Lords Sitting of 17 February 1826

BANK CHARTER AMENDMENT BILL.
The order of the day being read,
The Earl of Liverpoolrose, pursuant to notice, to move the second reading of the bill entitled "An act for the better regulating copartnerships of certain bankers in England, and for amending an act, passed in the 39th and 40th years of the reign of his late majesty king George 3rd, entitled an act for establishing an agreement with the governor and company of the Bank of England," &c. He believed it would be most convenient for the discussion to call their lordships' attention to the different branches of the subject, in order fully to explain the measures which his majesty's government had thought it right to adopt under the present circumstances. He was well aware of the difficulties opposed to any measure of remedy which could be suggested. At the same time he could not help thinking that, if their lordships were disposed to look the difficulties fairly in the face, they would become less than they might at first sight appear to be. A noble lord opposite, had, on a former occasion, referred to what he had thought it right to say in the course of last session, on the subject of the speculations which were then going on. What he had then said, showed that the causes of the present evils were not unforeseen. It had been said, however, that he had not pointed out all the sources of the delusion, and that in particular he had not said any thing of the country banks. Now, he would refer to the recollection of those who heard him at the time, as well as to those floating records, which, though loose and hastily made, would be found substantially correct, for an account of what he had said at that time. It would be found, that upon that occasion he had gone even out of his way, to give notice to the persons embarked in

451
the wild speculations, of the hazard they were incurring. He had then observed, that one of the reasons of his mentioning the subject was, that those speculations were not confined to the metropolis, where people might easily know what they were worth, but that they were extended through the country by the agency of the country banks. Government had received intelligence of this, and numerous individuals knew of it as well as government. When he referred to this declaration, he did it out of no view of laying claim to any prophetic spirit, beyond that possessed by any other noble lord, who had directed his attention to questions of that nature. Their lordships must say, when they recollected the numerous speculations of the last year, the mining speculations, the loans to foreign countries, the various extravagant projects which were on foot, that it was impossible but, sooner or later, a powerful reaction must take place.
In discussing the proposed measures, he should first endeavour to ascertain the causes of the present distress. And he had no difficulty in stating, that he agreed with those who had ascribed the principal part of the evil to those extraordinary and extravagant speculations which were afloat in this country during the last year, and which undoubtedly had their origin in the then great prosperity of the country. Their lordships would recollect the speculations of that period. The foreign loans, the mining associations, the joint-stock companies, had come to such an extent, that a noble lord, then in his place, and a noble and learned friend of his, not then on the woolsack, had thought it right to devise measures to obstruct the passage of these projects through parliament. Their objects were plain to every man, and made him feel for the dangers to which the unwary were exposed. The spirit of adventure—the spirit of gambling and speculation—was pushed to an extent never exceeded at any period of the history of this country since the celebrated South-sea bubble. This spirit of adventure and speculation was not confined to these new objects of speculation, but extended itself to all the branches of legitimate and ordinary trade. Their lordships had lately heard a great deal of the danger of giving freedom to trade, and much of the evils had been ascribed by some persons to those acts of parliament, by which some branches of trade had been liberated; but, the greatest speculation had taken place
452
in those articles, the trade in which had always been free. Their lordships had ordered some returns of the imports and exports of certain articles of commerce and raw materials to be laid on their table. They had called for these papers that they might compare the speculations and the trade of different years. These accounts were made up of the average of the three years before the last, in order to compare the extent of the trade in that year with the three preceding years; and a fairer comparison could not be made, because those three years, and more particularly the last two of them, were years of great commercial prosperity. He would enumerate some of the principal. In the years 1822, 1823, and 1824, the imports of sheep-wool amounted to 20,341,0761b. In the last year, the amount of the same imports was 38,703,682lb., being an increase of 90 per cent. In cotton wool, for the same period, the average imports amounted to 161,206,751lbs., while, in 1825, it amounted to 222,457,616lbs., being an increase of 38 per cent. The next article to which he would call their lordships' attention was indigo, the imports of which had risen from 5,077,878lb. in the three years, to 7,530,534lb. to which they amounted last year, and which was an increase of 48 per cent. The loads of square timber imported in the three years preceding the last, were 551,496. In the last year they amounted to 664,186, which was an increase of 20 per cent. Of deals, 41,102 cwts. were imported in the three years; in the last year the imports were 58,605 cwts., making an increase of 42 per cent. He would now draw their lordships' attention to silk—that article of which so much had been said. It appeared from accounts on the table, that speculation had been no less active in this article than in others. The imports of thrown silk, which were the three years preceding the last, on an average 404,423lbs., had risen to 800,501lbs., being an increase of 98 per cent. A similar comparison with respect to raw silk showed an increase of from 2,608,527lbs. to 3,431,172lbs. which was an increase of 31 per cent. The imports of wine, tallow, and several other articles, into the details of which he would not enter, had risen nearly in a similar proportion. Every branch of trade had thus been extended to a degree unparalleled in this country. Such had been the spirit of enterprise,

453
not only with respect to gambling and joint-stock companies, but also to speculations in trade, that it was beyond possibility, that a great re-action should not follow.
Having stated thus much with regard to over-trading, he would proceed to speak of the currency, and to shew its connection with the present state of things. He knew there were different theories upon the subject. Some persons attributed all the evils to speculation, while others attributed them all to the currency. That they did not flow exclusively from the currency, he thought he had already shewn; but he did not think that all these speculations and gambling transactions could have been carried to the degree they had been carried, if they had not been aided by the paper currency. Both causes had operated. The speculations in trade had been the origin of the evil; the spirit of gambling carried into every branch of trade had been the beginning, but it could not have been so extensive if it had not been aided by the state of the currency. Let their lordships see how the question stood with regard to the currency. That question also divided itself into two branches—the notes of the Bank of England, and the notes of the country banks. Accounts had been laid on their lordships' table of the number of Bank of England notes in circulation since 1819, and they led to this observation, that in 1821, in 1822, during the whole of 1823, and during one-half of the year 1824, there was no reason whatever to infer any over-issue of Bank of England notes. Even in 1823, the exchanges were in our favour through the whole of that year, though the Bank had made additions to its issues. During that year, and up to August and September, 1824, the exchanges were in favour of this country. He rested much on this circumstance; for he was one of those who agreed in the opinion, that the state of the exchanges was an infallible guide on this subject, if properly attended to. He knew this point had been disputed by some able persons; but he thought they were in error, by taking up wrong ideas in the outset, which they could not afterwards get rid of. He had looked at their writings; and was still of opinion, that the state of the exchanges was an infallible medium for regulating the circulation. Up to the month of August, and even up to September, 1824, the state of
454
the exchanges was in our favour; but then they took an unfavourable turn. On this indication, the Bank should have decreased its issues; but it had not—it had increased those issues. It must, however, be said, in fairness towards the Bank, that they soon saw their error, for so early as March, 1825, they perceived the necessity of drawing in, and between the months of February and May, a reduction in their issues had taken place to the amount of 1,300,000 l., while from May to August the diminution was 700,000 l. more; and, by the month of November, 1825, the Bank had contracted its issues to the amount of three millions and a half. Although, therefore, he was ready to admit, that the Bank did not, in the first instance, use due precaution in the contraction of its issues, he must, at the same time, do that body the justice to say, that they did not lose much time in reducing their circulation.
Let their lordships next consider what was the state of the currency as regarded the issues of the country bankers. And here he wished, once for all, to say, as some seemed to suppose he had a dislike to country bankers, that he disclaimed all intention of casting any imputation on the country bankers generally. Amongst them he knew there were many as wealthy, as well established, as respectable, and as solvent, as any bankers in the great city in which he was speaking. His observations were all directed against the general system, and did not refer to any individuals. Let their lordships, then, look to the state of the country-bank circulation during the period when the issues of the Bank of England had been brought under their notice. In the years 1821, 1822, and 1823, the country-bank circulation continued, as far as that could be known from the number of stamps issued (which he admitted, might not be exactly correct), on the average, to be somewhat more than 4,000,000 l. Stamps to that amount had been annually issued, and no considerable increase had taken place until the year 1824; but, in 1824, the number issued had been increased from four to six millions; in 1825, it had been further increased from six to eight millions; so that, between 1824 and 1826, this species of circulation had been actually doubled. This was a most material fact, and proved the continuance of the increased issues of the country banks, after the Bank of England had contracted

455
its issues to a very considerable amount. When the Bank had been doing every thing in its power to warn the country, and had reduced its issues three millions and a half, the country bankers had, at that very time, increased the amount of their issues. In comparing the accounts of the issues of the Bank of England with the issues of the country banks, it would be seen, that the Bank of England had begun, in February and March, 1825, to reduce its circulation, and it was then somewhat more than twenty millions. Between May and August it was reduced to 19,600,000 l., and in November it was down to 17,980,000 l., making in the whole a diminution of three millions and a half. But, in the year 1825, the issue of country-bank notes was, in the first quarter, 2,151,774 l; in the second quarter, 2,506,539 l; in the third quarter, 2,155,754 l., and in the fourth quarter, 1,941,242 l. Thus, the notes stamped for the country banks exceeded, in 1825, by a considerable amount, the average amount of former years. Whatever reduction of the paper circulation was effected by the Bank of England, was more than made up by the issues of the country banks.
Having established this fact, he would ask their lordships, if it was too much for him to say, that the spirit of adventure and speculation, the gambling in joint-Stock companies and mining associations, in loans, and the other extravagant projects, which he had before alluded to, had been, fomented and encouraged by the facilities afforded by the over-issues of the country banks; and that the failure of these speculations, necessarily involving that of those who had afforded them accommodation, was one of the main causes of the distress of the country? For where did the distress begin? The first failure which took place was that of a great house in the West of England. The second, that of a London banking-house, connected with not less than forty of the country banks. The third great stoppage was that of a large banking establishment in, Yorkshire. Thus, therefore, although the run was not altogether confined to the Country banks, and it was impossible when once the panic had diffused itself abroad that it-should be so still it would, he believed, be acknowledged that the run was mostly upon the country banks, and that when it extended itself to London, it fell with, the greatest fury upon the establishments most connected with the country-bank circulation.
456
Was it, then, too much to ask their lordships' assistance in putting down so crying an evil? It had, he knew, been said by some noble lords, as well as out of doors, that the measures proposed were premature, and that we ought to wait for more convenient and quieter times. But that was an assertion, the futility of which would, he was confident, be obvious to all those who knew human nature, and who had seen as much of the world as he had done. They knew that the hour of distress was the best time for the application of a remedy; and that, under such circumstances, it would be received with much less clamour, and be far more likely to produce a salutary effect, than during a period of prosperity.
Acting under these impressions, his majesty's government had suggested two remedies; one having for its object the gradual withdrawing of the one and two pound notes out of circulation; and the second, that which it had become his duty to propose that evening, for their lordships' adoption. Before he proceeded, however, to the second of those measures, he thought it right to state the grounds upon which he supported the first, and to obviate, if possible, the objections which he had heard urged against it; that measure was not yet before their lordships; but, from the votes of the other House of parliament, they knew that it was in progress, and that it was likely to come soon under their consideration. The first objection to the measure was one which could not be denied, and undoubtedly, as far as it went, he must admit its force. He could not deny that the withdrawing the one and two pound notes, in order to the substitution of a metallic currency, would operate as a considerable check on the supply of circulation which trade might require, and that, in this way, the distress would be generally felt; but their lordships must see the necessity of adopting this measure after the statements which he had just made. They must have observed, that the country might be left in a state of perfect delusion; that the country banks might go on increasing their paper circulation, while the Bank of England, aware of the state of the exchanges, were taking measures to reduce their issues. Now, if the circulation of the one and two pound notes were replaced by a metallic currency, this could not be the case. But there was another consideration of serious im-

