The Sun.
London, England, 1839-08-20 00:00:00

affect the money market, and he did not think it just i
towards those he was to deal with, to make any pro-
position until it had been well ascertaini.d that Bill
would become the law of the land. His communica-
r tion to the City had been made on the 10th August,
and the time for receiving tenders was the 16th.
Before he went into particulars, he wished to explain
the former mode of proceeding with respect to those
loans; and the pointi on which he had deviated from that
former course, leaving it to the House to determine
whether he was right or not. The former mode was
/
that the Minister of the day should fix the price arbi-
trarily, and communicate that to the Stock Exchange,
and they either entered into the contract or rejected it.
On the other hand, when the price was left to free open
competition, the public object was attained at the
cheapest possible rate. The course he (the Coanceilor
of the Exchequer) had adopted was this—the loan being
a loan for 4,000,0001, the Government invited the ca-
pitalists to unreserved competition. It was stated that
tenderi fo,r any sum not less than 500,0001. would be
received, and thus the utmost competition that was ne-
cessary would be secured. In these loans it was of
course an object to have them carried at once into ope-
ration, and, therefore, when a Minister was allowed to
fix a price, he was sure to fix it so high as to make it
f certain the individuals would come in and accept of it.
On the other hand, the tendency of his (the Chancellor
of the Exchequer's) plan being to reduce the profits of
the contractors, it was not likely that the object would
be so readily attained. Therefore, although fixing a
large price might be more convenient for the Go-
vernment of the day, the principle of competition
was more likely to lead to advantageous results
to the public. He would refer in proof of this to the
two last occasions when a similar operation took place.
In 1825 there were three millions of Exchequer bilis
funded, and on that occasion the course taken was
to fix a price, and to send it to the Stock Exchange. It
was stated in Parliament, in the course of the discus-
sions on the subject afterwards, that persons representing
18 millions of Exchequer hills, had coma forward ; and
he further stated, in proof of the favourable nature of
the terms, that the bonus upon the loans was equal to
21. The same results took place with respect to the
loans of 1820, and it was then said that the propo3ition
was so advantageous that a much larger sum could
have been taken if it was required. He (the Chancel-
lor of the Exchequer) had taken a new course, and if it
was necessary to bring forward any authority on the
subject, he could readily so. In 1801, when there was
a su. of 8k millions of Exchequer bills funded, and in
which a bonus was given to the parties of 41. ss. per
cent., a discussion took place in Parliament, and it was
stated that if the matter had been made the subject of
free discussion, there would have been a ranch better
chance of obtaining fair terms for the public. In 1829
that very subject had been agitated ; and one indiv

dual, whom the House would, lie was satisfied look up
to as a high authority on financial matters (Mr. Hus-
kisson) had given his opinion distinctly in favour of the
course he (the Chancellor of the Exchequer) had taken,
namely, allowing the fullest and freest competition in
the money market, instead of the Government fixing
an arbitrary price. The Right Hon. Gentlemen then
read an extract from the speech of Mr. Huskisson on
the subject and observed that more clear and distinct au-
thority in his favonr could not well be asked for. It had
been urged against him as a matter of complaint, why
had he limited the operation to the funding of Exche-
quer bills ?—why had he not also made it a money
operation ? Why, the proposition was not to obtain Ex-
chequer bills, but to extinguish a certain amount of the
unfunded debt. If he had made a contract for money
alone, the parties who made the tenders to supply it would
avail themselves of the ordinary advantages of the ope-
ration. But what would have been the practical effect
of withdrawing a sum of four millions out of the money
market in order to pay it in at another period ? The
result would have been a pressure upon the Bank, and
then that deposits made in behalf of the loan, would have
come out, and a reaction would have taken place, which
would be likely to be productive of the most serious
inconvenience. In the first place, the party paying the
money would have the benefit of the advance he made,

while that money would be again applied to the
payment of the Exchequer bills, and the public
in both points of view, would be losers. It was, he
trusted, unnecessary for him to argue that branch
of the case any further. He would now come to
the proceedings of the 16th of August, and he would
observe that the principle of open competition being
adopted, the system pursued was analogous to that of
a loan. He did not know that he should have more
than one offer. He mentioned that more especially in
reference to the allusions that had been made to the
tender sent in by the Bank of England that morning.
—(H .hear, from Sir J. R. Reid.) He was entirely
ignorant both of the amount and the price, nor did he
know that the Bank was about to send in any tender at
all. He had anticipated the probability of such a ten-

tier being made, and he thought the Bank was perfectly
justified in so doing. The third Wider had been made
by a gentleman who had arrived only that morning
from Scotland, and another, and the largest offer,
had been made by a house which was well known for its
extensive operations in the monetary world. He trusted
that those who now bore the name of that house would
sustain the high character which it had hitherto preserved.
The fourth was a sealed paper which had been prepared
by Lord Melbourne and himself. The principle adopted
was that if the offers made were more favourable than
the terms contained in the sealed paper, these terms
were then to be offered to the lowest contractor, and so
on in succession to the others. The terms offered by

the Bank were 1091. ss. 10d. Three per Cent.
Consols ; by Messrs. Rothschild 1101. 17s. 6d. ;
and by the Commercial Bank of Scotland
111/. The proposal contained in the sealed paper of
the Government was 1101. The House would see that

these proposals came very near to one another, but that
of the Bank was the most favourable to the Govern-
ment, and that tender was received. According to the
value of Stock, the proposal of the Bank was equal

