Commons Sitting of 8 December 1857

MINUTES.
NEW WRIT.—For Mayo, v. George Henry Moore, void election.
AUSTRALIAN MAIL SERVICE.

  QUESTION.
  MR. YOUNGsaid, he wished to ask the Secretary to the Treasury, What steps have been taken to prevent the interruption of the Steam Mail Service with Australia which is likely to be occasioned by the accident to the ship Emeu; and what provision will be made in future to prevent delay in this service in, case of accidents to one of the steamships engaged in the transmission of the mails between Australia and Suez?
  MR. T. G. BARINGsaid, that as the Emeu was to have taken the outward October mails from Suez to Sydney, and the accident occurred to her only shortly before she was to arrive at the former place, it was not possible for the company at home to take any steps to have that service performed by another vessel; and. unfortunately, there was not at Suez a spare ship belonging to the company.
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  The Emeu ought in January next to have brought home the mails from Sydney, but the company could not take any steps to supply the deficiency caused by her absence, nor would the company's agent at Sydney be able to charter a vessel in her place, because the first intimation of the accident would be conveyed to Sydney by the Simla, which ought in due course to arrive at Sydney on the 9th of January, and the homeward mails ought to leave that port on the 14th of January. The loss of two mails would therefore follow from the accident to the Emeu. With respect to any provision to prevent delay in future, the Admiralty had directed their attention to the manner in which the service had been performed. They were aware of the interest with which the speedy and regular transmission of the mails was regarded both in this country and the Australian colonies. There was no doubt that the company in performing the service had experienced some accidents, but the contract had not been altogether carried out to the satisfaction of the Admiralty. In August last a letter was written to the company by the Admiralty, pointing out certain defects in the management of the mail service to Sydney. In reply, the Admiralty received an assurance from the company that a fifth or spare vessel would be placed on that station. Subsequently to that, the company's vessels having taken a longer time in making their voyages than was set forth in the contract, another letter was written to the company by the Admiralty, requesting information relative to the fifth vessel, and generally as to the performance of the service. The company stated in reply that they had chartered a vessel named the Victoria, which had been engaged in carrying out troops to Calcutta, and which was now there. The company hoped that the Emeu would be able to return, after being repaired at Bombay, to Suez, in time to carry out the February mails. The company's new ship Australasia would take her place on the station in exchange for the Simla in February. Another new vessel belonging to the company would be launched next month, the Tasmania, and they hoped that the Oneida, which broke down on her first voyage from Sydney, and which would be refitted with new boilers, would be on the station next summer. Consequently, in May next

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  the company would have four vessels of full power and tonnage as required by the contract, together with the Emeu, which, although smaller than the others, was, as he had that day been assured by the Admiralty agent who had sailed in her, a very efficient vessel for carrying the mails. The Emeu would be a spare vessel, and next summer the company would have five vessels engaged in the service. He trusted that the company would fulfil their contract, and that next summer the mail service would be placed on a satisfactory footing, which would no doubt be done if five vessels were placed on the stations between Suez and Sydney.

TROOPS FOR INDIA—QUESTION.
MR. W. VANSITTARTsaid, he would beg to ask the President of the Board of Control, Whether, during the tenure of the Governor Generalship of India by the Marquess of Dalhousie, any recommendation was made by, or despatch sent from, the Supreme Government or the Commander in Chief in India to the Court of Directors or to the President of the Board of Control for an increase of European troops, in consequence of the extension of the British territories in the East, by the acquisition of the Punjaub, Pegu, Nagpore, Oude, Sattara, Jhansi, Berar, and other districts assigned to the East India Company by his Highness the Nizam of Hyderabad; if so, what was the date of such recommendation or despatch, and what was the date and the tenor of any reply that may have been sent; was any additional force of Europeans despatched to India in consequence, during the period referred to; and, if so, what number of men were sent?
MR. VERNON SMITHsaid, that the question of the hon. Gentleman was a very long one. He begged to inform him that there had been no official communication between the President of the Board of Control and the Governor General of India at any time, as all such communications were made through the Court of Directors of the East India Company. Therefore, if the hon. Gentleman wished for correct information on the subject to which his question had reference, his best plan would be to move for any despatch, if such there were, to the East India Company.
SIR JOHN PAKINGTON: I wish to ask the right hon. Gentleman the Presi-
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dent of the Board of Control the questions of which I have given him notice. First, whether it is intended to include in the papers on Indian affairs promised in Her Majesty's gracious Message a Memorial which has been sent home by certain inhabitants of Calcutta, praying for the recall of the Governor General? The next question of which I have given notice was partly answered by a letter from the hon. Member for Southampton (Mr. Willcox) which was read in another place last evening. Still, perhaps, I had better put the question, making an addition to it. It is, whether there is any objection to lay upon the table all correspondence which has taken place since the commencement of the Indian revolt between any department of Her Majesty's Government and the Peninsular and Oriental Steam Navigation Company, and I will now add, with any other company, with reference to the conveyance of troops to India by way of Egypt?
MR. VERNON SMITH: Sir, in answer to the first question of the right hon. Baronet I have to state that it is not my intention to include in the papers to be presented to Parliament the Memorial of certain inhabitants of Calcutta forwarded to my right hon. Friend the First Lord of the Treasury. The right hon. Baronet knows from his colonial experience that the usual course in case of such petitions is, that they be forwarded to the Governor General or Governor of the Colony, as the case may be. This has not been done in this instance. The House must be aware that this is an excellent rule, as an answer may be made by the Governor; and as we are informed that in this case the Governor General has prepared a reply, we intend to send the petition back, in order that it may be forwarded through the usual channel—the Governor General. In answer to the second question of the right hon. Baronet, I must say that if he had not asked it, owing to a story being circulated to my disadvantage by persons who acknowledged that they believe the story to be impossible, but who at the same time took no pains to investigate whether it was true or not, I should have myself moved for the whole correspondence to be laid upon the table of the House. The right hon. Baronet has been pleased to say, although a similar measure of generosity has not been shown to me by others, that he is satis-

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fied with the declaration which was made on my behalf in another place. But the right hon. Gentleman now asks me, whether there was any additional correspondence with any other company. Additional correspondence has taken place on this subject with other companies. With regard to the correspondence which the Peninsular and Oriental Company have had with Her Majesty's Government, I must correct the Return, as the right hon. Gentleman wishes for all the correspondence that has taken place with Her Majesty's Government I have made inquiry of all the other departments of the Government, and they have not any objection to produce the correspondence; but in my own department, the Board of Control, no communications have been made except through the East India Company. I shall be delighted to show all that correspondence to the House, but I would rather not present it myself, but that the right hon. Gentleman should move for it, for I admit I have some zest in seeing a political opponent showing up his own friends. I hope, therefore, my right hon. Friend will take upon himself to move for the correspondence.
SIR JOHN PAKINGTON: I wish, Sir, now to put one or two other questions to the right hon. Gentleman upon the same subject. I assure the House that I ask these questions with a very different and much more important object than has reference to any personal matter. I shall, however, have no objection to move, as the right hon. Gentleman suggests, for I see public reasons for doing so, and I suppose I had better include the correspondence with the Court of Directors of the East India Company. I wish now to ask whether it is true that Lord Stratford de Redcliffe telegraphed to the Government in this country that he had obtained a firman from the Sultan for the passage of troops through Egypt, and whether he will have any objection to state the date of the most friendly offers to which the noble Lord at the head of the Government has referred, from the Emperor of the French and from the Viceroy of Egypt, for the passage of any troops which the Government might wish to send through their dominions? I would also be glad to know whether Lord Elphinstone telegraphed to Lord Canning that if such course were desirable he was prepared to
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send steamboats to Suez to meet the troops? I am aware that I have not given the right hon. Gentleman any notice of these questions; so if he wishes I will repeat them on another day.
MR. VERNON SMITHsaid, it would be more convenient to defer giving answers to these questions, as the principal part of them referred to the Foreign Office, and it was desirable to verify dates before stating them.
MR. WISEsaid, he wished to know whether he understood the President of the Board of Control correctly, as having said that the inhabitants of Calcutta were precluded from sending any Memorial to Her Majesty without its passing through the hands of the Governor General of India?
MR. VERNON SMITHsaid, they were not precluded, because they had actually done it, but it was the practice that they should not do it, and of that they had been informed.

THE TURKISH MEDALS—QUESTION.
COLONEL NORTHsaid, he wished to ask the Under Secretary for War, When the Turkish medal and order of the Medjidi would be distributed to those officers and men of the army who were entitled to them? He hoped that he should not be thought to be taking up the time of the House improperly when he reminded hon. Members that nearly two years had elapsed since the war ceased, and not a single medal had been distributed.
SIR JOHN RAMSDENsaid, he could assure the hon. and gallant Gentleman that there had been no remissness on the part of the Government. There had been repeated communications between this country and Constantinople, and within the last few days a despatch had been received from Lord Stratford de Redcliffe, stating, with regard to the Medjidi medals, that the delay arose merely from the time necessary for the Sultan's jewellers to prepare so large a number. There was no allusion to the Turkish medals, but he presumed they would be sent at the same time.
COLONEL NORTHsaid, he wished to know whether it was true that the medals had been in the possession of our Ambassador for more than one year, if not for nearly two years?
SIR JOHN RAMSDENsaid, he was not in a position to answer the question.

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He was not aware whether they were in the possession of the Ambassador.
SIR JOHN PAKINGTONsaid, he would now ask whether the hon. Gentleman was able to state to what class of officers the medal would be given?
SIR JOHN RAMSDENsaid, the Turkish medal would be given, he believed, on the same principle as the Crimean medal, to all the officers and men who served with the Turkish troops in the Crimea. With regard to the Order of the Medjidi, there were five classes, and when the Orders were received a Return would be laid on the Table of the House of the different officers who would be entitled to receive them.

HARBOURS OF REFUGE—QUESTION.
MR. FENWICKsaid, he would beg to ask the Secretary to the Treasury, Whether, in consequence of the evidence before the Committee appointed to inquire into the question of Harbours of Refuge last Session, Her Majesty's Government intend to recommend that a Royal Commission be appointed to inquire on the spot into the proper site for such a harbour on the north-east coast?
MR. WILSONsaid, it was not the intention of the Government to appoint a Commission at the present moment. but on the reassembling of Parliament after the Christmas recess the Committee would be reappointed in accordance with the recommendation contained in their Report.

LAW REFORM—QUESTION.
MR. COXsaid, he wished to ask the Attorney General, Whether the Bills for "simplifying and amending the Laws relating to Real Property, and also for consolidating and amending several important branches of the Criminal Law," would be laid on the table before the Christmas recess?
THE ATTORNEY GENERAL,in reply, said, the Bills would not be introduced until after the Christmas recess.

