§ The Chancellor of the Exchequer
rose, for the purpose of moving for a committee, in the words of the notice which lay on the table of the House, that is, a committee to inquire into the effects produced on the circulation of the country by the various banking establishments issuing notes payable on demand. He trusted that in making that motion, he should not find it necessary to trouble the House with any lengthened statement; but he felt that this was a question of so much importance, that it would be disrespectful in him if he did not state to the House the grounds upon which he considered that he was justified in recommending the appointment of a committee, and why it was that he thought that the House would be justified in acceding to his proposition by the appointment of such a committee. At the same time he was anxious, as he understood that there had been some misconstruction as to the nature of the committee, and the inquiries he proposed it should undertake, to do away with any misunderstanding which might exist upon the subject. With regard, then, to the propriety of appointing a committee, the first thing to which he should call the attention of the House was, the position in which the Bank of England charter stood at the present moment. The House would recollect that when his noble Friend, Lord Spencer, had recommended the renewal of the Bank of England charter, which was carried in consequence of that recommendation, that at the same time there was expressly made this condition, that it should terminate in ten years, upon notice being given of the intention so to terminate it. Consequently this notice must be given in August, 1844. They must consider that then there would be a necessity for legislating on this subject; for they would observe that notice must be given by a resolution of that House; and therefore he apprehended that they ought not to postpone to the latest period an inquiry 1113 into the renewal of the Bank of England charter. The very latest period at which the House could enter into the inquiry was the year 1842. The House should also recollect that the Bank of Ireland charter was only now continued by an annual act. Lord Monteagle had, in the course of last 3rear, brought in a bill, by which it was proposed that the chatter of the Bank of Ireland should be continued for a certain time. The main object of the bill of his noble Friend was to make the duration of the Bank of Ireland charter co-terminous with that of the Bank of England, so that they might expire at the same time; and that a notice might be given to the Bank of England, as well as the Bank of Ireland, to have the whole subject inquired into, and the House would have brought before it the whole subject of the circulation of the country at the same time. He stated this, in order that the House might see that an inquiry of this nature would inevitably force itself upon their attention, so that they could not, in fact, avoid inquiring. By the present state of the law, they must speedily have an inquiry. But he could not conceive that it was possible for them to enter into a fair and proper inquiry with respect to the renewal of the Bank of England charter, without giving their attention to the whole of the subjects which he proposed to refer to the committee. It was not possible for them to decide a question of this nature by the mere consideration as to whether the Bank of England had exercised with discretion the powers vested in it—though that was a question of as much importance as could be well laid before them. But, even supposing that the Bank of England had exercised its powers with perfect discretion—and he gave no opinion on the point—still they had to come to much larger and much more important questions—whether the Bank of England's powers had been exercised for the public good?—whether the Bank of England should continue to have such powers? And, for the due consideration of these questions, their inquiries must be carried very far; for it was impossible to determine them without going into the whole subject, and taking a review not merely of the Bank of England, but of the whole of the paper circulation. His noble Friend, Lord Spencer, in appointing a committee, with respect to the renewal of the charter of the Bank of England, suggested other subjects for consideration, and they found, consequently, recommendations 1114 which had reference to other banking establishments. That, then, was one branch of the subject fir which he considered it advisable that the House should appoint a committee—they ought now to appoint a committee to investigate a subject which must speedily come before the House. These, however, were not the only grounds upon which he proposed an investigation into this matter. He was not inclined to overrate the importance of the public feeling upon a matter of this nature; but, he must say, that it appeared, that the wishes of the country, and the general opinion that now prevailed—an opinion not confined to persons whose attention had been turned most to this subject, and whose opinions were, therefore, most worthy of consideration; but if the House examined into it they would find that the wishes of such persons, and the feeling of the public, were the same, and that there was a strong impression abroad that this question ought to come under the consideration of Parliament. He begged to assure hon. Members that in the course of what he had to say to the House, it was not his intention to enter into details of charges against one establishment or another establishment. He wished hon. Members in coming to this inquiry, to look at it in a fair and candid spirit, and to look solely into the result—to the advantage of the country. It was not his wish to attack one establishment or another establishment; but, of course, the committee must inquire into the effects of former transactions—not with an invidious intention, but with a view only of ascertaining faces and applying a remedy for evils. If they looked to that