§ The Earl of Ripon moved, that this Bill he committed. As their Lordships had agreed already that this Bill should be read a second time, it was now his duty, before it went into committee, to state to them the circumstances which had induced the Government to form their present bargain with the Bank of England, and to call upon Parliament to ratify, as it would ratify by assenting to this Bill, the terms of it. Their Lordships were doubtless aware, that by the law as it stood at present, the Charter of the Bank of England was liable to be put an end to at any period after the expiration of the month of August, 1833, after giving to the Bank twelvemonths' previous notice to that effect; and it was obvious that, whenever the law fixed a period at which it was requisite that such a notice should be given, it was for the benefit of all parties that some definite arrangement should be instantly made. The Government had there- 840 fore felt it to be its duty to signify to the Bank that a new arrangement must be undertaken, with a view to the removal from the Bank Charter of a considerable portion, if not of the whole, of the advantages which that corporation at present enjoyed. As to the general question of the maintenance of a great banking company with exclusive privileges, it was a question on which, as a matter of speculation, considerable difference of opinion might reasonably enough be entertained. Many persons, ke knew, thought that it was not advisable that this Company should exist any longer with exclusive privileges, which gave them the power of accommodating the Government on the one hand, and of affecting the general circulation of the country on the other. Others entertained a contrary opinion, and if upon a comparison it had not been found, that the reasons for the maintenance of such an institution preponderated over those which were urged in favour of making a total change in its existence, he admitted, that it would have been difficult, if not impossible, for Parliament to have devised any means by which the business of that Corporation could have been transacted with equal convenience to the public and the Government; considering, however, the nature of the institution, the length of time which it had existed, and the manner in which its concerns were mixed up, not only with the King's Government, but with the King's subjects in every part of the King's dominions, and more particularly in England, he was sure that their Lordships would feel that it would have been an unwise policy for Parliament to have extinguished this Corporation, as by the law now in existence it had the power to do. This subject was not new to their Lordships, for it had been investigated by a Committee of the other House last Session, and the evidence which that Committee had taken had been laid some time ago upon their Lordships' Table; their Lordships had, therefore, the means of forming an opinion, whether it were desirable that the Bank of England, as a Corporation with exclusive privileges, should exist any longer. He knew that many persons objected to the sort of connexion which existed between the Bank and the Government, and also to the power which the Bank possessed of regulating the circulation of the country. It was possible, undoubtedly, that these circumstances might lead to abuses; but no man, he thought, would go the length of saying that the mere possibility of abuse 841 should be taken as a reason for depriving the public of the great advantages which it had derived from this institution, both commercially and financially. These considerations would, he trusted, be sufficient to satisfy their Lordships that it was desirable that the Bank of England should remain intrusted with considerable powers—that it was desirable that it should continue to enjoy most of those functions which it had hitherto enjoyed—and that it was desirable that the country should go on deriving from its connexion with the Bank the advantages which had already been derived from it. The question then was "how is this body to be continued—on what terms, and in what manner, shall these powers be granted—and how shall its conduct in future be regulated?" He would now proceed to state what were the terms which the Government had made with the Bank—what were the provisions under which the Bank was to enjoy certain privileges—and what were the modifications which this Bill proposed to make in the existing Charter. It was unnecessary for him to go clause by clause through the Bill, and he should therefore consult the convenience of their Lordships, by referring to those clauses only which he deemed of essential importance. The second clause of the Bill contained this enactment—that during the continuance of the privileges reserved to the Bank of England, no banking company of more than six persons should issue notes payable on demand within London, or sixty-five miles thereof. This was a mere re-enactment of the law passed in the 7th year of George 4th, by which, as the Bank of England consented to forego certain privileges to which it was entitled from the public, the public conditioned to prohibit the formation of certain banking companies within certain limited distances from London. It had not been thought right, on the present occasion, to diminish the radius of that circle. The next provision of the Bill related to the same subject, but involved in it something of novelty. After reciting, that doubts had arisen as to the construction of former Acts, and as to the extent of the exclusive privileges conferred on the Bank by former charters, and after declaring that it was expedient that all such doubts be removed, the clause declared the law to be such as authorized the formation of banking companies, not being banks of issue, but only banks of deposit in London, or within sixty-five miles of London, even though they 842 should consist of more than six partners. On this point great doubt had prevailed during the existence of the last charter. He knew that great authorities were ranged on both sides of the question; but as those to whom the Government were naturally in the habit of referring—the law advisers of the Crown—had expressed a strong opinion that by the existing law there was no prohibition upon the establishment of such joint-stock banks of deposit within a circle drawn with a radius of sixty-five miles from London, the Government had felt it their duty to abide by that opinion. He had always understood, not only that there was doubt as to the construction of the former charter, but also that the fact was, that within the circle to which he had just referred there were many banks of deposit with more than six partners. The duty, therefore, of Government, and of Parliament was to pass such a declaratory enactment as would leave no doubt upon the subject, and therefore, at the moment, when the question was raised and public attention drawn to it, it would have been erroneous policy, if not a dereliction of duty, in the Government and the Parliament, if they had abstained from making a positive regulation on the subject. On this account, resting upon the opinion of the law officers of the Crown, that the existence of these banks of deposit within the circle which he had just described were consistent with the law as it stood at present, the Government now proposed a declaratory clause that such joint-stock banks of deposits could be formed with more than six partners in London, and within sixty-five miles of it. For his own part, he could not see any objection in principle to the formation of such banks, nor could he see how they would interfere with the privileges of the Bank of England, or with the exercise of those advantages which this Bill was intended to confer upon that Corporation. He again repeated, that he felt it unnecessary to go clause by clause through this Bill; he would therefore content himself with stating that the next clause enacted that all notes of the Bank of England payable on demand, which should be issued out of London, should be payable at the place where they issued, and that the Bank, or their agents, should not issue at any place out of London any such notes not so payable. The advantage of this clause