JOINT-STOCK BANKS—UNLIMITED LIABILITY—MOTION.
MR. HEADLAMsaid, that, in bringing before the House a Motion with respect to the unlimited liability of shareholders in joint-stock banks, he was not influenced by light or trifling considera-
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tions or by any mere wish to vindicate a favourite theory, but by the serious object of preventing the recurrence of great national disasters. If he looked on this subject simply as an amendment of a law—if he acted merely for the interest of those who were at present, or might at a future time be interested in joint-stock banks—though he might have made a Motion of this kind in an ordinary Session, yet he would not think the circumstances such as to justify him in bringing it forward at such a peculiar conjuncture as the present, when Parliament was specially summoned to take into its grave consideration a great monetary crisis. The reasons which had induced him to bring forward this question at this particular period were these. He had long entertained a rooted conviction—not arrived at now for the first time, but come to after the panic of 1847, when he had occasion to investigate the causes of the failure of the joint-stock banks which then fell—a conviction strengthened by subsequent observation and confirmed by the events of the recent monetary crisis—that the principle of unlimited liability of shareholders was a chief moving cause of the mismanagement of joint-stock banks; and further than that—that the mismanagement of these banks, by leading on to their ultimate failure, most materially aggravated and precipitated a national crisis such as that we had just passed through. So strong was his conviction upon this head, that he did not hesitate to express his individual opinion that, if he had been successful in the Motion which he made upon this subject in 1849, the recent crisis would have been disarmed of much of its force, and he should not now have had to bewail the wide-spread ruin and disaster that has fallen upon a long list of personal friends and constituents. One additional reason which had induced him to bring forward this Motion at this time was, that it was almost hopeless for a private Member to attract the attention of the House to the subject except at a moment like the present, when the public mind was fully roused in respect to it. In as few words as possible he would now state the nature of the case which he had to bring before the House, and the propositions which he thought he could establish by an appeal to undoubted facts of which they all had cognisance. He contended

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that in periods of prosperity in trade, when the rate of discount was not high, and there was no undue pressure in the money market, mismanaged joint-stock banks laid the seeds of disease in the commercial system, which, when a period of pressure arose, developed themselves in the most alarming form. There were two modes by which joint-stock banks produced these results. First, by the power they possessed over capital, they were enabled to foster undue speculations, to give rise to enterprises which, though they throve for a time by the false credit which gave them birth, still remained in a condition to be overthrown by the first symptoms of a pressure. Secondly, by the principle of unlimited liability, they were enabled themselves to become indebted to an almost fabulous amount in all quarters of the money market, and thus they were placed in such a condition that it was next to a matter of certainty that when a time of pressure came they themselves should fall. Thus they converted a period, which would otherwise be only one of trifling and temporary inconvenience, into a great national crisis, involving all the evils which the country had just experienced. Whenever the pressure came, whether it were the result of an adverse balance of exchange, a deficient harvest, which imposed upon us the necessity of exporting bullion to pay for the people's food, or monetary disturbances in foreign countries, or any other accidental circumstance, the inflated credit created by the mismanagement of joint-stock banks collapsed, the joint-stock banks themselves fell, and then occurred precisely the circumstances described in the recent letter of the Government to the Bank of England, where they said, "Her Majesty's Government have observed with great concern the serious consequences which have ensued from the recent failure of certain joint-stock banks in England and Scotland, as well as of certain large mercantile firms." The question, then, was, were they prepared to allow the evil to go on without endeavouring to grapple with it. They had done so in 1847, and the result was, that in 1857 exactly the same events had occurred. Having passed over the former period without doing anything to prevent a recurrence of the evil, if they pursued the same course now, there was no reason to justify them in supposing that a similar course of events
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might not occur again and again in a constantly recurring cycle. He would now endeavour a little more fully to explain the particular modes in which a joint-stock bank was able to produce the effects he had just stated. A joint-stock bank possessed from its very nature an almost unbounded control over capital. At its foundation enormous sums, sometimes a million or more, were paid into its coffers in the shape of calls upon shares; by the modem system of paying high interest on deposits it was enabled to draw to itself all the capital of the surrounding district; and in consequence of the law of unlimited liability it had a further power of an infinitely mischievous nature to which he wished particularly to direct the attention of the House. A joint-stock bank, by the present law, possesses the power of mortgaging the real and personal property to the last farthing of every one of its shareholders. This was the very root of the evil. However notorious it might be that the original capital had long ago been wasted, however flagrant mismanagement might have been, and however widely it might be known that the assets were locked up in reckless speculation and worthless investments, yet still a joint-stock bank was able to keep up its head in the money market, and to borrow money, from the power which it possessed of pledging the credit of its shareholders. To make the case more intelligible he would illustrate it in this form:—Suppose that the shareholders in a joint-stock bank were to do individually that which they were enabled, under the existing law, to do conjointly, and were to pledge the whole of their fortunes in the money market, in order to raise as large a sum as possible to apply in promoting speculative enterprises. Suppose any individual thus to pledge his whole fortune and raise what he could in the money market to apply in speculation, there is little doubt but what such a course would lead to ruin, but such a course, fatal though it might be to the person pursuing it, would of course not deserve the name of a national disaster; but if, in place of one or two persons so acting, four or five hundred were to pursue such a career, then no doubt it would be admitted that that which was comparatively innocuous in one individual might well become a subject of serious concern. The mischief, however,

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which these persons could do, in pledging separately their respective fortunes, was not so great as that which they could effect when they were united by the bond of a joint-stock bank, while it was impossible that they could spend the funds which they separately raised more recklessly or improvidently than joint-stock banks expended the funds which they raised upon their conjoint security. He had stated that joint-stock banks became indebted in large sums of money under the action of this principle of unlimited liability. How precisely was this accomplished? In the letter of the Directors of the Bank of England to the Government this paragraph occurred:—
"In the following week a great shock of credit, and a consequent demand on the Bank of England for discounts, arose from the failure of the Liverpool Borough Bank, whose re discounted bills were largely held by the bill-brokers and others in London."
He had no reason to suppose that the practice of re discounting, which had clearly prevailed at the Liverpool Borough Bank, had not also been acted upon by the other joint-stock banks which had failed; and, indeed, in former years he knew that it had prevailed in such banks as had failed. The profit of a bank in the case of the re-discount of bills consisted, of course, in the difference between the rate charged by the bank in the first instance, and the rate at which it procured the bills to be re-discounted in the money market, and therefore the higher the rate of discount charged by the bank to its customer the higher the profit. The consequence was, that the bank had a direct interest in discounting bills of a speculative character on which a high rate of discount could be charged, the, bank itself procuring the re-discount of the bill at a lower rate on the faith of the liability of the shareholders, whose names it put on the back of the bill. What was that but selling in the money market from time to time the security of its shareholders? The practical result was, that a bank acting upon this system was continually indebted in a large sum in the money market. Such was the state of the Liverpool Borough Bank at the period of its suspension, and such the state of the other banks which had failed. Now, although he (Mr. Headlam) did not pretend to have any intimate knowledge of banking, he was sure that the House
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must agree with him that a bank so circumstanced was in a thoroughly false position. It was the imperative duty of a bank which received deposits, not only not to be in debt, but to have a considerable reserve at all times available in order to meet any extraordinary demands which might be made upon it; and a bank which had not such a reserve was constantly liable to have its advances stopped, when the only course for it to pursue would be to suspend its operations. He might add that it was within his own knowledge that the joint-stock banks in London were not in that position; that they were not largely indebted in the money market; but that, on the contrary, they had large balances at the Bank of England. With respect to them, therefore, all he could say was, that the law of unlimited liability conferred upon them a power of a most mischievous description, which, however, practically, they did not make use of. He had stated that the great and serious difficulties which arose in the period of a monetary crisis were greatly enhanced by the failure of joint-stock banks. He confessed he thought it not necessary on this part of his subject to press much on the attention of the House, but if any confirmation of his view were required, he might refer at once to the Speech of Her Majesty delivered at the opening of the Session, in which the failure of joint-stock banks was stated as the first aggravating cause of the present crisis. He might appeal also to the events of 1847, when again the failure of joint-stock banks aggravated most materially the circumstances of the panic. Or he might refer to the speech with which Sir Robert Peel, in 1844, introduced his Bill for the Regulation of the Currency, when the right hon. Baronet stated that one of the things which he wished to guard against the recurrence of was the failure of joint-stock banks,—an object which the Act, whatever might be its other merits or defects, certainly had failed to accomplish. He would now proceed to state some of the reasons why he thought that the principle of unlimited liability tended directly to render the mismanagement of joint-stock banks not only possible, but probable. It would be found by reference to the history of these cases that when a great failure occurred in the case of a joint-stock bank, it almost invariably arose from the paid-up capital in the first instance being

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wasted and squandered; and he was sorry to add that in cases where the paid-up capital had been so wasted it was generally attributable to mismanagement, amounting to something worse than a mere error in judgment on the part of those who had originated the bank in question. When a bank lost its paid-up capital, the law, if it were good and sound, would either compel it to be wound up at once, the shareholders submitting to the comparatively small loss which they had already incurred, or would render it incumbent upon them, if they chose to carry it on, to replace the capital which had been lost, to alter the form of management, and to place the establishment upon a safe foundation for the future. Instead of this, however, the operation of the existing law was such that, after the paid-up capital was lost, it was perfectly easy for a bank to continue its career of mismanagement. It could still obtain unbounded credit in the money market; it could continue its business for years, although its failure might be from the first almost a matter of mathematical certainty, and owing to the credit which it obtained through the unlimited liability of its shareholders, it was enabled to continue its downward career over a lengthened period. When its capital was thus lost it was almost a matter of certainty that it must go on for years getting into a worse and worse condition. It was compelled to pay large dividends upon the capital it had lost in order to give some compensation to its shareholders for the risks thus run, and in various modes it was obliged to carry on its business in a less economical manner than a solvent bank. It went on during the period of prosperity getting deeper in debt, and year by year the number of its bills for re-discount became larger, till at length the time came when its failure was immediately in sight and could only be delayed for a short time; and even then how did this law of unlimited liability work? It assured the wealthy shareholder and mismanaging director that if they could only contrive to carry on their mismanaged bank for a little longer they might dispose of their shares and the liability attaching thereto. It also assured them that should they attempt to bring exposure upon the fragile state of their bank, they would be the first victims of the crash, and would in all probability be ruined. When the law ex-
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posed men to temptations like these—when it held out to them such advantages and such means of escape if they pursued a wrong course, and such evils if they pursued a right course—was it wonderful that they should pursue that course which would lead to certain failure, and that they should endeavour to carry on a bank after it had in fact failed, in order to protect their own interests from the ruin? The result was that they went on until a pressure came on the money market, and then a bank in that position fell with a crash, which affected an entire district, and then it was that the shareholders were at length involved in entire ruin, that the trade of the whole district became paralyzed, and so continued till, by the gradual growth of capital in the district, trade again slowly revived. The daily records of the Court of Bankruptcy told of failures of this kind. The unlimited liability of the shareholders in a joint-stock bank rendered mismanagement probable, easy, and possible, and led to the fatal consequences to which he had alluded. He would now state to the House what was the origin of this law of unlimited liability, because he verily believed that a large proportion of its Members seriously thought that this law was prescribed in the first instance for the security of the public by providing for the good management of joint-stock banks. He believed that they imagined that joint-stock banks constituted the exception to the general law, because there was something in the principle of unlimited liability specially applicable to those banks. Now, so far from that being the case, he could assure the House that the truth was diametrically the contrary. So far from the Government of the time at which that principle was applied to joint-stock banks thinking that unlimited liability was beneficial to the public, they were of the reverse opinion, and that, instead of strengthening, it weakened joint-stock banks, and it was only because they were forced to do so that they applied that principle to them. That principle was, in fact, forced upon the Government by the Bank of England with the view of rendering joint-stock banks less formidable rivals than they otherwise would be to the Bank of England. Previously to the year 1826 joint-stock banks were not lawful in this country. The Bank of England alone, at that time, possessed the privileges of a