457
portance. If the country was to be exposed to a crisis of this nature—and in a great commercial country crisises of such a kind were to be expected—it was necessary to provide against the evil consequences of this description of circulation to the poorer classes. Let their lordships consider what were the consequences of the failure of a country bank to a labourer. The poor man could not refuse a one-pound bank-note, and he could not retain it, in order to recover its value at another time, as others might do, for he must expend it in supplying his weekly and his daily wants. Then let any one of your lordships reflect upon the consequences produced, under these circumstances, by the failure of a great bank in a country town, which bank had been supposed to be perfectly solvent; and, be it remembered, that no less than seventy or eighty of these banks had suspended payment during the late panic. Only let the House conceive for a moment to what a lamentable situation the poor inhabitants of that town must have been reduced by such an event! All they had been able to save from their hard earnings for years past were probably lodged in that bank; and even the very last payment of wages which they had received had been made in these worthless bits of paper; and, consequently, many of them were seen hawking them about for sale, and offering them for 5s. in the pound, to enable them to purchase the common necessaries for the support of life. Now that was a situation of things which never could take place in a country in which a metallic currency alone existed.
And this observation brought him to the next question; namely, the difficulties an the way of arriving at the substitution of a metallic for a paper currency. A noble lord opposite had rested his objection to the measure proposed by his majesty's government for the sanction of the legislature, on the difficulties which would attend the substitution of a metallic currency. Now he would beg leave, in the first place, to call the attention of the noble lord, and the attention of those other individuals who made that objection, to the actual situation of the country, which they seemed to have forgotten. In this great metropolis and its neighbourhood, a metallic currency alone was in circulation. The same observation applied to the county of Lancaster, one of the most populous districts in England. Liverpool
458
contained a population of 150,000 souls; Manchester 200,000 souls; and the population of the district altogether was not less than two millions; yet, in those populous towns, and throughout that whole district, there existed no other than a metallic currency. This, if the population of the metropolis and the towns in its neighbourhood were added, it would be found, that with respect to four millions of the inhabitants of the country, who might be fairly taken as the representatives of at least two-thirds of its wealth and respectability, the objection of the noble lord did not apply. Where, then, he asked with confidence, was the difficulty of extending to all parts of the country, a circulation which existed in full force in London and its dependencies, and in Lancashire, Liverpool, and Manchester, and their dependencies? There could be no difficulty in continuing it where it was already established; and the argument which had been advanced, that a paper circulation was more commodious for the purposes of commerce, was answered by the fact, that in London, and the places he had already alluded to, where there was tenfold the amount of business, there was no paper circulation. In Manchester, an attempt had been once made to establish a paper circulation; but it failed entirely; for the inhabitants had, he was happy to say, the good sense to reject the attempt, satisfied to remain as they were. Their lordships, therefore, had the benefit of experience with respect to these wealthy and populous parts of the country; and if they looked, likewise, to those accounts which were already on their table, and to those which would be placed there, they would be convinced that there was no serious difficulty to be apprehended. Their lordships pretty well knew what the circulation of 1l. and 2l. notes had been, and what they might have been, had there been no coin in the country. During the suspension of cash payments, parliament had regular returns of the amount of one and two pound Bank of England notes circulated in the country; and that circulation was found to have amounted to nearly seven millions. He would now take that sum, and add to it the amount of the circulation of those of the country banks. He was aware that, to get at this, they were under the necessity of taking their data from the number of stamps issued by the Stamp-office for that purpose; and, according to these, he was sure he did not under-rate

459
them, he was certain he over-rated them, at 6,000,000 l. or 7,000,000 l. at the utmost. Putting these two sums together, then, they would give a circulation of one and two pound notes of 13,000,000 l. or 14,000,000 l. He knew that 6,000,000 l. of country notes went beyond the mark as the amount of an average year; but, taking it at this extravagant rate, he would suppose them to have to provide for the substitution of a paper currency of 13,000,000 l. or 14,000,000 l. Now, by the official accounts laid before their lordships, they knew that, during the period from the year 1819 to the year 1826, the Mint had coined in sovereigns and half sovereigns, more than twenty-five millions sterling, of which in one year—namely, the year 1821—they had issued no less than 9,500,000 l. From that sum of 25,000,000 l. their lordships would have to deduct the amount of the gold that had been exported from the kingdom; and this was to be ascertained through the medium of the Customs; although it could not be done formerly, because then, absurdly enough, it was contrary to law to export the coin of the country, but now it might be lawfully exported. From the accounts furnished by the Custom-house, it appeared that the quantity of gold exported from this country since the year 1819, amounted to 7,269,000 l. During that period, as he had before stated, 25,000,000 l. of gold coin had issued from the Mint, which deducting the 7,000,000 l. exported through the Custom-house, left 18,000,000 l. But, in addition to that which passed through the Custom-house, he was aware that considerable quantities left the country through other channels—as, for instance, those sums paid to smugglers for contraband goods; and the money which the passengers on board vessels might have in-their pockets. Taking, therefore, the Bum of 7,000,000 l., which had been lawfully exported in the regular way, and adding to it the sum of 3,000,000 l. more as the amount of the rest—and this was a most extravagant calculation—their lordships would have to deduct 10,000,000 l., as the amount of coin exported, from the 25,000,000 l. issued by the Mint, and there; would be 15,000,000 l. as the amount now remaining in the country. Then they all knew that, since the month of November, in the last year, upwards of a million had been re-imported. So that, according to this calculation, there could not be in the
460
country at the present moment, less than sixteen millions of gold coin, to fill the place of the small note currency. Besides, circumstances had occurred which had partly anticipated, and thereby considerably facilitated, the proposed alteration. Their, lordships might remember the alarm which had been created in the country some time ago, by the circumstance of a banker in Bristol refusing to pay his notes in gold; and this having been acted upon in other places, the alarm soon spread throughout the kingdom; and the consequence was, that it threw a considerable quantity of gold into the country. Now, therefore, looking at the amount of the paper in circulation,—looking at the amount of the coin issued by the Mint since the year 1819, and at the result of the calculation which he had made—he did not entertain the remotest doubt that there was quite a sufficient quantity of coin in the country to meet the measure proposed by his majesty's government of substituting a gold for a paper circulation. They did not mean, however, that the paper currency should be withdrawn at once. It was to be done gradually, in the course of the ensuing three years; so that the country notes would still continue to circulate until (supposing even that there were not enough of coin in the country to supply their place) a sufficient quantity could be procured. However, looking at the example of Lancashire and London, all the difficulties on the subject completely vanished. Why did gold circulate there? Because they had no paper currency. Why was there no gold in other places? Because they had a paper currency. No fact had been more clearly established by all experience on the subject than this—that gold and paper never could be brought to circulate together. No paper would circulate where gold did; and no gold where paper circulated. There could be no common issues of both. This, he repeated, was clearly proved by all experience.
These were the grounds on which he submitted his first measure to the consideration of the House. It was proposed, as the means of making the evils more equally felt, whenever an unfavourable state of the exchanges took place, by which the great mass of the people would be protected from its effects. But then it would be said, "That measure of itself will be inadequate; you ought to go further; that is doing a good deal,

461
but it is not doing enough." But, though he preferred a metallic to a paper-currency in small transactions, still he admitted, that a system of banking, established on sound principles, was attended with convenience, and even benefit, to a country. The measure, however, which he had to propose on this subject, he granted, was but a half-measure. And why was it so? Because their lordships would recollect, they had the chartered rights of the Bank of England to contend with. This was an obstacle to their going further at present. They ought to go further whenever they could; but the question now was, were their lordships, although they could not go as far as they wished at present, to go as far as they could? He was surprised to hear it objected to, on no other ground than that it was calculated to do too little good. But surely, if it would do some good, and could do no harm, that was a groundless objection. The present system of law, as to banks in this country, he considered to be one of the most absurd that ever was invented. It was in the teeth of all sound policy or common sense. It had grown up gradually, and was not the result of any original plan or system. He could easily conceive one of two systems founded upon reason and good policy, which might be adopted by banks. For instance, let them have a system of liberty, permitting any number of partners; or let them have a system of restriction, founded on conditions of indemnity or security, so that the public had a chance of being secure. He could understand that in America, one of those systems was acted upon. For instance, in the state of Massachusetts, they had twelve chartered banks, and no others were allowed; and, the moment any one of them became unable to pay their notes in specie, it forfeited its charter. That might be a wise system in the country in which it existed. At all events, it was a system which he could conceive. It was a limited system, founded upon conditions. There was, however, another system which was founded upon perfect and entire liberty; and which, for similar reasons, might be found equally efficacious. Because, where perfect liberty prevailed, each person having an equal right to invest his capital, the wealthier must in time drive out the weaker and less solvent, and thus the same end would be obtained by different means. He might illustrate his argument by a reference to the state of
462
the banking establishments in the metropolis. The private bankers in London had it in their power to circulate their own notes—a privilege which they ally however, invariably waived, because the public would not take them, so long as they could get those of the Bank of England, in the solvency of which they had more confidence. So, if there were chartered joint-stock banks in other parts of the kingdom, there could be no doubt but that they would immediatly absorb the whole circulation of the country. Therefore, by either of those systems, the object of security would be attained. But what was the system in existence at present? Why, the most rotten, the most insecure, the very worst, in every respect, that could possibly be conceived. Any petty tradesman, any grocer or cheese-monger, however destitute of property, might set up a bank in any place; whilst a joint-stock company, however large their capital, or a number of individuals, exceeding six, however respectable and wealthy they might be, were precluded from so doing by the present system. One more absurd, therefore, he repeated, could not be conceived. Let them, then, either continue the system of restriction in point of number, but qualify it by condition; or else allow full liberty of number so that whichever they adopted, the public might have security for their property. The beneficial consequences resulting from one of these systems was manifested by its effects in Scotland. He knew he might be told that it was in vain for him to look to the example of that country, because they had not the power of granting charters. He admitted they had not, unless the Bank of England were to give up its charter; and therefore it was, that he had before said that his was but a half-measure. They had, however, consented to allow the restriction as to the number of partners in country banks to be removed, and so far one difficulty was removed. In return for this, the Bank might derive the consolation that they would have an opportunity of gratifying the desire, if they experienced it, of establishing branch banks throughout the country. Indeed, he believed they had a right to do so at present; and he confessed 'he was most anxious that they should make the experiment. But he trusted that, if they did not think it prudent to make the experiment themselves, they would not