was so palpable, that he felt that it would be a waste of words to utter a syllable in justification of it. The next clause related to 843 the termination of the exclusive privileges which this Bill granted to the Bank. The sixth clause was one of considerable importance—it was also a new clause, and therefore he would explain to their Lordships why it was considered a material point by those who had undertaken the introduction of this Bill. It made the notes of the Bank of England under a certain limit a legal tender, except at the Bank and its different branch banks. This proposition was at first sight startling, and was liable to this inconvenience—namely, that it tended to create an over-issue of paper which was liable to affect the stability of the Bank itself, and to derange all the commercial speculations of the country. Now, if he could bring himself to think, that such a result were likely to arise from this clause, he should be the last man in the world to recommend it to the acceptance of their Lordships. He thought, that the country had suffered enough already from the variations of the law on this subject—variations which were justified at the time by the immediate necessity of the case, and which admitted of no other justification. Anything, therefore, which had a tendency to renew such variations, would, in his opinion, not be desirable. This clause, he contended, would have no such effect; indeed, it was so worded as not to preclude Parliament from dealing with it whenever Parliament thought fit. It was not part of a positive bargain, for the words of the clause were to this effect:—"Be it further enacted, that from and after the 1st day of August, 1834, unless and until Parliament shall otherwise direct, a tender of a note or notes of the Governor and Company of the Bank of England shall be a legal tender, &c." It was obvious, therefore, that it was competent to Parliament to revise this part of the case, and to act as it might deem expedient. The limitation of the legal tender in Bank of England notes was to sums above 5l.,—for instance, a 5l. Bank of England note would not be a legal tender for a debt of 5l.; but if a man owed a debt of 7l, the tender of a 5l. note with two sovereigns would be a legal tender. If such a circumstance was to occur as a great political or a great commercial panic—a circumstance which, though not very probable, was still supposable—he thought that the existence of this provision would be a great security not only to the country banks, but also to the Bank of England itself. The country bankers, whose habit it was, not to retain in their 844 coffers more than one-twentieth part of their circulation, would find it a security, because it would be of the same advantage to them on all future occasions, as experience had proved it to have been in the crisis of 1825, to issue notes of the Bank of England rather than to produce gold, in payment of their own paper. He had no hesitation in saying, that the issue of Bank of England notes at that time had stopped the progress of that alarming and dangerous crisis. Judging by the successful result of the experiment which was then tried, and which was warranted by necessity, he had no hesitation in predicting that great advantage would result to the country banks from the permission now granted to them of taking up their own notes in paper of the Bank of England. He also contended, that as far as regarded the Bank of England this clause would also be a great security. Whenever a panic arose, the natural object of all the country banks was, to obtain a supply of gold, at a great expense, undoubtedly, to themselves, but, nevertheless, not without considerable inconvenience to the public. Now, whenever circumstances compelled the country bankers to get gold from the Bank, other circumstances, either precedent or concomitant, or it might be both, placed the Bank under no inconsiderable difficulty as to the supply of gold, for the first thing that occurred was the turn of the exchanges against this country. It then became more profitable to export gold from this country than commodities or produce of any kind; and the Bank might then be imperceptibly, and even without its own knowledge, drained of the greater part of its cash. Now, that would necessarily compel the Bank to diminish its issues. The country banks, in that emergency, might begin by extending their issues, thereby counteracting, to a certain extent, the proceedings of the Bank of England. But, then, before long, the operations of the Bank of England would compel the country banks to contract their issues; that would occasion great alarm, great inconvenience, and great fluctuation in prices; these circumstances would again occasion a great run upon the country banks, and that again, in its turn, would compel the country banks to draw on the Bank of England, in order to meet the demands upon them for payment of their own notes. This, too, would take place at a period when the Bank of England would be almost drained of gold, so that it would 845 only have a small sum to draw on, and would thus be placed as it was in the year 1825, in a situation of great difficulty and embarrassment. Thus, by enacting, that bank-notes should be a legal tender except at the Bank itself and the branch banks, the danger which he had described would be satisfactorily met, without being liable to the charge of having a tendency to produce that danger. The next clause enacted, that bills not having more than three months to run should not be subject to the usury-laws. Now, this would certainly be of great convenience in mercantile transactions. It did not affect the general principle of the Usury-laws, on which, though he entertained a very strong opinion, he would not he tempted to say a single word on the present occasion. It was considered as a great relief to commercial men, and on that ground he should rest its justification. The next provision of the Bill to which he had occasion to call the attention of their Lordships was new, and, in his opinion, of considerable importance; it was a provision which required a certain publicity to be given to the amount of bullion and securities in the Bank of England, and to the amount of its notes issued and in circulation. That subject had been fully investigated before a Committee of the House of Commons last year; and though there was some doubt as to what the mode of proceeding ought to be, he thought, that the doubt was rather as to the time than as to the principle of giving publicity to such accounts. For his own part, he had never been able to see what danger could arise to the Bank if this degree of publicity existed. It had always appeared to him, that one of the evils of our banking system was, that no man could make himself acquainted with the amount of the circulation of Bank of England paper at any given time. Great changes occasionally took place in the amount of bank-notes in circulation, and in the supply of gold in the coffers of the Bank to meet them. The consequence was, that all persons acting extensively in commercial transactions were acting in the dark. They might watch the turn of the exchanges, as the best criterion of judging of the amount of paper in circulation, but even that criterion was not always to be depended on; and, therefore, he thought, that it would be more satisfactory to the public that it should know, at stated periods, better than it did at 846 present, the amount of bank-notes in circulation. In the Bank of France this publicity had long prevailed. He knew that circumstances were different in the two banks, for the circulation of paper in France was considerably less than it was in this country; still, he had never heard, that any disadvantage had arisen from the publicity given to the accounts of the Bank of France. At any rate, the Bank of England did not think, that the Publicity required by this clause would lead to any inconvenience which would prevent them from discharging their duty properly towards themselves and the public, under the terms which this Bill was introduced to ratify. The next clause was, to authorize the Bank to reduce the amount of its capital stock. The public were now bound to repay the