§ Mr. ClayIn rising to bring forward the subject of which he had given notice, said, Sir, I have to bespeak the indulgence of the House. The subject which I am about to bring under its notice is one, in itself, but little attractive, and deriving no adventitious interest from any aptitude to excite the feelings of party; but it is a subject, nevertheless, of the very greatest importance, and one, I can venture to assure the House, urgently requiring an early and careful, not to say anxious consideration. The motion I am about to submit to the House is as follows:—"That a Select Committee be appointed to inquire into the operation of the Act of the 7th George 4th, c. 46, permitting the establishment of Joint-stock Banks, and whether it be expedient to make any, and what alteration in the provisions of that Act." Under that Act a system of Joint-stock banking has grown up already of great magnitude, which is daily extending its ramifications, and which promises very shortly to comprehend every portion of the kingdom, and every class of the population within the sphere of its operation. Of the vast importance of the consequences, whether good or evil, which must eventually flow from the workings of this system no man can reasonably doubt; banking forms, as we know but too well from our own experience, an important, perhaps the most important, part of the monetary system of any country, and the question of the soundness therefore of the principles on which it is conducted touches not only the welfare of the commercial and manufacturing classes, but deeply affects every relation of social life, and is consequently beyond most others deserving of the 841 earnest attention of the Legislature. My object is to induce the House to inquire whether the system of Joint-stock banking in this country has received the best legal developement of which it is susceptible. It is capable of conferring great benefit on the community, but may, if ill regulated, give birth to as great calamities. Have we taken all the means within our power to secure the one and to obviate the other? I think not. But before entering on this question, before stating what I consider the imperfections of the law by which Joint-stock banking is at present regulated, and how those imperfections may be best remedied, it may be well that I should recall to the recollection of the House the circumstances under which the existing system originated. The history of the year 1825 must be familiar to every hon. Gentleman who hears me; the mad excitement, the idle dreams of unbounded prosperity, the wild projects at the commencement of that memorable year, the wide-spread distress, the still more widely-spread alarm which attended its close, are not, I am sure, forgotten by this House, and will not be, I trust, forgotten by the public. On the assembling of Parliament in 1826, his Majesty having called its attention to the calamities which had signalized the period then recently elapsed, and to the consideration of the best means of obviating the risk of their recurrence, two measures for that purpose were submitted by the Government of that day to both Houses. The first was for a suppression, at an early period, of all notes under 5l., issued by private banking establishments, the Bank of England having already discontinued the issue of such notes. On this measure (in my opinion, a most salutary one) it is not necessary that I should at present comment; the second was intended to create a sounder system of banking. In the panic a very great number of country bankers stopped payment—fifty-nine commissions of bankruptcy were issued against country banks from October 1825., to February 1826, and many suspended their payments whose affairs did not proceed to bankruptcy. An opinion in consequence became prevalent, that one of the causes most operative in producing the crisis just then over past, was to be found in the law, which, by restricting partnerships consisting of more than six persons from issuing notes, and, indeed, as was supposed (although, as 842 subsequently appeared, erroneously), from carrying on the trade of banking altogether greatly enhanced the difficulty of forming solid establishments for that purpose. To the relaxation of that law, originally enacted in 1708, to confer on the Bank of England a monopoly of the power of issuing notes, it was necessary to obtain the consent of the Bank, as its re-enactment was part of the last as of previous bargains with that Corporation. Accordingly the First Lord of the Treasury and the Chancellor of the Exchequer, the late Lord Liverpool and Lord Goderich (then Mr. Robinson), had, on the 3d of February, written a letter to the Directors urging such consent. It is not necessary that I should trouble the House with reading either that letter, or any portion of the correspondence between the Government and the Bank Directors, consequent on the application it contained. The result of the negotiation was, that the Bank consented to wave its exclusive privileges in that particular, provided that the banking copartnerships under the new law were not to be established at a less distance than sixty-five miles from London, and that every member should be individually liable for the whole debts of the firm. In the course of the Session an Act was passed, the 7th of George 4., c. 46, embodying the conditions. As a law for the general regulation of Joint-stock banking, this Act was avowedly imperfect: the Ministers of that day stated, not that the Act was the best that, in their opinion, could be framed for the purpose, but that it was the best which the then existing bargain with the Bank of England allowed them to bring forward, and most deeply is it to be lamented, that advantage had not been taken of the renewal of the Bank Charter, in 1833, to establish a sound and enduring system of Joint-stock banking, as far as that object can be accomplished by the interference of the Legislature; that opportunity was lost. Lord Althorp did, indeed, propose conferring charters of limited liability on such Joint-stock Banks as would issue only Bank of England notes; but subsequently abandoned that intention, and the only change then made in the law relating to these establishments, was permitting them to make their notes payable in London. The laws regulating \ the trade of banking by partnerships of more than six persons in England and Wales are briefly as follows:—They must not be established at a less distance than 843 sixty-five miles from the metropolis. They may issue notes payable on demand at the place only where issued, or payable in London, and where issued. They may discount in London bills of exchange. They must, before issuing notes, enter at the Stamp-office in London the name of the copartnership, the names and residences of the partners, and the names of two or more officers of the copartnership through whom they may sue or be sued. A like return must be made every year, and also whenever a change takes place in the officers, the members, or the places where notes are to be issued. Execution on judgments and decrees obtained against the officers may be sued out against any member of the co-partnership. This responsibility attaches to persons retiring from the company for three years, as far as relates to transactions occurring whilst they were members. Under these laws, a system of Joint-stock banking has grown up already, as I have said, of vast extent, and clay by day enlarging the sphere of its action. By a return to an order of this House, of the 21st of March last, it appears that there were at that date sixty-one Joint-stock Banks established, with their branches, at 472 places, and consisting, in all, of 15,673 partners or shareholders. Of these, three were established in 1826, four in 1827, six in 1829, one in 1830, eight in 1831, seven in 1832, ten in 1833, ten in 1834, eight in 1835, and four in this year, to the 21st. ult.; and since the date of the return five have been entered at the Stamp-office—one of them having twenty-four branches and 2,052 partners. More companies I know to be in a course of formation, and there are probably others of which I have not heard. Now, Sir, I cannot but think that the circumstances I have now stated to the House—the vast and growing extent of the system of Joint-stock banking on the one hand, the absence of all legal control over the working of that system on the other, constitute a state of affairs very far from satisfactory, and, especially if looked at in combination with certain others, or, at least, without considerable anxiety. We have called into existence, we have introduced into our monetary system an element of tremendous power. We have taken no precaution to limit or control its operation. I say no precaution for the provision of the Act 7th George 4th cap. 46, which imposes unlimited liability on all the partners 844 in Joint-stock Banks, whilst it is, in my opinion, attended by inconveniences of the gravest kind peculiar to itself, has failed, and always will be found to fail, as a means of guarding against proceedings on the part of such establishments, perilous to themselves and injurious to the community. The dangers to which our present system is exposed arise mainly from these causes; by permitting an unlimited number of persons to combine for the purpose of carrying on the trade of banking, you confer on them an enormous power of creating an extensive business; by rendering all the shareholders individually responsible, you afford the most dangerous facility in obtaining credit, whilst you take not the smallest precaution that such banks shall possess capital commensurate with the engagements into which the powers and facilities you bestow, will tempt them to enter. I can conceive no state more dangerous for any commercial community than one in which a system composed of such elements should be in full activity, in which the country should be covered with Joint-stock banking companies, enabled to extend their operations through the thousand channels open to them by means of their shareholders, and feeling no necessity to limit the accommodation they afford from want of funds, the place of which, for a certain length of time, at least, their credit will supply. I can conceive no state more directly tending to produce that excitement, that overtrading, that apparent prosperity, so pleasant in its advent—so bitter in its consequences. If there be one case in which legislative interference with the intercourse of individuals could be justified equally by reasoning and experience, beyond