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corporation governed by the principle of limited liability. With that single exception, all the banks throughout the country were carried on upon the principle of unlimited liability, and it was also a part of the law that they should not have more than six partners. A large proportion of those private banks failed in 1825, and then it was that the Government sought to establish joint-stock banks for the purpose of giving greater security to the public. The Earl of Liverpool and Mr. Huskisson, who then presided over the financial affairs of this country, took a view of the matter, which was a singular proof of their prescience and their sagacity, because at that time the country had not had the benefit, which we of these days have, of experience as to the principles of limited and unlimited liability. The Earl of Liverpool and Mr. Huskisson proposed that the principle of limited liability should be applied to the joint-stock banks then about to be established; but the opposition on the part of the Bank of England was so great that they consented to the principle of unlimited liability being applied to them. Again in the year 1833 the same thing occurred when the charter of the Bank of England came to an end. Lord Althorp was then Chancellor of the Exchequer, and he adopted precisely the same view as that entertained by the Earl of Liverpool and Mr. Huskisson with regard to joint-stock banks. Lord Althorp, in fact, in that year, proposed to the House of Commons that the principle of limited liability should be applied to joint-stock banks on the occasion of the renewal of the Bank Charter. He proposed that in the case of joint-stock banks not issuing their own notes, one-fourth of the capital should be paid up and vested in securities, that the shares should not exceed £ 100 each, and that the partners should only be liable to the amount of their shares; the opposition of the Bank of England was again fatal to the proposition. But having observed the conduct of the Directors of the Bank of England for some time, he (Mr. Headlam) had not the slightest fear that the Bank would at this day attempt to oppose the principle by which itself was governed being applied to joint-stock banks generally; and if the present Government held the same opinion as the Earl of Liverpool, Mr. Huskisson, and Lord Althorp on this
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question, he had every reason to hope that he should succeed in his attempt to gain for the country the great advantage of having joint-stock banks governed by the principle of limited liability. He was glad upon this occasion to bear witness to the large and sound principles which they had now adopted. He would now refer to the direct evidence afforded by experience. None of those evils which resulted in this country from the mismanagement of joint-stock banks had attended the management of those chartered banks which had been established in the Colonies. Take the case with regard to Scotland. In that country there was one bank which certainly was based upon the principle of limited liability, and there were two others with regard to which some doubt existed as to their liability, but the liability in the Bank of Scotland was certainly limited. Now, the Western Bank of Scotland and the City banks were both founded upon the principle of unlimited liability, and so far as experience went the results were in favour of the principle of limited liability; for while the two banks to which he had referred as having unlimited liability were compelled to suspend, the Bank of Scotland not only was able to tide through the difficulty, but also was able to avert disaster from her sister banks. When he had brought forward the question in the year 1849 the argument upon his side was much more difficult than it at present was, because at that time the principle of unlimited liability was the general principle of the law, and, therefore, no doubt, it was a difficult task to ask that House to alter the general principle in one particular case. At the present day, however, the principle of limited liability had been admitted with regard to other companies, and he believed still, as he had believed in 1849, that the case for the limitation of liability was stronger with regard to banks than with regard to any other commercial bodies. At present the case of joint-stock banks was the only exception, and even Lord Over-stone, who was a strong opponent of the principle of limited liability, had stated in his evidence that if the principle were admitted he did not see any necessity for the exception. The question was one of great magnitude, and one which ought not to be delayed, and it was most desirable that the House

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should come to a decision with regard to it, for to leave any question relating to banking in a state of uncertainty was almost as great an evil as the adoption of a wrong principle. If his arguments were wrong, and his experience unfounded, let the House reject his proposition; but he felt confident that the Resolution which he proposed was well worthy of being agreed to by the House. They had a precedent of the House adopting a Resolution in favour of limited liability, and upon that occasion the Government which was presided over by the noble Lord still at the head of the Government, and who for his firmness in carrying out the principle expressed in that Resolution was worthy of great credit, brought in a Bill to carry the Resolution of the House into effect. Should the House agree to the present Resolution, he trusted that the noble Lord would follow that precedent, and bring in a Bill founded upon it, containing such safeguards as he might think to be expedient. He could say, for himself, that he was so convinced of the propriety of the Resolution as to believe that if it were made the foundation of legislation, this short Session of 1857 would not have been passed over in vain; nay, he would go further, and say, that, although there had been great losses and distress occasioned by the recent crisis, still, if the House adopted the principle contained in his Resolution, they would have the satisfaction of thinking that we as a nation had at least gathered wisdom from our misfortunes.
MR. EWARTseconded the Resolution.
Motion made, and Question proposed,
"That the Unlimited Liability of Shareholders in Joint Stock Banks gives rise to a species of credit injurious to the interests of the public; and that the present Law enforcing the adoption of this principle requires alteration."
MR. COWANsaid, that it was very seldom that he had the misfortune to differ from his hon. and learned Friend, or to oppose his proposals in that House, but he hoped that the House would allow him, as the representative of the ancient metropolis of Scotland, and the seat of several of the most valuable institutions in the country, some indulgence in expressing his views upon a subject which was well worthy of the serious attention of the House. For his own part, he could only say that he had been entirely unconvinced by the argu-
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ments which his hon. and learned Friend had employed in order to induce the House to consent to the Resolution which he had placed on the paper. He would ask his hon. and learned Friend to suppose the case of a fleet of merchantmen accompanied by a convoy caught in a hurricane, and some of them driven ashore, with a great destruction of property, and he would ask him whether, under such circumstances, he would introduce a new theory as regarded navigation, or the rigging of ships, especially if it appeared that on board the wrecked ships no proper look-out had been kept, that too much canvass had been carried, or that there had been too little ballast on board? There was no need to explain the metaphor; in fact, perhaps an apology rather than an explanation was due to the House for using a figure with regard to a subject of such gravity and solemnity. His hon. and learned Friend had stumbled upon an argument which was not a very happy one, when he assumed that because the Bank of Scotland was founded upon the principle of limited liability, and that the Glasgow banks had unlimited liability, and that as the Glasgow banks succumbed when the Bank of Scotland did not, therefore the sound effects of the principle of limited liability had been illustrated in contradistinction to the mischievous results of unlimited liability. He would beg to inform his hon. and learned Friend that, with the exception of one or two doubtful instances, all the banks of Scotland were banks of unlimited liability, and by all of them were their obligations met with as much readiness as by the Bank of Scotland. Now with regard to the Glasgow banks, no doubt some of the shareholders had suffered severely, but he believed that all the obligations of those banks would be met in the course of time, and he thought that the great body of public creditors or depositors had not suffered one farthing's loss. He himself was most unwilling to accede to any Motion which would militate against the security of the creditor, unless some equally good security were provided. He had always thought it his duty to vote against limited liability, except in the case of companies formed for carrying out railways and other undertakings of such a magnitude as to be beyond the reach of private individuals, for he

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thought that it was a principle fraught with danger to commercial credit. It was a sound principle, and one held by the best commercial lawyers of Scotland, as well as by that eminent authority Mr. Marshall, Lord Curriehill, that a man who shared the profits of any business was equally bound to bear the losses. Various taunts and insinuations had been thrown out by hon. Members of that House and by the public prints—and not the least, by the great Jupiter Tonans of Printing house Square, against the Scotch system of banking—taunts displaying an amount of ignorance which was only equalled by the intense and unworthy prejudice they indicated. There were two classes of institutions to which Scotland owed her prodigious advancement, if not her pre-eminence in many respects; namely, her banking system and her parochial schools, which had done more to elevate the moral and intellectual character and to develope the national resources of Scotland than any institutions that could be found in any age or country. He thought this discussion was ill-timed, and that they ought to wait until they got into smooth water again, but he would observe that the unlimited liability of the partners of joint-stock banks gave a valuable security to the poorer class of depositors which it would be most unwise to destroy. It was shown by the balance-sheet lately submitted to the partners of the Western Bank of Scotland that upwards of 26,000 of the depositors in that institution had sums below £50, and averaging only £19 12 s. 6d. each. The position of these humble depositors, who had entrusted their hard-earned savings to this bank, which was, unfortunately, in a state of suspended animation, would be greatly deteriorated under a system of mere limited liability. Emphatic testimony had been borne by a Government Department in favour of the principle of unlimited liability as a security for the payment of all the obligations of a joint-stock bank, because not only had distinguished noblemen and gentlemen in Scotland offered to take the dishonoured notes of the two Scottish banks which had suspended in payment of their rents, under the conviction that every one of those notes would eventually be honoured, but the officers of the Inland Revenue Department had also issued a notice in which they represented themselves ready to ac-
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cept them in payment of the public taxes; and this was a circumstance he wished particularly to impress upon the Chancellor of the Exchequer, as proving the confidence which was felt in the existing principle, and he might add that nothing had contributed more to the abatement of the panic. He had intended to meet the Motion of his hon. and learned Friend with a proposal for inquiry, which he now found to be informal; he trusted, however, that the House would allow him to state the reasons why an inquiry ought to be instituted. He thought his hon. and learned Friend (Mr. Headlam) had mistaken the causes of the late calamities. Malpractices, however, demanding a searching inquiry before that House had unhappily been rife. Was the case of the Great Northern Railway, which enjoyed limited liability, a favourable illustration of the advantages of that principle? The disasters which had occurred in connexion with joint-stock banks arose from gross mismanagement, breach of trust, and the neglect of a proper supervision of the officers. Moreover, there was reason to believe that for a series of years, in some one or other of these establishments, which he forbore to name, dividends two or three times as high as the sum fairly earned had been paid, merely because rival banks declared large dividends, and therefore it was necessary to keep up appearances without reference to the balance sheet. Again, if they were to believe the public prints, the entire available means of some of these institutions had been diverted from their legitimate object, and intrusted to two or three individuals, who used them for large trading or rather speculative purposes fraught with the greatest danger. Another mischievous practice which had much prevailed of late was the circulation of spurious bills of exchange called bills of accommodation, which purported to represent value interchanged between the parties, though no such value had really been interchanged. He did not wish to prevent one person becoming security for another, but the issue of these documents was something akin to forgery, and should be made an indictable offence. He hoped the Government would feel it to be their duty to carry out the suggestion of the right hon. Gentleman the Member for the University of Oxford, and consent to an inquiry into the causes of the commercial calamities that had

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fallen upon the country. He had refrained from saying whether the inquiry which he now asked for should be by a Committee of that House or by a Commission appointed by the Crown; but he felt strongly that they would fail in their duty if they ignored the circumstances that had led to such frightful evils as he had described, and he trusted that even this short Session would not terminate without something being done to justify the expectations of their constituents on that head. Instead of moving the Resolution which he had placed on the paper, he should meet with a direct negative the proposition of the hon. and learned Member for Newcastle.
MR. COLLIERsaid, that having in a previous Session moved a Resolution in favour of the principle of limited liability, a Resolution which had been carried, and had formed the basis of subsequent legislation, he would not shrink from carrying out that principle to its utmost limits; he would consent that all mercantile firms, including bankers, should be permitted to contract with the public either on the ground of limited or unlimited liability, the public having full notice of the terms of the contract, and exercising their discretion whether to trust them or not. This principle was based on the assumption that the mercantile classes were better judges of their own interests than either that House or the Government; and if the Resolution of his hon. and learned Friend (Mr. Headlam) had been confined to the assertion of that principle he should have felt bound to give it his support, but it went much further, and committed the House to the expression of an opinion that unlimited liability was the cause of a great number of disasters, and that banking carried on upon the principle of limited liability was better than banking conducted with unlimited liability. Now, he thought it would be extremely unadvisable for the House to give an opinion upon this subject. It was not for the House to say that one mode of banking was better than another; it was enough for them to say that they would not interfere, but that hankers and the public should be left free to choose for themselves. If, however, an opinion was to be expressed, he thought it should be just the reverse of that asked for by his hon. and learned Friend, for though he would allow banks to be established
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on the principle either of limited or unlimited liability, he thought that of the two an unlimited bank was better than a limited one. He would not prevent other people putting trust in a limited liability bank, but he would not do so himself. Of the two classes of persons whose interests were at stake—the shareholders and the public—he thought that if either were to be protected the interests of the public deserved more consideration than those of the shareholders. In the first place the shareholders were a very limited class as compared with the public; and again they had some cognizance of, and had, or ought to have some control over the conduct of their directors, while the public were altogether ignorant of their proceedings and innocent of their misdeeds. Take the case of the Royal British Bank, in which the greatest possible mismanagement, not to say fraud, had taken place. Even in that case the public had not suffered very much, for they would receive 16 s. in the pound, and but for the grievous law expenses, which were referable only to a state of the law that was wholly indefensible, they would have been paid to the last farthing. His hon. and learned Friend said that unlimited liability encouraged speculation, while limited liability discouraged it; but that statement was at variance with all the arguments that had hitherto been urged upon the subject. It seemed to him to ignore all the experience we had of human nature to suppose that the man who had nothing to lose was not more likely to speculate rashly than the man who was liable to lose all that he had. Surely, the fear of loss must always be a great check upon the desire of gain. The arguments hitherto employed against unlimited liability were, that it checked commercial enterprise, and, on the other hand, it was contended that limited liability had a tendency to promote enterprise, to expand our commercial energies, and to some extent to encourage speculation; but now his hon. and learned Friend had discovered for the first time that all these arguments were fallacious, and that the tendencies of limited and unlimited liability were exactly the reverse of what everybody had hitherto supposed. He would not retain the House further than to say that for the reasons he had stated he could not support the Resolution of his