Bank one-fourth part of the debt of 14,686,000l. borrowed in 1816, at which time the capital of the Bank was raised to its present amount. As to the Bank itself, the repayment of the whole sum would, at present, be an inconvenience; and, therefore, they only called for the repayment of 3,600,000l. The only other part of the Bill to which he had further occasion to direct the attention of their Lordships, was that by which the Bank agreed to deduct the annual sum of 120,000l. from the sum hitherto allowed to it by the public for the management of the National Debt. He knew, that it had been said, that, in not getting a larger deduction than 120,000l., the Government had not sufficiently consulted the advantage of the public. He admitted, that the Government might possibly have driven the Bank to make a larger deduction than 120,000l.; but, considering the claims which the Bank had upon the country, he thought, that it would not have been a wise course to have urged the Bank to a greater sacrifice than could in reason be expected from it. The public had great advantage over the Bank in making a contract of this nature, and might, perhaps, drive the Bank to its own terms; but that was no reason why the public should extort from the Bank terms which it was not fair for the public to ask. He thought, that, looking to the services which the Bank had rendered, and would again render, to the Government on the one hand, and to the public on the other, it would not have been wise in the Government to drive the Bank to the wall. When, therefore, the Government came to discuss this question 847 with the Bank, the Government thought, that, by accepting the reduction of 120,000l., which the Bank offered, they made such terms with it on behalf of the public as secured to the public an adequate compensation for the advantages which the Bank derived from the public. He could call upon his noble friend (Lord Bexley), who had been his colleague in office, and was well acquainted with the Bank, to speak to the utility of the Bank through all the years that he had been connected with the Government. He was sure, that no man was more alive to the services which it had rendered to the country, and upon that ground, as well as upon the other grounds which he had stated, he called upon their Lordships to ratify the contract which, in this Bill, was made between the Bank and the public. He had now done; but, before he closed his observations, he would say a word or two on another Bill, which was at present before their Lordships, and which was closely connected with the subject matter of this Bill. That was a Bill by which it was provided, that the country bankers should keep accounts of the number of stamps consumed by them, to be transmitted to the Government, and this was a very important branch of the subject, inasmuch as great difficulty had arisen from the Government not knowing the extent of the circulation of country bankers. The noble Earl concluded by calling on their Lordships to give their assent to a measure which was well calculated to ensure the prosperity of the country.
§ The Duke of Wellingtonasked, whether the last clause to which the noble Earl had alluded was part of the arrangement with the Bank?
§ The Earl of Riponsaid, that it was.
§ The Duke of Wellingtonproceeded to address the House. He quite agreed with the noble Earl (the Earl of Ripon) in thinking that his Majesty's Government had acted rightly in proposing a renewal of the Charter of the Bank of England; and also, that, in carrying on a bargain with that body, they acted rightly, while securing to the public some return for the advantages they held forth, in not bearing too hard on the Bank. The noble Earl, however, seemed anxious to take merit on behalf of the Government for having treated the Bank with considerable forbearance; but, so far as he had been able to understand the arrangement, he confessed he saw in it no evidence of any extraordinary forbearance on the part of the Government; 848 and unless he was much mistaken the Bank of England altogether coincided with him on that point. Unquestionably in some of the details of the arrangement the Bank was a gainer; but, when he considered the price which the Bank was called upon to pay for these advantages, he could not think the public had any reason to complain that the Bank had been favoured in the arrangement. At all events such was his conclusion, and he was induced to adopt it because, in point of fact, the Bank had been obliged to reduce their capital in order to meet the terms which Government required. If those who thought the Bank ought to have been pressed a little further in the arrangement of the bargain would only reflect dispassionately upon its terms, there could be no doubt they would soon come round to the opinion, that, so far from not being pressed enough, the Bank had been driven to the extreme bounds. The part in the arrangement to which he entertained the greatest objections, was that which constituted a Bank of England note a legal tender. Since he had first turned his attention to the question of currency he had always maintained the opinion, that, by the arrangement of 1819, which arrangement had been improved upon in 1826, and subsequent periods, the money system of the country was placed on the very best possible footing. The basis of that system was a solid gold circulation. Hitherto the detail payments in every transaction were made in gold, while the larger, or he might use the term wholesale, payments were made either by gold or credit, at the convenience of the parties. Now, when transactions were conducted on credit, on what was that credit based? Surely it was on the reliance of the parties that the paper, which was accepted on credit, was liable to he paid on demand when presented at the Bank of England or any of its branch banks. Whenever a man chose to cease giving credit to his debtor, all he had to do was to proceed to the Bank and demand payment in gold of his paper security, and he was sure to get it; and the effect of the arrangement was a great increase to the commercial facilities, and, consequently, the commercial prosperity, of the country. Under the present Bill such a system could not take place. The immediate convertibility of the paper security was doubtful, and, while doubt existed, it was idle to expect credit payments would be admitted. He did not go the length of saying, that 849 it would be impossible to receive gold for paper if it was desired; but, on the first appearance of the arrangement, there was every reason to fear considerable difficulty would be experienced in obtaining it. Looking to the clause in all its bearings, he did not hesitate to say, he considered it intended for the depreciation of the paper of the Bank of England, and had he been a Bank Director at the time it was proposed as part of the bargain, he would never have consented to any such arrangement. Indeed, looking at the arrangement throughout, he never could understand for what reason the Bank of England had adopted it. It was impossible for the Bank, do what they might, to avoid the depreciation of their paper. From the moment Parliament interfered, and gave to that paper a value which intrinsically it possessed not, it must inevitably become depreciated, to the great loss of the Bank, and to the general insecurity and dissatisfaction of the public. But it was not alone the depreciation of the paper the Bank had to fear as a consequence of the arrangement. In many other points of view the Bank would, ere long, feel further inconvenience from it. What was the object of the Government in proposing the arrangement? Evidently it was intended either to give to the Bank of England paper a value it did not possess, or to facilitate credit generally, and in particular to enable country bankers to extend their credit far beyond the limits they were under the present system enabled to reach. Indeed, the noble Earl had admitted, that the consequence of the arrangement must be to facilitate the issues of country bankers, and thus to augment their transactions. But did their Lordships consider the probable results of facilitating the issues of country bankers? Did they consider the effect of such a measure on the prices? For his part he apprehended nothing less than a great increase of prices, and the inevitable consequence of such an increase, experience gave reason to fear, would be the distress and ruin of many thousand individuals. Now, not one of those evils could happen if the present system was continued, and yet it was to be abandoned for the sake of trying an experiment. Since the establishment of the present system, the money transactions of the country had been brought to precisely that wholesome and sound condition, on which alone public confidence could be based, and the proposed departure from it he, for one, viewed with the greatest alarm and distrust. 