which might be considered as the means of ascertaining public opinion, they would find that whatever might be the opinions of different parties, whether they attributed the difficulties they had gone through either to the conduct of the Bank of England or of other banks, still they would find that there existed in the minds of the most intelligent and best informed parties a strong impression that the present system required revision and alteration. That was the general feeling of the country, and that feeling was mixed up with great anxiety. Since he had given notice of the present motion he had had more opportunities than had before presented themselves of estimating the anxiety of the country. This, then, was a fair ground for them, as representatives of the people, to act upon; it was for them, when the great interests of the country were 1115 considered to be involved, not to show themselves deaf to the wishes of the public so expressed, and when the public earnestly and anxiously turned their views to a subject, it was also expected that the House would direct its attention. He must say, that this expectation did not appear to him unreasonable. He did not then wish to enter into the history of former transactions. But let them look to what had happened since the renewal of the Bank charter under his noble Friend, Lord Spencer. Let them remember the difficulties and the misfortunes that marked the year 1836 and the year 1837—the ruin was then occasioned—the difficulties that involved the manufacturing interests, and the embarrassments to the commerce of the country; and then recollect that very soon after—within even two years—they were undergoing, not a crisis of the same difficulties, but a very severe pressure, from which he trusted they were now recovering, and of which he hoped, in a short time, they would no longer feel the effects. Yet, when he considered how rapidly these events had followed each other, he must say, that the feeling of the country was not at all unreasonable that the House should look to these events, and that it should show that it attached great weight to that feeling and attended to it, by the appointment of a committee such as he had moved for. He would, in addition, state another reason why the selection of the present time for inquiry appeared to him to be proper. He might be wrong in his apprehension of this subject, but as far as he could judge of the temper with which the public would approach this question, he must say that he never remembered a time in which he thought it would be approached in a more fair or more candid spirit than the present. The House was aware of all the difficulties that were felt, and of all the inconveniencies that were endured; and yet the House was approached with petitions from the most important bodies in the largest of our manufacturing towns. Those bodies, couched in calm and temperate language, requested the House to inquire—they made complaints—they stated to the House the difficulties under which they laboured, and they expressed their anxiety, the House should institute an investigation into their complaints, and they looked to that House for adequate remedies. It would, then, be wise on the part of the Legislature to take up the inquiry at a moment when they found the public 1116 in this temper. If they left it untouched for a longer period, they would probably find themselves involved in the mutual attacks, and recriminations of the different parties, they would find it difficult in such a state of things to carry any measure, and embarrassments and impediments would surround them and increase upon their hands on all sides; whereas if they took it up at a moment when the public were anxiously looking to them to interfere; if they consented not to abandon those functions which it was their duty to exercise, then he believed the public would look with anxiety for their councils, and be disposed willingly to receive their suggestions. Perhaps many hon. Gentlemen might think it unnecessary for him to make these observations in moving for the committee at this time. He did so, because he felt it to be a subject of very great interest, although some might suppose an inconvenient subject for the Government to enter upon. Whatever might be the feeling of others, he did not hesitate in bringing forward the motion for a committee. He did so, because he thought it was a subject of such very great importance, and it was one in which, after all, they must remember, the interests, not of a few, but the public in general were most deeply involved. It was in vain to expect, that hon. Gentlemen called upon to legislate upon this most important question, could be supposed qualified to do so without inquiry, without ascertaining the opinions of those who had given great attention to the matter—without the advantage of hearing and considering conflicting opinions in the committee, and without the examination of parties who had given mature consideration to the subject. It was impossible, without such an inquiry, to ascertain what was necessary, or to pursue the right course. He wished them likewise to look to what happened formerly, in consequence of inquiries similar to that which he now proposed. If they looked into the history of those reports, they would find that there was no subject from which more benefit had arisen to the public mind, than from inquiries of committees of Houses of Commons on this subject. This was a subject to which a very intelligent gentleman (Mr. Loyd) had alluded in one of his publications, and he believed, that with regard to questions of this nature, and the inquiries instituted into them by the Houses of Commons, they would be found to act, and were reacted upon by public 1117 opinion. This showed, that though not immediately successful, yet they ultimately carried with them public opinion, and directed it in the course of its efforts. He should have thought it almost unncessary to give an explanation as to the nature of the inquiry which he intended