463
suffer the people to wait until the year 1833, exposed to the consequences of the present system, but set the public free, by allowing the Crown to grant charters to country banks. He believed it would not in any respect injure them, but, on the contrary, while it would be attended with the greatest advantages to the country at large, it would be beneficial also, in its consequences, to the Bank itself.
This, then, was the nature of the measures which he had to propose; but, before he sat down, there were two or three points on which he wished to offer a few observations. A doctrine had gone forth to the public, to which it was necessary he should advert; because, upon it rested the defence of the country notes, and it had been alluded to by a noble friend of his on the first day of the session. His noble friend had said, that the measure of withdrawing the country notes altogether from circulation, was unwise, seeing that a paper circulation, convertible into gold, was at least as good as gold. The argument, however, was erroneous, because it was founded upon a false assumption. The paper was not all convertible into gold; for where the paper flourished, the gold, as he had before said, almost invariably disappeared. There was a material difference between applying a cure beforehand, and waiting until the cure was accomplished through the ruin of hundreds of thousands of persons. That was the great error of the doctrine to which he was alluding. It was true that the evil would carry with it its own cure; but when that cure came, it proved as great an evil as that of which it was to be the remedy. It was also to be recollected, that, although the doctrine might be true, in a poor country, where property consisted chiefly of land, in a great commercial country like this, where the currency was subject to greater fluctuations from the unsteady nature of its property, it did not apply. The object of every description of currency should be to make the value of property as steady and as little variable as possible.
And this reminded him of a subject on which he would give no opinion at present—he meant the Corn laws. He was afraid that when that subject came to be discussed, a great deal of heat and passion would be displayed on both sides. But he would recommend their lordships to look at it as one which called upon them to take a cool and dispassionate view of
464
it; not with the consideration as to whether the rents of the landlord, or the wages of the labourer, were to be high or low; but with a view to discovering what would be most likely to produce the least violent fluctuations of property. The truth lay there, and he who solved that problem would certainly come to the wisest conclusion. In alluding to this subject, he had, perhaps, gone out of his way; but he had been led to it by referring to the fluctuation of property; and he could not help entreating of their lordships, when they came to consider it, to do so coolly and dispassionately, not with reference to this or that individual's interest, but to the interest and welfare of the community at large.
Having said thus much, he now came to the question of a measure of relief, which amongst others was afloat. He had stated what his majesty's government proposed doing; but he was aware that a wish had been expressed, that a remedy for the present distress might be afforded by means of the issue of Exchequer-bills, at this moment; and he knew that if he studied his own ease or his own popularity, he could not do so more effectually than by coming down to parliament with such a proposition. If he had not adopted that course, he trusted the House would give him credit for abstaining from it, from a thorough conviction that it was not likely to be attended with beneficial results. He had always thought that the precedent of 1793, in that respect, was not a favourable one, and therefore, ought not to be followed. But there was a great difference between that period and the present; for it could not be pretended that the commercial distress which now existed had any connexion whatever with political events. The case before their lordships was not one of that description. What would be the effect of such a measure? Not to leave the people to rely upon themselves. What was that but the very evil which he had deprecated; namely, the looking to government for aid, to relieve them from the consequences of their own extravagance. It was now three or four years since the landed interest was suffering great distress; and not a month passed at that time, that he was not beset with the most urgent applications for relief by the issue of Exchequer-bills, as had been previously granted during the existence of commercial distress. But, there was a great difference

465
between the two cases. Payment, in the one case, might be secured within a given time upon goods, but that was not the case upon land. The landed interest, however, did not the less consider that the state ought to come forward, and help them in distress, as it had done the commercial interest; for, said they, the commercial interests had the advantage of being able to send their goods abroad; they might combine to assist each other; the landed interests could not. The applications, however, had been rejected. These were the reasons why he could not agree to adopt that measure. But, with respect to what the noble lord opposite had said of the proceedings of the Bank of England on that subject, he saw no objection to it. All that government said upon that subject was this—if the Bank chose to go into the market and purchase a limited quantity of Exchequer-bills for the purpose of affording relief to the public, the government would pay them part of the six millions which they owed them, to prevent them from experiencing any inconvenience from so doing. One noble lord had expressed an opinion, that such an act, on the part of government, would be a species of guarantee to the Bank. It was no such thing. In so doing, we were certainly forestalling the stipulated time of payment; but we were willing to do so, if we could, by so doing, afford relief to the country.
He had now stated generally the principles on which the measures which he proposed were founded; and, of course, would be happy to afford any further explanation which might be deemed necessary. Their lordships knew, that from a given day, no new notes had been stamped, and that, after the 5th of April, 1829, the issue of one and two pound notes was to cease altogether. It was originally intended that the circulation of the one and two pound notes of the Bank of England should be put upon the same footing as those of the country banks; but, upon consideration, it had been deemed advisable to allow the notes of the Bank of England to be stamped until the 10th of October next, instead of ceasing forthwith, like the country bank notes. With respect to Scotland and Ireland, it was intended ultimately to place them on precisely the same footing with England, although it had not been considered expedient to do so immediately. Upon the best consideration, it was thought advis-
466
able to wait a year or two after the time limited for England, before the change took place in Ireland, While in Scotland, it was intended that it should take place from the year 1829, when the change would take place in this country.—The noble earl concluded by moving the second reading of the bill.
The Earl of Limerickwished to observe, that in Ireland there was no circulation whatever but of notes under 5l. Gold was not to be had. Some small quantities might be kept in certain banks, but that there was any in circulation he denied. It would require a great increase of bullion to meet the discontinuance of the circulation of notes in Ireland.
The Earl of Lauderdalesaid, that when, upon a former occasion, a noble lord had introduced the subject of the Corn laws, he had treated his observations in a way in which they ought to have been treated; namely, by not noticing them at all. But the case was different when the noble earl opposite thought proper to travel out of his way to allude to it, for the purpose of treating the House to an exhortation on the subject. The noble earl had said, that from what he perceived in the House, he anticipated some heat and intemperance in the discussion of the Corn laws, and he had warned their lordships against the influence of passion on that discussion. Now, he had only to say, that when he had last argued that question, he had not used a single argument in which he had not considered the interest of the landed proprietor and of the manufacturer as combined. In arguing in favour of the continuance of the Corn laws, he had as much advocated the rights of the manufacturer as those of the landed proprietor; and on behalf of all, he had contended for an equality of price, for a moderate remunerating price, a price beneficial to all, and not subject to any variation. He believed that those who looked at the prices since that period, would find as little, if not less, fluctuation than before those laws' were imposed. When the subject was again brought forward, he would discuss it in the same spirit; and God forbid that he should ever attempt to separate the great interests of this country. He could not permit it to go abroad, that their lordships were likely to argue such a momentous question with passion. He had found, and he would find again, that in the discussion of that great subject, the interests of the poor man and of the great land-

467
holder, would be equally consulted. He now came to the main question under discussion. That question he conceived to be—how far it was proper, to the extent to which this bill interfered with the charter of the Bank of England, for their lordships to interfere on the subject? The noble earl had stated some circumstances, from which he inferred the propriety of discontinuing the circulation of one and two pound notes four years earlier than the term now limited. He was not prepared to say whether or not they ought to abolish the circulation of notes under 5l., nor was he called upon to give any opinion upon that question at present; neither was he called upon to give any opinion as to the policy of the exclusive privileges of the Bank of England. But, admitting, for a moment, the principle of the measures before the House to be sound, the question was, whether it was right, in the present state of the country, for government to bring forward any discussion of this subject. He believed that, if their lordships duly considered the matter, they would join with him in saying, that this was an improper time. What had been said on this subject in the Speech from the Throne? And what had been stated in the noble earl's letter to the Bank? Why, that the panic had subsided, and that things had returned to their proper and accustomed channel. Now, if that were true, it clearly proved that this was not the time for agitating the present question. He believed, that the panic had been about expiring, but that, by these discussions, it had been very unseasonably revived. All he asked was, that the ministers would allow the country to recover its situation; and then this matter might be discussed with temper without doors, and with no fear of passion within. He thought there was no more improper period for effecting a change in the system of our currency than at this moment. It was impossible for him to discuss this question now in the manner he wished; and yet it was equally impossible for him not to attempt to go into it, and to show that the noble earl's arguments had been founded on a mistaken view of the calamities of the country; or, if his view was right, his measures were of all others the most likely to magnify them. He agreed with the noble earl only in this, that we ought to ascertain the true nature of the disease before we attempted to apply a remedy. The noble earl's plans were
468
founded upon the principle of there being an excess of paper circulating throughout the country; but this he totally denied. He had also asserted, that no sooner had the Bank of England one-pound notes ceased, than the one-pound notes of the country bankers had increased, and hence arose an excess of paper. For his part, he wished to know what an excess of paper really meant. He thought it had been settled beyond dispute, that what at one time might be a great excess of paper for conducting the transactions of a country, might at another time be a great deficiency. There was no certain quantity of a circulating medium which, as the noble earl seemed to suppose, could form a lasting standard, or measure, beyond which all could be called excess, and beneath which all was to be esteemed deficiency. The quantity of circulating medium was to be estimated in relation to the extent of the transactions for which it was required. For instance, the quantity of the circulating medium, which would be absolutely requisite to conduct the multitudinous transactions in which this country was engaged, would, if transported to another country, prove ridiculously superabundant, or ridiculously deficient. Let the House consider how the affairs of this country had stood. The three per cents, which were held to be the criterion of the value of the funded property of all denominations, had varied lately from 75 and 80, up to 90 and 97. Land, which before had been thought to be well sold at 25 years' purchase, brought 33 years' purchase. The same thing had occurred with all fixed securities. Now, was it possible that the same transactions could be carried on in land and stock, at high prices with the same circulating medium which existed when they were at low prices? Was there not a greater extent of currency plainly implied in that rise of value upon the same land and stock? The argument was equally applicable to the proposition of the noble lord, who talked of speculation having raised the prices of commodities. Did the noble earl really think that the augmented transactions could be carried on, and the prices be raised, with the same quantity of circulating medium which existed before? This was utterly impossible. It was nothing, therefore, to show, that the quantity of the circulating medium had increased. It must be shown also, that it exceeded its due proportion, in