all doubt it would be an interference to obviate the dangers which an abuse of the powers and facilities of Joint-stock Banking inevitably tends to produce. We have made no such attempt. There is in the 7th Geo. 4th, no restriction or limitation whatsoever, either on the process of forming, or subsequent proceedings of these companies. The one sole condition is, that every partner shall be liable to the whole extent of his fortune; and those who may deny that any change in the law is necessary, must be prepared to show that the one provision of unlimited liability is sufficient to secure the stability of a system on which it is quite evident that the whole banking of the country is at no distant period destined to be con- 845 ducted. Will that condition ensure an observance of the caution essential to stability? Our own experience of almost half a century is a sufficient reply. Banking in England has (with the exception of the Bank of England) been hitherto on no other footing. Need I remind the House how far from stable that footing has proved? In 1791 and 1792, one hundred country banks were swept away. There had been then no bank restriction, and there were no small notes. But was the system more secure during the bank restriction, and whilst the country bankers had the power of issuing small notes? From 1809 to 1819, no less than 174 commissions of bankruptcy were issued against country bankers; and after we had again returned to cash payments, from 1819 to 1826, including the time of the panic, ninety-nine commissions were issued. To these bankruptcies must of course be added the many cases of temporary suspensions of payment and arrangements with creditors stopping short of bankruptcy. But it may be said that, as these were not Joint-stock Banks, the illustration does not apply; but, we will examine how far the consciousness of individual responsibility will suffice to ensure the requisite caution in conducting the trade of banking, and if it be found that such consciousness has failed to secure prudent conduct in private banking establishments, the probabilities are infinitely less that it will have that effect in Joint-stock Companies. In such companies, the feeling of responsibility is less intense in proportion as the bulk of the partners take no share in the operations by which that responsibility is incurred—their very numbers and aggregate wealth generate a careless confidence, whilst the temptations to improvidence are almost incalculably increased by the facility of credit which those very circumstances produce. But I shall, perhaps, be told that the losses they may sustain is a matter with which the public has no concern. Sir, we must carefully distinguish between immediate and ultimate solvency. With ultimate solvency, it is true, that the public has no concern. Whether the assets of a bank stopping payment prove sufficient to pay one per cent, or twenty per cent, in the pound is a question almost wholly without interest to the public. The real injury to the community, produced by the working of an unsound system of banking 846 is, first, in the waste of capital consequenon the overtrading which it creates or stimulates; and, secondly, in the shock to credit—the alarm, the distrust, and lessened demand for labour, which the extensive failure of banking establishments inevitably produces. How far, then, does unlimited liability in the partners of Joint-stock Banks afford a security against the stopping payment of such establishments? Not only does it afford no such security but it inevitably tends to augment the risk of such occurrence. The credit obtained by such banks will be in proportion, not to the paid-up capital, but to the presumed extent of their ultimate solvency—their engagements in prosperous times will be in proportion to the credit so obtained; but should a period of difficulty arrive, the paid-up capital would be the only fund to which recourse could be had. To suppose that a call on the shareholders, at such a moment, would be attended to is visionary. Many among them themselves would probably have need of all their disposable funds, and none of them would be found to advance money, the return of which from their brother shareholders might reasonably be considered problematical. Of by far the greater portion of Joint-stock Banks at any time existing, the ultimate solvency could not be doubtful; but by how frightful a process would that solvency be put to the test. I have already stated, that execution on judgments obtained against the officers of Joint-stock Banks may be sued out against any of the partners. In the case of a suspension of payment by one of these establishments, the most opulent shareholders would of course be selected for attack, and respectable and wealthy persons might, if the engagements of the bank were large, be reduced at once to beggary, and left to recover their lost fortunes by suits in Chancery against their partners for their proportion of the debts of the concern. It is also by no means clear that every partner in a Joint-stock Bank is not subject to the operation of the Bankrupt-laws, with all their train of formidable consequences. But the mere misery thus created is but a small portion of the evil to be dreaded. If a period should ever arrive in which several of these establishments should become embarrassed, and legal proceedings be had against individual shareholders, it is certain that suspicion would arise generally 847 with regard to shareholders in all such concerns. The creditors of persons thus circumstanced would feel the inclination to secure what was due to them before the property of their debtors became liable for the engagements of the bank; and a state of distrust, discredit, and alarm would occur, far more widely spread, and more disastrous, I firmly believe, than any we have yet witnessed. If a private bank fail, its immediate connexions alone are liable to suspicion: the distrust created by the stoppage of a Joint-stock will extend more widely in proportion as a greater number of persons are implicated in responsibility. The House will not think that I have overrated the importance of this consideration, when it bears in mind that nearly sixteen thousand persons, many of them commercial men of considerable eminence in the great towns of England, are partners in these companies. There are other evils attendant on the present state of the law as regards Joint-stock banks, of no inconsiderable magnitude, although trifling compared with those to which I have just adverted. Prominent among these is the facility afforded by the existing law for getting up, in a moment of excitement, bubble companies—companies, I mean, of which the projectors have no other object than to make a profit by jobbing in the shares. It is scarcely possible, indeed, to conceive a state of the law affording a more direct temptation and encouragement than the present. Under the 7th George 4th, a company for Joint-stock banking may be formed with a nominal capital, we will suppose of a million—10,000 shares of 100l. each. It may commence business with 500 or 100 shares really taken—for to constitute the company according to the Act, it is sufficient that half-a-dozen shareholders and two officers enter their names at the Stamp-office. Upon those shares 40s. or 20s. each may be paid up, for the Act requires no paid-up capital, and if the projectors can provide funds to procure mahogany desks and brass door-plates, they are authorised to establish branch banks in every town in the kingdom sixty-five miles from the metropolis, for in the Act there is no limitation of the number. A fictitious dividend may be declared, for the Act prescribes no publicity; and when by this, or any other contrivance, the shares have been raised to a premium, the reserved shares may be issued; the profit thus obtained furnishing a fund from which 848 further dividends may be made, and fresh delusions practised on the public. Even the principle of responsibility of the individual shareholders is, in the existing law, by no means efficiently worked out. No publication of the names of the shareholders is prescribed, and it is quite possible, therefore, that all the parties whose names were originally the means of raising one of these companies into credit may withdraw, and the confidence of the public might thus be found to be resting on grounds altogether illusory. It is only by application at the Stamp-office that the names of the partners in any Joint-stock Bank can be ascertained—a process but little likely to be resorted to with respect to establishments at a considerable distance from London. I may add that, in point of fact, the changes of proprietors, although required by the Act to be registered at the Stamp-office, are not always registered; and indeed, if every transfer of every share in every Joint-stock Bank is to be entered at the Stamp-office, some new and extensive arrangements must be made for the purpose. Having, Sir, now stated to the House what I conceive to be the defects in the existing law, and the evils likely to flow from those defects, it may be expected that I should state to what extent existing circumstances illustrate the arguments I have used, and whether there be any symptoms indicating the near approach of those dangers and inconveniences which I have stated to be, in my apprehension, of probable occurrence. Sir, I will confess that this is ground on which I tread reluctantly, and on which if I venture at all, it will be with the utmost caution and reserve. In the first place, it will be observed that a large proportion of the Joint-stock Banks comprehended in the return on the table—the only banks yet in operation—were established before the present excitement, and are, therefore, not open to the suspicion of being got up with any other than the avowed object. In the next place, I am quite persuaded that, with regard to very many of these establishments, no want of caution can be fairly imputed to those by whom they are conducted, and where a course has been pursued open to objection, the error is rather to be attributed to our own faulty legislation, than to those by whom the mistaken principles, sanctioned by the State itself, have been practically brought into operation. Still there are fac and circumstances connected with 849 the actual working of the Joint-stock Banking system which may be stated with a due regard to the caution, which it appears to me every man, but especially every Member of either House of Parliament is
| JOINT STOCK BANKS. | ||