to propose; but that he had found that there was an impression in certain quarters, that his inquiries were to be specifically directed to the working of private banks, excluding the Bank of England. He thought, that the words of his motion were sufficiently explicit; but as there was an impression in those quarters to which he had referred, he thought it right to refer to it. He had no intention to ask for a committee with a view to attack any particular party whatever. It was his anxious wish so to frame the words of his motion, as to show his desire to make the inquiry general, that it should be an inquiry into the system, and not against particular parties. It was not pointed against the Bank, or joint-stock banks, or private banks of issue. But, he was told, that there was to be no inquiry into the Bank of England! Certainly an inquiry into paper circulation, and banks of issue, without an inquiry into the Bank of England, would be an inquiry something like the play of Hamlet with the part of Hamlet left out. They were aware of the great privileges granted to the Bank. Now, an inquiry into the paper circulation, without looking to the effects of the privileges enjoyed by that body, was a matter which had never entered into his contemplation. He should be unwilling to preclude the committee from entering into an inquiry necessary to the object of his motion. Undoubtedly it appeared to him, that with respect to the Bank of England, there were many points connected with it which would come under the consideration of the committee. There were many points which were connected with the charter, which properly would come under the attention of the committee, one was the principle which the Bank had adopted to regulate the circulation were correct, and whether that principle had been adhered to; whether the system of branch banks ought to be continued; whether the arrangements made in the banks of issue in connection with it, should be persevered in; these were questions of considerable importance, and which must be looked to in connection with the Bank of England. There was another point—the publication of the liabilities and assets of the Bank of 1118 England—a point which was much discussed at the time of granting the charter, when much alarm was expressed as to the consequences of letting the public into the secrets of the Bank. They had now some experience upon this point, and they had the means of coming to a decision as to whether the advantages expected from that change had been derived from it, or whether the alarms expressed respecting it were well-founded. These were points which he adverted to, as some, amongst others, that must come under the consideration of the committee. But there was a much more important question, and a still much more important principle to be determined by the committee. The question to which their attention ought to be especially called was as to the existence of a bank having any particular privileges—whether the existence of that bank was right or proper—whether it would not be more advisable to introduce the system called free banking; whether, if they conceded that a bank ought to exist, sufficient powers had been given to it to perform those functions which they expected a bank to perform. And then again there was the question, whether it were advisable at the present moment, to reconstruct the whole system and have but one bank of issue. These were questions which would be agitated in the committee. To these questions the committee would turn its most serious attention. He was well aware that they must give their consideration to this subject; but the House would recollect that the question was forced upon them, and before long they must consider it, whether they would or not. It appeared to him, that in entering upon this inquiry, they would do so fully determined fairly to consider the subject, and obtain upon it the best information that they could, in order that they might themselves be fully informed, and the public also might be fully informed upon it, before they were called upon to legislate on a subject in which were involved the interests and the security of almost every man in the country. There was one other point to which it was necessary for him to allude before he placed his motion in the hands of the Speaker—he meant the Bank of Ireland. The House would recollect that, when his noble Friend (Lord Monteagle) introduced the Bill last Session, relating to the Bank of Ireland, he did not propose to continue for a long period the charter of the Bank of Ireland, but only for such time as, on 1119 inquiry, a decision might be come to with respect to the Bank of England. Now, he must say, that, if he were called upon at the present moment to bring in a bill, it certainly would be one on the same principle as that which was brought in by Lord Monteagle. At the same time it appeared to him that there would be much inconsistency in binding the hands of Parliament for four years in regard to the Bank of Ireland, at the very time when they were about entering upon an inquiry upon the whole subject of banking. He should, therefore, not bring in any bill on this subject at the present moment, but wait until he had obtained from the committee some expression of opinion as to what course it would be right to pursue in regard to it. Some measure of the kind must be introduced before the end of the present Session, and he was anxious not to do anything on the subject which might be opposite to any views which the committee might entertain in regard to it. With this brief explanation of the objects which he had in view, he should now content himself with submitting his motion to the House, trusting, that the House would not object to the appointment of the committee for which he was about to move. The right hon. Gentleman moved that a committee be appointed to inquire into the effects produced on the circulation of the country by the various banking establishments issuing notes payable on demand.