469
comparison with commodities at the different periods stated. It would have been very easy to ascertain the fact, if the inquiry had been properly directed. Adverting to the Bullion committee, the noble lord observed, that they had very judiciously rested on the supposition, that mankind acted uniformly on the sense of self-interest; and that, if the public should see that the state of the exchanges and the price of gold were running adversely to the paper circulation, they would promptly exchange whatever notes they held for hard cash; and by that means entirely prevent an excessive issue of paper, one time with another. In this they had merely concurred with Dr. Adam Smith, and all the writers on political science who were of any authority. Dr. Smith having proposed, as part of the basis of a system of mixed currency, paper convertible into gold, with which he proposed to couple the agency of banks throughout the country. But how was the excess of the paper circulation proved? It was said, that there was a great rise in the prices of commodities. But, rise of prices might proceed from an alteration in the proportion of the quantity of various commodities as compared with each other. They must go a step further; they must prove—if it was meant to be shown, that the rise of prices manifested an excess of paper—that the value of paper was diminished in proportion to the value of commodities. Now, gold was a commodity; and, while paper did not decline in comparison with the price of bullion, it would be difficult to prove that paper was in excess. While a twenty-shilling note was convertible into a sovereign weighing 123 grains of gold and a fraction, it must be held to be equivalent to 123 grains and a little better of gold; and therefore not depreciated, and therefore not in excess—unless it were attempted to be proved, against all established science, that things equal to one and the same subject were unequal to one another. The spirit of scheming, and the excess of paper issues, had been absurdly linked together. How stood the question with respect to the great eras of scheming which had marked our latter history? Was it the over-abundance of one and two pound notes—was it an excess of country bank paper—which set a-going the bubbles of the South-sea project? So far from it, there were at that lime no small notes in existence, nor any paper of country banks
470
floating. The same might be said of other periods. It was not the excess of paper which excited the schemes of 1793, which were happily put an end to by the war. There were no allegations of the kind at that time. He could not concur with the noble earl in ascribing the spirit of scheming to an excess of paper. High prices there might be, for a time, through the influence of scheming, but his imagination could not trace how the issues of one and two pound notes could have called the schemers into action. There was a whimsical contrast observable in the opinions expressed on this subject between two eminent writers of the day, Mr. Mushett and Mr. Tooke. The latter gentleman attributed to high prices the propagation of all the late joint-stock companies, and wild projects of speculation. Mr. Mushett assigned low prices as the cause of the same evils. Leaving those gentlemen to decide as they might between opinions so extreme, he did not believe that either high or low prices were enough to account for the causes of so strange an agitation as that which the country experienced in the course of last year. Was it, then, that be was puzzled by these phenomena, and that he had no way of solving the difficulty in his own mind? No such thing. Now then, to discover the real cause of these phenomena, in attempting which he was led naturally to the circumstances of a few-years back, and the measures which had been adopted, under the auspices of a noble lord opposite (Bexley), who was then sitting in another house. He would observe, in passing, that it would be not a little surprising if that noble lord, after having brought the House in which he then sat, to concur in a resolution, that Bank-paper not convertible into gold on demand, which was actually at a discount of 25 per cent compared with gold, was not depreciated, should now concur with the noble earl opposite, that paper was in excess, and therefore, by implied necessity, under a depreciation, though immediately convertible at the discretion of the owner. He pronounced this idea of the excessive issue of paper being the cause of the fluctuations and mischief which had recently occurred to be wholly ridiculous and untenable. The real cause was to be found in the working of that sinking fund which had, within a few years, been established on an effective footing of 5,000,000 l. annually. Let their

471
lordships observe how this operated, and say if it was possible to deny that, instead of 1,000,000 l. which was the former amount-of the effective sinking fund, and which was scarcely felt in the money transactions of the country, the public had now to contend with an excess of capital equal to 5,000,000 l. thrown in annually to seek employment among the other interests. The commissioners go to market, and buy three per cents or Exchequer bills held by dissentients to the reduction of the four per cents or any other public securities. These securities must be held by capitalists. The commissioners succeed in persuading them to sell and pay their money. Must not that money immediately enter the markets, and become a candidate for new employment? Was there not, in like manner, a quantity of 5,000,000 l. thrown in every year to become a candidate for new employment? Must not this extraordinary supply of capital diminish the value? Was there any writer who attempted to deny that extraordinary supply had a tendency to diminish the value? Here, then, was a new experiment upon the general interests. While the war lasted, the sinking fund did not, in effect exist. Its operation was farcical or delusive; receiving 20,000,000 l. with one hand, and paying 30,000,000 l. with the other, of course this brought no excess of capital into the market. It was a new feature in our affairs to have annually 5,000,000 l. brought as a candidate for new employment. It shewed at once the reason for the increased prices in fixed securities. This it was that had reduced the interest upon them. This it was that had sunk the five per cents nearly as low in interest as the interest before paid on the 3½ per cents, and its effect was still going on to a further reduction. They must see how the case stood with men who had disposable capital. They could not be at a loss to calculate its effect upon other interests. Mortgages undertaken at 5 per cent were in hundreds of instances redeemed with money got at lower interest. The situation of the borrower now began to be one of difficulty; he found himself narrowed in his enjoyments; he listened eagerly to projects which would be likely to retrieve his income; one successful project counteracted the experience of many which failed; as in the lottery scheme, the drawing of a 20,000 l. prize spread the hope of gain far and wide, beyond any possibilities
472
even of the law of chances. In former periods the same consequences had followed the diminution of interest, though no excess of one and two pound notes could then be alleged. Mr. Hutchison was the author of the scheme of our first sinking fund, which in 1716 was adopted by sir Robert Walpole. The foundation of that scheme was laid in a plan for lowering the interest of the public securities. There was the same circumstance of lowering the interest of fixed securities just before the bursting out of the South-sea scheme; and the same cause had then, as lately, led to the same disposition for adventures and projects, which deluded the capitalists with the hope of obtaining more interest, and replacing their income upon the former footing. Such, he assured their lordships, not on his own dicta, but on the arguments of the gravest authorities, was the real cause of the recent fluctuations in interest and in capital, and then in the prices of commodities. It was impossible to circulate commodities at their previously reduced value, while the sinking fund was constantly stepping in with an increase of capital seeking for new employment. The noble earl opposite had objected to him, that he was not authorized in saying, that the noble earl, in predicting the evil consequences of that rash and wild spirit of speculation in last session, had left out of view the operations of the country banks. On the contrary, the noble earl insisted that he had pointed out the transactions of the country banks even at that period, as an effective cause of the prevalence of that speculative spirit. But he put it to the House, did the noble earl then say any thing of the excessive issues of country bank paper? If the noble earl did really take that excess into consideration, what did he mean by that threat, which he very properly held out in terrorem, against those who should advance too far in that mad career, telling them, that if they got themselves into difficulties, they must not look for any commiseration from government after that warning, as ministers had determined not to advance any thing for their assistance in the way of Exchequer-bills? Was there any man in the kingdom, who had talked or written upon the subject, from the noble lord on the woolsack down to the most petty newspaper editor, who did not assign as the cause of the calamity the wild and disastrous speculations and the projects of

473
the joint-stock companies? If he was right, then the high prices had been occasioned by 5,000,000 l. of capital coming into the market annually as a candidate for new employment; and, as its tendency was to urge on speculation, so its operation, within the last year, had been to call out 17,000,000 l. of capital, which were exhausted in foreign loans, in mining, in speculations of silk, linen, cotton, and other articles. This contraction of the general capital of the country had led to a reduction of prices equal to one-fifth. The inevitable consequence of that was a diminution of credit, and from thence came a fall of prices in the fixed securities. The 3 per cents were before at 97, and land at 33 years' purchase; circumstances changed, and the 3 per cents were at 80, land at not more than 30 years purchase. It was impossible that all this could be done so suddenly without having the effect of causing many stoppages. Some among the best houses were nearly crippled, while bankruptcy at once overtook the unsound dealer, who had habitually depended on accommodation.—Now for the remedies suggested and proposed by the government. He wished to know, if the government had left the country alone, what might at this time have been the amount of the loss? He would venture to say not 2,000,000 l. altogether. Things would rapidly have come round, and the industry of the country would, by this time, have been again actively engaged. But the noble earl chose to put out an alarming statement, in the Speech from the Throne, deprecating the causes of the evil, and declaring that some measures, on the part of government, were absolutely necessary. He put it to the noble earl, and to the House, to calculate, before that relief could possibly reach the public, what must be the loss in staying the transactions of every kind in the commerce and manufactures of so active and wealthy a community, in consequence of that alarming denunciation of the causes, and then to say if that loss was not greater than all the evils to which the new remedies were to be applied. But he must ask, did the noble earl as minister, attempt to do any thing to restrain these excessive issues in the operations of country banks? For his own part, he could not see those symptoms of a chief agency in the country banks to the production of the present evils. He saw, at the time, men of all parties, in that as well as in the other
474
House, joining in the schemes, and strengthening the good opinion entertained of those schemes by the public with the authority of their names. The noble earl had never done any thing to discourage the speculation and scheming of which he now complained. Had the government ever tried to put in execution the Bubble-act? The, noble earl might say that he thought the Bubble-act afforded no means of security; then why did he not propose some other legislatorial provision? The members of the public offices were, to his own knowledge, speculators in these scheming companies, and yet the noble earl had never attempted to put the Bubble-act into execution. No exceptions had been taken by the noble earl to any thing that he now denounced as so prejudicial.—His noble friend, who was absent from indisposition, and himself, had exerted themselves to the utmost to undeceive the country. Day after day had he teased the House with prophecies which had been but too fully realized.
The noble earl opposite had taken the amount of coin in circulation at 16,000,000 l. How the noble earl had arrived at that knowledge was beyond his ability to tell; and so it was how the noble earl had succeeded in getting any return at all of the quantity exported, which the noble earl had put at 7,000,000 l. All he could say of it was, that three years ago, when he had called for that account, he was answered, that since the coin was allowed by law to be exported without being sworn to, no register had been kept of the amount. He would not, however, dispute the estimate of the noble earl. He was aware that the business of a banker did not require him to hoard capital to answer demands on him to such an amount as would subtract 6,000,000 l. from the circulation. He could not suppose that the sum was so great. The securities which were held by bankers might be such as to be capable of being recalled at the end of a year or a month, or at the pleasure of the lender. Their property might be good in the light of securities; but, as to that sum in coin, they had it not. Suppose them to be called on suddenly by the country to produce 5,000,000 l. They must call upon their customers in turn, who had their capital actively employed. The noble earl must first create a further demand for coin to the amount of six millions, before his expectations would be realized.