850 With regard to the details by which the new arrangement was to be carried into effect, he had likewise one or two remarks to offer. In the first place he thought the arrangement for the taking up of Bank of England notes likely to cause considerable confusion. By the Bill, as it then stood, a note issued by the Bank of England, was not liable to be taken up and paid at any of the branch banks. At present it was so, but under the new arrangement the note must be brought for payment to the same Bank by which it was issued. [The Earl of Ripon: No, no!] True; the notes issued at the branch banks could be presented for payment either at the branch bank from which it was issued, or at the Bank of England; but a Bank of England note, under the new arrangement, could only be presented for payment at the Bank—a measure for which he saw no necessity, and from which he apprehended no small degree of confusion. There was another point of view in which he considered the details objectionable. The noble Earl had that evening given him some information which he confessed no perusal of the Bill, in his opinion, could have afforded him, namely, that a five-pound note would, under some circumstances, become a legal tender. His impression, from an attentive perusal of the Bill, was, that under no circumstances whatever, a five-pound note constituted a legal tender; but somewhat to his surprise the noble Earl had stated, that a five-pound note and two sovereigns, would be a legal tender for seven pounds. At present, how-ever, he would pass from that part of the Bill. When the Committee proceeded to that part of the Bill, he would certainly endeavour to have a clear understanding on that point. But to show the working of the Bill in another point of view, he would suppose the case of a country banker declining to issue notes under 10l.—an expedient which he could see no reason a country banker should not adopt, and in that case, what answer would he give a party bringing one of his own notes for cash payment? Would he not, to suit his own convenience, either give two five-pound notes, when it appeared they were legal tender, or a ten-pound note of the Bank of England? And what redress would the party have? None, whatever. He might ask for gold, but the reply of the banker would be, "I here offer you what the law looks upon as a legal tender, and, if you want for your convenience to be paid in gold, you must pay me either five per cent, or ten pet cent., 851 whichever it may be, for the accommodation." Now, what would be the inevitable result of such a state of things? Why, a general agio for gold throughout the country. He had now stated the objections he entertained to that part of the measure relating to the legal tender. He was opposed in the first instance, to its principle, and, secondly, to its details; to the principle, because, in a certain degree, it lost sight of the only secure basis on which the money system of the country could be based, namely, a solid metallic circulation, a departure from which would produce a depreciation in the value of bank paper and an increase of prices; and to its details, because, from the confused form in which they were drawn up, their only effect must be to render an ill-advised and dangerous experiment, difficult to be understood even by the most acute understanding, however conversant with the subject of banking. There was another part of the proposed arrangements to which he was also strongly opposed: he meant the clause which enabled firms of more than six partners to establish banks of deposit in the metropolis, and within the prescribed circuit. In the first instance, he believed, it was intended by Government, and, unless he was much mistaken, formed a part of the original proposition to the Bank, that such banks of deposit should not be established; and he was yet to learn why that intention had been abandoned. It was generally understood, that the establishment of banks of deposit within the metropolis was prohibited by Act of Parliament, said to have been in force for 150 years; but before the Bill had passed through all its stages in another place, it was discovered that that which had been the law for 150 years was, in point of fact not the law, and that it was perfectly legal for banking firms of more than six partners to establish banks of deposit. A very learned Gentleman in the other House of Parliament having given a legal opinion that the law on the subject was for 150 years misinterpreted, instead of taking measures to ascertain by some of the ordinary modes what the law was or what it had been, his Majesty's Ministers thought proper to introduce a clause into the Bill, declaring the law on the subject to be directly the contrary of that which it was understood to be, and that which had been in force for upwards of 150 years. Such was the history of the clause to which he alluded. The course which Ministers bad adopted might on some ground, of 852 which he begged to say he was ignorant, be defended; but he appealed to their Lordships' whether, on any ground whatever, it could be considered fair conduct towards the Bank. But the question for their Lordships to consider was, whether the arrangement that firms of more than six partners might in future establish deposit banks in the metropolis would not be highly prejudicial to the interests of the Bank of England, and very dangerous to the general interests of the country? In the first place, was there any necessity for the change? In his opinion there was not; for the existing system, while it gave very general satisfaction, was attended with every requisite security, and had gone on as well as it was possible any system could go on for a period of upwards of 150 years. But it was in its consequences upon the security of the Bank of England, the change was chiefly to be dreaded. One of the main resources of advantage as well as security to the Bank of England was, the large deposits it constantly received from private banking firms, which source would be at once cut off by the establishment of a number of deposit banks. At present, the banks of deposit were few in number, and, consequently, merchants and capitalists of all kinds, occasionally placed very large sums for security in the Bank of England; but when the capital of the country became scattered over a number of deposit banks, there would be little or no necessity for any such security, and, consequently, the Bank would gain nothing by the deposits of private individuals. What had caused the panic of 1797? It was generally attributed, he believed, to the large loans borrowed by Government, and to an extraordinary expenditure abroad; but to neither of those causes did he attribute it, because in later periods, and within his own recollection, larger loans had been raised by the Government, and greater expenditure had taken place abroad than at the period he had mentioned without the recurrence of a panic. It was what was called the "Loyalty Loan" that had caused the panic of 1797, and it did so by taking the deposits from private banks, and through them from the Bank of England. In every point of view he thought the clause upon which he was then commenting, would do more injury to the Bank of England than any other part of the Bill; and it was with the greatest surprise he understood the Direct" ors and Proprietors of the Bank acquiesced in it. The noble Duke concluded, by 853 stating it was not his intention to offer any opposition to the House going into Committee on the Bill.