§ Mr. Gisborne
did not rise to object to the present motion, but to suggest that the Chancellor of the Exchequer had not stated any reason why the inquiry proposed to be instituted should not apply to all banking establishments, whether issuing notes payable on demand or not. He did not see why joint stock banks not issuing their own notes should not be equally subject to inquiry; for it was quite a mistake to suppose that because they did not issue notes these establishments produced no effect upon the circulation of the country. It was scarcely possible to refer to the various existing bargains between the Bank of England and joint stock banks, by which the latter were accomodated with certain advances, upon condition of their not issuing their own notes, without coming to the necessary conclusion that the existence of these establishments must produce a very great effect upon the circulation of the country, by the discounting transactions which they were enabled to enter upon. The consequence of these bargains was, 1120 that when gold was plentiful, the joint-stock banks had no occasion to go to the Bank of England for a supply; but, on the other hand, when the supply of gold was small, and when interest was high, these joint-stock banks had an immediate inducement to go to the Bank, and that at a most inconvenient moment, and obtain from it the whole amount for which they had bargained. The inducement was evident at once, because as they only paid the Bank three per cent, and gave it out to their customers at five or six per cent, they had a clear profit of two to three per cent, upon the amount. This system acted further very materially upon the circulation of the country by the bills which these banks were the means of bringing into the market, and he thought it would be found upon inquiry, that the banks of non-issue were far more improvident on the whole than others. He for one, from being a shareholder in a large banking establishment which did not issue its own notes, could speak from experience upon this point; and he could state that this bank had lost no less than half a million of money by bad debts. They had advanced to one firm alone to the extent of 350,000l.—a firm also which never had property in any shape to the extent of more than 40,000l. or 50,000l. He wanted to know, then, whilst these facts existed, why these non-issuing banks should be left out of the inquiry, and why it should not rather extend to the operations of banking generally throughout the country? There was another point to which he could not but refer. In the Bank Charter Act was a clause restricting all banks having more than six partners from accepting bills having more than six months to run. This was a point which amongst others he thought it would be well to inquire into. He should therefore suggest to the Chancellor of the Exchequer, that if he were to word his motion more generally—for instance, to "inquire into the operation of the system of banking in the United Kingdom, as by law established"—it would let in no questions which it would not be desirable to inquire into, and avoid casting out something of an imputation that banks which did issue notes were worse conducted than those which did not, and would bring the whole subject and the great object they had in view more completely before them than the motion proposed by the right hon. Gentleman. He hoped also that upon the committee would be appointed gentlemen of 1121 a sufficient variety of sentiments respecting this subject to ensure a fair and full inquiry. This had not been the case on former occasions, when the great majority of gentlemen had been appointed on account of their known and expressed sentiments on the subject. This was an error which he hoped would not be followed in the present instance.
§ Mr. J. Ellis
did not wish to oppose the motion of the right hon. Gentleman; but with regard to what he had said on the subject of the Bank of Ireland, he must beg to make one observation. He understood the right hon. Gentleman to say, with regard to the Bank of Ireland, that if he were left to himself, he should be inclined to renew the measure last year brought in by the then Chancellor of the Exchequer (now Lord Monteagle), but that he should take advantage of the inquiries of the committee, which he was now about to appoint, and regulate his future conduct on this subject by such information as he might derive therefrom. Now, this was a course of proceeding against which he must protest, because he thought that it was not right that a committee should be made to discharge the duties of a Chancellor of the Exchequer.
§ Mr. Hume
thought, that the objection of his hon. Friend, the Member for Car-low, as to the restricted nature of the proposed inquiry was a groundless one, so far as the matters went to which his hon. Friend had referred. He apprehended from the wording of the motion, that all the topics referred to by his hon. Friend would be open to the inquiry of the committee. He apprehended, however, that one of the principal objects in proposing an inquiry of this sort would be, to put an end to that ever-varying state of currency which existed, owing to the particular condition of establishments having power to issue paper in lieu of money. But there was this additional consideration, which he thought the committee should inquire into, namely, whether our currency was a correct one or not. So important were these points, as relating to the subject of banking, that if the committee were not to be at liberty to go into them, he feared their labours would be in a great degree useless. He certainly entertained a different opinion now from that which he had entertained some years ago on our present currency system, 1122 composed as it was of metal and paper. He would mention this strong fact, in illustration of this point. Since the year 1791, when a metallic currency was fixed in France, there had been very little variation in the exchanges in that country. In proportion as the Bank of France endeavoured to force the circulation of its paper, it found that it was not liked; so much so, that in the provinces, their notes were never met with of less amount than 250 francs, and generally not less than 500 francs; and then there was little favour shown them. So completely were the French people satisfied with their metallic currency, and so little doubt or dispute existed on the subject, that he was informed that since the year 1791, up to last year, there had not been published more than five pamphlets on the subject of currency. So different was the state of the public mind in England on the subject of their currency, that he had been informed, that Mr. Richardson, the bookseller, of Cornhill, had printed and sold no less than 2,000 pamphlets on the currency question within the last two years and a half. He had been informed that that was the fact; two thousand different publications on the subject of the currency in the course of two years and a half! Why, there was scarcely a morning in the year when they did not see or receive new papers or publications on the subject. He was one who believed, that the basis on which our circulating medium was founded was not a correct one, and he wished to know whether the Chancellor of the Exchequer considered that the committee would be at liberty to make inquiry upon this part of the subject, which he thought was a most important one? His hon. Friend near him asked whether he meant to adopt "the little shilling?" He had certainly no such intention. Though he thought silver might be made a joint tender with gold, he was so far from wishing to clip the King's money, as the common saying was, that he had uniformly contended against it. He would say further; he was almost a convert to having nothing but a metallic currency. He said this from a consideration of the disastrous occurrences of the years 1825 and 1826, and of 1836 and J837, when fifty millions of property was lost in the country, by circumstances which the parties who suffered were not able to control. He thought, therefore, that it would be but fair to the 1123 country, and particularly to the masses of the people who were peculiarly affected by disasters of this kind, to inquire how far it would be desirable to introduce a metallic currency. It was for want of something of this sort that all previous inquiries on the subject of banking had led to little or no useful result. He would wish, therefore, that the Chancellor of the Exchequer would stale whether he intended to include this branch of the subject in the inquiry he now proposed.