475
The noble earl talked of joint-stock companies, with an increased number of partners, as one remedy. If the noble earl could find men ready to embark in those schemes in greater numbers than hitherto allowed by law, he would own himself to have greatly mistaken the subject. If at any time the noble earl could find six men, or more, who were ready to embark their whole property with the chance of dividing it to the last shilling in case of failure—taking into account, too, the variety of temper, and disposition, and the sense of risk—it would very much confound all his previous calculations. He knew that such establishments had been attempted, and one of them had been set on foot last summer. They had done him the honour of applying to him to be their governor, and had stated, that, as they only wished for his patronage and advice in directing their affairs, they did not mean to call upon him at all as a sharer. His reply was, that he felt the compliment which they intended him, but, as he never could be brought to embark his property in such a scheme, he could not lend it the sanction of his name, and make himself a decoy-duck to induce others to do so. The noble earl might flatter himself that, after the passing of this measure, every thing would go on as before. He would find, however, that banking laws must, both in principle and detail, be entirely new modelled. Did he suppose that an increased number of partners would add one iota to that general security of banks? It would give no security at all. The richest partnership ever known in any joint-stock bank in Scotland, was that of Douglas and Co., and its failure in 1772, which was also the greatest bankruptcy known in those parts, produced the most distressing consequences. Security there was none, either in the number of partners or in their wealth, if there was not skill in transacting business. So far from the remedies proposed being effectual, they were almost sure to lead to the utmost distress.
He complained, that the noble earl opposite had alluded to many things which he ought not to have touched; and had not alluded to one topic of which he was bound to have taken notice. The point which he ought to have noticed, and did not, was the effect of the mint regulations. The seignorage on silver was too heavy, and government would not allow any body
476
but itself to issue silver. At a time when they appeared so anxious to withdraw the one-pound notes, and to let in gold, why did they persist in exempting silver? Why not allow a free mint in silver as well as a free mint in gold? What reason could be assigned for so absurd an exception? The father of the noble earl opposite had published a book on the subject, which contained one of the most ridiculous and absurd arguments that he had ever met with. It was contended in that book, that, as we were a richer nation, we required a more valuable standard; that silver might do for the people of the continent, but gold must be our standard. This was similar to the argument, that as we were in a greater degree than other nations manufacturers of broad cloth, we ought, by the same rule, to have the longest yard measure. Some gentlemen were for a double standard of gold and silver, and he could not directly oppose that. He strongly recommended the adoption of silver as a standard at a small ago. The absurdity of excluding this standard, which was common to all Europe besides, was, to the last degree, absurd when considered in detail. It was the pride of the noble earl's administration, that treaties of amity and commerce had been concluded with the independent states of South America. Were they still prepared to refuse to admit that standard which was allowed to France? What would be the consequence? Some of the returns would be made in silver ingots, which would necessarily be conveyed to the continent, where there was a free market, while the seignorage here amounted to a tax of one and a half per cent. He recollected arguing that point fully when those mint regulations were settled. He rejoiced at the prospect of seeing something done towards carrying into effect that which he considered to be so indispensable.—Some remarks he must make with regard to the application of this plan to Scotland. He confessed he had never heard any proposition with more astonishment than that of the noble earl, for extending to that country the remedy for evils which were only known in this. When did it once occur that Scotland was in a state to require such a plan? Bank-notes were in constant circulation there, aid always had been; but never, except in one instance, had the interference of the legislature been necessary, and then it was exerted, as he admitted,

477
in a very proper way. There had been some notes issued which were payable, at the option of the parties, either on demand, or at six months from the date, bearing interest. Those notes had been very properly abolished by an act of parliament. But, for notes of one and two pound payable on demand, they had been in circulation la Scotland constantly since 1696. without any inconvenience to the public, or loss to the poor, or suspicion of any excess of issues. The noble earl would see why he did not believe that joint-stock companies would take in this country, when he had explained how they were managed in Scotland. Of thirty banks, seven were chartered or joint-stock companies; the other twenty-three were common partnership banks, of from four to fifteen partners. Were these less secure than the chartered or joint-stock banks? They were quite as secure.—The notes of the one were as good as the notes of the other. The royal bank and the bank of Scotland, in this respect, had no advantage whatever over the partnership banks. But, what was the nature of that security? There was no bank in Scotland, whether in Edinburgh, or any other part of the kingdom, the agents of which did not meet the agents of the other banks at least twice a week, at which times they interchanged the notes which they held of each other's bank, and the balance was paid in gold or bills on the Bank of England at sight. How could there ever bean over-issue; and how could they derive any profit from it, should they attempt an over-issue of their own paper, when they must immediately balance the amount in cash or bills on England? In fact, there had never been an over-issue of their paper. This, he knew, was contradicted by some persons who affected to be deeply skilled on the subject. And here he could not avoid noticing an article on this subject, which, it seemed, was to appear in a popular review. In that article, the writer did certainly advance a most extraordinary proposition—extraordinary from its total inaccuracy in point of fact, and no less extraordinary from its total absurdity in point of argument. It was a paper on the currency, in which the author professed to teach the two Houses of parliament their duty. As "the Edinburgh Review" would not be published sufficiently early to instruct their lordships in the course which the writer deemed it ad-
478
visable for their lordships to pursue in the parliamentary discussions on this subject now before them, the author—such was the overweening importance that he attached to his opinions—had published this article in a separate pamphlet, and had sent a copy to each of the members of both Houses. He should read an extract from this pamphlet, to which he wished particularly to call the attention of their lordships. The writer stated, that "those who were acquainted with the real state of things in Scotland, were not a little amused by the paragraphs in the newspapers about the confidence, stability, &c. of the Scotch banks during the late crisis. The truth is, that these establishments were then, we shall not say on the brink of destruction, but certainly in a state of very great danger. Had the British Linen Company and the National bank not stepped forward to the assistance of the Fife bank, the latter must have stopped payment; and the alarm that would have been caused by that circumstance, in conjunction with that which was caused by the failure of Pole, Thornton, and Co., could hardly have failed to occasion a run, that might have been productive of the most disastrous consequences." This statement was not correct, and was calculated to produce the greatest alarm and distress throughout the country. The fact was, that the Fife bank had actually stopped payment, instead of that event having been prevented by the anterior operations of the two establishments mentioned. The 1l. and 2l. notes of the Fife bank were dispersed amongst the poor, and it was expected that the industrious classes would have been great sufferers. But, at that critical moment, the national bank and the British Linen Company interfered, and averted the evil. They well knew what were the available effects of the house whose credit had been shaken. They were cognisant of the fact, that their concerns had been mismanaged for three years, by persons who were not acquainted with the proper mode of conducting business; and, under these circumstances, they stepped forward with their assistance. Those great establishments felt that there was such security as justified them in putting an end to the evil at once. But, did this circumstance afford any proof that the Scotch country banks were in danger? No such thing. It showed, on the contrary, that their foundation was solid, and that they commanded

479
general confidence throughout the country. In this instance the two establishments which he had named said—"We will take up all the notes at once, because we are quite sure we can do so with perfect safety." Was this a proof of any thing else, but that those banking establishments which could command such relief were in a state of prosperity? It appeared that those who ministered their aid had the fullest possible confidence in the strength of the security offered. Looking to the proverbial caution of the people of Scotland, he was sure that no one would expect to see them going out of their way to assist their friends; no one would suppose that, in a chivalric mood, they would, without any attention to their own interests, study the good of their friends alone, by keeping these 1l. and 2l. notes in their hands, if they imagined they were likely to suffer by such a proceeding. But the fact was, that the people of Scotland were perfectly satisfied with the currency. Now, he should be glad to know, on what principle the noble earl meant to alter the system which had so long prevailed in Scotland, and which had not been attended there with any inconvenience? There was not a man in that country, he would venture to say, from the highest to the lowest, merchant, manufacturer, or tradesman, who wished any alteration to be made. Why, then, should the noble earl apply to that country a remedy, which he found it necessary to resort to for the purpose of eradicating a disease that happened to be prevalent in this, but which had not visited Scotland? As well might a physician who had cured one of their lordships of a painful disease by a violent medicine, prescribe it in all cases. It would be strange, if that physician, having been called in to attend one of the reverend prelates opposite, should say, "I have seen most excellent effects produced by this medicine, and, as I have anointed my lord such-a-one, I must be permitted to anoint you also," although the reverend prelate's age and gravity of his calling might fairly be supposed to exempt him from the necessity of using such a medicament. In this way, the noble earl was about to extend to the people of Scotland a remedy, when in fact no evil existed which called for it. On the contrary, the existing system had prevailed for a century and a half, and no inconvenience, no mischief, had been known to result from it. In the course of
480
the discussion to which the subject of the currency must give rise, he would take an opportunity of explaining fully to their lordships the calamity which an extension to Scotland of the noble earl's principle was likely to produce. He had done his utmost to convince their lordships; first, that government had mistaken the cause of the injury; and secondly, that the remedy would create a greater degree of suffering than noble lords had anticipated. It was a remedy which was to take place in the course of three years; but, in that time, the situation of the country might be very different from what it was at present. The noble earl was sanguine in his expectation of the establishment of joint-stock bank companies. For his own part, he thought it was vain to hope for them. The disease was really of the nature which he had described. It arose from a great extra supply in the first place, and a great extra demand of capital in the second; and such being its origin, it appeared to him that the measure now proposed would not remove it.
The Marquis of Lansdownsaid, that after what had fallen from his noble friend who had just sat down, he would endeavour, as much as possible, to avoid touching on several of the topics noticed by him. To one point in particular which his noble friend had mentioned he would not advert at all, or, if he did, but very slightly, as his noble friend had thrown around it a sort of cordon sanitaire. His noble friend had been justly induced, in dealing with this important subject, not to confine himself to the bill immediately before the House. He had viewed it, as their lordships ought to view it, with reference to the general state of credit, to the circulation of the country, and to the operation of other measures which it was the intention of his majesty's ministers to propose. He trusted, therefore, that he might be allowed to claim somewhat of the same indulgence in considering this subject. The topics to which he alluded necessarily divided themselves into two parts; the one was that which the noble earl had described as having been lately adopted by the king's government with a view to the immediate relief of the country; the second was that which had been proposed to parliament for the purpose of administering, if not a complete, at least a powerful remedy against a recurrence of that ruinous disorder, the existence of which no man attempted to deny. These

