hands of the Bank; he took it for granted that the noble Lord would hereafter give an explanation on the subject, particularly as the Government might do what it pleased with those balances in future, and invest them to the best advantage. On the subject of the Bank itself, experience had proved, that the general system of management was judicious. Besides, the Bank had so accommodated itself to the affairs of this country that no considerable alteration could be made in the system without producing the greatest inconvenience. The same system was found equally beneficial wherever it was adopted. The Bank of Hamburgh was now, he believed, the only one conducted on a different principle, and a principle which he considered a bad one. The plan of the Bank of England was adopted in all parts of America, and he did not think it admitted of any material improvement. He fully agreed with the noble Lord that there ought to be only one bank of issue in London. The other plan of having more banks of issue than one, was repudiated by every man of sense and experience, and in this the whole of the Committee concurred. The competition where there were more banks of issue than one, must produce a jarring which would prevent any bank from acting without previous inquiry into the proceedings of the other, without seeing what their rival was about, and thus could not fail to lead to great inconvenience and embarrassment. The next point to which the noble Lord adverted, was the limitation of distance within which other banks might be established with more than a certain number of partners; and he thought the noble Lord right in his limitation. There was no very considerable town nearer to London than sixty-five miles, and no benefit could therefore arise from bringing the privilege nearer to the metropolis. Now one word as to chartered banks. His opinion was, that this country had never yet sufficient experience of the principle to judge fairly of it. It was Mr. Huskisson's intention to have inquired fully into it had he lived. It was his (Mr. Baring's) opinion that it prevented capital from being employed in the business of banking by every proprietor being rendered liable to the full amount of his property. He approved of the French principle, always, however, taking care that the capital was really advanced, and not subsequently taken out. The Board of Trade could not employ itself better than in entering upon a careful revision of this important subject. The noble Lord said, that banks of issue would be unlimited in responsibility, but banks not of issue limited. He did not see upon what grounds the distinction was made. The noble Lord said, the present limitation which prevented country bankers from drawing bills on London for less than 50l. was to be removed, and that they might in future draw to any other smaller amount. If they might draw bills on London of 10l. or of 5l., it would be the same in effect as allowing them to issue their own paper. There must be some limitation to such a power. However, he should not at present venture to offer any opinion upon this part of the subject. As he said before, however, he did not wish to give any opinion just now upon the general question as regarded country banking. He unfeignedly wished, that they should have, in the first instance, the opinions of persons connected with the country circulation on the subject. Indeed, he thought that the discussion should be delayed until they had the opinions of those individuals on the subject. The noble Lord said, that all country banks should be obliged to pay 7s. per cent Stamp-duty upon the amount of their issues in circulation, and that with a view to ascertain the amount in circulation. Now, he should like to know how the noble Lord would ascertain the amount of such issues in circulation. Was he to take the account from the bankers themselves? The fact was, that this criterion of the amount of their issues would be anything but a true criterion. It would no more afford a true criterion of the amount of notes in circulation, than a Property-tax would afford a criterion of the real amount of any individual's property. For his part he could not understand the means which the noble Lord would have of ascertaining the real amount of the issues of those banks in circulation. There was one point in the noble Lord's arrangement to which he had personally a great objection, and an objection that was founded upon personal experience, not only in this country, but in other parts of the world. He was aware that it was an objection, which in the present temper of the times, and of that House, was likely to meet with little favour there. It was an objection to the publicity of the Bank accounts. He was quite sure that in times of difficulty the means of the Bank would be limited, and its operations would be cramped, by its being under the necessity of making an appearance to the country for the purpose of masking its operations. He was aware that the opinions given before the Committee were various upon that point. It appeared to him that it would be important for the House to know what the Bank as a body thought upon the subject. He (Mr. Baring) was of opinion that the publicity of the accounts of the Bank would, in times of difficulty, materially cramp its operations, and further, that it would sometimes create an alarm amongst the public where there were no real grounds for alarm. It was perfectly well known, that the Bank at times, like many persons engaged in large general business, would perceive a great disproportion between its issues and the means in its hands; but it would, at the same time, know, that by circumstances which were not explicable by figures, sometimes the next week, or the next month, all things would be set to rights, and the due proportion brought about again. The publicity of the accounts of the Bank in such periods, and under such circumstances, would occasion an alarm amongst the public at appearances which, properly understood, would afford no grounds for alarm at all. It should not be forgotten that, every