§ Mr. Grote
perfectly agreed with the right hon. Gentleman as to the importance to the nation of inquiries upon subjects of this nature at all times and under all circumstances; he agreed also, that at the present moment there were circumstances which would give it peculiar interest and importance. They had just escaped a serious crisis of the monetary system, and he was sure that Gentlemen who had attended to what had taken place last year, would own, that if the causes of the decline of our foreign trade had been a little more aggravated during that period, the consequence to the country would have been very serious. He could not think that it would be advisable to introduce into this inquiry the question of the basis of the currency, for he was sure no man would look at the announcement of such an inquiry being entered upon without attaching to it a much larger and more critical importance than was attached to it by his hon. Friend himself. His hon. Friend had compared the results of the several systems of England and France in a way which he thought did not necessarily elicit the fact of the superiority of the latter. He said, that there bad been no pamphlets published in France on the subject of the currency, but that there had been a great number in England. He had good reason to believe, that many Gentlemen had given their attention to this subject, and that many valuable suggestions had been made by there, an advantage from which the French public had been debarred. It was not his intention to make any elaborate or exclusive observations upon the state of the currency, for he did not think that the appointment of this Committee was the proper occasion to do so; but he thought, that considerable benefit would result from the appointment of this Committee, if only from the accurate information which it would be the means of 1124 eliciting on the position in which the Bank of England and the joint-stock banks, really stood. There were scarcely ten Gentlemen who were agreed as to what the Bank of England ought to do with regard to the regulation of the currency. The Bank was, therefore, called upon to regulate the currency, without having any system given it as a guide; and in many respects the results of which complaints were made, were not in any way owing to any mismanagement of their own. He thought, that if the Bank of England were found open to some censure, it would also by this enquiry be rescued from a great deal of undeserved complaint, and that it would be found, that a great portion of our monetary difficulties had not been of their creation, though earlier and more prudential precautions on their part might have lightened them. But if Gentlemen were bound to explain what they meant by the Bank of England regulating the currency, that being understood, and that duty being imposed upon the Bank of England, they would be able to avoid for the future much of that vague declamation against it as body of monopolists, by which the true merits of this question had been too often deviated from. There was another point also to which he thought some attention ought to be paid—namely, the magnitude of the Bank reserves of bullion. It appeared, that each Gentleman had an imaginary standard of his own of what he thought the amount of bullion reserved ought to be; and yet no attempts had been made to define clearly what proportion ought to exist between the liabilities and the reserves, so as to enable the public to form an intelligible opinion on the matter. The country bankers were compelled to regulate their conduct by the conduct of the Bank of England as to the supply of currency; and unless some definite understanding were come to as to the principles upon which the Bank of England itself ought to act in this matter, it would be impossible to expect any stability of system in the result. There were other points to which the Committee should direct its attention, with a view to giving a decided opinion; as for instance, as to what extent the Bank of England would be justified in administering the currency with a view to the support and protection of trade; enlarging the currency not according to the rules of proportion between the 1125 bullion and reserves, but as the means of preserving extensive commercial engagements from distress and ruin. He would not go into this point now; but it was one which he thought the Committee should give its attention to, in order to give the public an intimation of the rules which should guide the Bank of England in future occasions of the kind. His hon. Friend complained, that the previous Committees appointed on joint stock banks had led to no results. He did not think that this complaint was borne out by the fact. It was in 1832, under Lord Althorp, that the Committee on the Bank of England was appointed, and since that period a better system had been adopted for the management of the Bank of England than had ever existed before. On this occasion it was determined that the affairs of the Bank of England ought to be managed on a system, and their attention was directed to what that system should be. The publication of the Bank returns was one very material point effected on that occasion. With respect to the Committee now about to be appointed, he apprehended that a great number of documents would be laid before them, which would afford them the means of refuting many public errors, and eliciting many important truths on the subject of banking. There was another point to which attention should be directed—namely, the propriety of combining or separating the issues and deposits. This was too large a question to enter upon it at present; but it was one deserving of great attention, and no doubt many arguments might be adduced on the subject. He thought, whatever was done in these matters, it would be done much more satisfactorily from being the result of an inquiry like this than otherwise. He was glad that this inquiry was not to be directed either against the Bank of England, or the joint-stock banks, or the private banks. He was satisfied, that much information would be illicited from which all parties would derive much advantage. He should therefore be very glad to lend his support to the right hon. Gentleman in voting for this Committee, and he hoped it would be conducted in that fair, full, and candid spirit, which the right hon. Gentleman had prescribed.