481
different classes of measures were totally distinct, inasmuch as they rested on grounds essentially different. One of them assumed to be founded on a recurrence to the old and wise principle of placing the credit and currency of the country on a sound and permanent foundation; while the other was admitted to be a departure from an established principle, authorized and justified by the immediate necessity of the case. He would, in the first place, call the attention of their lordships to the measure which had been adopted with respect to the Bank. That measure had, he understood, been only determined on in the course of the last few days, and they had that night, for the first time, received correct information on the subject from the noble earl opposite. Admitting that the distress of the commercial world had arrived at such a pitch as justified the government in calling on the legislature to interfere with respect to that which was the common concern of all men, still he must say, that such a proceeding was a departure from sound principle. Because, in his view of the subject, every attempt on the part of the government to interfere with the currency of the country, was, to whatever extent it proceeded, a departure from those sound principles which every intelligent writer on the subject maintained. He confessed the impression on his mind was, that, under such a necessity as was described, it would have been better to have taken the course which the noble earl informed them had been rejected by his majesty's government, than that which they had preferred. The course they had adopted would, in his opinion, operate more indirectly and less effectually than the other; and he would shortly state the grounds on which he came to that conclusion. It was laid down as abroad fact, that the present state of public credit rendered parliamentary interference absolutely necessary. If it were so, then that interference should be as efficient as possible: it should go directly to the root of the evil which it was proposed to remove. What, then, was the evil which was to be remedied? It was not so much the absence of money which the country felt, as the want of confidence in a certain class of individuals who required to be relieved. The noble earl said, that to correct this state of things, the Bank had been induced to go into the market and to purchase 2,000,000 l. of Exchequer bills.
482
Such a purchase must have a considerable effect on the market, namely, that of throwing in 2,000,000 l. in addition to the currency already in circulation; but, non constat that those 2,000,000 l. would find their way (so immediately at least as could be wished) to those parties who were the objects of relief. This issue could have no other effect at the moment except to aid and assist speculations in the market. It would aid the speculations of those who were in the habit of trafficking in Exchequer bills; but it would not find its way into the pockets of individuals, who, supposing their property and their different securities good and solid at any other time, were distressed because those securities were not available at the present moment. This measure would, therefore, fail, in a great degree, in administering relief at the present moment. The primary object of the measure described by the noble earl, certainly was not to raise the rate of Exchequer bills, but to extend relief to those who were suffering from the pressure of the times. The plan might do very well for the Exchequer, but their lordships must look to that which was the primary object of the measure; namely, the relief of certain individuals; and he must contend, that this departure from an established principle was not the best mode of effecting that object. The most efficient course would have been to follow the example (to the extent which the noble earl had stated) which had been set in the year 1793. In doing this, ministers would have had the benefit of experience: they would have known that the plan then adopted, however objectionable in point of principle, had been attended with the effect which it was hoped would follow from it, and that, too, without any ultimate loss accruing from the plan. On these grounds, therefore, although he was as slow as any man could be in admitting, under any circumstances, the addition of one more to those most dangerous precedents which permitted the interference of government—even for a good purpose—in adding to the circulation of the country, yet, having arrived unhappily at that state of things in which it became necessary to take this attitude, he certainly would, on the whole, have wished ministers to have availed themselves of the beaten path, attended, as such a course would have been, by the benefit and influence of past experience. He had thought it right to state thus much, both on account

483
of the principle which the measure involved, and the mischief which might arise from it.—He should now dismiss this part of the question, and enter on the consideration of the larger and perhaps the more important topic, because it embraced the whole case—he meant that view of the subject which related to the cause of the evil, and which treated of a permanent remedy for it. One of the questions which had been asked the noble earl opposite, and those who were convinced that the present state of things called for a direct interference on the part of the government, might, he conceived, be easily answered. That question was, "Why should you interfere with the principle of free trade in a paper circulation any more than in any other article?" Now, advocate as he was for the general principles of free trade, he could see no connexion whatever between those principles and the principles by which the circulation was governed. He could not maintain the principles on which free trade proceeded without admitting this exception, that, with respect to those regulations which governed the intercourse between man and man, and, of course, property, it was fitting for government, under particular circumstances, to interpose. If the legislature were allowed to alter weights and measures which were used for the ordinary purposes of the country, be conceived it to be quite clear, that it was equally the duty of the legislature to interpose for the sake of giving to individuals, either coin, or that which, under peculiar circumstances, they were compelled to receive as coin, to the extent and to the full real value of that which their labour or their merchandise ought to command. They ought to receive the full real value, not a nominal and fictitious value; and the legislature certainly had a right to effect that object. For his own part, he could conceive no principle more hostile to free trade, than that which would tie up the hands of the legislature in such a case, and allow one man to put his hands in the pocket of another, and take out of it as much as he pleased. Admitting the necessity of this interference—admitting that the present crisis demanded this interposition—he was of opinion, in common with every enlightened person in the country, that the evil was inherent in the system as it now stood. Some individuals, however, thought that the present was not a proper moment for
484
the discussing and setting at rest this important question. They contended, that a period of greater calm and tranquillity ought to be selected for that purpose. He knew not what the noble earl opposite felt on the subject; but if by any means the legislature could, for a period of six months or a year, suspend the wheel of currency, and put a chain and drag on it, so that, at the expiration of that time, it would be in the same situation as it was at the present moment, he would not object to the delay. Looking at the present system as exceedingly defective, he would, in that case, willingly take a later period, for the purpose of making an effectual alteration. But they all knew, that when the wheel of circulation was out of order, it could not be made to stand still in the way which he had described; and if it were admitted, as he believed and trusted it was admitted by all persons, that there was an indispensable necessity for altering the system of the currency, it was for the legislature to consider, whether it was not far less galling to impose those fetters when the members were contracted, rather than to select a period when they would be distended and enlarged, and when, in consequence, it would be a much more difficult duty to impose those necessary restraints. He thought a full case had been made out for parliament to act, and to act at once; and, when he looked to the state of disorder which prevailed, arising partly from speculation and partly from the currency (on which he would presently say a word or two with reference to what had fallen from his noble friend), he thought that the legislature could not proceed with too much celerity. When such was the situation of affairs, was it matter of supererogation to inquire, whether there had not been, in a period of profound peace—without any circumstance from abroad that could affect or alter the internal condition of the country—was it, he demanded, too much to ask, whether there had not been effected, in that time of calm and tranquillity, a greater change and convulsion in the mercantile property of Great Britain, than had been effected in the kingdom of France in 1815, when that country was overran and conquered by foreigners? When he was asked, what he conceived to be the reason of this mighty change—was he wrong, if he stated in answer, that there was something fundamentally wrong in the system on which the cur-

485
rency of this country rested, and which alone caused this convulsion? The evil which existed in the present day was not only felt amongst those whose trade was speculation, but it had found its way even to the lowest classes of life. Ought not the legislature, then, to consider what the existing law was, and to see how far the currency was affected by that law? The noble earl opposite attributed the evil almost entirely to over speculation; but he must contend, that the real source of the evil was to be traced to the state of the currency. The state of the currency produced speculation; which was, in fact, the secondary evil. That point, however, lie did not think very material for discussion in that House. It was manifest, by a reference to events which had occurred in the last two years, that between the currency and speculation there was a mutual action and re-action. No commercial country, like that in which they lived, could exist without being affected by the spirit of speculation; and it was the peculiar nature of the currency in this country, as it at present stood, to administer ample food to that speculation which was of the most mischievous and of the most unbounded description. He thought a case was fairly made out to induce their lordships to interfere, and to adopt some efficient remedy for this crying evil. His noble friend had, however, found out another reason for this extensive speculation. He had stated, that one of the great causes, indeed almost the sole cause, of this unusual spirit of speculation, was the application of 5,000,000 l. annually as a sinking fund. This his noble friend looked upon as an addition to the speculating capital of the country. He argued, that if these 5,000,000 l. were not taken from the people, the speculating capital would be diminished to that amount; but that, when applied as a sinking fund, it really became a speculating capital. Now, he could not see that the 5,000,000 l. thus taken annually out of the pockets of the people tended more to increase the speculating capital, than if that sum were suffered to remain in their pockets. The speculation, he believed, would be exactly the same in either case. There was, however, this difference—the sinking fund consisted of 5,000,000 l. of real capital, but the evil against which they had now to contend was, that of a nominal capital and a nominal surplus, which were forced out for the moment for the purposes of
486
speculation. Now, on looking back a little, what circumstances did he find; with respect to the speculative proceedings which afterwards took place? Previous to the period of those speculations being generally undertaken, he found an issue from the Bank increasing in the ratio of 8 per cent, from 1824, and producing some unfavourable effect. He also found in 1825, after the Bank issues had increased, that the issue of country bank notes, on the average of three years, had been increased about 33 per cent. Gold, he perceived, in consequence, rapidly left the country. Then came a sudden demand for that metal; and then came those failures, and all those unfortunate circumstances, with which their lordships were well acquainted. The increased issues of the Bank of England, in 1824, led to an extension of the issues of the country banks. This created a rise of prices in London, and goods were sent in large quantities from the country to the metropolis. The same thing occurred in the country. An opposition rise of prices, not a beneficial one, took place there also. Thus, the issues of country paper were extended, and these, together with the additional issues of the Bank of England, produced that state of things which they were now called upon to alter and amend. When, however, he stated this, with respect to the Bank of England, he was sure no one would suspect him of thinking that the gentlemen in the direction of that establishment were at all aware of the effect and influence of those issues. He believed they were not only not aware of the effects which they were likely to produce, but that, if they had been aware of its probable consequences, they were so hampered by their relations with government, in consequence of issues which were placed out of their own reach, and which were made under the sanction of the government and the parliament, that they could not have warded off the evil. They were not, in fact, in that free situation in which the Bank of England ought to be placed. They were not able to exercise an immediate control over their own issues; and, being in that situation, the machinery of their establishment could not act properly. The Bank directors were not in that situation in which a body, having a great influence over the circulation of the country, ought to be placed. The noble earl opposite, in referring to the state of the relations between the government and