_ . .
to 90/. 18s. 2d. ; that of Messrs. Rothschild was
90/. 2s. 10d. ; and that of the Commercial Bank
of Scotland, 901. ls. ma. Comparing these
prices pith the average price of Consols for the
64 transfer days ending Monday the 16th of August,
the resjilt would be as follows :—The average
was 921. 4s. 21d., and the closing price on the
Saturday before the loan was 91/. 12s. 6d., therefore
the difference between the several proposals and the
"sing price was as follows :—The Bank offer was be-
Tow it 2s. 6d. ; the Government offer was below it 14s.
4d. ; the Messrs. Rothschilds was 1/. Bs. and a frac-
tion, and that of the Bank of Scotland was below it
11. 10s. and a fraction. An offer had been

made by the Bank in the first instance, and the
other parties had been offered the Government
terms, which they declined. An immediate communi-

cation was made to the City, stating that the Govern-
ment adhered to the proposal of 1101. To the 23d was
the time fixed for the receiving tenders ; a considerable
amount had already been received, 600,0004 that

morning.—(Sir J. R. Reid--" Nearer 700,0001.") This
was satisfactory, as showing that the Government had
not attempted what was unreasonable. He felt con-
fident, that before this Bill passed through its stages,
the operation would be brought to a successful termina-
tion. As to the bonus which the tender of the Gover-
ment would afford the parties, it was a question which
coald scarcely be solved with certainty, seeing that it
must test on data open to controversy, for instance, the
average pren2ium of Exchequer bills : the closing
prices were not the real average. But he
believed that on the whole the bonus would be
from 15s. to 16s. The offer of Messrs, Rothschild
would have been equivalent to a bonus of 11. 11 s. 9d.,
and the offer of the Scotch rank, to 11. 14s. He
hoped the result would justify him in having adopted
the plan of pubiic competition.—(Hear, hear.) He
acknowledged thatihe had felt some considerable dis-
trust in adopting it. Not that he doubted the cor-
rectness of the reasoning by which it was supported, but
feeling that in adopting an unusual proceeding he incurred
higher responsibility. The resolutions he meant to
propose were these :—Erst, that the contract entered
into with the Bank should be completed, on terms more

reasonable than those proposed by the Government.
Secondly, that in respect to all parties who should on
these terms deliver up their Exchequer Bills to be can.
.celled before Friday next, should receive in lieu thereof
Three per Cent. Consols. Thus, assuming that
2400,000/. more were subscribed for, which, in addi-
tion to the 500,000 i. from the Bank, would make
a 000,0001., leaving a million, which should be
as Three
per
DCents. Consols calculated at
the average pthe quarter immediately
preceding the transactionreof
engrafting in respect to this
deficiency the
provisions
vi
Bill, he might be askeds‘ous on the Irish Bank Charter
, Cents. and not in stock in why he funded in Three per
o ldahigher
1 reply (Hear)—to which he would denomination ?
discrimination betweenthat there must be a
the
general interest of moiey
the
op temporary loans, and public interest as peraa-
gently shown in the securities,
he merely took the
temporary interest he should has': selected stock of a
higher denomination ; but that was different, when the
permanent interest was low. He should, if he com-
pleted the operation, conclude it attasuprtiuce equivalent
per cent.
u of its
to the interest, of not much more
h
—a clear proof this that there was nothingri st seteri n the cir-
cumstances of the country to create any d
resources. Next year would be the first commence.
went of a series of dropping securities, which fromyeee;
to year would fall in. He would not advert to the
halycon days of 1860, which probably few present would
live to enjoy--( A L;ugh)—and when the danger would
be from the amount of income set free.--(A laugh.)
There were several inillions of the debt in terminable
annuities. Lord Spencer bad felt strongly the advan-
tage of converting perpetual into terminable annuities,
and had proposed terms for the conversion into annui-
ties for 100 years. But the House might be curious to
know in what measure the public had availed them-
selves of this ; and the result had been that only one
annuity, And that for 201., had been so converted.
This, too, was to pay 100 years' rent of the same
amount. Adam Smiai, who was the great authority
for the terminable annuities, said that though there was
no real difference between the perpetual and the ter- 1