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hon. and learned Friend as it then stood.
MR. JAMES EWARTsaid, he could see no reason why, as the House had adopted the principle of limited liability for other joint-stock partnerships, it should not be extended to joint-stock banks. The great objection he had to unlimited liability in banks was, that it induced persons to deposite large sums of money in them, and bill-brokers to discount to a great extent, which they would not do but for the reliance they placed upon the private fortunes of the shareholder. Hon. Members would remember the failure of a bank in South Wales some years ago. The bills upon the bank showed on the face of them a most wild and extravagant system of banking operations. At that time he was extensively engaged in trade, and discounted bills for them, and having obtained a list of all the shareholders in the concern he did not hesitate to go on discounting. At length he got somewhat alarmed and stopped the facilities which he had offered to them. The consequence was, that as other parties followed his example, the bank stopped, to the ruin not only of the unfortunate shareholders, but of very many persons in the district. He would give his cordial support to the Motion of the hon. Member for Newcastle.
MR. WYLDsaid, it seemed to be assumed by the hon. and learned Member for Plymouth (Mr. Collier), that on the failure of a bank which traded on the principle of unlimited liability the public were not sufferers, but the truth was that in every such instance the public were severe sufferers. In the case of the Royal British Bank only 8s. in the pound had been declared, and it was supposed that 18 s. 6d. would be paid after exhausting the whole shareholders, but this arrangement had not yet been carried out. In unlimited liability banks they had few of the wealthy and respectable portion of the community. The shareholders were usually people of small means. In the Royal British Bank many of the shareholders were governesses, shopmen, and clerks, &c. Though at first sight unlimited liability held out the prospect of obtaining means enough to meet all claims, yet in reality it was not so. Those who were in good circumstances left the country, and those who were compelled to remain had to pay as they could. He knew from
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his investigation into the affairs of the Royal British Bank that if the principle of limited liability had been adopted the whole sum due to the creditors would have been paid. If the hon. and learned Gentleman (Mr. Headlam) did not succeed in carrying his Motion, he trusted that the Government would allow the subject to form part of the investigation entrusted to the Committee to be appointed.
MR. LOCKE KINGremarked, that he thought it important that one great distinction between banking and other trades should be kept in mind. Other traders employed their own capital, but bankers traded with the capital of other parties. If the principle of limited liability had been applied to banks he believed that there would have been far more distress than had actually occurred during the last few months.
MR. WEGUELINsaid, he was unable to vote for the Resolution as it stood. To limit the liability of banks to their paid-up capital would be, in his opinion, not only prejudicial to the banks themselves, but also to the public interest. He agreed with the hon. Member who had just sat down, that bankers dealt with the capital of other people, and in that respect there was a marked distinction between banks and other trading establishments with the exception of insurance offices. But if Parliament limited the liabilities of a bank it would also limit its credit, and the credit of a bank was its sole and true capital. Its credit was that on which it traded and which induced people to deposit their money. It was for the public interest that banks should be stable, sound, and of undoubted character, in order not only that the depositors should be protected, but that in time of pressure there should be no question about the stability of the banks, and no difficulty as to their circulation. It was true that in former years the Bank of England opposed the establishment of joint-stock banks. He did not remember the grounds upon which that opposition was founded, but he was satisfied that it was based upon public grounds. The Bank of England did not either then or now desire to see an unsound system of banking introduced into this country, for no establishment was more prejudiced than the Bank of England the moment commercial credit was shaken. It was most desirable in the interest of

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the Bank of England that none but sound and stable banks should be established. Mismanagement had not been confined either to banks of limited or unlimited liability, and when it was stated that prudent men would not join in any bank of unlimited liability he could assert that he knew many wealthy and most respectable men in London who were members of joint-stock banks. The same also might be said of joint-stock banks in Manchester and Liverpool. He would admit that as far as prudence was concerned he should not like to be a shareholder in a bank of unlimited liability, unless the capital of the bank were so large that no doubt could be entertained that the capital would be sufficient under any circumstances of mismanagement. An argument had been used in favour of limited liability which certainly in his opinion had some weight. In the event of mismanagement occurring the shareholders who might be cognizant of that mismanagement knew that if they exposed the affairs of the bank they might stop it, and thus bring its liabilities upon themselves, and this rendered them timid and unwilling to expose that mismanagement. It was supposed that if their liability were limited they would no longer feel this timidity, and that the mismanagement would not go so far. There was force in that argument, and when he said that he could not support the Motion as it stood on the paper he meant that if the hon. and learned Gentleman (Mr. Headlam) would propose that there should be a large reserve of liability behind the paid-up capital, as in the colonial banks, where it was doubled or trebled, he should be happy to support the hon. and learned Gentleman. One objection to the proposal was, that the public could not very well take into consideration the difference between limited and unlimited liability in banks. Besides, it must be considered that the public are not exactly free agents in their transactions with banks. If a trader did not wish to place himself under a disadvantage with other traders he must take the notes of the banks in his neighbourhood, whether they were banks of limited or unlimited liability. There was therefore an objection to mixing up sound with unsound banks in the same neighbourhoods. The argument had been used that unlimited liability had not been sufficient for the protection of
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those who had trusted joint-stock banks. That argument had astonished him, because, although ever since joint-stock banks had been established there had been many deplorable failures and to immense amounts, he could only recollect two instances in the last twenty-five years in which the depositors had not been paid in full—the one being the Glamorgan Bank, which paid 18s. or 19s. in the pound, and the other being the composition paid by the Royal British Bank. That was a very strong argument, as far as the public were concerned, in favour of unlimited liability. The difficulty of obtaining prudent managers was the same in both cases. It was well known that the circumstance which had prevented the increase of joint-stock banks in London was the difficulty of obtaining safe and prudent managers. It was easy enough to get ornamental and aristocratic directors, and to obtain good commercial names, but the great difficulty was to get a good manager. That difficulty would remain whether banks were established with limited or unlimited liability. He recollected that a few years ago there was a great desire to establish joint-stock banks in London in consequence of the large dividends paid by some of these banks, which were very well managed so far as he knew. Great difficulty was then found in obtaining persons who could be prudently trusted with the management. One or two applications were made to clerks in the Bank of England to undertake these concerns. Some accepted the offer, and he felt it as a great compliment to the way in which the business of the Bank of England had been conducted that these offers should be made. He thought, too, he might add that the prudent management of the London joint-stock banks was in great part owing to the excellent traditions of the Bank of England and to the Lombard Street style of banking; but it could not be expected that those principles would be carried out if banks were extended all over the country; but you would have weak and ill-managed banks, and in periods of pressure like that which had just occurred, instead of one or two joint-stock banks failing, they would go down by the dozen. For these reasons he was desirous of seeing the proposition modified, so that there should not only be a large paid-up capital, but a large reserve of liability.
THE CHANCELLOR OF THE EXCHEQUER: I quite concur in the observation made by my hon. and learned Friend the Member for Plymouth (Mr. Collier) with respect to the form in which my hon. Friend who has made this Motion has expressed it. The Motion is in the form of an abstract Resolution—which is a. form to which the House is always somewhat cautious in acceding—"that the unlimited liability of shareholders in joint-stock banks gives rise to a species of credit injurious to the interests of the public, and that the present law enforcing the adoption of this principle requires alteration." Now, if he had expressed his Motion "that the present law, which enforces on shareholders of banks unlimited liability and leaves them no option, is inexpedient and requires revision," the House might, perhaps, have been willing to entertain that proposition. But I must profess my unwillingness to be bound down to a formula of this sort, "that we think that the unlimited liability of shareholders in joint-stock banks gives rise to a species of credit injurious to the interests of the public." The inference which I understand naturally follows from these words is, that we ought to prohibit unlimited liability, and make it imperative on all shareholders in banks to have limited liability. If unlimited liability lead to dangerous consequences, surely it may be argued that we ought to set about enforcing limited liability. That is a conclusion to which I, for one, object to being bound without further investigation, and therefore, agreeing with my hon. and learned Friend the Member for Plymouth, I cannot vote for this Resolution. But the question is one of importance, particularly at the present moment, and perhaps the House will allow me briefly to express some opinions upon it. There is one distinction which I think has not been sufficiently adverted to in the course of this debate. The functions of banks are two. One function is the issue of notes, and the other is the receipt of deposits. There seems to me to be a considerable difference in the question of the unlimited liability of shareholders with respect to those two functions. When a country bank issues notes, although those notes are not, according to our law, a legal tender, as are the notes of the Bank of England, nevertheless they
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do in the district pass current. They practically discharge the office of money, and no person in the ordinary course of business has an option about accepting them. Therefore the note of a country bank passes, not on the credit of the person who pays it, but on the credit of the bank which issues it. A tradesman in a country town to whom a country bank-note is offered in payment of a debt practically is unable to refuse it, although he does not take it on the credit of the person who asks him to receive it, but on the credit of the bank whose name it bears. He can hardly be said to be a voluntary agent, like the depositor who selects the bank for the deposit of his money; and it appears to me that unless you require the deposit of securities for the issue of notes,—unless you require notes to be issued against bullion in the custody of public functionaries,—unless you take some precaution of that kind, it will be unreasonable to deprive the holder of notes of the security from the unlimited liability of the shareholders. With regard to that part of the functions of a bank I must altogether dissent from the doctrine of the hon. and learned Gentleman who has moved the Resolution, "that the unlimited liability of shareholders in joint-stock banks gives rise to a species of credit injurious to the interests of the public." On the contrary, it seems to me that with respect to the issue of notes it gives rise to a species of security to which the public are entitled, and of which it would be most unjust to deprive them. My hon. and learned Friend's arguments, however, did not apply to that class of obligations. They applied altogether to the deposit business of banks. There is no doubt that many of the joint stock banks may be considered to a great extent as mercantile firms, and that when we have applied to other mercantile associations the principle of limited liability—when we have by statute given to those associations the option of having limited or unlimited liability, reasons may be fairly alleged against preventing banks, with regard to the deposit portion of their business, from conducting their business on the principle of limited liability. But I will call the attention of the House to the manner in which limited liability came into our legislation. We began by introducing it by special Acts with regard to large works

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and projects, involving great expense, such, for instance, as canals and railways. The argument which prevailed in Select Committees of this House, and which was accepted as authorising the establishment of special Acts derogating from the general law, was, that it was expedient to encourage enterprise, that persons would not go into great and uncertain undertakings with unlimited liability, and that it was desirable, therefore, to limit their liability. That was the way in which the principle was introduced into our legislation. It was first engrafted into local Acts, and then embodied in a general statute, applicable to mercantile associations, and I have always understood that one of the main arguments relied upon for applying it to mercantile associations was, that it promoted mercantile enterprise. That argument, let me observe, does not apply to banks. There is no object in promoting enterprise in banks. In fact, one of the objects which you would seek to attain with regard to banks, is rather to check their credit and any tendency to speculation incident thereto than to increase it. And I must admit that I believe one of the effects of the limited liability of banks would be, as has been remarked in the course of this debate, that it would in some degree repress undue credit, inasmuch that at present the knowledge that various wealthy persons with large possessions are among the shareholders of a bank induces discounters to look to the name of the bank only on the back of a bill, to be indifferent to the bill itself, and not inquire into its character. I think it is not an unfair argument to urge that if the liability of the shareholders were limited, and the credit of the bank were therefore less comprehensive, bill-discounters would look rather to the character of the bill itself than to the single credit of the bank, and that it might introduce wholesome caution among commercial men with respect to such transactions. That argument, however, is accompanied by other considerations, and I confess that, looking to the fact stated by the hon. Member for Southampton (Mr. Weguelin), who spoke with so much ability on this subject, that the great majority of joint-stock banks which have failed have ultimately proved solvent and discharged all their obligations, it is strongly in favour of maintaining the present law, and not abridging the security which depositors are certainly entitled to, if they
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can obtain it. The suggestion, therefore, which I shall make to the House will be, that if they should agree to the Motion which I shall submit on Friday night for the appointment of a Committee to inquire into the question of banking, the question of limited or unlimited liability with respect to joint-stock and other banks be considered by that Committee. It will properly fall within the scope of their inquiries. It will certainly involve other questions, such, for instance, as to the security which may be taken for note issues. It can hardly be considered by itself on the general ground of the limited liability of mercantile associations, and in that manner the House will be more likely to come to a satisfactory conclusion on the subject than if they accede to the Motion of my hon. and learned Friend. I therefore must be under the necessity of voting against the Motion of my hon. and learned Friend.
MR. MALINSsaid, he agreed in thinking with the hon. Member for Southampton (Mr. Weguelin) that the joint stock banks of the metropolis had been conducted in a more satisfactory manner than those in the country, but at the same time no one could look at the recent failures of the Royal British Bank and the London and Eastern Banking Corporation without coming to the conclusion that the present system of unlimited liability was not based upon a safe, sound, and sensible principle. There were advantages, no doubt, in the unlimited principle, but there were also disadvantages which brought discredit on the country and ruin on shareholders, and it therefore became incumbent that the House should take some steps to prevent their recurrence. The principle of unlimited liability allowed joint-stock banks to obtain a greater degree of credit than they could otherwise command. It had been stated that without it acceptances of the Glamorganshire Bank would not have been discounted, and in that event, the public would to a certain extent have been benefited when the bank failed. The hon. Member for East Surrey (Mr. Locke King) argued that there ought to be an exception made with respect to banks, because they traded with the capital of others, but surely the man who traded with goods entrusted to him on credit, traded just as much on other people's capital as the banker who traded with the bank-