| By return from the Stamp-office, dated 21st March, 1836 | 61 | |
| Omitted | 1 | |
| Of the above— | — | 62 |
| In process of formation | 3 | |
| Private, although included in return, having more than six partners | 4 | 7 |
| 69 | ||
| 55 | ||
| No returns from | 9–46 |
| Banks. | Shares. | Shares Issued. | Nominal capital. | Capital paid up. |
| 46 | 821,050 | 529,397 | £30,930,000 | £5,922,505 |
| of shares. | 63 per cent. | of capital. | 19 per cent. |
§ Of the above forty-six banks, four having a nominal capital of 9,500,000l. and paid up capital of 1,474,600l., do not issue their own notes. The present circulation of notes by the whole of the Joint-stock Banks, including, of course, those of which I have not been able to state the capital, is 3,094,025l. In December, 1833, it was 1,315,301l., no great increase when the increase of their number is taken into account, and it is also recollected that the private bank circulation has fallen off 500,000l. in the same period. But it is by no means by the amount of issue of notes alone that the effect of the operations of the Joint-stock Banks upon the monetary system of the country is to be measured. The means strictly within the power of such of these establishments as do not issue notes, of affording accommodation to their customers, consist, of course, first, of their paid-up capital; and secondly, of the money deposited in their hands. Of the amount of this latter item I have no means of forming a correct estimate, but as these establishments are comparatively of recent formation, and large deposit accounts can only be the growth of years, it is not probable that the deposits with the Joint-stock Banks can be very large, perhaps not commonly greatly exceeding the amount of the paid-up capital. In the case of such as issue notes, the amount of circulation must be added to their means of giving accommodation. But I believe I am justified in stating that the accommodation afforded in many instances by these
850§ bound to observe in making statements which can by possibility affect the commercial credit of the country. For the following table I am indebted to the courtesy of the Directors of several banks:—
§ banks very considerably exceeds the combined amount of paid-up capital, deposits, and circulation. They are enabled to give this accommodation by re-discounting in the London market. Large amounts of bills are discounted by these establishments in the country at one rate of interest, and negotiated in the London market at another—the profit of the bank, of course, consisting in the difference between the discount they charge, and that which they pay on the transaction. In the case of banks not issuing paper, this is done through the Bank of England, which, up to a certain extent, will discount for such banks at three per cent. In the case of banks issuing their own paper, it is done through bill-brokers in London. Now, I believe, I am justified in saying, that this practice of re-discounting is not considered by the most skilful and prudent among private bankers as a very creditable or business-like proceeding—nor one which could be carried to any considerable extent by a private banking establishment without exposing it to suspicion and discredit; as showing conclusively that it was in want of disposable funds, and getting into engagements beyond its strength to manage. But this practice thus repudiated by private bankers is freely resorted to by some, at least, of the Joint-stock Banks. The House will at once see how strong an illustration this fact affords of the principle which I have ventured to lay down, viz., that the very facility of credit which unlimited liability affords, tends directly to 851 abuse, and, consequently, to danger. The endorsement of a bank known to contain among 500 or 600 members, many individuals of great wealth, will give currency to any Bill. "Do you not observe (said a broker to a person who expressed a doubt of the character of a bill offered to him for discount), that it has a thousand indorsers?" I by no means intend to assert that, under the sanction of these establishments, many accommodation bills have been negociated, although, perhaps, they may have been the means of introducing some paper of a questionable character into circulation. But, can no injury be done to the community, no danger be incurred even by an unlimited discounting of good bills—bills that are in payment of real mercantile transaction? I am far from thinking so; and I believe, that if, at this moment, the system of Joint-stock banking be working ill for the community, it is more through the facility it affords of a dangerous extension of bill accommodation than by any indiscretion in the issue of their own promissory notes on the part of these establishments. It is well known, that in periods of rising prices, and consequent excitement in the commercial world, persons will always be found ready to speculate in matters not within their usual trade, or to extend the operations of this legitimate business to the full extent to which they can obtain capital for the purpose. It is quite clear, therefore, that any Joint-stock Bank possessing, from the estimated liability of its many partners, an almost unbounded credit, may give a fearful stimulus to overtrading, without discounting or procuring to be re-discounted one single bill not drawn in discharge of a bona fide mercantile transaction. But is the credit of these Joint-stock Banks, when so employed, a sound and wholesome credit? Is it not, on the contrary, a credit in the highest degree hollow and dangerous, and one which would in a period of difficulty but too probably prove unsound? Suppose a change in the state of the London money market were to occur—that the rediscounts of which I have spoken could not be obtained, and that these establishments consequently must withdraw the accommodation they had hitherto afforded, is it not clear that great embarrassment would be felt by all the persons thus deprived of the support on which they had been led to rely?—an embarrassment almost of necessity shared by the Joint-stock Bank, which should have entered on a sphere of opera- 852 tions beyond the means under its direct and immediate control. To what extent the operations of the Joint-stock Banks may have contributed to create the present state of excitement in the commercial world, must, of course, be mere matter of conjecture. That they have had some considerable influence is probable from the fact that the excitement and rage for speculation is greatest in those parts of the kingdom where the operations of those establishments have been most active. London has been comparatively unmoved, but Liverpool and Manchester have witnessed a mushroom growth of schemes not exceeded by the memorable year 1825. I hold in my hand a list of seventy contemplated companies for every species of undertaking which have appeared in the Liverpool and Manchester papers within the last three months. This list was made a fortnight or three weeks since, and might, probably, now be considerably extended. It is impossible also, I think, not to suspect that the facility of credit and consequent encouragement to speculation to which I have alluded, can have been without its effect in producing the great increase of price in almost all the chief articles of consumption and raw materials of our manufactures. That increase has been enormous—not less than from twenty to fifty and even 100 per cent in many of the chief articles of produce of consumption, and materials of our manufactures. I am quite aware that there is every indication of this advance of price being sound—that it has arisen from consumption outrunning supply—and that our manufactures are working on orders rather than speculation. But I cannot forget that the excitement of 1825 commenced legitimately—that the rise of prices will infallibly check consumption, whilst it stimulates supply; and when we look at the amount of our paper currency resting at this moment on the somewhat narrow metallic basis of the bullion and specie in the vaults of the Bank of England, it is impossible not to feel the apprehension, or at least the propriety of a caution and forethought. The circulation of the Bank of England, as appears by the last average in the Gazette, is—.
| Circulation of the Bank | £18,063,000 |
| Deposits with ditto | 14,751,000 |
| 32,814,100 | |
| Private and Joint Stock Banks | 11,447,919 |
| 44,261,919 | |
| Probable amount of Scotch and Irish currency | 10,000,000 |
| 54,261,919 | |
| Specie and Bullion at the Bank £7,801,000 |
* Hansard, New Series, Vol. xiv. p. 461.
† Ibid. p. 209.859 induce many persons of great credit and fortune to invest their money in shares of such banks. But the Bank objected to the extension of this limited liability."* I have only further to state why I determined in bringing under the consideration of the House the propriety of an alteration of the existing law, to move for the appointment of a Select Committee, rather than for leave to bring in a Bill for that purpose. I was, Sir, first induced by the belief, that by a Select Committee important evidence might be collected, and placed on record, illustrating the defects in our present system. I was yet more strongly induced, I can assure the House, by an unaffected anxiety to have the assistance of a Committee, in devising a measure on a subject of such vast importance, and with respect to which, although it has long occupied my laborious consideration, I could not but be conscious I might have failed to advert to many important considerations. The opinion that some alteration of the law is necessary is, if I may judge from the communications I have received, all but universal; but opinion, both without and perhaps within these walls, is much divided as to what may be the most expedient alteration. The labours of a Committee may usefully guide us in a path yet new to us in legislation. I have now, Sir, only to thank the House for its indulgence. I regret that I should at such length have trespassed on its attention—and yet those who are conversant with the subject will be aware how much, for the sake of brevity, I have omitted. I have, however, I hope, stated enough to induce the House to concur in a motion I now put into your hands. The hon. Member concluded by moving, "That a Select Committee be appointed to inquire into the operation of the Act of the 7th George 4th, cap. 46, permitting the establishment of Joint-stock Banks, and whether it be expedient to make any, and what, alterations in the provisions of that Act."