The Marquess of Lansdownobserved, that his noble friend had so clearly explained the provisions of the Bill, that it was quite unnecessary for him to trespass long upon their Lordships' patience. He perfectly agreed with what had fallen from the noble Duke as to the basis of our circulating medium. If there was a point on which he entertained a more distinct and deliberate opinion than another, it was, that any departure from that principle which placed the circulating medium on a metallic basis, would endanger its security. If anything entitled the Government, or he would rather say, the Governments of this country to the confidence of the public, it was the firmness with which, resisting every temptation to the contrary, they had adhered to sound principles of currency, and had placed and continued the circulating medium on what he hoped would ever be its unalterable basis. He was not sorry, therefore, that this point was one which had attracted the notice of the noble Duke; and if he (Lord Lansdown) could for a moment believe, that it involved what the noble Duke thought it involved—a depreciation of the paper of the Bank of England—no consideration on earth should prevent him from giving so fatal and destructive a proposition his full and uncompromising opposition. But it was because he differed from the noble Duke—because he took the same view of the subject as must be taken by the Bank of England, whose duty it would have been, if they supposed that the measure was calculated to depreciate their paper, to have abstained from giving it that degree of approbation which they had expressed towards it, that he warmly supported the Bill. As long as paper was convertible into a metallic standard, he contended that the credit of that paper must be sound and good. He had been on Committees upon the subject with the noble Duke; and the noble Duke must agree with him, that the security of paper depended, not on the amount of gold in the country, but on the amount of paper as compared with the wants of interchange, and to the amount of gold all over the world. All that the clause to which the noble Duke objected went to, was to give to the country bankers only that degree of credit which would render it necessary that they should provide themselves with Bank of England paper instead of gold; and of thereby not undergoing the 854 expense (an economy worth attending to) of the transmission of the precious metals from place to place. If our places of business here, were very remote from one another, as for instance in the United States of America, he might join in the apprehension entertained by the noble Duke; but he could not believe, that in England, where the post gave opportunities of daily communication between every part of the empire, the circumstance of being occasionally obliged to have recourse to London, could be attended with any serious inconvenience. Whereas it would be attended with considerable advantage, that where the whole circulation was regulated by the Bank of England, the check should be at its fountain head; thereby rendering that operation simple, which would otherwise be compound. If it should enter into the head of any person to fancy that a country banker might not provide gold enough for ordinary purposes, the answer was, that the common competition of one bank with another would soon cure that evil; it being evident, that that bank would have preference which was most liberal in its issues of gold. But gold would be called for only in cases of panic; and at other times it was desirable to do as much work as possible with the least possible quantity of gold; there being always an ultimate security at the branch, banks or at the Bank of England, for the immediate commutation of that paper for gold. On the other subject to which the noble Duke had called their Lordshipsattention—namely, to enable banks of deposit, with more than six partners, to carry on their business in London, it certainly had not been the intention of his Majesty's Government to make any change in the law. But they were bound to take the law as they found it. It was not for him to go into the legal argument. The law officers of the Crown had been consulted, and the grounds of their opinion were before their Lordships and the public. He had reason also to believe, that those grounds were pretty generally considered as satisfactory. It certainly appeared from them, that the law had always been what it was stated in the present Bill to be.