difficulty and every restriction put upon the Bank, produced corresponding difficulties and restrictions upon the intercourse of the Bank with the world at large. Gentlemen should not imagine that in imposing restrictions upon the Bank, they were imposing them upon the Bank merely; they should recollect, that by the imposition of such restrictions, they were making it less useful for the purposes for which it was established and intended. He would refer for an illustration to the last period of difficulty since our return to cash payments—to the year 1825. In fair weather every bark might go to sea, and there was then little or no necessity for inquiring into its seaworthiness; but it was obvious that there must be in this country a description of vessel that would weather a storm like the only one that we had experienced since the return to cash payments—namely, the storm of 1825. Now of this he was quite certain, that if a necessary publicity of its accounts had been established at that period, the Bank would have stopped payment over and over again. He forgot to what amount its resources in specie were then reduced—he believed that it was to an extremely and almost incredibly low amount. The Bank knowing that all would be set to rights went on confidently, and things did eventually come about, but such would not have been the case if the public, at the time, had been let into its secrets. In point of fact, there was no inconvenience experienced from the present state of things as regarded the Bank in this respect; on the contrary, at the period to which he referred, in 1825 the power of secrecy on the part of the Bank was the safety and the security of the Bank. He was aware that such a state of publicity existed in other countries: but it did not exist there, at least in France, without the disadvantages which he had mentioned attending it. Undoubtedly, the noble Lord, by proposing that the publication of the accounts of the Bank be made every three months, instead of weekly, so far diminished the danger that was likely to be produced by such an arrangement. He would suggest this change in that part of the noble Lord's arrangement—namely, that the averages to be published at the end of the quarter should not be averages made up to that time, but to the middle of the quarter, for if they should be made up just before the payment of the dividends, they would exhibit a small amount of notes in circulation; and if made up just after the payment of the dividends, they would exhibit a large amount of notes in circulation. He therefore thought that by taking the averages up to the six weeks previous to the end of the quarter, they would have a greater chance of having a fair and correct return on the subject. To the making the paper of the Bank of England a legal tender he had no objection; on the contrary, he thought that the doing so would be productive of great benefit to the country. He thought that the noble Lord's second Resolution might be more judiciously worded, so as to afford greater security to the public. He would suggest that that Resolution should be altered to this effect—that so long as the Bank of England continued to discharge all its legal debts and responsibilities, its paper should be a legal tender in the country. It was not sufficient to say that so long as the Bank was bound by law to discharge its liabilities its paper should be a legal tender; it was more safe, as far as the public was concerned, to say that so long as it continued to discharge those liabilities, and no longer, its paper should be a legal tender. He had considerable doubts as to whether we should not limit the payment in specie on the part of the Bank to London alone. He, for one, was inclined to limit it to the Bank in London alone. The doing so would facilitate the issue of paper; and he thought that one place for payment in specie would afford sufficient security to the public. The late Mr. Ricardo's plan was, that there should be only one place—namely, London, and that payment in specie should be made only for every 100l.; and, undoubtedly, if his plan of paying in ingots were adopted, there still would be ample security for the public. He wished to know whether the noble Lord intended that the branch banks should be liable to pay in specie only for the amount of notes issued from them respectively, or whether they were to be called upon to pay for the whole amount issued by the Bank itself. He supposed that the noble Lord only intended, that those branch banks should be liable to pay in specie for the amount of paper issued by themselves. It was proposed by the noble Lord, that at the end of ten years the Government should have the power of giving notice to the Bank that its charter was to expire. Was that power to be reciprocal on the part of the Bank as well as on the part of the Government? The noble Lord proposed that, the Government should have the power of putting an end to the charter. Was the Bank, on the other hand, to have a similar power? There was a variety of points connected with this important subject, which would require much time for their consideration; and yet, it would be hard to call upon the noble Lord to give proper time for their discussion; for that would, in point of fact, be calling upon the House to sit there till Christmas next. It was greatly to be regretted, that their time should have been wasted upon measures of much less consequence, so that when a great measure like the present was brought forward, it must be disposed of in a hurry, as it was physically impossible for hon. Members to continue to sit for the period required for its due consideration and discussion. It was, however, of great importance that with respect to that part of the noble Lord's plan which regarded the internal circulation of the country, and the country banks, some time should be given to the persons connected with that circulation to pronounce their opinion upon it. Without entering generally into the question, he could not refrain from offering the observations which he had now addressed to the House.