§ The Chancellor of the Exchequerdid not rise for the purpose of following his hon. Friend through the whole of the argument into which he had entered on the present occasion, because, as he intended to express his concurrence in the appointment of the Committee, he should simply slate the grounds on which that concurrence was founded, in order to prevent any possible misconstruction of the views taken either by the Government collectively, or
* Hansard, New Series, vol. xiv p. 243.860 by himself individually, of the character, nature, and tendency of the present motion. He did not complain, nor did he think the public could have any right to complain, of the course adopted by his hon. Friend. Neither the arguments contained in his hon. Friend's speech, nor the motion with which it concluded, ought to excite alarm in the mind of any person whatever. If, indeed, he thought that his acquiescence in the motion could be considered as in any degree calculated to affect the commercial credit of the country, he should have felt that there was a necessity for making out a much stronger case of exceeding danger than any he had yet heard stated, before he incurred so fearful a responsibility. At the same time, it was impossible to approach the consideration of any question which touched upon the currency of the country, and upon the general banking system, without being aware that they were in a greater or a less degree approximating to those great principles upon which all commercial credit depended. But he thought there were sufficient grounds to induce the House to acquiesce in the present motion, without suggesting causes of distrust or apprehension in the minds even of the most timid. His hon. Friend, it was true, in the course of his speech had pointed out many inconveniences, risks, and responsibilities, to which the proprietors of Joint-stock Banks were exposed. He believed it had been often said, that if a skilful anatomist were to point out all the risks to which the human frame was liable, no one would rise up with cheerfulness, or go to bed with resignation, so in matters of great speculation, if the parties about to engage in them were clearly to foresee all the chances of calamity to which they were exposed, it might prove a great hindrance to the free employment of capital. His hon. Friend would excuse him, he hoped, if he stated, that it was not on account of the difficulties which individuals might experience from the operation of Joint-stock Banks that he was disposed to concur in the motion. All parties had a right to exercise their own judgment in the application of their own property, and must take the consequence of success or failure. It was not on individual but on public grounds that he was prepared to enter upon the inquiry, and he therefore would not mingle, with this the main consideration, any notice of those awful consequences to individuals on which his hon. Friend had in 861 the early part of his speech so much relied. He thought that the subject furnished a proper ground for a Parliamentary inquiry. He would put it upon this fair principle:—within a few years Parliament had adopted a new plan, and had passed a new law with respect to Joint-stock Banks. That new law had been brought into operation in many parts of the kingdom; and latterly its operation had been greatly extended. It was a law deeply affecting the interests of the whole community. It was, to a certain extent, an experimental law. It was right and proper then that Parliament should inquire what had been the result of that experiment. It was right that Parliament should inquire whether the law answered the ends for which it was originally framed. It was fit that Parliament should inquire whether it required any and what amendment. If such were the objects of the inquiry for which his hon. Friend moved, he for one was ready to admit that a case did exist upon which it was expedient that a Committee should be appointed. Undoubtedly, since the Act which had given occasion to the present motion passed, there had been a great and enlarged establishment of Joint-stock Banks. But let him take the liberty of earnestly cautioning the House against—he would not say the vice—but the error, to which popular assemblies were, perhaps, peculiarly prone. He meant a want of stability in their opinions from year to year, and the habit of rapidly rushing from one extreme to another. Let the House, for instance, look at those very debates in the year 1826 to which his hon. Friend had referred. What then was the cry? At that period what was the principle advocated in Parliament? The general declaration was this: that all the difficulty, all the distress under which the country was then labouring, was entirely to be attributed to the want of Joint-stock Banks. They were told that the private Banks of the country were not sufficiently stable—must always be subject to the influence of a sudden panic; but that the establishment of Joint-stock Banks would afford a remedy for all the difficulties into which the broken credit of private Banks had plunged the country. But whilst he assented to the motion of his hon. Friend, and whilst he differed, perhaps, from those who anticipated in the Joint-stock Banks a perfect panacea for all the evils by which public credit could be assailed, he would not have 862 the House suppose that he was disposed to go into the opposite extreme, and to say, that whereas in 1826 he took the Joint-stock Banks as a remedy, in 1836 he was disposed to attack them as the disease. He looked upon the principle of Joint-stock Companies as one of the great discoveries of modern times. He regarded them, when made responsible to public opinion, as the ground on which all successful enterprise must be founded. He said, further, that if there was any one description of business to which the principle of a Joint-stock Company could be more applicable than another, it was, under due restrictions, the business of banking. He was aware, when he made that statement, that he was not combating the arguments of his hon. Friend (Mr. Clay); but he undoubtedly was combating an argument which he knew in a greater or less degree occupied the minds of many persons within the walls of that House, as well as out of doors. It might be shown that in certain instances abuses had taken place in the formation of Joint-stock Companies. But those abuses, if proved, would furnish no argument against the principle itself. The ground upon which he was ready to acquiesce in the motion of his hon. Friend was, the great extension of these banking establishments at the present moment. The House was aware that a general spirit of speculation was abroad—that Joint-stock Companies were formed for all kinds of purposes—some for purposes to which such co-operations were by no means applicable—and the House would feel that this rage for speculation would hardly fail to extend itself to the banking business as well as to others. Within the last few years, indeed, the increase of Joint-stock Banks and branches of the Bank of England had been very considerable. In proportion, then, as they allowed the application of the Joint-stock principle to sound and -legitimate objects, they were bound to see that under the colour of Joint-stock Companies the country was not imposed upon by a number of bubble companies, representing no real property, and incapable of affording the smallest security. If the law, as it now stood, opened the way to such an abuse, it was time that they should seriously consider whether it might not require some amendment. With respect to the Joint-stock Banks at present established, his hon. Friend, he was sure, must know, from the return he hold in his hand, that any apprehension that his 863 speech could properly excite as to their perfect solvency, would be an utter and complete delusion. There was nothing in the present motion calculated to effect in the smallest degree the credit of any one of these companies. His hon. Friend had suggested various remedies for the evils he pointed out; he had spoken of the beneficial effect of limited liability, of paying up capital to the fullest extent, and of entire publicity of accounts. But he thought the House would see that if they were about to enter into this Committee for the purpose of inquiry, it would be the most prudent, the most cautious, and by far the wisest and most convenient course, to abstain altogether from expressing even the slightest opinion with respect to any one of the points suggested by his hon. Friend. He was not, any more than his hon. Friend, without his opinion, affirmative or negative, on all these points; he should be unworthy the duties he was called upon to discharge if he had not directed his attention to the subject; but if the House were disposed to agree to the appointment of the Committee, it must at once strike every gentleman present that any debate upon the subject at the present moment would be utterly fruitless—utterly useless to any good end—whilst by possibility it might lead to disastrous consequences; because it was impossible to go into any one of these points of detail without opening the whole question, and thus anticipate the labours of the Committee. It was on that account, and that only, that he declined altogether from entering into any discussion of any one of the details to which his hon. Friend referred. Upon principle, however, he must say, that he differed most essentially from many of the doctrines laid down by his hon. Friend, and his acquiescence in the motion must not be assumed to be an acquiescence in the reasons on which it was grounded. He must add, that he would not, at that moment, enter into any discussion on the important questions involved in the motion, as that could not be done without causing the evils he wished to avoid. With respect to the course which the Government felt it their duty to pursue upon that occasion., he begged to say one word before he sat down. His hon. Friend would not take it as intending to offer any disrespect towards him, if he took the liberty of stating, that he did not conceive this inquiry to be one that ought to be left in the hands of any private or individual Member 864 of the House. It was an inquiry which, to be undertaken at all, ought to be placed in the hands of a responsible Government. There was much of information upon this subject, which no doubt it would be greatly for the interest of the public to obtain; but which, with that care and that observance which was due to private property and private interests, ought not to be rashly called for or lightly divulged to the public. In matters of private business there was much, which if made known at all, ought only—except upon very strong occasions indeed—to be made confidently known. Such was the course taken upon the appointment of the Committee in 1826. The right hon. Baronet, the Member for Tamworth, when he moved for the Committee of 1826, obtained for the use of that Committee, from the various banking establishments in the kingdom, all the information that was necessary to be communicated to it; but the private transactions of private bankers were not unnecessarily divulged nor made known. Therefore he thought it essential, without meaning the slightest disrespect to his hon. Friend, that the appointment of a Committee like that now moved for, and the responsibility of directing its proceedings, ought to be left in the hands of the Government. To that proposition he believed his hon. Friend would make no objection, and if that were the case he (the Chancellor of the Exchequer) should raise no opposition to the appointment of the Committee. But at the same time, he could not conclude without stating his hope that the Joint-stock Banks themselves would feel as he (the Chancellor of the Exchequer) did, that an inquiry of this kind conducted in an amicable