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notes and sovereigns deposited with him. The two cases were exactly the same, and the principle of limited liability applied equally to both. The hon. Member for Southampton (Mr. Weguelin) had confessed that he should be very unwilling to be a shareholder in an unlimited joint-stock bank, and after recent experience that opinion probably would be shared by a majority of men of capital, experience, prudence, and far-seeing sagacity. But these were exactly the sort of men wanted to conduct the banking operations of the country, and who were prevented from engaging in that kind of business by the evils of the present system. It was most desirable that the proprietary should consist of such men, instead of shareholders, not one in ten of whom could meet their liability, when the occasion arose, and whose connection with a bank of unlimited liability was calculated to deceive the country. It seemed to him that the Motion of his hon. and learned Friend was not put in a tangible shape. He was not for enacting a compulsory limited liability, but would tender the option to joint-stock banks of conducting their business on either principle. If the principle of limited liability were chosen, of course the usual notices would have to be given, the public would know exactly the limit of the liability, and every man could choose for himself whether he would do business with the limited or unlimited banks; and if the limited principle did not find favour the banks conducted on it would soon have to shut their doors, and no harm would be done. At any rate the adoption of the limited principle would teach caution, and would never involve shareholders in the ruin and misery which had been produced by the unlimited banks. It would induce men of capital and experience to join these concerns, it would improve the condition of the banking interest, and confer a great been on the country at large. He rejoiced to find so strong a feeling in that House against the compulsory principle of unlimited liability, and he was well pleased that two such authorities as the Chancellor of the Exchequer and the hon. Member for Southampton had ranked themselves among the antagonists of such a principle. Every one must allow that the present state of things was most unsatisfactory, and could not be
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allowed to go on without some attempt at amendment.
MR. T. HANKEYsaid, that if he supposed the Resolution of the hon. and learned Member for Newcastle was intended to recommend the compulsory adoption of limited liability by all joint-stock banks he should not vote for it; but all that he understood him to propose was that it should be left optional, just as it was with every other joint-stock undertaking. His wish was to see the law which applied to other joint-stock undertakings extended to joint-stock banks; nor had he heard any argument to convince him that such an extension would have any other effect than to give greater confidence to the public, and induce persons of capital to embark their money in that species of trade, which under the uncertainties of the present system they were deterred from doing. With these convictions, and with the view of rendering the meaning of the Resolution upon this point clearer, he should move as an Amendment the substitution of the following words:—
"That the present law enforcing the unlimited liability of the shareholders in joint-stock banks requires alteration."
MR. PULLERseconded the Amendment.
Amendment proposed, to leave out from the word "That" to the end of the Question, in order to add the words, "the present Law enforcing the principle of the Unlimited Liability of their Share-holders on Joint Stock Banks, requires alteration,"—instead thereof.
MR. BUCHANANobserved, that he thought, as the subject involved questions of great importance, with respect to which much difference of opinion prevailed, that the best course would be to adopt the suggestion of the Chancellor of the Exchequer, and refer the whole matter to a Committee.
MR. HEADLAM,in reply, urged that the Motion was one which ought not to be got rid of by special pleading. Nor did he see any reason for altering its terms, as it expressed no opinion that banks on the principle of unlimited liability should not be permitted to exist; all that it declared being that the present law enforcing the adoption of unlimited liability required alteration, and he had certainly heard no valid objection to such a Resolution. As to referring the

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subject to a Committee, the effect would be wholly nugatory. Twenty gentlemen could be as readily found to give evidence in support of one principle as the other; and when all was over the Committee could do no more than count the number of witnesses on either side and allow the public to balance the weight of testimony as they might think fit. Under the circumstances he would not accept the offer of the Government, therefore, to refer the subject to a Committee, but he had no objection to adopt the Amendment if the House should prefer it to the Resolution which he had proposed. The subject was of such a nature, however, that he was anxious to take the opinion of the House upon it.
Question, "That the words proposed to be left out stand part of the Question," put, and negatived.
Question put,
"That the words 'the present Law enforcing the principle of the Unlimited Liability of their Shareholders on Joint Stock Banks, requires alteration,' be added, instead thereof."
The House divided:—Ayes 47;Noes 111: Majority 71.

BEVERLEY ELECTION.

  PROSECUTION ORDERED.
  Resolution (3rd August last) reported from the Select Committee on the Beverley Election Petition read:
  Ordered,
  "That Mr. Attorney General be directed to prosecute Edward Auchmuty Glover, esquire, in respect of the Declarations made and signed by him, under the Act 1 and 2 Victoria, c. 48."
  Ordered,
  "That the proper Officers of the House, and the Shorthand Writer attending this House, have leave to attend and give evidence, and to produce such Papers and Documents as may be required, on the trial of the said Edward Auchmuty Glover, esquire."

MAYO WRIT.
COLONEL FRENCH COLONEL FRENCH moved:
"That Mr. Speaker do issue his warrant to the Clerk of the Crown in Ireland to make out a new Writ for the electing a knight of the shire to serve in the present Parliament for the county of Mayo, in the room of George Henry Moore, Esq., whose election has been determined to be void."
COLONEL NORTHsaid, he rose to oppose the Motion on the ground that the Committee that tried the petition, and of which he was a Member, thought that the writ should not be issued until the
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result of the trial ordered by the House with reference to the last election was known. The inquiry lasted nearly five weeks, and during its progress circumstances of such a nature were made known to the Committee as to induce them to recommend the House to suspend the issue of the writ until the trial of those priests, against whom a prosecution had been commenced in pursuance of a Resolution of the House, and the result of which trial would shortly be known. He therefore begged to move that the issue of the writ be suspended until then.
COLONEL FRENCHsaid, he would remind the House that when this question was brought before them last Session they resolved that the writ should be suspended during that Session; and he called upon the noble Lord at the head of the Government to put a stop to the attempt of the hon. and gallant Gentleman to overrule the privileges of the electors of Mayo.
VISCOUNT PALMERSTON: When this question was last brought before the House I certainly concurred in the opinion of those who thought that the writ should not issue, and that it be suspended until a certain prosecution was terminated, believing at that time that that prosecution would take place in the course of the autumn, and that before Parliament met again the House would be in a condition to order the issue of the writ. It is perfectly unnecessary to explain the reason why that result has not taken place. The prosecution is still postponed, and I confess, under these circumstances, it appears to me doubtful whether it is right and proper that we should continue to oppose the issue of the writ. I am bound to say that the objection which was urged against its issue last Session is no longer tenable, and as far as I am concerned, I have no objection whatever to urge against the Motion of the hon. Member for Eos-common.
Motion agreed to.

THE QUEEN'S MESSAGE— PENSION TO SIR HENRY HAVELOCK.

  RESOLUTION.
  HER MAJESTY'S Message considered in Committee.
  (In the Committee.)
  HER MAJESTY'S Message read, as follows:—
  "VICTORIA R.
  "Her Majesty being desirous of conferring a signal mark of Her favour and approbation on Major General Sir Henry Havelock, Baronet, K.C.B., for the eminent and distinguished services rendered by him in command of a body of British and Native Troops in India, and particularly in the gallant and successful operations undertaken for the relief of the Garrison of Lucknow, recommends it to the House of Commons to enable Her Majesty to make provision for securing to Sir Henry Havelock a pension of One Thousand Pounds per annum, for the term of his natural life.
  "V. R."
  VISCOUNT PALMERSTON: I rise, Sir, to perform a duty which is most gratifying to myself, and which I trust, nay, I am sure, will he equally gratifying to the House,—that is, to propose a Resolution in accordance with that intimation of the wish of the Sovereign which has just been read from the Chair. It is almost unnecessary, I am persuaded, that I should say a single word in order to recommend a Motion to the House in favour of which I am convinced every hon. Member will be only too glad to vote. It was said by Mr. Canning that India is a land fertile in heroes, but the fact is that India is a land fertile in those events which give to British subjects the opportunity of displaying those great and heroic qualities which abound so much among the inhabitants of the nation to which we have the happiness to belong; and among those who have of late had an opportunity of distinguishing themselves, few have been more fortunate than Sir Henry Havelock, and none have better availed themselves of that fortune. Sir Henry Havelock is not a soldier of yesterday. He has served with great distinction in almost all the operations which of late years have been carried on in India. He served with distinction during the operations in Burmah, and with equal distinction in Affghanistan. Wherever, in short, British troops have been called upon to act for the honour, dignity, and interests of their-country in India, there Sir Henry Havelock has been known to hold a prominent
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  and distinguished position. As regards the late operations in India, to which the Resolution which I am about to propose more particularly relates, Sir Henry Havelock has had the good fortune in the short space of two months to gain nine victories over a force numerically very superior to his own, and in the course of those brilliant operations not only has he defeated the enemy nine or ten times, but he has taken, I behave, seventy pieces of cannon. The two men who in the late operations in India have gained the greatest and most signal military successes are Sir Henry Havelock and Sir Archdale Wilson. Of these two Sir Henry Havelock belongs to the Queen's Service, and it was therefore for Her Majesty to recommend to this House to take into consideration what grant should be bestowed as an acknowledgment for his services. General Wilson, on the other hand, belongs to the service of the East India Company, and the East India Company claim as a right to themselves the privilege of doing for Sir Archdale Wilson, as a reward for the capture of Delhi, that which Her Majesty recommends this House to do for Sir Henry Havelock, who is an officer in her own service, in reward for his distinguished services at Cawnpore and Lucknow. Her Majesty has conferred upon both of these distinguished officers the dignity of a baronet, and she has also conferred upon them that other distinction which I believe is dearer to a soldier than any title he can receive—I mean that military order which is an object of the utmost desire and ambition, and the greatest stimulus to exertion to every soldier. It is, however, usual in cases of this description for the Sovereign to invite Parliament to partake in a duty which is most agreeable to the Sovereign, and which can be no less agreeable to Parliament—I mean that of acknowledging and rewarding the distinguished services of her officers. I must also add that, although Sir Henry Havelock and Sir Archdale Wilson have so greatly distinguished themselves, we must not forget, while we are commemorating their actions and rewarding their services, that there are others who. although they have not perhaps had the same good fortune of having the opportunity afforded them of performing such specific actions as have fallen to the fate of those two officers, are