487
the Bank, had adverted to 6,000,000 l. of Exchequer-bills held by that body; but, was that the whole amount of the weight which the transactions with government had pressed on the Bank? Was there no further sum placed beyond their control? Or was not that only a part of the burthen which deprived them of acting with that facility which they ought to possess, to enable them to contract their issues when necessary? Undoubtedly this was not the only clog on the exercise of their discretion. In addition to that, they had provided for what was called the deficiencies in the 4 per cents. That, he believed, was made good by the Bank to the amount of 3,500,000 l. And, beyond all this, they had another charge, arising from that most extraordinary act of parliament, adopted some years ago on the suggestion of the noble earl, and agreed to by parliament. That plan, thus recognized by parliament, rested on one of the most extraordinary conundrums that was ever heard of, and was most appropriately denominated "the Dead Weight." By that plan, they were called on at one and the same moment to raise taxes on the present generation, for the relief of posterity and to raise taxes on posterity for the relief of the present generation. This was a conundrum so strange, so unaccountable, that he did not think any noble lord would rise for the purpose of defending it. This "Dead Weight" was attended with the bad effect of increasing the difficulties of the Bank; for, by this extraordinary scheme, no less a sum than 8,000,000 l. was taken out of the hands of the Bank, and completely placed beyond their control. They, in consequence, found themselves unable to act when the circulation of country Bank paper had increased in the ratio of 33 per cent. They were then obliged, instead of giving that effectual relief which they otherwise might have done, to allow the evil to flow unchecked in its mischievous course. He remained, and always should remain, the firm supporter of the doctrine which held as beneficial, a paper currency convertible into cash; but it was necessary to have a sound circulation in the country, that the convertibility of paper into cash should be immediate—that the check to an improper issue of paper might be resorted to without delay. But, unhappily, such a state of things had arisen in this country as prevented the application of that check and remedy, until a
488
great number of persons had sunk under the pressure of the times, overwhelmed by the misfortunes attendant on rash speculations. Neither government nor parliament could do any thing at the moment to arrest the evil. It had, however, in some degree, effected its own cure, for the exchanges had at length come round. The circulation had been narrowed, the exchanges had turned in our favour, and there bad been a rapid flow of gold into the country. There were other material circumstances which influenced the situation of the Bank, and which he hoped would never occur again. One of the circumstances which operated, in addition to those he had already stated, was the advances made by the Bank—he believed at the instigation of government—in the shape of loans on mortgages [The earl of Liverpool intimated, that this was not the case]. He had heard that government had advised the measure; but he was extremely glad to hear that it was not so, because he was convinced that it was a system of operation which it must injure any banking company to engage in. It added to that portion of the circulation which was tied up and taken out of the hands of the Bank. He thought he saw, most distinctly, the different steps by which the present system was produced. In 1824, he saw an undue issue of paper on the part of the Bank, and much of that issue placed out of the reach of their own control. He then saw a powerful effect produced on the state of prices throughout the country by the extension of the country-bank circulation, which was incidental to the state of things then existing, and the facility afforded for the issue of paper. And then, in 1825, came that heigh-day of public prosperity which they had been taught to believe was never to have an end. Parliament was then induced to congratulate his majesty, and his majesty in return, to congratulate the parliament, on so apparently sound, permanent, and prosperous a state of affairs.—Now, when he was told, that the approach of all the subsequent mischief was seen by his majesty's ministers, however much he concurred with them in the remedy which they now proposed, he could not express that concurrence without, at the same time, throwing some blame on the government, for not having, if they had foreseen the evil, applied to it those measures which, at a late period, they had felt it necessary to adopt. At the very moment, however,

489
when all this mischief was in progress—when the worst evils were afloat—when the one and two pound country notes were in active circulation—and when the exchanges were beginning to turn against this country, he found his majesty, at the close of the session, thus addressing the two Houses, on the subject of the measures which had been adopted, for the purpose of extending our commercial relations:—"These measures, his majesty is persuaded, will evince to his subjects in those distant possessions, the solicitude with which parliament watches over their welfare; they tend to cement and consolidate the interests of the colonies with those of the mother country; and his majesty confidently trusts that they will contribute to promote that general and increasing prosperity on which his majesty had the happiness of congratulating you on the opening of the present session, and which, by the blessing of Providence, continues to pervade every part of his kingdom." Now, he did not mean to contend, that there was not much prosperity in the country; that there were not materials upon which solid and permanent prosperity might be founded; but he would complain, that at the very moment when this Speech was made, notwithstanding the avowed knowledge of his majesty's ministers, that there was great mischief brewing, with respect to the state of the currency, parliament was suffered to separate, in July, 1825, without any step being taken to alter the state of the currency, so as to prevent the frightful misfortunes which had since occurred. If any step had then been taken, it would have been impossible for the evil to have reached the height which it attained in the autumn of that year. He therefore could not concur in the measures proposed, without expressing some regret that no provision was made at that time for retracing those steps which parliament had been induced to take in 1822, for the purpose of throwing into circulation that addition to the issues of the country banks which some individuals believed to be absolutely necessary. It was now proposed to deal with the one and two pound notes; but, he thought, nothing completely effectual could be done while there was so great a portion of the issues of the Bank of England locked up and placed beyond the control of that body. The lessons which they had received for the last three years clearly proved the great importance of placing the entire
490
currency of the country on a broad metallic basis. For any other purpose he was quite sure that the interference of parliament could produce nothing but mischief. Whenever parliament attempted to give a fictitious aid to the currency, the attempt had uniformly failed. There was no royal, there was no parliamentary, road by which they could contract engagements, beyond what they had the means and power of fulfilling. The attempt to bolster up a bad system of currency was always attended with extreme difficulty, and never could succeed. All those who looked to the history of past years would see, that every effort to interfere with the currency, except that which had for its object the introduction of a permanent metallic circulation, proved the folly of the principle on which the attempt proceeded, and led to effects of the most mischievous character. No sooner had that famous resolution been passed some years ago, ascribing to the bank note a value that did not belong to it, than the evil of such a monstrous proceeding became manifest. He adverted to that resolution with less hesitation than he would otherwise have done, because he understood it was not, as had been supposed, the offspring of a noble friend of his (lord Bexley) now present. That noble lord, however, had taken up and adopted the foundling; and he it was who gave it that existence, in the Journals of the other House of parliament, to which it was by no means entitled. No sooner was that unfortunate resolution adopted by the other House, which declared that a pound note and a shilling were equal in public estimation to a guinea, than parliament was employed, and had continued to be so employed ever since, in providing against the consequence which necessarily arose from the difference that manifested itself between the value of the one pound note and the golden sovereign, in this and in every other country. No paper ought to be tolerated, except that which could be promptly and easily converted into gold. He certainly approved of the measures which the noble earl proposed for removing one portion at least of the paper circulation of the country; because it would afford that security to the poorer classes which should be a primary object with the legislature. The labourer had a right to reap the full benefit of the king's prerogative; and when he demanded the reward of his labour and his industry, he ought to receive it in that circulating me-

491
dium which possessed a real, not a nominal, suspicious, and fluctuating value. The withdrawal of those notes would also materially alter the relation between the proportion of metallic and paper circulation; and unless it did that, he was sure that no benefit would result from the measure; and if the suppression of the one and two pound notes were not adequate to the accomplishment of that object, then he would recommend that parliament should proceed still further.—With respect to the other measure which was more immediately the object of the present proceeding—the formation of a different description of country banks—he certainly was one of those who thought that, in its present form, that measure would not be very extensively acted upon. But he sincerely hoped to find the scheme placed upon a more practicable footing; and that the Bank, which professed, and no doubt felt, a deep sympathy for the distresses of the country, when it became satisfied that it could not, by establishing branch banks, afford the relief desired under its own system, would not resist such an alteration in its charter as, without at all affecting its material rights, would substitute a sound and secure system of banking for an unsound and dangerous one, in places which their own circulation could never reach.—He did not doubt that, upon reflection, such would be the policy adopted by the Bank; and that parliament, by that alteration in the Bank charter, would be enabled to license chartered banks throughout the country; the condition of whose charter of limited responsibility being the annual publication of those accounts, all persons would have an opportunity of constant examination into the affairs of the parties whom they trusted; and the country would have, perhaps, the best system of banking which commercial interest and security could desire. To such a change of system, at all events, at the natural expiration of the Bank charter, he looked for a relief from that dangerous species of circulation which at present filled the country—a circulation under which no man knew, when he accepted a country note, scarcely whom he trusted, and never what he had to rely upon. With reference to Scotland and Ireland, where none of the evil under which our own country was suffering was found at present to exist, a greater space of time might perhaps be allowed for effecting the proposed change, than that which he understood the noble
492
earl to suggest; but he agreed with the noble earl in the propriety of ultimately bringing both those countries under the operation of the same system. The experiment of delay for a few years might be tried, parliament keeping a watchful eye in the interim, and holding itself ready to apply the remedy the moment any symptom of disease appeared; but, ultimately, he looked most certainly to the system generally being made the same. The noble marquis, in conclusion, said, that he should reserve till a future opportunity the expression of his opinions on the subordinate parts of the noble earl's plan. On the general question he felt no difficulty in saying, that their lordships were about to legislate in the right way, and on right principles. The fortune of every individual was intimately connected with the settlement of the currency on a sound metallic basis. He begged to assure their lordships, that, if by obtaining temporary high prices, they hoped to benefit either their friends or themselves, they would find themselves greatly mistaken: for such temporary rise would necessarily be followed by a dreadful and ruinous depression. It was not more sure that any artificial excitement or fever must, in the body natural, subside into ultimate langour and exhaustion, than that the bubbles of speculation blown up by paper, would finally bring all articles of merchandise into the market at lower prices than they would otherwise legitimately obtain. If, therefore, on the score of justice, the parliament was not called upon to legislate, they were bound to do so in defence of their own interests, which were essentially bound up with that regularity and uniformity of prices which were the proper object of all legislation. They ought to enter upon this duty with the resolution to avoid the crisis heretofore admitted, and to adhere without deviation, to the path of sound principle, and, above all, with a determination to reduce and limit, instead of enlarging and increasing, that complicated relation between the government, the public, and the Bank, in which they were mixed up, by the present state of the currency.
Lord Bexleysaid, that he should not have trespassed on their lordships' attention, were it not that some allusion had been made to him by the noble marquis. With regard to the practical measure now proposed, he hoped it would not prove so defective as the noble lord opposite seemed to anticipate. He thought it

493
would ultimately have the effect of correcting, to a great extent, the evil complained of. He could not think that the late difficulties were entirely to be attributed to the present banking system. When so great a proportion of the country banks still remained in a flourishing condition, they must, he thought, look for the origin of the evil in some other source; and he thought it would be found in the spirit of speculation that had taken possession of the country. The system, however, of joint-stock banking companies was one which he wished to see gradually established. The probable effect of this measure might be judged of from what had taken place in Ireland, within a very short period. In that country an alteration had been effected in the charter of the Bank, and the consequence was, that many joint-stock companies had been established, and were now, to the great convenience of the public, in full operation. The circulation of Ireland had thus undergone a material alteration for the better, particularly in the very important circumstance of security. There was no reason to despair of similar results here, when the proposed alteration took place in the charter of the Bank. It should be recollected that, not many years back, the shock which took place in Ireland, and the difficulties in its pecuniary transactions, arising from the failure of country banks, was much greater than it had been even here. It soon, however, recovered that shock, and, under the improved system, there was little probability that it would occur again. He wished to say a word or two with reference to the temporary relief which it was proposed to afford by the purchase of Exchequer-bills. On this point he differed from the noble lord opposite. He felt convinced that it must have a very beneficial effect. It should be remembered, that the difficulty to be provided against was a present deficiency in the circulating medium. Now, the effect of buying up Exchequer-bills by the Bank, would be to throw into circulation a considerable sum. However the Bank might increase its circulation, whether by issuing their paper upon discounts, or in the purchase of Exchequer-bills, the effect must be the same. The money, which thus got into circulation, would not remain with the individuals who sold the Exchequer-bills, but would, in no long time, find its way through all the various channels of trade. The relief thus afforded
494
was more effectual and more speedy, than if government had come to the determination of issuing the same amount of Exchequer-bills, as had been done in former cases, when similar difficulties prevailed. If the latter course had been determined upon, it could not have been carried into effect without considerable delay. It must have undergone inquiry, and could not have been acted upon without the previous sanction of the legislature. Though quite confident that much good, must have resulted from either course, still, in the existing state of circumstances, he thought the wiser one had been adopted. The difference between them was, that by the operation of one, a large amount of currency must be immediately brought into circulation. This would not have been so in the other case. Besides, the course pursued had this advantage, that it was not, in fact, a measure of government, but of the Bank. In the observations which had fallen from the noble marquis, with respect to the conduct of the Bank, he fully concurred. They merited all the praise which had been bestowed upon them. During the many years he filled a public situation, he had frequent opportunities of intercourse with the directors, on matters connected with the most important public interests, and he had abundant opportunities of becoming acquainted with their integrity, their good faith, and their excellent management of the affairs committed to their charge. He could not admit, as had been contended, in the course of the debate, that the Bank were put to any inconvenience in consequence of their advances to government, or that they had thereby been prevented from coming forward to relieve the late difficulties in the money market. The securities they held from government might have been paid off, at any time within the last two years, or they might, if necessary, have sold them, to any extent they pleased. They might have sold the Exchequer-bills in their hands, or they might have brought the annuities connected with the half-pay and pensions to market, if they thought it necessary to dispose of a part of them. Upon this last part of their transactions with the government, the noble marquis had commented with great severity. In the first place, the noble marquis said, that, in the same year in which parliament had laid on taxes to the amount of three millions for the reduction of the national debt, and the relief of posterity, the charge