§ Lord Wynfordsaid, that the Government had certainly taken a most extraordinary course to effect the object thus stated by the noble Marquess. If the professional advisers of the Government had really thought, that the law was as declared in the clause in question, why had more than a usual declaratory clause been inserted? 855 He believed, however, that legal men had been unanimous in their opinion, that under the existing laws no banks whatever could be established within the specified limits; and there was only one banking house in London, that of Messrs. Glynn, whose practice as to the number of partners differed from that of the remainder. This discovery of the supposed meaning of the law was at least quite new, and it was surprising, indeed, that commercial men, usually so acute in matters relating to the advancement of their, own affairs, should not before now have discovered the real meaning of the laws, and have applied the discovery to their own advantage. There was an authority also whom he would name in support of the view he had stated,—that of Adam Smith, who had so understood the law as to declare, that the Bank of England had an exclusive privilege of banking of every description within the before-mentioned limits. It was clear also from the correspondence between the Chancellor of the Exchequer and the Bank Directors, that, in the early period of the progress of the Bill, it was supposed by all parties that the Bank of England had the exclusive monopoly of banking of every description within the prescribed limits, and as the basis of the arrangement was, that all the privileges hitherto enjoyed by the Bank should now be confirmed to them, he (Lord Wynford) did not see upon what principle of justice the other disposition had been subsequently made. The Acts of Parliament to which he would refer as supporting the construction of the law hitherto acted upon were as follows:—By the 8th and 9th of William 3rd, chap. 20, it was enacted by sec. 18, that "during the continuance of the corporation of the Governor and Company of the Bank of England no other Bank, or any other corporation, society, fellowship, company, or constitution, in the nature of a bank, shall be erected, or established, permitted, suffered, countenanced, or allowed by Act of Parliament within this kingdom;" and he (Lord Wynford) contended, that those words referred to every description of bank. Then, by the 6th of Anne, chap. 22, sec. 9, it was enacted, that it shall not be lawful for any body politic or corporate whatsoever, united or to be united, in covenant or partnership, exceeding the number of six persons in that part of Great Britain called England, to borrow, owe, or take up any sum or sums of money on their bills or notes payable on demand, or at 856 any less time than six months from the borrowing thereof.' This Act was passed, because, since the pussing of the former Act, banks of the description there referred to had been set up, which "frauds" it became necessary to put an end to. And to prevent the existence of any doubt on this subject, the 15th George 2nd, cap. 13, was passed, giving to the Bank of England the privilege of exclusive banking, and also enacting, that no other bank should be erected, established, or allowed. Precisely the very same words were to be found in every Act of Parliament relative to this question, down to the 39th and 40th of George 3rd, which was the statute under which the Bank at the present moment held their Charter. Could it be denied, then, that the establishment of joint-stock banks of deposit in the metropolis, or within sixty-five miles of it, was an infringement upon the acknowledged privileges of the Bank of England? He begged to tell the noble Lord opposite, that all the evils which he thought likely to result from the institution of banks of issue in London would as certainly follow the institution of banks of deposit. The Bank of England had been properly described as an instrument of great public utility; one great advantage attending which was the power it possessed of regulating the exchanges, by contracting or extending its issues, as the circumstances of particular seasons might seem to require. But how could the Bank of England perform this office with effect, if other banks, possessing an enormous capital, (and he had heard of one to be started with a capital of 8,000,000l. or 10,000,000l.) and holding a considerable quantity of bills upon the Bank of England, were allowed to be established? He was quite sure, that these Banks would have the power, when it suited their own particular interest, to render abortive all the endeavours of the Bank of England properly to regulate the exchanges. But, independently of these considerations, he contended, that the privileges of the Bank ought not and could not be taken away by Parliament: because no public body whatever had the power legally to commit acts of injustice, and the principle which was now attempted to be applied to the Bank of England would, if acted upon, establish a precedent by which similar injustice might be done to every other class of the community. There was another Act of Parliament which appeared to him most decisive on the subject, and which, be was 857 persuaded, must, by some accident, have escaped the observation of those whose duty it had been to draw up the present Bill—he alluded to the 7th George 4th, chap. 46, by which the privileges of the Bank of England were limited to a boundary of sixty-five miles round London. What was the inference he drew from this Act of Parliament? That no banks consisting of more than six partners could, until the passing of that Act, be established in any part of England. But if his Majesty's Ministers thought, that the Bank of England had no right to the enjoyment of exclusive privileges to the extent to which it now claimed them, why did they not at once acquiesce in the proposal which the Bank made—namely, to introduce a clause declaring the continuance of all the privileges granted to the Bank, except so far as they might have been altered by the 7th George 4th? It appeared from this, that the Bank was contented with the law as it stood, and he could not conceive what pretence it was possible to put forward for the rejection of so fair a proposition on the part of the Bank. Their Lordships were, however, told, that Government had taken the advice of the law officers of the Crown, and they were called upon to pay due deference to their opinion. Yet, with all respect to those learned persons, he must be permitted to say, that their minds were liable to be swayed by prejudices; and, at all events, he thought, that it was not fit that the rights of the subject should be decided upon by the law officers of the Crown. Let the Courts of Justice remain open to the Bank of England, and, if the opinion of the law officers of the Crown was correct, the Bank must necessarily fail in any endeavour to prevent the establishment of banks of deposit in the metropolis consisting of more than six partners. It was but fair, however, to allow the Bank an opportunity of having that question decided; but of such opportunity it was deprived by the clause to which the attention of the House had been called. Whatever the law might be, the practice for the last 150 years had been for the Bank of England to enjoy exclusive privileges in London; and there was no justice in binding any party to a bargain to which he might have consented from a misunderstanding of the position in which he stood. He was aware, that the Bank had since agreed to the proposed plan of Government; but for what reason? Because it could not resist. The Bank protested against the 858 injustice of the measure; but if Parliament resolved to commit an injustice, what could the Bank of England, or any other body of persons, do? He confessed he felt great apprehensions on the subject; for he was afraid lest this rivalry in banking should lead to the derangement of the monetary system of the country. When Parliament was pleased to extend the privileges of banking all over the country, except within sixty-five miles of London, it was required, that the names of all the co-partners in every bank should be sent to the Stamp Office. [The Earl of Ripon: That regulation refers to banks of issue.] He would admit, that it applied to banks of issue; but he would ask his noble and learned friend on the Woolsack how it would be possible to obtain justice against those great companies which were about to be established, unless it was made imperative that the names of the members should be registered? The public ought to be allowed an opportunity of knowing what was the state of their balances, and it was not right that the Bank of England should be looked upon with more jealousy than these new banking establishments. He certainly should be very glad to have the opinion of the Judges on the point, whether or not, under the existing law, banks of deposit consisting of more than six partners could legally be established in the metropolis. He was told, that it would be difficult to assemble the Judges at this period of the year; but he was ready to say, that if any one of them could be found to support the opinion on which the clause in the Bill was founded, he would at once forego his opposition to it. He begged, therefore, to submit to their Lordships, as an Amendment upon the original question, the following Motion:—"That before the House resolves into a Committee upon this Bill, the opinion of the Judges be obtained on the following question—whether, under the existing law, a co-partnership, consisting of more than six partners, can carry on the business of bankers in London, or within sixty-five miles thereof, though such bankers do not borrow or take up money on their bills or notes payable on demand, or within any period less than six months."