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  still well worthy of having their services recorded. In recording the exertions of Sir Henry Havelock we must not forget the chivalrous conduct of Sir James Outram. That gallant officer, when he joined the force under Sir Henry Havelock, might, from his superior military rank, have assumed the command, but, with that delicacy of feeling which is ever the concomitant of true courage, he nobly abstained from doing so, and placed himself as a volunteer under the orders of General Havelock, because he thought that the man who had gone through such difficulties and dangers, and who had made such great exertions to relieve Lucknow, ought not to be deprived by the arrival of a superior officer of an atom of glory, but that he ought to be left to finish that which he had so well begun. The list of those who have gained distinction in this unfortunate and calamitous war is a numerous one:—Wilson, Havelock, Greathed, Eyre, Salkeld, Home, the last two of whom we can only deeply regret, for as they lived so they nobly died in the service of their country; Nicholson and Neill, two officers whose loss the country must most deeply deplore. Then, again, we have Sir John Lawrence, who, although not engaged in active military service in the field, yet by his energy, by his powers of administration, by the manner in which he developed and organized the civil and military resources of a province, which was supposed by those who at one time professed to be authorities upon the subject to be our weak point, but which has turned out to be our strong point, has performed great services to his country, and those services will no doubt be done justice to when the time arrives for taking a general review of the career of all those engaged in the conduct of operations in the East. Then, again, we have General Wheeler, who also, placed in a position of the utmost difficulty and danger, nobly did his duty, but lost his life in the service; Chamberlain, Cotton, Edwardes I might add to this list;—in fact, there is hardly a single officer who has not been called upon in the course of these events to perform any duty who has not acted in a manner which would entitle his services to be enrolled in the annals which record the military fame of his country. At present, however, my duty is to confine myself to the case of Sir Henry Havelock, and therefore I will not trespass longer upon the attention of the Committee, but
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  will at once, Sir, place this Resolution in your hands.
  Moved to resolve—
  "That the annual sum of One Thousand Pounds be granted to Her Majesty, out of the Consolidated Fund of the United Kingdom of Great Britain and Ireland, to be settled upon Major General Sir Henry Havelock, baronet, K.C.B., for the term of his natural life, to commence from the 7th day of December, 1857."
  SIR JOHN PAKINGTON: Sir, I hope I may be allowed the great satisfaction of seconding the Resolution which has been proposed in terms so just and so appropriate by the noble Lord. I most entirely concur with the noble Lord in the belief that there can be no difference of opinion as to the propriety of the step which is now proposed. I think, on the contrary, that upon all sides and among all parties in this House there can be but one unanimous feeling of cordial concurrence in the proposal of the noble Lord. If there be, indeed, any Member of this House who feels any doubt as to the proposal of the Government, I think that that doubt will be as to whether the present proposal is sufficient to meet the desire of the public and the feelings of the House with regard to the acknowledgment due to those distinguished officers. I heard with great pleasure the manner in which the noble Lord coupled the names of Havelock and Wilson. The distinction drawn by the Government as to the pensions to those officers is of course, under the circumstances, perfectly correct; but there is no distinction, I will venture to say, in the gratitude we owe, and which, in common with all the public, we feel to those distinguished men. I think that, considering the climate, the time of year, the number of battles fought, and the distance marched, the march of General Havelock with his devoted band of heroes deserves to be recorded among the most brilliant achievements that shed lustre on our military annals. Nor less conspicuous, although of a different character, were the services of General Wilson and his heroic force before Delhi. Placed upon the heights before that town, he had to contend not only against the dangers and difficulties of the climate, but also against incessant, almost daily, attacks of an enemy greatly superior in number. We should bear in mind also one circumstance which the noble Lord omitted to refer to. The enemy with whom General Wilson had to contend were not only superior in number to the

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  force under his command, but they had also the advantage of that discipline which we had taught them, and they were armed with the very weapons which we had put into their hands; and although the relative superiority, man to man,—and a wonderful circumstance it is—of the European over the Native appears to be as great as it was in former times, before they had been disciplined by us, we must recollect that throughout this combat the Natives opposed to us have exhibited great skill and power in that important arm, artillery. If the authority of the Crown be shortly restored in India, as we must all hope it may be, I think we must look to the heroic valour of those gallant bands under Wilson and Have-lock as having been the primary cause of that result, for while those large reinforcements which the Government have sent out from this country to the East were lying becalmed upon the Equator or tossing about round the Cape of Good Hope, those two little bands, opposed to a force numerically stronger, succeeded in stemming that torrent by which the British power in India seemed in danger of being overwhelmed. I am glad that the noble Lord has done justice to the great and generous conduct of Sir James Outram. There never was an incident more honourable to a British officer or more clearly showing that generosity which so much becomes the soldier, than the order of the day issued by that distinguished man which we have lately had the pleasure of reading. When Sir James Outram arrived at General Havelock's position he had, as senior officer, a right to claim the command, but he did not wish that General Havelock should be interrupted in his heroic career, and therefore he relinquished the command of the force which relieved Lucknow. Let it be our earnest hope and prayer that the next intelligence we receive from India may confirm our expectation of the safety of that gallant band, and inform us that General Havelock has entirely succeeded in his great object, and that the garrison of Lucknow is entirely relieved from the imminent dangers which at present seem to surround it. Sir, while we pay just honour to the commanding officers, let us not forget the heroic gallantry of the troops who served under them. Nothing could exceed the difficulties and dangers encountered by the forces under General "Wilson and General Havelock, except the
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  distinguished bravery by which those difficulties and dangers were met; and I hope that I shall not be thought to encroach unduly upon the proper province of Her Majesty's Government if I throw out a hope that, considering how diminished by the fortune of war and the effects of the climate those two little bands now are—considering how few men still survive who have either gone through the entire siege of Delhi or have followed General Havelock from the beginning to the end of his marches—I cannot help entertaining a strong wish that it maybe deemed right and consistent with precedent by those who advise the Crown on these subjects that some distinguishing honour and reward should be conferred on the remnant of those gallant men to whom the country owes a debt of gratitude which it is impossible to overestimate or repay. With these feelings, Sir, I most heartily concur in the proposal made by the noble Lord, and I beg leave to second the Resolution which he has moved.
  MR. BRISCOEremarked, that he hardly needed to say how cordially he agreed in all that had been said by the noble Lord and the right hon. Baronet; yet with great humility and every apology to the House he could not help making a suggestion, which he trusted would be favourably received. He wished to add a few words to the Resolution, and after the proposed pension of "£1000 per annum to Sir H. Havelock," to insert "and to the next successor to the title during his life."
  MR. CHAIRMANinformed the hon. Member that his Amendment was irregular.
  MR. BRISCOEsaid, that he did not intend to move a proposition, but merely to throw out a suggestion for the consideration of the Government. It might not be generally known that Sir Henry Havelock was between sixty and seventy years of age, and that he had a son who had received the Victoria Cross. Under these circumstances, and considering the danger to which General Havelock's life was still exposed, as well as the nature of the climate, it would be a source of consolation to the brave old soldier to know that at his decease there would be some provision for his son; without which, indeed, the title would be a very inadequate acknowledgment of services the value of which no language could exaggerate. Sir Henry Havelock might

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  almost be said to have preserved to this country the empire of India. It would not be becoming to make any remark on the amount of the pension, which was certainly not large, considering the manner in which it had been earned. But if so deserved a mark of favour were made to extend to General Havelock's next successor, the House and the country would hail its proposal with acclamation. When the annuity was voted to Lord Gough, the sum fixed on was £2000, which was also to be paid to the two next surviving male heirs of that nobleman.
  ADMIRAL WALCOTTsaid, that as a member of the sister service he could not refrain from expressing their warm admiration of the brilliant achievements of these gallant officers in India. Indeed, he knew not which most to admire—the rapid marches and glorious victories of General Havelock; the magnanimous self-denial of General Outram, who scorned to deck his own brow with the laurels due to his comrade; or the siege, assault, and capture of Delhi, in all of which the same bravery—the same sublime heroism were displayed; nor would he omit from the bright catalogue the civil servants of the East India Company. The noble Lord at the head of the Government had described in terms so graceful, so spirited, and so appropriate, the services rendered by these brave men, that it would ill befit any other hon. Member to enlarge on this subject; but there was one topic on which the noble Lord had been silent that would awaken a generous response on the part of the House. No language that he could command could do justice to the heroism of those noble women who, triumphing over the natural weakness and timidity of their sex, stood unmoved amid threats that might well have moved the stoutest hearts, and with death staring them in the face feared it not until there was added to it the certainty of dishonour. With such terrors before their eyes they unhesitatingly sacrificed life, so dear to all, to escape what was far more repulsive, and, dying by their own hands, frustrated the savage—the demoniacal designs of the brutal miscreants who surrounded them. He had but one word more to add, in which he was sure that he would carry with him the feeling of his profession. He ardently wished that an opportunity might he given to the blue-jackets under the
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  gallant Peel of emulating the deeds of their brethren of the red-jackets.
  GENERAL CODRINGTONsaid, he should be sorry if in that House, although they were so unanimous, some military man did not rise before the Resolution was passed, and he had waited in the hope that some other member of his profession would express those feelings which he was sure would always be in perfect unison with the sentiments of the House on such a subject. Nothing that we had read of in any former days exceeded the gallantry, the determination, and the constancy under extreme difficulty which had characterised the marches, the endurance, and the actual fighting of the column under General Havelock; and the same must be said of the troops before Delhi, who had to resist perpetual attacks, not only under General Wilson, but also under the first commanding officer who took up a position before that stronghold, General Barnard. General Barnard had the greatest difficulties to encounter, and his great services ought not, to be forgotten. He started in the midst of the revolt without preparation, and though many persons were against his moving his troops (as they had also been against General Anson's moving them) in the middle of the hot weather—which, as they all knew, tried the English constitution—yet he resolved to march on Delhi. When he arrived before that place, he found the enemy in possession of a most important position, and although heavy marching had wearied his troops, he attacked and carried that post, and it had been subsequently held by a small force against a powerful enemy until it was eventually made the means of securing the effectual capture of the rebel stronghold. General Barnard was attacked there no fewer than ten times in twenty days; and when that fact was borne in mind, together with the constant accessions of strength which the mutineers received in Delhi, it could not fail to establish the claim of that commander to the gratitude of his country, or to perpetuate the recollection of his name. It was owing to General Barnard's having maintained that position in the face of all these difficulties that General Wilson, when he succeeded to the command, was able to hold it. Indeed, so strongly did General Wilson feel the difficulties of his position, that

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  at one time it was positively a question with him whether, if he did not receive reinforcements, he ought not to retire to Kurnaul. For the final operations, which were crowned by the capture of Delhi, the credit was due to General Wilson; and nothing could be finer than the patience, the resolution, with which he waited for a sufficiency of troops and supplies, and the courage which marked the great achievement of the assault itself; while, on the other hand, nothing could be more painful than the loss of General Nicholson and his gallant comrades who fell in its accomplishment. To all these officers the House and the country owed a lasting debt of gratitude, as also to the officers who served under Sir Henry Havelock. General Neill having performed important services in the Crimea, where he held a high command in the Turkish Contingent hurried out to India when the late war was over. The valuable assistance he rendered to General Havelock, to whom he marched with reinforcements, and then shared in the operations for the relief of Lucknow, could not be too highly praised; and his memory would be long cherished by a grateful country. It afforded him the sincerest pleasure to join in the Resolution by which the distinguished services of General Havelock and General Wilson were to receive their due reward, and it would add to the nominal title of a baronet, now conferred upon them, to feel, that in the one case "of Lucknow," and in the other "of Delhi," could be written after their names. He was quite sure there was no military or naval man who would not feel the deepest gratitude to the House for the unanimity with which this proposal had been received.
  MR. JAMES WHITEsaid, as the Committee had been addressed by hon. Members of the military and naval professions, he hoped that, as a merchant, he might be permitted to say a few words. He regarded the pension proposed as a very niggardly one, and quite unbecoming the dignity of that House, when they considered the weighty obligations under which this country was to General Havelock. If he was not misinformed, General Havelock was now some sixty-three or sixty-four years of age. His life was exposed to great danger from the climate alone, independently of the other perils by which it was constantly menaced. He would put it
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  to any gentleman connected with an insurance office, what was the value of a pension of £1,000 a year under such circumstances. Was it worth two, three, or four years' purchase. He believed the highest estimate would be three years' purchase. The sum proposed was so utterly incommensurate with the services rendered by General Havelock, that the country must entertain a very mean opinion of that House when it found that to such a man so insufficient a reward was offered. At the same time he could not forget the fact that General Havelock had not the honour of belonging to any very noble family. He begged to say that those who had returned from a humiliating and degrading campaign in the Crimea had received higher honours than it was now proposed to bestow for glorious achievements which would adorn the annals of this country. These observations had been forced from him, and he would only say that he regarded the pension now proposed as very inadequate to the services performed.
  VISCOUNT PALMERSTON: I cannot allow the expressions which the hon. Gentleman has thought proper to use with reference to the Crimean campaign to pass unnoticed. The hon. Member must be in a state of entire ignorance as to what took place in that campaign. He must have forgotten the battles of Alma and of Inkermann—he must have forgotten those long months of privation, and danger, and difficulty, which nothing but the courage of Englishmen could have enabled an army to surmount—he must have forgotten that the army landed after having suffered most severely from cholera; he must have forgotten that, after having undergone privations for two or three months, not only destitute of those ordinary conveniences which are almost invariably seen in the tents of soldiers during a campaign, but the men without their kits, the officers without their baggage, the troops still performed their duty without flinching, and in a manner honourable to themselves and to their country. I think the hon. Member must have forgotten that the army, having commenced its career under such difficulties, closed that career in a manner which elicited the admiration of the officers of other Powers. He must have forgotten that the army—which had to encounter difficulties unexampled, I believe, in history—instead