Mr. M. Attwood
adverted to the want of uniformity which existed in banking transactions in different parts of the king- 1126 dom. In the county of Norfolk, of the paper in circulation nine-tenths was payable on demand, and one-tenth not payable on demand; whilst in Lanarkshire the very reverse was the case, only one-tenth being payable on demand, and nine-tenths not. He considered that every banking operation more or less affected the currency of the country. It was said, that the fluctuations in the currency arose from the importation of foreign corn. This assertion might be made with some show of reason as to the panic of 1839, but how was it justified by that of 1836? There was something radically wrong in our whole system. The right hon. Gentleman, the Chancellor of the Exchequer, should not include a great many subjects in his motion for a Committee, and abstain from giving any opinion himself on the subject of the currency. What the people of this country wanted was, a government which would pledge itself to carry forward some measure which would prevent the ruinous fluctuations which had taken place of late years.
§ Mr. Clay
thought the question before the House was, whether the monetary system was a fit subject to be referred to the consideration of a Committee. The appointment of a Committee was strictly in conformity with precedent. All the great alterations that had been made on this subject were preceded by inquiries. A Committee was appointed in 1810, another in 1819, another in 1826, and another in 1832, which preceded the renewal of the Bank of England Charter. He thought the Legislature was right in the course they adopted on those occasions, because if there was one subject more than another on which it was desirable they should carry public opinion with them, in their legislation, it was the monetary system. Although public opinion had for the last few years taken a right direction upon this question, yet he did not think there was such a concurrence of opinion, that the public were prepared to agree in the propriety of some legislative measure without previous inquiry. The hon. Gentleman who had last spoken, had said that the monetary system was radically bad. That was owing to the difficulty of solving the problem of regulating the paper, and metallic currency. That problem had been experimented upon for thirty years by two of the most enlightened nations in the world, but they had not been able to 1127 arrive at any satisfactory conclusion. He for one, humble as he was, would not withhold his approbation from the measure introduced in 1819, by the right hon. Baronet, the Member for Tamworth, upon the currency. He had never heard anything like an argument against the principle of that measure. But it was supposed that after the passing of that bill the same fluctuations to which the country had been exposed would not be experienced again. In 1825 however, a crisis occurred more violent than the monetary system had ever before experienced. It was attempted to meet that in 1826 by a final suppression of the small note circulation, and the establishment of Joint Stock Banks; but in 1837 there was another crisis in our monetary system, and they all knew there was a crisis in 1839. It was clear, therefore, that after some twenty or thirty years of experiment—it was acknowledged by universal consent, that the great problem to which he had alluded had not been solved. The hon. Member for Carlow had said that non-issuing banks ought to have been included in the terms of the motion for the Committee. He (Mr. Clay) thought that for all the useful purposes which his hon. Friend had in view, that subject would fall within the scope of the inquiry. It was intended to refer the Reports of the Committee on Joint Stock Banks to the Committee about to be appointed, and his right hon. Friend the Chancellor of the Exchequer, had stated that it was his intention to direct inquiries to be made into the transactions of the Bank of England with the non-issuing banks, so that would involve an inquiry into the subject to which his right hon. Friend, the Member for Carlow had alluded. His hon. Friend the Member for London had alluded to the inquiry, and complained that it had led to no result; but the labours of that Committee had not been thrown away—it had made a collection of, and put upon record, some most important facts. Inquiry was absolutely necessary, for by a decision given about two months ago in a court of law, the public had absolutely no protection against Joint Stock Banks. The judges had there laid it down, that a judgment obtained against the person who was to sue and be sued, would not be effective against the proprietors of a Joint-stock bank of which he was the officer; but that a party complaining 1128 must commence his action against all the parties in the Bank. This now amounted to a denial of justice. The motion of his right hon. Friend he thought was quite comprehensive enough, and would do great good.