495
of the naval and military pensions, which ought to have fallen on the present generation, was spread over a period of forty years for their relief. The fact was, that the three millions were imposed, in pursuance of a resolution of the House of Commons, passed so long ago as the year 1819. But, the Bank had taken no part of the annuity until four years afterwards. The plan of the annuity was not formed till 1822, when such an improvement had taken place in the finances of the country, as rendered it decidedly an advantageous measure at that time, whatever it might have been in 1819. The noble lord then proceeded to exculpate himself and his colleagues from the imputation of having contributed, by the act of 1822, to give a longer period to the circulation of small notes. It was perfectly true, that, in his official capacity he had with great regret proposed the bill, but he had accompanied it with another measure, which, if it had passed, would greatly have limited the mischiefs that had accrued. The noble lord then explained the character of the measure to which he was referring, and of another which he brought forward in 1818, having for its object to restrict the issue of small notes to such bankers as would give security. He objected to the power of issuing small notes, on the principle, that it was tantamount to the dangerous power of coinage to an unlimited extent. He entirely agreed with the noble marquis that the present was the most suitable and advantageous period that could be selected for the change. In justice and in mercy to the country bankers themselves, parliament was bound not to lose this opportunity. If they were allowed to revert to their former circulation, the pressure would be greater, when they were at any subsequent time called upon to contract it. At present, too, they would save the proportion of stamp duties they would otherwise be called on to pay. The quantity of gold required to supply the place of the notes would be small in proportion to the contraction of the circulation. Three or four millions would be all that would be called for, in the course of three years, to provide for the country circulation. Surely, that was not a sum, which could excite any great alarm. The measures, now proposed, were, he was satisfied, calculated to put the currency of the country on a solid foundation, and to prevent, for the future, all ruinous fluctuations of prices.
Lord Ellenboroughsaid, he could not give his assent to the measures flow before parliament, without expressing his opinions freely with regard to them. The measures at present proposed, as he understood them, were three: one intended to afford immediate relief; and the other two to prevent a recurrence of the calamities under which the country laboured. His chief objection to the measure for present relief was, that it would not relieve those who were most deserving of it, and that, while it would relieve some, it would necessarily injure others. For example, while it relieved those, who would not convert their Exchequer-bills into cash at a discount, it injured the banks that had been obliged to sell them during the height of the panic. There was no proof of the want of a circulating medium. It was more extensive now than at the end of 1824; yet, the object of government was, to increase it, when its very extent was alleged as one of the causes of the distress. The great cause of distress was, that people were all called on to pay what they owed, at the same time, and much sooner than they expected. It pervaded every class and description of persons. He knew not by what means relief could be administered; but he was sure that the measure of the noble earl would not reach those who were innocently involved in the calamities that pressed on the country. But, the noble lords on the Treasury bench were not agreed as to the character of their own measures. The noble earl had admitted, that the measure relative to the country banks was only a half measure, and had expressed his regret that he could not grant charters to the many joint-stock companies at once, while the noble lord who spoke last regarded the measures as of the greatest importance, and was only afraid that too great a number of joint-stock banks would be instituted. For his part, the events of the last two or three years, he confessed did not induce him to look at joint-stock companies with a favourable eye. He was not, therefore, sorry at the delay which must take place in the full completion of the measures; and, therefore, he thought no injury would result from the circumstance of these new companies not being able immediately to obtain charters. When the period fixed by law arrived, the materials would be provided for establishing them on an extended basis. He trusted no events would occur to prevent his majesty's ministers

497
from following up the course on which they had entered. No man evidently thought more deeply on the subject than the noble earl at the head of the Treasury, nor felt greater apprehensions from the present state of things. As it was impossible to doubt, that the noble earl was in favour of a system of restriction, it was to be regretted that into the present bill, out of which joint-stock banking companies might arise, a provision had not been inserted for the purpose of restricting such companies in their operations. The measure for putting an end to the circulation of small notes at the end" of three years, was a measure only of justice and humanity to the poorer classes, and therefore he highly approved of it; but, still, approving of it entirely, as far as its operation went, it was not, he thought, a measure which would reach to the causes of the existing mischief. For, if the noble earl at the head of government, looked at the papers on the table, he would find, that of 3,000,000 l. of country-bank paper, issued between last year and the year before, scarcely 1,000,000 l. had been issued in notes under 5l. Therefore, the putting an end to the circulation of 1l. and 2l. notes was not going far enough. To him it appeared idle to talk of the convertibility of notes into gold, while our system of country banking remained upon its present footing. If that system was allowed to go on, his firm persuasion was, that the country banks must ruin the Bank of England itself. In February of the last year, the Bank of England, seeing the foreign exchanges against us, had taken the just course to correct that mischief, by calling in more than 3,000,000 l. of their issues. What was the consequence? Why, that the country banks had immediately advanced their issues, for every pound which the Bank of England had withdrawn. Under such a system, it was physically impossible for the Bank to prevent foreign exchanges from being against us. At present, the Bank was compelled to take the risk, not only of its own trading, but of the trading of all the country banks. Its situation was one of great difficulty, and he was surprised how it had acquitted itself so well. It was absolutely necessary to the safety of the country, that the currency should be placed upon a solid foundation. He was quite sure that the noble earl must feel deep apprehension on the subject; and he trusted that after the present
498
alarm had passed away—with seven years of delay for consideration, before the Bank charter would expire—that noble lord would propose some definitive scheme which should give confidence for the future. The convulsions which the country had sustained under the old system, did mischief far beyond any actual loss that was sustained. It was said that, by the recent failures, the country would lose2,000,000 l. in money; but, the real mischief was in the derangement in the transfers of property which such accidents produced. He viewed the whole of this subject as of the highest importance to the safety of the country; and he trusted that the noble earl, with all the authority which belonged to him, as head of the government, and in virtue of his great talents and personal integrity, would boldly face the subject, and come down to parliament, with some comprehensive plan for establishing a firm and solid system of banking.
The Earl of Liverpoolsaid, that no clamour, no fear of the resistance they might meet with, would prevent his majesty's ministers from doing their duty fully with respect to this important subject. He trusted that their recent conduct was evidence of their resolution not to shrink from the task which they had prescribed to themselves. As to the mode of relief, to which the noble lord had objected, his opposition probably arose from his not having turned his attention to questions of that nature, and therefore not seeing the full bearing and operation of the course pursued by government. What was the state of the country? A general want of confidence. It was not that there was not the money; but every man shut up his resources, and looked only to himself. Many banks had already ceased to issue notes, though they had still the power to do so; and, in many other parts the public had absolutely refused to take them. There was a general want of confidence, and consequently a want of money. If the object of government had been merely to relieve the holders of Exchequer bills, it would have been highly improper; but the object was to throw two millions of money into active circulation, by which means they expected to relieve the country better than in any other way. If the noble lord had attended to the questions of the circulation, in 1819, he would have known, that in the committee of that House, their lordships had obtained lights

499
on the subject which never shone on them before. They mostly, he believed, went into the committee, thinking that the issues of the Bank for the purchase of Exchequer bills were much less beneficial to the country than the issues for discounts; but they all came out of that committee satisfied, that there was no difference, in the end, as to the effect, whether the issues were in discounts or in government securities, whether they went in the first instance to particular individuals or the public at large. The Bank, it was known, had always acted with the greatest impartiality; but he spoke on high authority when he said, that whether relief was given by one means or by the other, precisely the same effect was produced. The greatest relief that could be given in the most satisfactory and safest way, would be given by the measure that had been adopted. It was not a measure of government, so much as of the Bank; although, he admitted, that it had been adopted with the advice of government; and he, for his part, was ready to take whatever responsibility attached to that advice. And if an addition was, by this measure, made to the circulation of the country, and a facility afforded to a relief of the present pecuniary embarrassments, it would be but fair to repay an equivalent to the Bank for the advances it had made in this way. The circulation of the Bank of England had been frequently, but erroneously, referred to, to determine the amount of the exchanges of the country. This was a mistake of the first Bullion committee. That committee considered the exchanges to depend upon the circulation of the Bank of England; whereas, they did not depend upon the circulation of the Bank alone, but on the circulation of the Bank, and that of the country generally. The whole paper of the country should be taken into consideration. As a proof that this was the case, he remembered a conversation which he had with the noble earl (Lauderdale), in which he remarked, that although the circulation of the Bank was then higher than it had ever been; it was then so high as twenty-eight millions—yet that all the exchanges were in our favour. Upon this remark of his the noble earl observed, that as the Bank increased its circulation, the notes of country bankers were withdrawn from circulation. This was a just observation, and satisfied him, that the whole of the circulation of the country, in the deter-
500
mination of the exchanges, should be taken into consideration. Although the circulation of the Bank of England was at present high, yet it was not so high as perhaps for the good of the country, it might be. The exchanges, after all, were what it was most important to attend to; more so than the price of gold, as that was variable, and not easily to be determined. The great object, however, at present, was, to throw money into circulation throughout the country generally, and that would be more effectually done, in his opinion, by the present measure, than by any other that could be resorted to. It was a far more effectual one than any specific plan that might be suggested for throwing money into the hands of a certain class of individuals. It was a simple measure—a natural measure—and one, in every respect, preferable to that which had been proposed instead of it.
The bill was then read a second time. After which, the earl of Liverpool moved, that it be committed on Monday.