The Lord Chancellorsaid, he should trespass but a very few minutes on the attention of the House, while he endeavoured to answer the legal argument which had been put forward by his noble and learned friend. In the first place, however, he 859 begged to state, that he would be the last man to express an approval of any measure, if he thought that its results would be to lead, by however long a process, to a depreciation of the currency of the kingdom. It was absolutely and imperatively necessary for the safety of all interests in this country, mercantile or otherwise,—for the stability of trade and agriculture,—that there should be no further tampering with the currency, and that no attempt or proceeding should be sanctioned by Parliament or the Executive Government which could by any remote possibility cause any change in the value of the circulating medium. How it could be said, that the present measure Would cause a depreciation, or create a monopoly in the remote provinces in favour of the Bank of England, and therefore lead to a diminution in the value of its paper, he was at a loss to imagine. With much more reason, in his opinion, the measure might be described as calculated to make the paper of the Bank of England bear a premium. But he believed, that in reality the plan proposed by Government would be found to produce neither the one effect nor the other. His noble and learned friend had said, that the Bank of England had not been liberally treated by the Government. Now, for his part, he must say, that he should entirely disapprove of any measure not founded on good faith towards that company; but he begged to remind the noble and learned Lord, who had talked so largely of the advantages conferred on the country by this establishment, that there had been a reciprocity of benefit; and the noble and learned Lord was greatly mistaken if he thought the advantage had been all on one side. From the year 1797, when a little gentle violence was used against them, and when they were prohibited by an order in council from paying their notes in gold—a proceeding to which they were so averse that the order in council was found to be insufficient for its purpose, and it became absolutely necessary to pass an Act of Parliament to compel them, contrary to their most anxious desire, to suspend cash payments,—from 1797, he repeated, until the year 1819, the fact was that they did cease to pay their notes in gold, and they so greatly benefited by the violence which was done them, that their dislike to it gradually lessened, until, at last, they became gradually reconciled to it. It was also a fact, that during that period bank-stock rose to 280l. He thought 860 these were circumstances which showed that the bargain which the Bank made with the public for thirty years was not a very hard one for themselves. The noble and learned Lord said, that the Bank had been obliged to yield to the Government; but he could see no symptoms of a yielding disposition on the part of the Bank. During the latter period of the negotiation the Bank resisted the Government, and if it had been minded to hold out it might have done so, and would have done so—for let not their Lordships deceive themselves on the subject—if it had not thought that it had made, upon the whole, an exceedingly good bargain. Indeed he knew that many persons considered the bargain to be a good deal better, as regarded the Bank, than it ought to have been, and that if there were any party which had not obtained such good terms as it was entitled to, that party was the public. His opinion was, however, that neither the public nor the Bank had any right to complain; and he was sure, that the Bank directors would laugh exceedingly if they were told that any one fancied they had been overreached in the transaction. He would now address himself shortly to the legal argument of his noble and learned friend. By the 15th George 2nd it was enacted, that no other bank but the Bank of England should be established or allowed by Parliament. So far this favoured the argument of his noble and learned friend, who, in referring to that Act, had contented himself with quoting those words. But the succeeding part of the clause clearly proved, that the Banks intended to be prohibited were banks of issue; for it went on to state, "that it should not be lawful for any body politic or corporate whatever, or any company of persons exceeding the number of six, to borrow money on their bills or notes payable on demand, &c." These last words, he contended, proved that banks of issue were intended to be prohibited by the Act; and when the Legislature, in William's time, enacted a general prohibition, the words used were exceedingly different. In the Act passed in the reign of King William, nothing was said about borrowing or taking up money on bills; but the restriction was general, and depended on the continuance of the corporation of the Bank of England. When he looked to the 7th George 4th, to which the noble and learned Lord had referred, he found in it a great additional argument in favour of the construction put on these 861 Acts by the law officers of the Crown, for the first part of the enactment was couched in those general expressions employed in the former Acts—a circumstance clearly showing, that the Legislature placed the same construction on them as that given by the law officers of the Crown. The fact that the law officers of the Crown were opposed, on this point, to the noble and learned Lord, was a sufficient answer to his assertion that all lawyers were unanimous in their opinion on the subject. The noble and learned Lord was equally correct in his statement, that no difference of opinion prevailed among bankers with respect to the state of the law. He had heard of more than one instance of a banking establishment being formed in London, consisting of upwards of six partners; and since he had taken his seat on the Woolsack that evening, he had been told by a noble friend, that a highly respectable firm openly carried on the business of banking at the west end of the town, the number of the partners being eight, until it was reduced by the death of one of the partners to seven. The noble and learned Lord concluded by expressing his disapproval of the Amendment (moved by Lord Wynford), as he conceived that great inconvenience and waste of time must be the consequences of their Lordships agreeing, at the present season of the year, to call the Judges before them.
§ Lord Bexleywas not disposed to quarrel with the general provisions of the present Bill, but felt called upon to object to the legal-tender clause, and still more to that clause which went to declare that the law did not prohibit the establishment of joint-stock deposit banks within sixty-five miles of London. One fact was decisive, that neither the Bank of England nor the public believed that such was the law—namely, the fact that, on the one hand, no such joint-stock banks were ever thought of during the joint-stock mania, while, on the other hand, forty-eight hours had not elapsed from the moment that it was promulgated, on the authority of the law officers of the Crown, that such might be legally established, before a prospectus, involving a capital of 10,000,000l., was issued and acted upon. Surely the fact, that not only the Attorney and Solicitor General were at variance with such a man as Sir Edward Sugden, and the Lord Chancellor, and Lord Wynford, on the interpretation of the law on this head, ought to make that House, the Court 862 of last appeal, pause ere it pronounced that to be law which a more cautious scrutiny might prove was illegal; at least, they ought not to commit themselves till they had taken the opinion of the twelve Judges on this important and much-contested point.