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  of meriting the terms which the hon. Member, most improperly, I think, and so unlike an Englishman, has applied to it—having covered itself with honours, was, at the end of the war, in a state of perfect discipline, and performed services of which the country was justly proud.
  MR. JAMES WHITEsaid, he wished to explain. God forbid that he should utter a word against the gallantry and indomitable courage of the army which served in the Crimea. He quite concurred in all the noble Lord had said in its praise. He should be unworthy the name of an Englishman if he said anything disparaging of British troops. He had referred to the campaign in a strategic point of view. He did not pretend to be learned in such matters, but he had spoken on the authority of German and French writers, who had criticised the tactics of the campaign. In the one campaign there had been success; in the other failure.
  VISCOUNT PALMERSTON: I will take it, then, upon strategic grounds. The two armies in the Crimea—French and English—besieged a fortress behind which there was an army equal, if not superior, in numbers to the allied forces, amply furnished with all the matériel of war, with stores which had been accumulated during many years. The allies occupied a position of extreme difficulty, at a great distance from their own resources; they conquered; they took the fortress, which was considered impregnable; and instead of failing in a strategic point of view, they gained advantages which enabled the allied Powers to conclude a peace, by which Russia engaged in future not to keep any naval arsenal in the Black Sea, and instead of maintaining a fleet of eighteen or twenty sail of the line in that sea, bound herself to confine her naval force to ten small vessels for purposes of police and customs. I think my hon. Frieud—if he will allow me to call him so—on reflecting a little upon the results of that campaign, will see that not only as regards the bravery and endurance of our forces, but also as regards strategic results, the expressions which he used in a moment of warmth, and perhaps without much reflection, were unjustifiable.
  MR. CROSSLEYsaid, he thought, considering the services of General Havelock, that he ought either to receive higher honours and no money, or that
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  if any pension was proposed it ought to be more proportionate to the eminent services which the gallant General had rendered to his country.
  Resolution agreed to: to be reported To morrow.
  House resumed.

MOTION FOR SUPPLY.
Committee on Motion, "That a Supply be granted to Her Majesty."
Queen's Speech referred:—Motion considered.
(In the Committee.)
Queen's Speech read.
THE CHANCELLOR OF THE EXCHEQUER THE CHANCELLOR OF THE EXCHEQUER moved, "That a Supply be granted to Her Majesty."
In reply to a question from Sir D. NORREYS,
THE CHANCELLOR OF THE EX-CHEQUERstated that it was not the intention of the Government to ask for any Votes in Committee of Supply before Christmas. The present Resolution related to a charge upon the Consolidated Fund, and was not in the nature of a Vote. He had considered the Report of the Committee of last Session with regard to proceedings in Committee of Supply, and he had prepared some Resolutions founded upon that Report, which he would submit to the House after the holidays.
Resolution agreed to; to be reported To-morrow.

BANK ISSUES INDEMNITY BILL.

  COMMITTEE.
  Bill considered in Committee:—
  (In the Committee.)
  Clause 1 agreed to.
  Clause 2. (The restriction on the amount of securities to be taken in the Issue Department suspended.)
  MR. MALINSsaid, the effect of the Government letter was to authorise the Bank of England to exceed the limited issue of £14,500,000 upon securities, but that letter was unlimited in its terms. It had been stated by the Chancellor of the Exchequer that that letter had been acted on only to the extent of £2,000,000. The whole of that sum, however, had not been issued to the public; but according to the accounts of the Bank of England, published in last Friday's Gazette, the amount of notes in the banking department was £2,268,000,

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  and consequently, if the Government letter had not been issued, and things had gone on as before, the amount of reserved notes would have been reduced to £268,000. The object of the Bill was to give legal validity to that which had been done by the Government contrary to law, but most beneficially to the public. The second section would suspend the operation of the Act of 1844 until the expiration of twenty-eight days after the first meeting or sitting of Parliament in 1858, and then came a proviso which introduced a most prejudicial qualification, the removal of which was the object of the amendment he was about to propose. The proviso was to the effect that if before the expiration of the time mentioned the Bank of England reduced the minimum rate of interest below the rate of 10 per cent, the suspension of the Act of 1844 should cease. So that, although the Bank might have a sufficient reserve to justify them in reducing the rate of discount, the effect of that provision was to make it obligatory on the Bank of England to maintain the enormous rate of interest of 10 per cent, or to bring the operation of the present Bill, as far as the second section was concerned, to an end. The Chancellor of the Exchequer stated last night that this was the highest rate of interest ever known in the history of the Bank of England since its foundation in 1697. The highest rate previously known was 8 per cent. Now, was it consistent with the well-being of this great commercial country that the rate of interest should be fixed at 10 per cent? Could commerce exist or flourish under such a rate? What was the operation of this rate of interest? In the first place it created alarm, and the borrower was afraid to ask the lender for money because that rate of interest was understood, while it prevailed, to act as a prohibition to the loan of money. It operated not so much against the great trader, the holder of first-class paper, as against the bills of the smaller trader, which were not discounted for less than 15 or 20 per cent. How was the trading interest to exist under such circumstances? Mr. Chapman in his evidence said that no person could trade anew on 10 per cent—that was, no person could enter into new transactions. Did the Govern-men, then, mean to proclaim that all new transactions in this country should be stopped for the next two or three
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  months? He had not as yet heard any reason given which could justify the raising of the rate of discount from 6 per cent in July to 10 per cent, as it stood now. The excuse assigned was that the gold was to be prevented going out of the country, and the exchanges were to be turned in our favour. But did this compensate for the ruinous depreciation in the value of our manufactures, which had taken place? He was assured, for instance, that silk within the last month or two had been diminished in value 40 per cent. In the iron districts of Wales, likewise, iron rails, which were before worth £8 per ton, were now attainable at £5 per ton. When it was considered how many thousands of men were engaged in the manufacture of these rails, it was no light matter to have the price reduced so that it would no longer answer the master's while to employ men to make them. It was supposed that if there were not this high rate of discount the result would be the withdrawal of the gold from the Bank of England. By the accounts in the Gazette of last Friday it appeared that the bullion in the Bank up to last Wednesday night was not less than £7,356,467, and that the amount of notes in the hands of the public was £21,102,430. Now, the gold was in the issue department, with the exception of a small quantity, some £300,000 or £400,000 in the banking department, and that gold, amounting to £7,000,000 in round numbers, was positively locked up, and could not be released except by the return of some portion of the notes representing those £21,000,000. Therefore it was only by the diminution of the notes that the gold could be taken away, and was it within the range of possibility that the whole £7,000,000 of notes would be returned to the Bank? From the return annexed to the Report made by the Bank Committee of last Session, it appeared that for the last eight years the notes in the hands of the public had not gone so low as £18,000,000. On the 22nd December, 1849, the amount was £17,803,000, but in the week following it had risen to £18,227,000, and since that the minimum had been £18,000,000, and that being the case, he asked on what principle could it be said to be, he would not say probable, but possible that the notes in the hands of the public should now be reduced below £18,000,000? It was impossible that the notes held by

