BILLS OF EXCHANGE (SECOND BILL). (Hansard, 16 July 1839)

§ Earl Fitzwilliam
said, it had perhaps been his own fault, that he had not been in the House to exhibit to their Lordships the grounds on which this bill had been brought forward. He was not sure whether he was right in attributing it to the recent proceedings on the part of the Bank of England? [The Marquess of Lansdowne: It would have been proposed without that.] However, that proceeding on the part of the Bank of England was, to a certain degree, connected with this measure. The effect of it would be, to allow a higher rate of interest on bills of exchange than was now allowable by the usury laws. He was not sure, whether any one in that House ever called the attention of the House to that proceeding on the part of the Bank, either in relation to the effects which it was likely to produce, or to the causes which had led the Bank of England to take that course. It certainly was a matter of the very greatest importance to the commercial world, and they would give him leave to say, that he was not quite sure whether their Lordships were all of them entirely disinterested persons in this transaction; he really could not say that all their Lordships had their landed estates clear from debt. And, undoubtedly, though the effect of this bill did not relate to those debts which affected land, nevertheless, any law whatsoever 396 which had a tendency either to raise the interest of money, or to legalize a higher interest for money, had ultimately the tendency of raising the interest of money, even to their Lordships; therefore, they were not quite disinterested persons. That was not the view of the question on which he had ventured to say a word on this occasion; because, in his opinion, it would be far better, both to lender and borrower, that they should not be bound by any of those laws which regulated the interest of money. But he wanted to know whether there was any person in that House that represented the Bank of England, and who, on its part, could state what were the grounds (there were one or two persons who had attended very much to the subject) and what had been the causes which had led the Bank of England to take this step, and what was the object they had in view in this undertaking. He should be very glad to have some explanation afforded to their Lordships, because he was sure it was of great interest to the commercial world, and it was exceedingly desirable that they should come at the real cause which had led the Bank of England to adopt this course. He had his own opinion about it, but that opinion he should not state.

§ Lord Ashburton
said, the motive was supposed to have been to advance the rate of interest. He was as little able as the noble Earl to answer for what the Bank of England had done. He conceived the Bank to have been very much mistaken in its view of this subject. If it were desired to go into the question of the bill on the present occasion, he should have to trouble their Lordships with some alterations. His noble Friend, who had now charge of the bill, seemed to speak of it still as a bill to carry more effectually into operation the original bill, which had come down to that House for facilitating the negotiation of bills of exchange and promissory notes. But the bill was totally changed. The bill not only asserted that promissory notes should be exempt from the laws of usury, but that the laws of usury should be totally done away with for all contracts. He was not aware that a more sweeping expression could be used to cover every loan. If their Lordships had to decide on this bill, it would not be as originally; to afford facility for the negotiation of bills of exchange, but they would have to 397 decide whether they were prepared to enact, that the laws regulating the interest of money, should be totally done away with, which was the object of the bill. He would draw the attention of their Lordships to the manner in which the principle had gradually grown upon them. The original proposition was put into the Bank charter, and it was to provide that bills of exchange and promissory notes, not having more than three months to run, might be negociated, without reference to the usury laws. About two years ago it was stated, that a further extension of that principle was necessary—that bills of exchange were in circulation of a longer date than three months, and it was a great inconvenience, that bills coming from India should not be negotiable; and a bill was brought in to make these bills pass at any interest. That bill was thought quite a sufficient stretch of this principle. Afterwards, his noble Friend (Lord Lansdowne) had introduced an extension of the principle to stock securities; and afterwards, on the third reading of the bill, he had extended the principle to goods and merchandise. The bill went to the other House, and it was there found to be a total violation of the Pawnbrokers' Act, and that by it they were laying the poor open to extortion and usury. But not content with these advances, by the present bill they extended that principle to contracts of every description. Opinions had been held, that money, like everything else, should be freely traded in. He confessed that he had certainly come to the conclusion, when he considered the artificial state of society, and the complicated state of engagements which existed, and the dangers which might arise from extortion in the loan of money, that this was one of those cases in which the general principle of throwing open an article to competition did not apply. There was a necessity of protecting those who were not wise enough to protect themselves; or who, if wise, were too much led away by their passions to protect themselves; and that degree of protection which the Legislature had thought it right to throw around society, he saw no necessity of doing away with. The noble Lord had said, that these kind of improvident transactions bad always taken place, but he (Lord Ashburton) could assure him, that the extension of the usury laws which had taken place, had enormously increased these transactions, Hitherto, however, 398 there had been difficulty and delay in obtaining money; but with the facilities they were about to give, a young man in a gambling-house might find a money-lender at his elbow, with pen and ink, ready at once to lend him money, and which might in some cases, be productive of the worst consequences. It appeared that the Bank of England, having too much paper out, thought that this proceeding would be a convenient mode of getting it in, but they forgot that the country banks, having a claim upon them for advances at the rate of three per cent., would call in those claims, for the purpose of lending money at six per cent. There were many other methods which the Bank might have taken to reduce the general circulation, if that were desirable, without going the length of alarming the community, and producing also great and cruel inconvenience, by forcing upon the less important classes of traders that high rate of interest which they were now obliged to pay. He feared, that if the bill were passed in its present shape, confusion might be introduced into the transactions connected with bills of exchange, and a door opened to frauds of various kinds.

§ The Lord Chancellor
said, that the present bill would really introduce no material change beyond what had been already made by the last.

§ Earl Fitzwilliam
said, what he wanted to know was, what had been the moving causes of the late proceedings and operations on the part of the Bank of England, and why that body had thought it necessary to take steps in which it must have some views to its own interests, and which might most seriously affect the monetary interests of the country? It was impossible but that there should be some explanation to be given of this, although their Lordships had not yet heard one, any more than, as he believed, the other House of Parliament had, and it seemed desirable that they should be no longer kept in the dark.

§ The Marquess of Lansdowne
said, it was impossible for him, or his noble Friend near him, to give a satisfactory answer to the questions of the noble Earl, because the proceedings referred to had been taken by the Bank, solely with reference to its own interests. He might add, too, that the connexion between the Bank of England, and this bill, did not arise out of that transaction, but the former bill being 399 about to expire, it had become expedient to consider whether it should be renewed or not in this measure.