spirit, and instituted not for the purpose of injuring these establishments, but of improving the law under which they were called into existence, could be productive only of beneficial results to all parties, and that they would, therefore, regard it without jealousy or suspicion, feeling (as they ought to do) that the best proof they could give to the world of the soundness of the system under which their affairs were conducted, the best proof they could give of their perfect solvency, of their prudence, their honour, and of their discretion, would be, not to view the inquiry with distrust or alarm, but, on the contrary, to come forward cheerfully and readily to furnish all the information that 865 could be fairly required at their hands. With the view of bringing before the House, in this spirit, the result of the inquiry, he should think it necessary that the same discretion should be used in this instance as was used with respect to the inquiry into the Bank charter—he meant that the Committee should be a Committee of secrecy. Whilst the House had the full benefit of the results of the inquiry, it would not, he thought, be expedient that the inquiry, during its progress, should be open and public. He was led to this conclusion, not from any distrust of the result of the inquiry, still less from any distrust of the soundness or solvency of the establishments to which it related, nor from any apprehension as to the present state of public credit, but because he thought when the Legislature instituted inquiries into the transactions of individuals carrying on business according to the law of the land, they were bound to take care, whilst they sought the information they desired, that matters which might seriously affect the interests of those individuals should not lightly or needlessly be divulged. He wished to press that point particularly upon the House, because he really conceived it to be of very great importance. If the inquiry were perfectly open, it was impossible to say what injury might not be effected. Suppose on any one day of the inquiry that evidence were tendered to show that one of these Joint-stock Banks was improperly conducted, that its affairs were in a bad state, that it was insolvent—what could be so unjust as to allow a day's examination proving the case against the bank to go out to the world, unless it were accompanied with what the bank could say, on the other hand, to remove the erroneous impression that would otherwise be created. Upon this ground, then, he repeated, it was essential that the Committee should be one of secrecy. He thought he had stated enough to justify the Government in its acquiescence in this motion. He hoped, too, that his statement had been made in such a manner, as neither in or out of the House to give rise to the slightest apprehension at the course proposed to be taken. He could not agree with his hon. Friend, that the present rise of prices was wholly to be attributed to unsound and illegitimate causes; but, at the same time, he was perfectly prepared to admit, that when a 866 general rise in the price of all commodities took place, it became the duty of all engaged in the management of money concerns to inquire whether that general rise of price took place entirely from natural and legitimate causes, or whether, with much that was natural and legitimate, there might not be mixed up causes of a totally different character. For his part, he believed that he had reason to be thankful for the present posture of affairs. He had stated as much the other night, and nothing he had since heard had induced him to alter his opinion. Indeed, he might add, that taking into consideration the future consequences of present events, it was possible that he had not told the whole truth. In a time of prosperity like the present, inquiries of this description might be entered upon with the greatest safety. If it were a time of apprehension and of alarm—if there were reason to doubt the solvency of the great bulk of these banking establishments, then he should conceive the appointment of a Committee of this kind to be most objectionable. But, believing they were now in a condition to conduct the inquiry with advantage, he was disposed to concur in it. If it had the effect of discouraging the establishment of any new banks till the law were improved, or of making those which were already established to increase their prudence and caution, it would be advantageous. It was just and right that Parliament should inquire, in order to legislate with caution on this important question. As his hon. Friend consented to place the matter in the hands of the responsible Government, he would, perhaps, to-morrow name such a Committee as would embrace all interests concerned, and develope all the facts material to be known before it. He would not have it a one-sided inquiry, to support any particular theory; but to ascertain the operation of the present law, and whether it required some amendment, and if so, what that amendment should be. He trusted that such an inquiry could have none but the happiest effects.
Mr. O'Connellsaid, that if the motion had rested solely upon the speech of the hon. Gentleman who brought it forward, he certainly, for one, should have felt it his duty to have divided the House before he gave his consent to it. He did not think it had ever happened to him to hear purer principles laid down, as governing 867 a great commercial question, or rather he should say, so many principles laid down diametrically opposite to the end in view, as he had heard that evening from the hon. Member for the Tower Hamlets. But of the course taken by the right hon. Gentleman, the Chancellor of the Exchequer, he was disposed to approve. The right hon. Gentleman had not pledged himself to any particular opinion. If he differed from the right hon. Gentleman at all, it was only upon this point—that the Committee should be a Committee of secrecy. But the right hon. Gentleman had stated one reason in favour of the secrecy, which appeared to be all-powerful with the House, and which he supposed would induce it to coincide with him; but the hon. Gentleman opposite, in the course of his long speech, had. stated nothing to make out his case—had positively adduced no evidence whatever—had put forth not the shadow of an argument, to show that the inquiry for which he moved was necessary. It was true that he talked a great deal of the failure of the banks in 1795, and again in 1826; but it so happened that not one of those banks were Joint-stock Banks, and consequently their stability or instability, at any particular periods, had no reference whatever to the subject which the hon. Gentleman professed to be discussing. All the banks that stopped payment in 1795 and 1826 were private banks, and the cause of their failure was sufficiently obvious. But whilst the hon. Gentleman spoke at so much length on the failure of the English banks, he was perfectly cautious not to say anything about the banks in Scotland. In the year 1826, when the English banks were falling to the ground, in every direction, only one Scotch bank stopped payment, and that only for a short time, afterwards paying 20s. in the pound, in discharge of all claims upon it. How did this happen? The systems of banking in the two countries were totally different. In the one country, in a moment of emergency, there was a general break-down of the banks; in the other, with the single exception he had mentioned, the banks remained firm, and upheld their credit. How was it that this circumstance had escaped the observation of the hon. Gentleman? Then, again, nothing could be more absurd than the argument put forward by the hon. Gentleman, with respect to limited responsibility. It was as much as to say, that a man who risked 10l. in 868 a speculation was better security than one who risked his whole property. How such a proposition could enter into the head of so intelligent a Gentleman as the hon. Member for the Tower Hamlets was to him perfectly astonishing. The point of paid-up capital he certainly thought a very fit subject for discussion; but for the reasons stated by the Chancellor of the Exchequer, he should abstain from entering upon it at that moment. There was one point upon which he thought the Committee would stand clear from any species of difficulty, and that was, as to the propriety of giving complete publicity to the accounts of these banking establishments. The public had a right to know every thing. No man should engage in a business of that description, unless he was prepared at all times to make known the amount of his assets and of his liabilities. He thought publicity perfectly necessary—it would give additional stability to those banks who were enabled to give good security, whilst, on the other hand, it would prevent the public from being deceived and defrauded by those who could give no security. He believed, that shortly there would not be a single private bank in the country. The system of banking was such as left little doubt in his mind that the whole of it would very soon be done by Joint-stock Banks. Whether in that House they could rightly be called currency doctors or not, no man could deny, that as the circulating medium had increased they had had periods of prosperity. From 1826 to 1835, the circulating medium had been exceedingly limited. Gold did not afford a sufficiently abundant or sufficiently rapid medium of circulation in a country like England. Where there were such extensive commercial and manufacturing transactions, it was necessary to have cheap instruments wherewith to work exchanges; and wherever cheap instruments could be employed without danger to the public, they ought to be resorted to. The prosperity of a great mercantile country was always found to be in proportion to the quantity of its circulating medium. It, therefore, by the establishment of Joint-stock Banks, the circulating medium of this country could be increased with safety to the public, the prosperity of ail classes of the community would be infinitely increased. If such a result should follow the appointment of this Committee, it would afford him great sa- 869 tisfaction. He was glad to learn from the Chancellor of the Exchequer that the Committee was not to be composed exclusively of gentlemen who took any one particular view upon the subject of banking or of the currency. He trusted that they would ponder well before they suggested any alterations that might involve an extensive change in the medium of circulation—for he had seen more families ruined, more persons reduced from happiness and comfort to a state of misery and starvation, more social mischief produced in Ireland, than almost ever occurred in France at any period of the revolution, and all from a sudden change in the medium of circulation. The very reports which showed that the English labourers were better off after the change of the currency than they were before, at the same time proved that the Irish peasantry were reduced by it to an infinitely worse condition. Whatever the effect of the change in England might be, in Ireland it worked nothing but mischief. But from the establishment of the Provincial Bank in that country up to the present moment, there had been an improvement. The present year was the best that the Irish agriculturists had known for a long time past. He was glad to find that there was a disposition to come to the consideration of this question without heat or rancour. He was the bet e pleased with it, because on former occasions he had observed a sort of bigotry in the House on the subject of the currency. He entirely agreed with the Chancellor of the Exchequer as to the inexpediency and impropriety of entering into any discussion on the subject at the present moment, and he hoped that he had said no more than was consistent with that view.