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  the public could be reduced so low as £18,000,000, and as the amount of gold held by the Bank could be reduced only by a contraction of the circulation, the only reason given by the Government for maintaining so high a rate of interest as 10 per cent—namely, that it was necessary to preserve the gold in the coffers of the Bank—fell entirely to the ground. Then the notion was, that it was necessary to maintain the convertibility of our notes. The Bank at this moment had only £7,000,000 in gold in their coffers. Of the twenty-one millions of notes which were out, there were fourteen millions and a half nominally convertible but in reality inconvertible. By law they were issued on the foundation of securities, and, in fact, there was not gold in the Bank to meet them were they produced. The experience, however, of the ten years before the passing of Sir Robert Peel's Act showed that the minimum average of notes in possession of the public was £16,000,000, and since then it had never been less than £18,000,000. They had thus gone on for twenty years with the notes never below £16,000,000, and why then should they abstract from the public a rate of interest so prejudicial to all the great interests of the country? Mr. Chapman had stated, and the right hon. Gentleman himself had admitted last night, that it was a great national evil, when the rate of interest was so high as 10 per cent, or even 7 per cent; for when the Bank rate of interest was even 7 per cent, the interest actually paid by the shopkeeper and the farmer was always from 3 to 5 per cent more. "What then was the effect of the present state of things upon trade? They might read it in the daily papers and in the trade reports every Monday morning; from which it appeared that there was hardly a mill in Manchester at the present moment that was working full time. He did not deny that the monetary collapse in America might have had some share in bringing about our own troubles, but that share was a trifle compared with the effects produced by a feeling being universal, that every prudent man ought to suspend his operations and not enter into any new engagements so long as the rate of interest remained so high. It had been said the other night that the profits of trade would never pay a rate of interest as high as 10 per cent—why then
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  maintain that rate at such a point? The Chancellor of the Exchequer had stated that he was only following the precedent of 1847; but what was that precedent? The rate of interest in 1847 was 5½ per cent, and the Government authorised the Bank to infringe the law provided that they charged 8 per cent. The public would never have tolerated discounts at that price but for the relaxation of the law; but the operation of the Act had been gradually to familiarise them with 7 and even 8 per cent; although it had not enabled them to bear a high rate one whit the better. Take the case of mortgages. The land, they knew, only yielded 3 per cent, and how could they pay 10? If that rate were kept, the land must, in the course of a few years, change its proprietors. Take, again, railway property. It appeared that there were debentures secured upon railways amounting to £160,000,000, a large portion of which required to be renewed every month. Those railways could either not get their debentures renewed, or they must submit to ruinous terms. The evil effects of the present state of things upon the agricultural, the railway, the shipping, and the commercial community could hardly, therefore, be exaggerated; and in the meantime there was not the slightest necessity for it; the convertibility of the note not being in the slightest degree endangered. Twice, however, the Bank had been in danger of stoppage for want of notes, and because they had locked up so large an amount of gold in the issue department. He contended that they had exposed the interests of the community to the greatest possible danger, for no other reason whatever than the fancy of the late Sir Robert Peel for dividing the Bank of England into two departments. The only justification offered for maintaining a high rate of interest had failed them, and he trusted the Committee would agree with him—in as much as the House and the Government had expressed such unbounded confidence in the Bank of England, and concurred in praising the prudence, foresight, and judgment with which they had conducted the finances of the country—that the arbitrary restrictions imposed upon them by the proviso in the Bill should be expunged, and that, instead thereof, the Bank Directors should have a discretion vested, in them.
  Amendment proposed, to leave out from the words "Provided always" to the end of the clause.
  SIR JOHN TRELAWNYsaid, that, as he understood the hon. and learned Member, he wished that the Bank should discount in such a manner as should be advantageous to the interests of merchants, railway directors, and others engaged in trade, and that if the funds of the Bank fell short and it sustained any loss, the British public should make up the difference. He could not imagine that the hon. and learned Gentleman seriously expected the Government to support such a view. As one very much interested in the state of our finances and very anxious to keep down the Estimates, he could not assent to such a proposal. In 1844, being but imperfectly informed upon this subject, he read with much admiration the articles published by the hon. Member for Devonport (Mr. Wilson) in the Economist, which he then thought conclusively proved that as long as convertibility existed no notes which were needed could remain out in the market. It now appeared to him that some hon. Members wished to argue that what was true of a convertible was also true of an inconvertible currency. He himself was in favour of a convertible currency, and thought that the best course to pursue would be to leave gold as free as corn. In these matters we seemed to be performing the evolutions of a political quadrille. At one time we had a most ingenious sliding scale to keep corn in the country, and now we seemed to be adopting a similar machinery to preserve ourselves from a dearth of gold. If there was to be a Committee on banking, it was desirable that there should be upon it some person who on these subjects was a pure sceptic, who was not convinced, who was not pretentious, and who did not profess to be informed. That was his case. He professed to be ignorant and wished to be informed. The onus of convincing him lay upon the Government. At present he believed that they had no diagnosis—they were quite at sea, It had been well said that "fools rush in where angels fear to tread," and he was afraid that they had given an example of that, not only on questions of currency, but with regard to all matters of social and political economy. As, however, the Act of 1844 had broken down in the only instances in which it
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  had been tried, he for one was not prepared to endorse it.
  THE CHANCELLOR OF THE EXCHEQUER: I must be excused for not subscribing to all the doctrines contained in the speech of the hon. Baronet, but so far I agree with him that it would not be advisable for the Committee to expunge the proviso to which the hon. and learned Gentleman opposite (Mr. Malins) objects, and I hope in a very few words to be able to satisfy the Committee that no sufficient reason exists for altering the Bill as it is now printed. The ground upon which that proviso was introduced was this:—When the letter of 1847 was addressed to the Bank the Government inserted, and in my opinion judiciously inserted, the condition that so long as the Bank continued to exercise the extraordinary powers conferred upon it the rate of discount should not be below 8 per cent. The rate of interest then prevailing was, according to my impression, 6 per cent, but according to the statement of the hon. and learned Member for Wallingford 5½ per cent, and the Government required that it should be raised to 8 per cent. At that rate it continued for about three weeks. All that the Government did when they issued their letter in the present year was to say—
  "In order to prevent this temporary relaxation of the law being extended beyond the actual necessities of the occasion, Her Majesty's Government are of opinion that the Bank terms of discount should not be reduced below their present rate."
  It was with that understanding that the licence was granted to the Bank. In drawing the bill we thought that it was our duty to preserve the condition upon which the Bank was allowed to issue the £2,000,000 of notes, and that no reason could exist for our taking some arbitrary rate of 6 or 8 per cent, or any other below the rate of 10 per cent, which was spontaneously fixed by the Bank as determined by the then rate of discount in the market, and without any reference to the Government letter. That is the point to which I desire to call the attention of the Committee—that the rate of 10 per cent was not arbitrarily fixed by the Government. It was merely assumed as being the existing rate of discount at the Bank. The hon. and learned Gentleman seems to think that we are fixing this rate for some considerable time, whereas we only propose to establish it

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  for the period during which the infraction of the law shall continue. The moment the Bank of England find their affairs so far re-established as to consider it unnecessary to overstep the law they will be able to fix the rate of discount at whatever point they think convenient; but so long as the breach of the law is continued it does seem desirable that they should not reduce that rate below the point which it had reached before the suspension of the Act. I understand that the reserve of the Bank is gradually increasing, and it is no very sanguine expectation to hope that before very long they may have so re-established themselves as to render further transgression of the law unnecessary. On Saturday night last the reserve in the banking department, including gold and silver, amounted to £3,200,000; on Monday night it was about £3,590,000. Therefore they had then a reserve of about £1,500,000 beyond the excess of notes issued under the authority of the Government letter. It is to be hoped that this state of things will be progressive, and that ere long the state of the reserve will enable the Bank to reduce the rate of interest. But it is a fallacy to suppose that the Bank regulates the universal rate of interest. If the condition of things be such that it is profitable to money lenders to lend at less than 10 per cent, they will no doubt lower their rate of interest without asking the permission of the Bank. The very circumstance that the prevailing rate of interest is 10 per cent is a sufficient proof that the rate fixed by the Bank is not an arbitrary one, but that they are following the common rate of the market. The hon. and learned Gentleman says we shall injure the landed and railway interests of the country by fixing this rate of interest; but let me remind him that the mercantile rate of interest is not one that necessarily fixes all the other rates of interest in the kingdom. Can we have a better proof of this than the present price of Consols? If any one invests at present in Consols he cannot expect to realize anything like 10 per cent for his money, and I might refer to the practice of moneylenders on mortgages to prove that the rate of interest on real security is independent of the Bank rate, and not in any way affected by it. The hon. and learned Gentleman wishes us to believe that the whole trade of the country is dependent on this clause, but I trust that after the
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  explanation I have given the Committee will not agree to the proposal which he has made.
  MR. SPOONERsaid, that, notwithstanding what had fallen from the right hon. Gentleman, he still thought that the discounts charged by the Bank of England regulated the rate of private bankers. He would put a case which he thought was likely to arise. They all knew that the rate of discount was raised to prevent gold going out of the country. That had been accomplished, but in the operation they broke up the general confidence of the country; and in order to restore that general confidence and to revive trade it might be necessary to continue in circulation an amount of notes larger than the Bank limit permitted, because, when there was a want of confidence, the same amount of notes did not perform the same duty that a much smaller amount did in a time of confidence. If it turned out that the demand for commerce required the continuation of a larger amount of notes than the limit permitted, it might safely be granted, so far as the exchanges went, because they were turned. But if that happened, what would be the result? The Bank would say this:—"We must keep up the rate of 10 per cent, however injurious to the public, or unnecessary it may be as far as the trade in gold is concerned, because, if we do not, the privilege of continuing that increased quantity of notes in circulation which is necessary for the restoration of confidence will be taken out of our hands." If the Bank found no danger in the export of gold, but that public confidence required a large issue of notes to remain out some time longer, the matter might be left in their hands. He objected to any arbitrary rule being laid down in this House with regard to the rate of discount which the Bank ought to charge, or the amount of notes they ought to have in their possession; and he believed that the more the matter was left to their discretion the sounder would be their practice, and the better would it be for the country at large. If his hon. and learned Friend divided the Committee, he should give him his support.
  MR. GREERsaid, that, notwithstanding the statement of the right hon. Gentleman the Chancellor of the Exchequer, he also was of opinion that with an increasing reserve at the Bank amounting now, as he understood it, to a million

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  and a half and upwards, beyond the £2,000,000 in excess of their legitimate issue, the question of interest might be safely left to the discretion of the Directors; and he was perfectly willing to trust to their discretion and prudence that they would not make an injudicious reduction. Indeed it was not to be supposed that they would be over-hasty in making any reduction, for they had a pecuniary interest in keeping up the rate. He thought the country had been to a very unnecessary extent put under contribution to the banks and money-lenders, and the result was, as stated by the hon. Member for Glasgow, that trade was now staggering under an incubus of 10 per cent discounts. He thought, therefore, that the sooner this state of affairs was brought to an end the better. The Chancellor of the Exchequer seemed to think that because the Government of 1847, when authorizing a similar violation of the law, had stipulated for an advance of the rate of interest to 8 per cent, being, as he alleges, 2 per cent beyond the existing rate, the present Government was acting very graciously in permitting the Bank to retain their existing rate in 1857 on obtaining an indemnity for breaking the law. But it appeared to him that, supposing the Bank had acted with the same degree of prudence on both occasions the Government had only proved that they were too late in interfering when they did so in November last, the rate of interest having then risen to the unprecedented height of 10 per cent, and that they would have been justified, if not bound, by the precedent of 1847, in applying the relaxing principle when the rate of interest had been raised to 8 per cent. Besides, it must be recollected that at present 10 per cent was only the minimum rate of interest, and he was informed that the maximum rate was 12, 15, and even 20 per cent, a state of things that operated most injuriously upon all the mercantile transactions of the country. There might, no doubt, be an exception, as had been stated, in the case of loans upon real estate, which were of a permanent character, or investments in the funds; but there could be no doubt that the transactions affected by the present exorbitant rate of interest were immense, and made a difference of millions to the country. He, therefore, entreated the Government to consider whether it was abso-
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  lutely necessary that 10 per cent should be fixed as the minimum rate. Let it be reducible to 8 per cent without the Bank forfeiting the right of falling buck upon the £2,000,000 which they had issued in excess in case of a recurrence of the panic. He thought the hon. and learned Member for Wallingford (Mr. Malins) would not object to that proposal, and if he adopted it in his Amendment he (Mr. Greer) would give him his support.
  MR. CAYLEYsaid, one reason why the relief experienced in 1847 was not felt now was, that the commercial public had been so alarmed at the high rate of interest that they did not know yet what might follow, and therefore the Government, by delaying the adoption of measures of relaxation, had protracted the pressure to which the country was subjected. It was to be supposed that, in consequence of the reduction in the number and amount of commercial transactions consequent upon the present crisis, a much less amount of currency than usual was required to conduct them. He believed, for instance, that not more than £19,000,000 of currency was now required. If confidence were restored, it was most likely that the immediate effect would be to withdraw some £2,000,000 from the hoards where it was now deposited. Nor did he know that there was any measure more likely to have this effect of restoring confidence—withdrawing, say, £2,000,000 from the hoards where it was deposited, and increasing the reserve of the Bank of England to the same amount—than a reduction of the rate of discount by 2 per cent. Under these circumstances, he thought it would be wise to leave a little more discretion to the Bank than was done by the present Bill.
  SIR CHARLES WOODobserved, that he did not rise to address the Committee upon the general question, but only to set the hon. and learned Member right on a matter of fact. The hon. and learned Gentleman (Mr. Malins) had stated that in 1847 the rate of discount was 5½ per cent, and that it was afterwards raised to 8 per cent. The fact was, that the minimum rate of discount was 5½ per cent, which was not charged upon any considerable portion of the paper that the Bank discounted. The average rate of discount in 1847 was 7½ per cent, so that the real amount of the rise in the rate of discount was not much more than

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  a half per cent. [Mr. MALINS: I spoke of the minimum.] The minimum rate was 5½ per cent upon bills having only a short time to run, but the average rate was 7½ per cent, and the rise was only a half per cent on the average rate.
  MR. MALINSsaid, he had distinctly stated that the minimum rate of interest of the Bank of England in 1847 was 5½ per cent. If that were the minimum rate of interest in 1847, and 7½ per cent was the ordinary charge, now that the interest was at 10 per cent the ordinary charge would probably be 12 per cent. He did not require to be told by the Chancellor of the Exchequer that the present rate of interest did not affect all the ordinary relations of life, and did not proportionally increase the interest upon mortgages; but if a small freeholder went to the country bank with his deeds under his arm for a loan of money he would not get it at present for less than 10 percent. He would challenge the First Lord of the Admiralty to show that there was any danger of gold being taken out of the country if the present enormous rate of interest were reduced. He had been appealed to not to divide the Committee, but he had so strong a sense of the evils from which the commerce of the country was at present suffering that if he could find any hon. Member who would go out with him as a teller he would go to a division.
  Question put,
  "That the words 'Provided always, that, if before the expiration of the time' stand part of the Clause."
  The Committee divided:—Ayes 18; Noes 100: Majority 82.
  Bill reported without Amendment; to be read 3° To-morrow.
  Adjourned at Ten o'clock.