Mr. Grote

said, that as far as he could understand and follow the points of the noble Lord's plan, he was not disposed to quarrel with the principle of it, but there was one point upon which he thought that the noble Lord deviated from the principles which he laid down in the commencement of his statement—he alluded to the publicity of the issues of the Bank of England. He concurred in every word that had fallen from the noble Lord as to the extreme importance of the publicity of the Bank issues, as the best guarantee to the public for the sound management of that body. It was not that he had any reason to find fault with its management hitherto, but he saw clearly that there was no security to the public for the sound management by the Bank of the circulation of the country, and more especially for its adhering to one uniform principle, except in the publicity of its accounts. The noble Lord had laid down that principle in the most emphatic manner at the commencement of his statement, but when he came to see the mode in which the noble Lord proposed to effect that publicity, and the extent to which the noble Lord would carry it, he owned that he felt deeply and grievously disappointed. The publication of the accounts of the Bank for a quarter at the end of the quarter was not calculated to give the public a proper insight into the management of the Bank, or to operate as a check upon the Bank itself. If, however, the series of weekly averages, which were to be made up during the quarter, and which, according to the noble Lord's plan, were to be laid before the Government, but not before the public—if that series of weekly averages, and the amount of issues in each week during the quarter, were to be made public at the end of it, the public would get a better insight into the management of the Bank, and he thought that such publication was necessary in order to enable the public to understand accurately whether the Bank Directors were right or not in their view of the results, and to ascertain whether the variations that occurred could be fairly and satisfactorily accounted for. He was of opinion, that it would be an improvement in the noble Lord's plan to postpone the publication of the accounts from three months to six months, if at the end of that time the whole series of weekly averages during the time should be given. No benefit, he conceived, would be derived from the publication as proposed by the noble Lord. He would not then enter into the other details of the plan; he would content himself simply with stating, that he saw no material objection to the plan as a whole, and there was one part of it, that which went to make the note" of the Bank of England a legal tender, which was of essential importance to the country.

Mr. John Smith

said, that it would be seen from the evidence given before the Bank Committee, that the Bank never was afraid of any run upon it occasioned by an unfavourable state of the exchanges, as it was well known to the Directors that that would in time right itself. In the year 1825, as his hon. friend the member for Essex was aware, the Bank of England, to its highest honour, came forward and lent its notes to the country bankers. During the run that then took place those very notes were frequently, in the course of half-an-hour after their being thus advanced, brought back to the Bank to be exchanged for specie. If the Bank of England had only to meet its own engagements, then it would have had no difficulty in doing so. The noble Lord now proposed to 'make Bank of England notes a legal tender, which would prevent, in case of a run hereafter on country banks, such a run on the Bank of England for specie, a matter of the highest importance to the tranquillity of the country, and a measure that would in all human probability, prevent the occurrence of great distress. He thought that the Bank of England had a right to be paid, and well paid, for its management of the Public Debt, The noble Lord's plan, as far as it regarded country banks, was one of considerable complexity, and with respect to it he would not at present give an opinion. He could not agree with the hon. member for Essex in thinking that the plan of the noble Lord would go to destroy the smaller banks of issue in the country parts of England. He was sure that under this plan they would continue to flourish, and he certainly thought that their continuance would be of infinite use to the commerce of the country. He was of opinion, that on the whole the noble Lord had shown great judgment and good sense in the plan which he had brought forward. He thought the proposition of the noble Lord quite clear, and one that could not effect any injury to the Bank establishment. When the papers and other documents were printed and distributed, he did not doubt but the proposition would give general satisfaction.