§ Sir R. Peel
said, it was far easier to talk of a full and comprehensive inquiry than to secure it. He could easily conceive a full and comprehensive inquiry being entered upon without the slightest practical benefit. It was quite possible to encumber such an investigation, with details, in a way to render it perfectly useless. He thought the Committee ought to be appointed, but that they should propose for themselves some definite subject of inquiry, such as this, for instance—when the Bank Charter expired, what regulations should Parliament adopt with regard to the circulation? And it was quite evident that there were certain leading considerations which ought to decide this question. It was very important, for example, to know when the report of the Committee of 1832 determined that the capital of the bank should consist of three kinds, two of securities, and one of bullion—why this system was departed from. But if they submitted a number of subjects at once to the consideration of the Committee, in the firs place the attendance would soon become limited, and then there would be nothing but confusion, embarrassment, and uncertainty in their decisions. What was the use of ascertaining how this joint-stock bank or that was conducted? Let them limit their inquiry to the question whether there should be a limited responsibility attached to such banks, and let them make their report on that point. He did not think that Parliament could consent to an inquiry which had the currency for its basis, without leading many to suppose that the maintenance of the present system was no longer to be observed; and, he for one, declared that, however plausible might be the reasons for entering upon such an investigation, Parliament had conclusively determined on a metallic currency, and on the present standard of value. The hon. Member for Kilkenny had hinted at the propriety of banishing paper from the circulation. He could understand the extinction of one pound or five pound notes, but he did not see how paper could be excluded completely without destroying credit alto- 1129 gether. This could not be done without reverting to the principles of the barbarous ages, and establishing a state of barter. He doubted whether it would not be better to extend the power of the Committee as occasions arose, than that they should be called upon in the first instance to enter upon such an extensive and complicated investigation as was beyond human labour. There was no doubt that one of the first questions which must come before the Committee was the distinction between the functions of a bank of issue and one of deposit, and the sooner they addressed themselves to it the better. He would much rather that the Government, on its own responsibility, and with its own means of observation, should undertake the settlement of his question than involve a Committee in inquiries directed to no practical result.
§ Mr. Charles Wood
said, that he thought the right hon. Baronet (Sir R. Peel) had misunderstood the hon. Member for Kilkenny, when he supposed him to have recommended the suppression of all promissory notes. All that he had understood the hon. Member to recommend was the introduction of a larger quantity of metallic money into our circulation, as was the case in France, to the extent perhaps of putting down 5l. or 10l. notes. He did not agree with the hon. Member, for he thought that it would be impossible, in this commercial country, to carry on the ordinary business without the accommodation of these notes; but clearly such an object was within the scope of the inquiry moved for by his right hon. Friend, the Chancellor of the Exchequer. He agreed with the hon. Member for the Tower Hamlets, that almost all improvements in our currency had been preceded by parliamentary inquiry; and he was surprised to hear the hon. Member for Whitehaven say that a committee was unnecessary, and call upon his right hon. Friend to legislate at once. He agreed with the right hon. Baronet (Sir R. Peel) that the inquiry ought to be limited within reasonable bounds, and to practical objects; for such an inquiry as some Gentlemen seemed to contemplate would never be brought to a conclusion. He thought that the opinions contained in some of the pamphlets referred to by the hon. Member for Kilkenny, opinions held by persons of the greatest authority upon questions of this description, and yet most inconsistent 1130 and contradictory, did afford strong ground for inquiry. That the recent speculations and subsequent distress have been caused by the issues of the Bank of England—that they have been caused by the issues of the country banks in spite of the Bank of England—that the Bank has a perfect control over the issues of private banks—that they issue their notes without any regard to it—that the fluctuations in the amount of our circulation have arisen entirely from the defective system of the Bank of England—and that they would have been greater, if the circulation had varied exactly as a metallic currency would have done were opinions the most contradictory; but they were, nevertheless, maintained by persons to whom the House and the country looked upon these subjects. The information we possessed was insufficient to form a decisive opinion upon. It was evident that average returns of the amount of circulation for periods of three months, did not give an accurate indication of its increase or decrease. It might gradually increase for three months, and if for the next three months, it gradually decreased to the point from which it had risen; the average returns would show an uniform amount through the whole period. The right hon. Baronet (Sir R. Peel) had referred to the rule of the Bank as laid down in 1832, of keeping their securities even in amount. It was evident from the most cursory inspection of the returns that they had not done so. They had deviated to a great extent. He