The Express.
London, England, 1866-07-02 00:00:00

HIGH WATER AT LONDON BRIDGE.

THIS DAYZilornini4ll:73sni----AlternOOr: 4b.
To-Momow—Morning, sh. 13m Afternoon. bh.

LONDON, MONDAY, JULY 2.

A nAJORITY of the Directors of the Bank of
England appear determined to show the world to
how great an extent a close corporation is capable
of alighting the public interests. Week after week
they persist in maintaining their rate of discount
at 10 per cent., with a sublime disregard for the
remonstrances of suffering commerce. If the
whole body of merchants, bankers, and other
traders were consulted throughout the kingdom,
hardly a single voice would pronounce in favour
of the present extraordinary course of the
Bank. The position is the more inexplicable
since, except in the most sordid sense, there is no
object whatever to be gained. Certainly, if we
are to understand that the policy of the Bank is
conducted on the principle of making the utmost
possibleprofit, and of pitilessly exacting the very last
shilling as the price of an assistance which, during
the existing pressure, is obtainable from the na-
tional establishment alone, the matter becomes
simple enough. Thanks to the Government letter,
the Bank have the power of causing an immense
amount of financial distress elsewhere, without
inourring itself the slightest approach to
danger. People who read in the news-
papers that Messrs. ROTHSCHILD or BARING can
get money at 6 or 7 per cent., and that other
eminent mercantile houses discount their bills
freely at 9i, or at the most 10, per cent., are
unaware of the misery that is borne by the small
trader. To him, the Bank rate at 10 per cent.
for nearly two months does not mean inconve-
nience, but absolute ruin. The majority of the
Directors of the Bank, however, care little for
such insignificant sufferers. There seems a strange
fatality about the Bank Charter Act of 1844.
Whilst it was nominally in force this prominent
specimen of bad legislation inflicted an incal-
culable amount of mischief, and now that it is
virtually got rid of the evil is perpetuated by the
perverse incapacity of our financial administrators.
The most significant feature in the last weekly
account of the Bank is the increase of 200,0911.
in the Government securities. In the week pre-
viously the increase was 50,0001., and before
that 285,051/., making a total of 535,1421. It
may appear singular that the Directors should de-
termine to invest so large a sum in securities
yielding less than 311 t per cent., while they could
profitably employ it at 10. Possibly, how-
ever, it was considered desirable not to
let the reserve increase too fast, lest
the agitation for a reduction of the rate of
discount to 8 per cent. should become irresistible.
If such a movement were to take place, the present
monopoly practically exercised by the Bank in the
disoountmarket would immediately cease. Sooneror
later the relaxation must come, but, as a matter of
business, it is as well to defer it as long as possible.
Certainlyit is a bad plan, as regards money-making,
to revive confidence when an uncommonly good
thing can be made out of its absence. If the
above £535,000, instead of being locked up in
Government securities, had been added to the
reserve, the amount of the latter item would have
been raised to not far short of six millions, and
the bullion standing at over fifteen millions, the
maintenance of the rate of discount at 10 per
cent. and the prolongation of the present distrust
would have been simply impossible. The public
would have been reassured by this change from
the gloom of the past month ; but then, so far as
the Bank is concerned, gloom at these times
may. be made to pay.
Doubtless we shall be assured that the policy of
the majority of the Directors of the Bank has been
actuated by no such motives as these, but rather
by high considerations of the stability of the in-
stitution over which they preside, and by a lively
interest in the financial position of the
country. Be it so. We are content to accept the
excuse, although it implies a serious reflection on
their want of judgment. It is impossible to
escape the alternative suggested by this admission.
Surely the majority of the Directors should be
capable of perceiving what is thoroughly well
known by every trader in the City, great or small.
Can they not understand that a reduction in the
rate would be the surest means of increasing
their reserve, and of inspiring confidence
both at home and abroad, so that commerce
should once more proceed on its usual
footing I It is a notorious fact that the
drain of gold abroad is mainly due to the dis-
trust caused by the maintenance of 10 per cent.
Gold is taken from us, and why 4 Because foreign
bankers will place no confidence in English bills.
They naturally argue that with the evidence
of monetary pressure shown by the Bank