Mr. O'Connell

hoped he might be permitted to put a question to the noble Lord upon a point which much interested a great portion of his constituents as well as Ireland generally. It was not his intention at this stage to enter into the general principles of the proposition; he was only anxious to obtain some information. The plan of the noble Lord made Bank of England notes a legal tender, and he should be glad to learn from the noble Lord if it was his intention to extend that principle to Ireland. He understood the noble Lord to intimate, that he did not contemplate any such extension, and he therefore must inquire whether, as the notes of the Bank of Ireland were not now a legal tender, the principles of the present proposition were in that respect to be extended to Ireland. His third inquiry was, whether it was the intention of the noble Lord to bring the consideration of the Bank of Ireland Charter this year before Parliament.

Lord Althorp

said, that the propositions which he had submitted to the House were intended merely to apply to England and Wales, and did not extend either to Scotland or Ireland. With regard to the question put by the hon. and learned member for Dublin, with reference to the consideration of the Charter of the Bank of Ireland, he could only say that Charier did not expire until the year 1837, when by Government paying off the Debt due to that body, and giving proper notice, the subject might be brought under the consideration of Parliament.

Mr. O'Connell

begged to remind the noble Lord, that he had not answered his inquiry as to whether it was contemplated to make Bank of Ireland notes a legal tender in Ireland.

Lord Althorp

replied, that it was not contemplated to interfere at present with the Charter of the Bank of Ireland.

Mr. Hume

regretted, that he felt called upon to differ from the sentiments which had been expressed by several hon. Gentlemen on this subject. He felt no hesitation in saying that to the negligence of the Bank of England was to be attributed the lamentable events resulting from the panic of 1826. At all events, he thought that those results would not have been so lamentable if proper diligence had been used. Experience had proved, certainly, that the Bank of England gave relief, but he was far from thinking, that no relief would on that occasion have been afforded but for the Bank of England; on the contrary, he was firmly of opinion that but for the mismanaged monopoly, the lamentable and eventful circumstances to which he had alluded would never have occurred, nor the severe losses then suffered have been sustained. He therefore could not but regret, that the public were again to be subjected to an extension of that monopoly for ten or eleven years longer, and he still more regretted this, because the public were not to be benefited by the renewal of the monopoly. He was aware that many hon. Gentlemen entertained an opinion that a Government bank ought not to be established, but he was of opinion that no body of individuals could manage such an establishment like the state itself, and that Government banks might be established with as able men to conduct them as at present, and with as little trouble to the Minister for the time being, as was at present experienced, and most unquestionably at a much less expense to the nation than by the monopoly and management of the Bank of England. He complained that the people were to be deprived, for a continuance, by the Bank of England of between 600,000l. and 700,000l. per annum; and he strongly objected to the enjoyment by any individual bank of a monopoly extending sixty-five miles round the metropolis. This appeared to him to be a departure from ail the principles to the full extent of which the noble Lord had stated himself ready to go in order to free the country from such monopolies; and he was sorry to find the noble Lord had been led to acquiesce in their continuance. With reference to the bargain which had been spoken of, it seemed to him to be ridiculous that the circulation of the Bank of England paper should be forced all over the country, and that all the people should get nothing in return. True it was, that the people would have to pay for the management of the debt 120,000l instead of 248,000l., but that was the only advantage to the public. With reference to the proposition that Banknotes should be a legal tender, he could only express his opinion that it would greatly increase the dangers to be feared from a paper currency, and would eventually drive a gold circulation out of the country; for, as the law now stood, every country bank was obliged to retain a certain quantity of gold in its possession to answer the demand, equal to the circulation of its notes; but under the plan proposed that was done away with, and, therefore, whenever a run for gold might arise, it would be directed to the Bank of England and its branches, and the danger consequently increased. The plan was wholly bad, and particularly as respected the renewal of the existing Bank monopoly. He saw no reason why the business of banking should not be opened the same as any other trade, business, or occupation. The hon. member for Essex had said, that by the establishment of two rival banks evil would follow, for they would be playing tricks. He must, however, remind the hon. Member that the responsibility of each establishment, arising from publicity, would be a sufficient check, and under it no danger could be incurred. So far from entertaining any fears from publicity, he thought, on the contrary, that it would tend much to the public advantage. On the whole, however, he must protest against this system of monopoly being continued, for he was sure the time would come when it would be regretted that such an important trust as that about to be conferred should have been placed in the hands of any set of individuals.