§ Mr. Gisbornedid not intend to enter into any discussion of the general question. He did not intend to object to the appointment of the Committee, although he confessed he could not look at the proposition of the hon. Member for the Tower Hamlets without some feeling of suspicion. This feeling, however, had been greatly alleviated by the speech of the right hon. Gentleman, the Chancellor of the Exchequer. The main object he had in rising was to say, that having himself given notice of a motion having reference to this subject, as the Committee for which the hon. Member for the Tower Hamlets moved was not to be appointed that day, 870 he (Mr. Gisborne) would consent to put off the motion of which he had given notice until that Committee was appointed, upon the understanding that his right hon. Friend, the Chancellor of the Exchequer, would then allow him to bring it forward.
§ Mr. Richardsagreed with the hon. Member for the Tower Hamlets that this was a subject of the greatest magnitude, and he should have been much better pleased if the Government had come down to the House with some well-digested plan, in order to cure any evils that might be incident to Joint-stock Banks, instead of sanctioning this motion for a Committee, and he could not help suspecting that there was some understanding between the right hon. Gentleman and the hon. Member for the Tower Hamlets, as to the latter bringing forward this proposition, He regarded it substantially as a motion on the part of the Government. But he could not refrain from observing that Joint-stock Banks, in 1826, were instituted almost upon the sole recommendation of the Government of that day. In reference to the motion before the House, the hon. Gentleman had stated many grounds for granting his motion, but he had not given the House one single proof of any evil that had arisen from Joint-stock Banks. There had not been a single failure for the ten years during which they had existed. That fact of itself ought to make the House approach the subject with considerable caution. The hon. Gentleman seemed to have some dreadful apprehension haunting his mind, as to the possibility of evil. He had said, that such a state of things might arise as to make the operations of these banks dangerous. He was quite aware that a bad harvest might cause the exchanges to turn against this country, create a general alarm on the public mind, and occasion an effect upon the currency which might lead to great individual and general distress. But was that an objection to Joint-stock Banks? Unquestionably not. True it was, that there was danger attending these banks; but there was also danger arising from the use of the steam-engine; but surely that was no argument why steam-engines should not be used. He much approved of the language of caution used by the Chancellor of the Exchequer. Nothing could be more guarded, more prudent, or more statesmanlike. Still he thought the Government ought to have proposed 871 a measure, on their own responsibility, and not to have sheltered themselves behind a Committee. There might be individual; cases of misconduct on the part of these banks; but that sort of thing would correct itself. What would be thought of a motion for a Committee to inquire concerning the best mode in which merchants might generally carry on their operations? The merchants would laugh at it, and say it was a busy, meddling, impertinent interference. Now he would take the liberty of warning the right hon. Gentle- man how he dealt with this subject. A mighty power had arisen, which was beneficial to the public, and which had set in motion a vast quantity of industry. A flattering statement was made by the right hon. Gentleman the other night of the state of the revenue. He could tell the right hon. Gentleman, that, in a great measure, he might thank the Joint-stock Banks for his being able to make that statement. He for one protested against the appointment of a packed Committee, with a view to obtain the sanction of this House to a preconceived set of measures, which Gentlemen might possibly contemplate. He could not conceal the suspicion he entertained, that the Bank of England—and that suspicion was by no means diminished on viewing the very near connexion that exists between the right hon. Gentleman and the hon. Member for the city of London at this very moment, the Chancellor of the Exchequer was in close conversation with Mr. Pattison, the governor of the Bank, and one of the Members for the metropolis. He did entertain a distrust lest a feeling of jealousy on the part of the Directors of the Bank of England, who, from the increased business of the Joint-stock Banks, had found their own business decline, might not have influenced the right hon. Gentleman in acceding to the motion of the hon. Member for the Tower Hamlets. He for one, believed that that hon. Member had been (to use a common expression) set on by the Government; and he viewed the appointment of this Committee with the greatest possible jealousy, believing, as he did, that it would consist of men high, no doubt, in station, but, generally speaking, not men of practical experience in commercial affairs.
§ Mr. Pattisonassured the House, that the conversation which had just passed between him and the Chancellor of the Exchequer, 872 had not any reference whatever to the subject now under consideration. He was asking the right hon. Gentleman a question which deeply interested a portion of his constituents as to what was the intention with respect to allowing a drawback of duty on paper.
§ Mr. Humesaid, the speech of the hon. Member for Knaresborough, showed how difficult it was for any Minister to steer his course satisfactorily. It appeared to him his Majesty's Government had acted rightly in taking upon themselves the appointment of the Committee rather than leave it to an individual who might possibly have selected persons entertaining erroneous opinions on the subject of the currency, which might have led to most disasterous results. The Chancellor of the Exchequer would now be responsible as to the individuals composing the Committee. He did not think the hon. Member for Knaresborough had spoken in the manner he ought to have done, when he said, that this was an understanding between the Chancellor of the Exchequer and the hon. Member for the Tower Hamlets; as if the Chancellor of the Exchequer required the aid of any individual to bring forward such a motion. He, at the same time, wished to hold himself free from the opinions expressed by his hon. Friend, the Member for the Tower Hamlets. He did not believe that the Joint-stock banks had produced any surplus of paper money what-ever. He was prepared to show that the increased production of this country in manufactures alone, was upwards of 10,000,000l., while the increase of paper circulation was only 1,000,000l.; and this was effected by the present system of banking, which allowed discounts to such an extent as enabled the country, with the same quantity of circulation, to transact a great deal more business than under the old system. What he wished to see changed, or at all events inquired into, as to the present system of the currency was, the working of the clause which was inserted by Lord Althorp in the Bank Charter, which enabled country banks to pay their notes in Bank of England paper instead of gold. His wish was, that bank notes should be convertible into gold on demand. That was the best security against evil arising from over issues; and was the only check that could be applied to it. He thought he could show that it was impossible to issue too much paper money, if it were thus made convertible 873 into gold on demand. Indeed he believed that great delusion existed in the country with regard to the effect of prices on the currency. His opinion was, that the quantity of money depended on the rise of prices; and that the rise of prices did not depend on the quantity of money. He held the prevailing doctrine to be extremely erroneous on this point. The currency doctors he knew differed from him; but there never had been a fair opportunity of demonstrating the truth of his positions. Whether the result of the labours of this Committee would do so he could not tell. Before he sat down, he begged to propose, as an addition to the motion now before the House, that the Committee should be instructed to inquire into the effect of the clause introduced into the Charter of the Bank of England, by which country bankers were held to have satisfied their engagements by paying them in Bank of England paper.
§ The Chancellor of the Exchequerthought, by adopting the proposition of his hon. Friend, they would be embarrassing the proposed inquiry with a subject which did not naturally belong to it. He was willing to inquire into the operation of Joint-stock banks. That was an important subject, and was quite enough to occupy the Select Committee. He could assure the hon. Member for Knaresborough, that he had not the slightest notion that the hon. Member for the Tower Hamlets intended to make this motion until he saw it on the order book.