§ The Earl of Ripon briefly replied.
§ The Amendment was negatived, and the House resolved itself into a Committee.
§ The 1st and 2nd clauses were agreed to.
§ On the 3rd clause being read,
§ Lord Wynford moved, as an Amendment, that the entire clause be omitted, and that a clause ensuring the Bank of England all the exclusive privileges granted by the 39th and 40th of George, 3rd, and confirmed by the 7th George 4th, be substituted. The clause, as it stood, was a breach of public honour towards the Bank; and he really knew not why Ministers refused to wait for the opinion of the twelve Judges, unless they were pretty confident that that opinion would be adverse to their present proceedings. The learned Lord on the Woolsack had referred to the case of a joint-stock bank at the west end of the metropolis, as a proof that the Bank of England, no less than the partners in that concern, did not believe that the law prohibited the establishment of such banks. All he would then say, that if such were the case, he was greatly deceived if the Bank of England did not issue a writ and bring the matter to a legal issue; and very probably the learned Lord would have another opportunity of stating his opinion when hearing the case in that House as the highest Court of Appeal.
The Lord Chancellorcould not but admire the praiseworthy zeal which prompted his learned friend to thus interfere in behalf of a body who had honourably proved their ability to judge what was, and what was not, inimical to their interests; and who, being the parties not only most interested but most competent to judge of the tendency of the present clause, had expressed their satisfaction with its provisions. To adopt, therefore, his learned friend's proposition would be not only a work of supererogation, but an implied assertion, either that the Bank Directors were not competent judges of their own interests, or that they unworthily shrunk from their duty towards those over whose interests they presided. He was sure that they were too enlightened to follow the hint of his learned friend, and issue a writ 863 against the deposit bank to which he had alluded.
§ Lord Wynfordsaid, that his learned friend was in error in asserting that the Bank Directors were satisfied with the provisions of the present clause. No later back than the 9th instant, in a letter to Lord Althorp, they distinctly stated that it literally and substantially went to take away those exclusive privileges which they enjoyed under Acts of Parliament; but that, in order to prevent the commerce of the country from being injured by delay in settling the question this Session, they submitted to its adoption.
The Lord Chancellorrepeated, that to assert that the Bank Directors had agreed to the present clause on any grounds but a conviction that it would promote the interests of the Bank proprietors, was an imputation on their courage and fidelity. As a Joint Stock Company they were the trustees of the funds intrusted to their management; and, as such, had no right to enter into any arrangement which would prove at all detrimental to the interests of the Bank proprietors.
§ The Duke of Wellingtonsaid, that the question for their Lordships was not what bargain might have been made between a noble Lord and the Bank Directors, but what course they were bound to take in legislating upon this important subject. He maintained, that it had been clearly shown that the Bank possessed, by law, a privilege which was to be destroyed by a mere declaratory clause in an Act of Parliament. If the clause were left out and the law left to stand in its present situation, then if the noble and learned Lord's view of it was right, there could be no injury done by that course. While, on the other hand, if the opinion of his noble and learned friend were the correct one, then the law would be altered in a manner which he considered to be highly objectionable.
§ Earl Greymaintained, that it was the usage of Parliament to declare, in its legislative capacity, what was the law in cases of disputed interpretation. All that the present clause did was to declare explicitly what, otherwise, might be a matter of doubt, thereby conferring an advantage on all parties interested. To assert that the declaration would be a breach of public faith towards the Bank Directors, was to grossly misrepresent the fact. It was enough to declare, that Lord Althorp was the individual who managed the correspondence 864 with the Bank, to repudiate the remotest imputations of want of honour or breach of faith. The character of that noble Lord was too high, and too universally appreciated by men of all parties, to admit of the remotest suspicion of the want of ingenuousness in any proceeding to which he was a party. That noble Lord entered into a bargain with the Bank of England that, on certain conditions, would insure that corporation a continuance of the exclusive privileges which it enjoyed under the existing law. The question then was, what those exclusive privileges were? And a doubt having arisen as to the extent of those privileges, Parliament was called upon to clear it up and prevent further misconception. But be it remembered, that the bargain was not ripe—not to say concluded—when the Minister judged it expedient to make an explicit declaration of the law on this doubted point; and that it was optional with the Bank to either agree to this declaratory enactment, or declare themselves off as to the bargain, and let the matter he over till next Session. The Bank preferred the former choice, and therefore could not justly complain of a want of fair dealing. If the proposition of the noble and learned Lord were carried, it would defeat the Bill for the present Session, and he (Earl Grey) should feel himself called upon to move that the further proceedings of the Committee should be deferred till that day six months.
The Duke of Cumberlandbegged leave to remind the noble Earl, that his learned friend's Amendment was not for them to await the opinion of the twelve Judges.
§ Earl Grey—If the illustrious Duke had taken the trouble to attend to what I did say, he would know that I did not say that the learned Lord's Amendment was for waiting till they had the opinion of the Judges before them.
The Duke of Cumberland—With great humility, I appeal to the House whether the noble Earl did not so mistake the tendency of my noble and learned friend's Amendment, I am aware, through mistake—
§ Lord Wynfordbegged leave to ask the noble Earl whether he meant to say, that when a doubt arose as to the interpretation of any provision of a Bill, his own interpretation should be received as decisive?
§ Earl Greyundoubtedly maintained, if 865 the interpretation of Ministers, acting on the part of the public, were not received, that the bargain founded on the subject-matter of the interpretation should be off and at an end.
§ The Committee divided on the Amendment: Ayes 11; Noes 29—Majority 18.
§ The Clause was agreed to, as were all the others.
§ The House resumed; the Report to be received.