Colonel Torrens

said, that though he considered the plan developed by the noble Lord, the Chancellor of the Exchequer, to be in many respects an improvement upon the present monetary system, yet he could not discover how the dangers inherent in that were to be removed. Publicity of accounts, making Bank of England paper a legal tender, and relaxing the Usury Laws with respect to Bills of Exchange, were undoubtedly improvements; but evils of the greatest magnitude remained, for which it was not even attempted to apply a remedy. Long, varied, and calamitous experience had now established the fact—that a circulating medium mainly consisting of paper money, issued by irresponsible bodies, and convertible into cash, at the option of the holders, was the most fluctuating, insecure and dangerous currency which it was possible for a great commercial country to employ. The evils of this species of currency were made manifest to a considerable extent during the crisis of 1797, which terminated in the suspension of cash-payments. It would not now be contended that the pecuniary embarrassments of that period were occasioned by the war then raging in Europe, because in 1826, when for the five preceding years there had been peace with the world, a pecuniary crisis of a still more calamitous character occurred. The panic of 1825 and 1826, occurring during a period of profound repose, with universal peace abroad and perfect tranquillity at home—that panic traceable to no external or intrinsic cause, had its source and its origin in the nature of the system itself, and in the insecurity which belonged to a paper currency, when issued at the discretion of irresponsible bodies, and convertible into cash at the option of the holder. The Bank Directors, indeed, had stated in the evidence which they gave before the Secret Committee of last year, that they had, at length, become wise in their generation, and that, instructed by past experience, they now recognised and acted upon the principles which they formerly repudiated, and that in their new-born sagacity they would avert the recurrence of the evils which had arisen to the country. But was the conduct of the Bank Directors calculated to inspire the House and country with confidence in their professions? Quite the contrary. Their new and improved rules for regulating the issues of paper, so far from imparting steadiness to the circulating medium, occasioned deep and calamitous vibrations between deficiency and excess. The Directors stated that their improved system commenced in 1827. Now, in the first place, did the official accounts submitted to the Committee of last year establish the fact, that the new system adopted by the Directors of the Bank of England in 1827, had tended to give increased steadiness and uniformity to the currency? On the 27th of January, the amount of notes in circulation was 18,300,000l.; and on the 22nd of November, in the following year, the circulation had increased to 27,012,000l, being an increase of Bank paper in circulation to the extent of one-third, or upwards of thirty per cent.; and, during December, 1831, to the first week of January, 1832, the circulation was computed at 16,400,000l. Now, these fluctuations in the amount of the circulation which had been produced under the improved principles of management, which was to give steadiness to our monetary system, had exceeded the fluctuations which took place before the improvement was adopted. Between the years 1820 and 1826, the highest circulation was 26,511,000l., and the lowest 16,304,000l. Thus the facts, as recorded by the Directors themselves, showed that the fluctuations to which the circulation was previously liable had increased. The practical rule of the Bank Directors, as stated by themselves before the Committee of last year, was, when the currency was full, as indicated by the exchanges being at par, or about to become unfavourable, to keep in their coffers bullion and coin to the extent of one-third of their liabilities. Thus when the currency was full, if there was 10,000,000l. of gold in the Bank, their liabilities would be 30,000,000l., 10,000,000l. being issued upon the deposit of gold, and 20:000,000l. upon available securities; but supposing a succession of bad harvests or other unfavourable events to reduce the deposit of gold in the Bank to 5,000l. and supposing, while only this amount of treasure remained with the Bank, the exchanges were at par, or about to become unfavourble, then, upon the rule which the Bank Directors laid down for their conduct, they would have to reduce their liabilities from 30,000,000l. to 15,000l. But if abundant harvests or other favourable circumstances should increase the supply of the metals in the Bank to 15,000,000l., and should the continuance of a favourable exchange indicate a deficient currency then on their own rule the Directors would extend their issues of paper until their liabilities became equal to 45,000,000l. Thus, under the new rule of management of the Bank Directors, the currency of the country was exposed to the deepest vitiations. He regretted that his Majesty's Government should have proposed the renewal of the Bank Charter without any essential improvement, and left the country exposed to all the calamities of an insecure and deeply fluctuating currency. The establishment of a Government Bank, issuing a fixed amount of inconvertible paper, somewhat under the wants of the country—say 29,000,000l., and compelled, over and above this fixed amount of inconvertible paper, to issue inconvertible notes in the purchase of gold at the Mint price, and to receive them back again in exchange for bullion at the same price, then would the circulating medium be exactly upon the same fooling with respect to amount and to value as if it consisted entirely of the precious metals. The proposed bargain with the Bank was most improvident, and would assuredly disappoint the just expectations of the country.