§ Mr. Cayleyagreed in opinion with those who thought the hon. Member for the Tower Hamlets had failed in showing any cause for this Committee. But looking at the subject in the point of view in which the Chancellor of the Exchequer had put it, he was not opposed to the motion. If the subject would bear the light, then the present state of things ought to stand; if it would not bear the light then it ought not to stand. But he protested against the notion that Joint-stock banks were at the bottom of our present position. In his opinion this Committee was brought forward with a view of tampering with the currency. He was frequently accused of a wish to tamper with the currency; no one, however, was more averse to tampering with the currency than he was; because that undermined all the engagements of society. What he desired was, to have such a well-regulated standard as would not require the frequent tampering with the currency, 874 which the existing standard had required. Since the preparations for, and the establishment of, [the standard in 1810 they had always been tampering with the currency. They tampered in 1815, again in 1816–1817; again in 1819; again in 1822; again in 1826; again in 1 829, when one pound notes were withdrawn. Again in 1833, when the legal-tender clause was introduced into the Bank Charter Act, and now the Joint-stock banks were to be regulated, or lather put under, the screw, so that they could not issue so much paper as before. All these changes; ail these tamperings—had taken place with the view of propping up the unsuitable and iniquitous standard of 1819-Talk of the Joint-stock banks—talk of the signs of the times—what were they? Why simply, that more paper had lately been issued—prices were rising, in consequence—this rise in prices according to the gold standard price of 1819, must drive the gold abroad, then the paper would be reduced, and then prices must fall, and adversity be restored. The fact was, as he had often stated, that good prices were often requisite, under our heavy engagements to prosperity, and good prices were incompatible with our standard of value, with Mr. Peel's Bill of 1819. There would soon be again a struggle with the standards as there was in 1825. The symptoms might vary, but the disease would be the same; already the gold was beginning to leave the country. He agreed in much that had fallen from the hon. and learned Member for Dublin, but he totally disagreed with that part which related to the conduct of private banks in 1825. All the blame of that panic was visited on the country banks and one pound notes. They were made the victims of the ignorance of the Government, and its co-operation with the Bank of England. In 1822 the Government had stimulated a larger issue of paper, with the avowed object of restoring prosperity; the prices of 1824 and 1825, were attributable to this paper issue; but gold remaining low in price, by the Act of 1819, while all other things rose, was drained from the Bank, and the Bank drew in its circulation, and caused the fall in price, and then gold could not be had in sufficient quantity, and rapidly enough. And this it was which caused the panic, and the country banks to stop payment; though they ultimately, at least sixty out of seventy, paid twenty shillings in the pound. A victim, however, was wanting for the errors of Government and 875 the Bank of England, and a victim was found in the country banks and the one-pound notes, and the Joint-stock banks were patronised in their place. He was much mistaken, if the present motion was not preparatory to making the Joint-stock banks the victims of the crisis, which every reflecting man was expecting. But that crisis, which would be hastened by a deficient harvest and the importation of Foreign corn, or by a Foreign loan, would be attributable not to the Joint-stock banks, which have, as yet, fully answered the intention of their creation, but to the Act of 1819, which made a rise of prices and general prosperity impracticable with the preservation of the standard. The House must choose between the standard and prosperity, but it could not have both. On this account he had always advocated an alteration of the standard. He wished to ascertain what rate of prices would give general prosperity, and then to strike the standard at that point, which would preserve those prices, without the gold leaving the country. His hon. Friend, the Member for Whitehaven, stated truly the other night, that there was one part of the present prosperity in manufactures which had a solid foundation, and one only, namely, "that which rests on the industry, the energies, the enterprise of the people of this country," which laws, the most blighting to industry, had proved insufficient to tame and subdue. The rest of the prosperity was based on an increased issue of paper, and that increased issue was unsafe and incompatible with the present standard of value, which, from the confiscation of property it had caused, and from its cramping effects on industry, had seared the best affections of the parent towards his child—had turned into a curse the bountiful gifts of Providence—and had made the late peace a tenfold greater calamity than the savagest horrors of the war which had preceded it.
§ Mr. Forsterbore his testimony to the extensive information; accurate statement, and spirit of candour which pervaded the speech of the hon. Member for the Tower Hamlets. He thought, the Chancellor of the Exchequer having acceded to the appointment of this Committee, that it could not fail to do good. The best corrective of the evils, whether belonging to private or public banking, Was a strict adherence to the laws now regulating our currency, namely, the maintenance of the standard, and the principle of convertibility with regard, to all issues, and the prohibition of 876 bank notes under 5l. By an adherence to these principles they would do more to redress any evils of the banking system than by any other course that could be pursued. He must say, understanding the obloquy that had been cast upon the Bill of 1819, that the right hon. Baronet the Member for Tam worth, had he no other claims to public gratitude, had by that measure alone raised his fame upon a certain and sure pedestal. He was persuaded that many benefits which the country now enjoyed, such as diminished pauperism, fewer cases of insolvency, and a more stable system of commerce, were to be attributed to that measure. He could not refrain from observing, that should any money crisis arrive—and it was always possible in a great commercial nation like this to happen—he foresaw that the Minister of the Crown would be subject to a pressure, arising from the present state of the banking in this country, to which no Minister had ever hitherto been subjected. It would not be confined to the arrangement between the Government and the Bank of England; but the Minister would be assailed by Joint stock banks from all parts of the country, backed by the most powerful part of the constituency of the towns in which those banks were established. Such a pressure would require great firmness on the part of the Minister to resist what he (Mr. Forster) anticipated would be their request. But he trusted the Finance Minister of this country would always have that firmness. It was reported of Mr. Huskisson, when the Bank of England asked him for advice at a moment when they were in a predicament for want of gold, that he advised them to put a notice on their doors to this effect—"Closed, waiting a supply of gold." That was just such an answer as a Minister of England ought to have given. Had Mr. Pitt given that answer in 1797, most of those evils which had arisen from the paper system, and the non-convertibility of paper into gold, would have been prevented. But Mr. Pitt was exposed to the influence of circumstances too powerful for him to control or to resist. The present Minister had no such circumstances to contend with; and he trusted that whenever he should be assailed his answer would be-—"You gentlemen paper makers, if you have brought yourselves into a scrape by the undue issuing of paper money, you must trust to your own resources to extricate you from it; for I cannot give you relief." He felt so strongly on this subject that he should like to see a resolution of this House declar- 877 ing that any one who should advise his Majesty to issue an order of council depriving any of his subjects of their right to recover their debts in the lawful money of the realm, was deserving of impeachment.
Mr. Hundleycould not allow this discussion to close without entering his solemn protest against this Committee as unnecessary, uncalled for, and calculated to check that return to a state of prosperity which the agricultural interest was now making. In 1825 Joint-stock banks were admitted on all hands to be the panacea for the evils of the country, they then received the sanction of Parliament in that belief, and he now asked whether any injury had arisen from them; or whether any proceedings had occurred which at all called for this interference, and from which he anticipated great and grievous consequences?
§ Mr. Peasethought the Committee recommended itself. It ought to be the wish of the Joint-stock banks themselves to institute this inquiry; for a prejudice had sprung up respecting them which was perfectly unfounded. A court of inquiry, constituted of impartial Members of that House, would do good by giving encouragement and a proper development of the sound principle on which Joint-stock banks were established, and of retarding everything that could throw a doubt on the responsibility and respectability of those banks.
§ Mr. Haweshoped the suggestion of the hon. Member for Middlesex would be adopted. If there was any evil at all arising from an increase and fluctuation of the circulating medium, it was to the clause in the Bank charter alone that it was to be attributed. With reference to the state of the country he would mention one fact. He believed that there never was a time when the amount of bad debts in trade was so small; or when there was so little artificial paper in circulation as now.
§ Mr. Poulett Thomsonsaid, his hon. Friend misapprehended the object of this Committee if he supposed it was to inquire into the fluctuating amount of the circulating medium in the country. The object of the Committee was, as it had been stated by his right hon. Friend, to inquire into the principles on which Joint-stock banks were conducted, with a view to ascertain whether it were advisable to introduce any amendment in the Act upon which those banks were established, or to interfere in any way, so far as the legislature was concerned, as well for the purpose 878 of removing any prejudice which might exist against these banks, as to prevent any bad consequences arising from improper speculation on their part. But that had nothing to do with the other part of the subject. When his hon. Friend recollected the grounds upon which the clause in the Bank charter was inserted, he would clearly perceive that it could not form a proper subject of inquiry before the proposed Committee. That privilege was accorded to the Bank of England simply on the ground that it was advisable to enable bankers in the country to pay their liabilities in the paper of the Bank of England, in order to do—what? In order to avoid that drain upon the Bank of England which in a moment of temporary crisis might withdraw a great deal of gold from its coffers, as was found to be the case in the year 1825–6; which gold went out of the country, and, of course, greatly diminished the resources of the Bank of England, and impaired the security to the public for the payment of the notes of that establishment. Therefore he should say, supposing it was advisable to make an inquiry at any time as to the effect of that clause, they had no grounds now for such inquiry, because the circumstances under which the advantages or disadvantages of that privilege could be tested had not arisen. But he should object to the introduction of the question now, as being entirely inconsistent with, the object of the formation of this Committee.
§ Mr. Warburtonsaid, that a question had been raised as to whether or not the establishment of Joint-stock Banks had raised the prices, and it had also been insinuated that the change of the currency had had an effect on the prices. On that account he considered the amendment should be adopted. It was not to be an inquiry whether or not Joint-stock Banks had sufficient means to meet their responsibilities, it was to inquire into the increase of the currency; and that could not be done without inquiry into the effect from the increase of the currency from other causes. With regard to the inquiry being secret, as they could not be considered private accounts that were to be gone into, but the effects of a system on the money of the country, he thought that a Select Committee would be sufficient.