did not mean to say that they had been wrong; but he did say with the right hon. Baronet, that this was a proper subject for inquiry. The explanation put forward by one of the most eminent Bank directors of the increase of securities in the autumn of 1835 rendered this inquiry more requisite. What was that explanation? That, in order to form a just opinion of the conduct of the Bank, it was necessary to make a distinction in the deposits and securities, which distinction did not appear in the returns. The returns, therefore, did not afford adequate information. The increase in 1835 was attributed to extra deposits; but a similar increase took place in the autumn of 1836, and ft was impossible to say, from the returns, whether this was in the ordinary course of the working of the Bank, or was owing to some extraordinary cause. He meant to impute no blame to any body, Bank of England or private 1131 banks; but he thought good ground for inquiry was made out. Principles could not be tested in ordinary and quiet times. It was in extraordinary times, that the applicability of rules and their value became known. The few last years were most eventful in every view connected with our circulation; and it was impossible but that much light must be thrown upon the subject from a careful examination of what has taken place during that period. He believed that great advantage would be derived from such an investigation. The Bank would be relieved from much of the absurd accusation now directed against it; and the country bankers would obtain a better guide, if they could be said to follow any guide at present, for their conduct. Additional information and of the most valuable description would be gained upon the question. It had been so in all former committees. The first was the Bullion Committee of 1810. At that time the Bank directors held a doctrine as to their issues, which though it happened to produce no harm, might have led to most mischievous consequences, if pushed to the extent professed by them. In 1819, they resolved that the foreign exchanges had nothing to do with their issues. In 1827, they rescinded that resolution. In 1832, they adopted the rule alluded to by the right hon. Baronet (Sir R. Peel) which was highly approved at the time. Subsequent experience had shown that rule to be impossible in practice; and he believed it to be defective in theory. Judging them from the past, he could not but anticipate further improvement from the proposed inquiry. These advantages would be gained under all circumstances, but it was impossible to shut our eyes to the possibility of still more extensive changes in the system of our currency. Some Gentlemen advocated perfectly free trade in banking, checked only by convertibility. Others would maintain one bank of issue; and even render what the hon. Member for Kilkenny attacked as the monopoly of the Bank, still more stringent, on the ground, of which the force must be admitted that it was absurd to expect from the directors a steady regulation of the currency, unless they were invested with adequate power for the purpose. These questions might seriously involve existing interests; but they were great and important questions in which every member of the community was 1132 deeply interested; and they must be kept in mind by every Member of the committee. For their selection much patient inquiry would be required, and the application of sound and enlightened principles to the facts which might be elieited by the inquiry.
§ Mr. Hawes
hoped the inquiry would be of a thoroughly practical character. He thought the tendency of the speech of the right hon. Baronet the Member for Tamworth, and the words of the right hon. the Chancellor of the Exchequer's motion, had a tendency to limit the inquiry within too narrow a compass. It seemed impossible to shut out from an inquiry of this nature all consideration of the general question of the currency, and one or two collateral points. He was inclined to regret that the information already obtained had not been thought sufficient to justify legislation. Perhaps, however, the inconvenience of further delay might be Well purchased by the result.
§ Mr. Hume
explained. The tight hon. Baronet had misunderstood him in supposing that he wished to return to a metallic currency. He certainly desired that they should approach nearer to a bullion currency than they were at present, but under the existing circumstances of the country he never meant that they should return to an entirely metallic currency.
§ Sir John Rae Reid
said, he should not have addressed the House, had it not been for certain observations that had been thrown out with regard to the jealousy of the Bank of England. Now he begged to say, that the Bank had no jealousy whatever of joint-stock banks; and he would take the opportunity of saying that, as far as the Bank was concerned, they had no objection to inquiry. He felt satisfied that the public would afterwards be more satisfied than they at present seemed to be with the conduct of the Bank of England.
§ Mr. Slaney
trusted that the committee would take care that good security should be given that the notes issued by the banks that were thus to have the privilege of coining money—for he could scarcely give it any other name—should; be good and genuine. He congratulated the House on the appointment of the committee, but he decidedly thought some guarantee should be given that the notes issued should be good. How were the public to know whether a note was worth 20s of 2s.?
§ The Chancellor of the Exchequer
said, that With respect to the remarks of the hon. Member for Kilkenny, he thought that the object of the hon. Member would be answered by the words of the motion. He would not open the question of the abolition of bank notes. The suggestions of the right hon. Baronet the Member for Tamworth were worthy of consideration.
§ Motion agreed to.