Lord Althorp

said, that it appeared to him that the hon. and gallant Member had entirely misunderstood the principles upon which the Bank proposed to act, and therefore he did not wish that the impression which such a misapprehension would create should remain unanswered. It was true that the object of the Bank would be to keep in possession of bullion to the amount of one-third of their liabilities; those liabilities included their deposits as well as the circulation. The principle which the Bank Directors professed to adopt was, to keep the amount of their securities level, and the consequence was, that when bullion was drawn out of their coffers to go abroad, the effect was to diminish the amount of the circulation; while, on the other hand, when bullion came in, of course the circulation was increased; therefore, so long as the securities remained the same, a diminution of 5,000,000l. would occasion a decrease in circulation of that amount also, and not of 15,000,000l., as had been stated by the hon. and gallant Member. The increase of the amount of bullion would also create an equivalent increase of circulation.

Colonel Torrens

said, that admitting that the deposits constituted part of the liabilities of the Bank Directors, yet he maintained that it tended still more to decrease the circulation, and was another element of fluctuation.

Sir Matthew White Ridley

inquired from the noble Lord, the Chancellor of the Exchequer, if it was intended that the country bankers who did not issue their own paper were to be compelled to return the amount of their circulation, assets, and securities; at the same time, he begged to observe that the making a 51. Bank of England note a legal tender was no boon to the country bankers, and had not been sought for nor solicited by them.

Lord Althorp

replied, that his proposition only applied to bankers issuing their own notes; and, therefore, if a country banker did not issue notes, he could not be called upon for an account of his circulation and assets.

Mr. Baring

remarked that the noble Lord had said, that his proposition did not extend to Scotland. From this a great evil or inconvenience would arise with respect to a legal tender, particularly on the border. This inconvenience was manifested by supposing a person living in Berwick-upon-Tweed, or upon the border, who might be compelled to receive from his English debtor that which he could not tender to his Scotch creditor.

Lord Althorp

said, that in Scotland 1l. notes were in circulation, and, therefore, the making Bank-notes a legal tender would exclude a bullion circulation altogether. Admitting, as he did, that there should not be a difference made in the circulation, yet still he thought that subject would involve a difficult question with one sufficiently difficult as regarded England and Wales, without interfering with the Scotch circulation.

Mr. Forster

, as a country banker, acquitted the noble Lord of any hostility to the body of which he formed a part, yet he was not sure that the noble Lord had not unwillingly been led into a scheme which had long been cherished by the Bank Directors, of monopolizing to themselves the circulation of the country. Such a measure would be most injurious. The system of country banking had its faulty parts he admitted, but taken in the aggregate it was much better than the Bank of England, inasmuch as it presented a smaller circulation founded upon a larger basis of property. The hon. member for Buckinghamshire (Mr. John Smith) was, he admitted, a high authority upon all subjects connected with banking; but he must venture to differ from that hon. member in his opinion that the measure for making Bank-notes a legal tender would prevent panics; on the contrary, he thought its tendency would be to increase their frequency and extent. The country bankers being released from the obligation now imposed on them of keeping a store of gold, whenever a demand for that article arose in the country, whether from political discredit or any other cause, there would be a simultaneous application for it from all the country banks to the Bank of England, which would thus be exposed to most severe and sudden drains. The Committee would recollect that it was an operation of this kind which caused the panic of 1825, and if this measure were adopted, he anticipated a repetition of such events. Indeed, so impressed was he with the conviction that people in the country districts would prefer paper directly convertible into gold, to that which was indirectly convertible, that he should think it would be the policy of country bankers, notwithstanding their protection from payment in gold by law, to issue notes which should express on the face of them that they would be paid in gold; and such notes he was inclined to think, would soon obtain pre-eminence over those of the Bank of England.

The Chairman reported progress, and obtained leave to sit again.