Mr. Forbesopposed the amendment. He did not approve of the original motion, but he considered the amendment far more objectionable.
§ Mr. Matthias Attwoodobjected to the appointment of the Committee, on the 879 grounds brought forward by the hon. Member for the Tower Hamlets, in support of it. He had experienced some difficulty in ascertaining the intentions of hon. Gentlemen who supported the motion. He could not learn what evils they were desirous to remedy, nor what benefit the country was to expect from the proposed measure. The right hon. Gentleman, the Chancellor of the Exchequer, said that the whole system of Joint-stock Banks was a great experiment—that the experiment had now been tried for ten years; and that we now ought to inquire into the manner in which that experiment had worked, in order to discover whether the system was acting beneficially for the country, or whether there were dangers in its mode of operation to be guarded against,—and whether, lastly, there were any means which could be adopted to bring its advantages more prominently into action. But those grounds led to an inquiry of a far more extensive nature than that proposed by the right hon. Gentleman—an inquiry into the whole of the financial and monied system of the country. Joint-stock Banks were introduced as an invention to guard the country against dangers of precisely that description which almost every Gentleman who had spoken, now apprehended from the very action of these Joint- stock Banks. These Banks were the creation of the Legislature. They were an invention to guard against a panic, and any dreadful convulsion which it was apprehended might otherwise occasionally take place in our monetary system. If any such apprehension now exist, was not that a strong ground for inquiring into the whole question of our monetary system, and not merely into the nature of Joint-stock Banks? The hon. and learned Member for Dublin had spoken of the effect of this great experiment upon the interests of Ireland, and of the prosperity consequent on the establishment of Joint-stock Banks in that country. The hon. and learned Gentleman appeared, while thus describing the state of Ireland, entirely to lose sight of the landed interest in that country. Had it not been proved that the distress of the agricultural interest had been entirely the result of the great experiment—whether the country could rest with security, not merely with 20,000,000l. of circulation,—not merely with 55,000,000l., being the entire amount of circulation in Great Britain and Ireland, but with 800,000,000l. of debt—founded on 8,000,000l. of gold and silver, coined and uncoined in the Bank of England? He was willing to believe that there was con- 880 siderable prosperity in many branches of our trade; but it had been shown that one-third of all the commercial transactions of the country rest upon Joint-stock endorsements. Now, the great national establishment—the Bank of England—had rejected much of the paper of those Banks. On what ground? Because it believed the paper to be insecure. If so, must not much of the prosperity connected with such paper be insecure also?—must not commercial transactions, so supported, rest upon a foundation which could not be permanent? The hon. Member for the Tower Hamlets said that the prosperity was real, and not artificial, because our manufactured goods were sold off,—no stock was left on hand,—and the orders were abundant. It was this very circumstance which distinguished the transactions of the year 1825. That was, word for word, the description given in the reported evidence of the state of our manufactures immediately preceding the panic of 1825 and 1826. The hon. Member for Walsall had praised the Act of 1819, which was recommended on the ground that it would give a firm security to the monetary system and commercial operations of the country. But had that been the result? Instead of giving permanency to the monetary system, soon after that Bill had passed, the Minister of that day found it necessary to give additional powers to the Bank of England in respect to its issues. The hon. Member for the Tower Hamlets had proposed three amendments in the present system of management of Joint-stock Banks. First, limited liability; second, the capital to be paid up; and third, publicity. Now, as to limited liability. That was a matter resting entirely with the Bank of England; for the Bank of England had bought the power of establishing this limited liability, and without its consent no Joint-stock Bank upon such a principle could exist in England. With respect to paid-up capital, had these Banks been originally confined to a paid-up capital, it would have been a prudent measure; but now that they were in their heyday, if they were made to pay up their capital they would be exposed to very great danger, that would not only seriously affect the new ones, but would weaken the stability of the old. It must be obvious that the House could not adopt this part of the hon. Member's plan, without involving the country in great and serious danger, and hastening the catastrophe which was so much apprehended. Then, as to publicity. Publicity was the great instrument recommended by the Bullion Committee, and was 881 brought into action in 1832. The establishment of publicity was to lay the foundation of the commercial credit of the Bank of England. He took it for granted that every Gentleman who was accustomed to trade, was convinced that that instrument had failed altogether, and had been found to be inapplicable to banking affairs. There were in banking affairs periods of commercial convulsions, against which no bank could guard; and during which the credit of the bank did not rest alone on the amount of bullion in its coffers, but upon its character for prudence and discretion. It was as much for its moral qualities that confidence was reposed in any bank, at such a time, as for the amount of its bullion. Upon the whole, he saw no benefit to be derived from this Committee, nor had he heard sufficient grounds for its appointment. At the same time he saw no serious objection to it, if its inquiries were conducted with caution.
§ Mr. Clay, in reply, begged it to be distinctly understood, that so far from being hostile to Joint-stock Banks, he was a decided friend to them, thinking them capable of conferring the greatest benefits on the country. He could not agree to the proposition of the hon. Member for Middlesex.
§ The motion for the appointment of the Committee was agreed to.
§ Mr. Humethen moved, "That it be an Instruction to the Committee that they do inquire into the operation of the privileges conferred on Country and Joint-stock Banks to pay their Promissory Notes in Bank of England Notes, instead of paying them in gold."
§ The House divided: Ayes 12, Noes 98: Majority 86.
| List of the AYES. | |
| Aglionby, H. A. | Warburton, H. |
| Crawford, W. S. | Wason, R. |
| Ewart, W. | Williams, W. |
| Marsland, H. | Williams, W. A. |
| Morrison, J. | |
| Potter, R. | TELLERS. |
| Thompson, Colonel | Mr. Hume |
| Villiers, C. P. | Mr. Hawes |
| List of the NOES. | |
| Adam, Sir C. | Bewes, T. |
| Alston, R. | Blamire, W. |
| Astley, Sir J. | Bonham, R. F. |
| Bailey, J. | Bowring, Dr. |
| Baldwin, Dr. | Brotherton, J. |
| Balfour, T. | Buckingham, J. S. |
| Barnard, E. G. | Buller, E. |
| Barry, G. S. | Chapman, A. |
| Beauclerk, Major | Chichester, A. |
| Benett, J. | Childers, J. W. |
| Bernal, R. | Clay, W. |
| Collier, J. | Musgrave, Sir R. |
| Crawford, W. | North, F. |
| Crawley, S. | Packe, C. W. |
| Crompton, S. | Parker, J. |
| Curteis, H. B. | Parrott, J. |
| Curteis, E. B. | Parry, Sir L. P. J. |
| Ebrington, Lord Vis. | Pattison, J. |
| Estcourt, T. | Pease, J. |
| Fazakerley, J. N. | Philips, M. |
| Felden, W. | Plumptre, J. P. |
| Finch, G. | Price, Sir R. |
| Forbes, W. | Pryme, G. |
| Foster, C. S. | Rae, rt. hon. Sir W. |
| Fremantle, Sir T. | Rice, right hon. T. S. |
| French, F. | Richards, J. |
| Gillon, W. D. | Rushbrooke, Colonel |
| Gisbourne, T. | Russell, Lord J. |
| Goulburn, rt. hon. H. | Scott, Sir E. D. |
| Goulburn, Mr. Serg. | Scourfield, W. H. |
| Green, T. | Seale, Colonel |
| Grote, G. | Strickland, Sir G. |
| Handley, H. | Stuart, V. |
| Hardy, J. | Tennent, J. E. |
| Hastie, A. | Thomson, rt. hn. C. P. |
| Hector, C. J. | Thompson, Mr. Ald. |
| Hindley, C. | Turner, W. |
| Hobhouse, rt. hn. Sir J. | Vernon, G. H. |
| Horsman, E. | Wemyss, Captain |
| Howard, hon. E. | Weyland, Major |
| Howard, P. H. | White, S. |
| Howick, Lord Vis. | Wilbraham, G. |
| Inglis, Sir R. H. | Wilson, H. |
| Johnston, A. | Wrightson, W. B. |
| Jones, W. | Wynn, rt. hon. C. W. |
| Knight, H. G. | Yorke, E. T. |
| Lushington, C. | Young, G. F. |
| Maher, J. | |
| Marsland, T. | TELLERS. |
| Martin, J. | E. J. Stanley |
| Murray, rt. hon. J. A. | Mr. M. O'Ferrall |