The Sun.
London, England, 1854-05-02 00:00:00

[PRICE SD.

EXCHEQUER BONDS.-THE BANK.

Today Mr. Gladstone is to know what the capitalists
will offer for his new loan bonds. A stop taken last night
in the House of Commons is not likely to render the offers
more liberal. On the very eve of a financial bargain, for the
Government to step forward and to announce that they
will want more money still—and mean to ask for supple-
mentary estimates—is very clumsy, to say the least of it.
The Bank of England, according to rumours in the City,
in order to smooth the ruffled vanity of the Treasury, is to
take at par, though above the market value, 2,000,0001. of
Exchequer Bonds. People are beginning to discuss the re-
newal of the Bank Charter : Mr. Gladstone, it is said,
" may insist on a bettlr bargain for the public than was
made by Sir Robert Peel;" and so it is insinuated that the
Treasury is to be quietly humoured by a little success in a
financial operation to favour the Bank. We entirely dis-
believa the rumour. If such motives could influence pub-
lic men, now is not the time for appealing to them, for no
alteration can be carried into effect in the Bank Charter till
after next year, though then preparations for a change
may be made. At that time Mr. Gladstone may not be in
the Treasury, and to flatter him now might then tell
against the Bank.
It is said the " Charter expires this year;" but this is a
mistake. The abstract of the act of 1844 published by Mr.
Macculloch, who is not likely to make a mistake on such
an important point, says all the power and authorities,
franchises and privileges given to the Bank by Acts of Par-
liament are continued in full force by this act, except so
far as the same are altered by this act, subject, neverthe-
less, to redemption upon the terms and conditions follow-
ing—viz., at any time upon twelve months' notice to be
and uponhu certain
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fore next year can the notice of redemp given
though, if then to be given, the means of repayment,
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must be prepared ; and not before the Ist day of August,
1856, can the charter be extinguished. Till the end of
that period the interests of the country have been impro-
vidently pledged to the Bank, and neither the Bank nor
the Government is yet devising the means for redeeming
or renewing the pledge. Distant, however, as is the period
of renewal, it is not now premature to prepare for it in
order to prevent the public interests from being improperly
bargained away in 1855 as in 1844. What was then done
is now almost forgotten by some, and by others was never
known, and therefore we shall state the principal provi-
sions of the act of 1844.
The Bank of England dates from 1694, and the act of
1844 continued the charter granted by previous acts of Par-
liament. By that act, however, a great alteration was
made in the constitution and functions of the Bank. A
wish then prevailed to place the issue of all paper money
in the hands of Government, and though Sir Robert Peel
would not do this directly, he essayed to do it indirectly.
That act began by declaring "that it is expedient to regu-
late the issue of bills and notes payable on demand!' A
similar assumption was, we believe, never before made in
England, and it seems the forerunner of a law, also de-
clared expedient by some writers, for placing all bills as
well as promises to pay on demand under legislative con-
trol. In order to carry out this newly-found expediency,
the Bank was divided into two branches, one called the
"Issue department," the other the "Banking department."
The former has all its operations regulated by law, and is
completely and entirely the instrument of the Govern-
ment. The latter is left to the management of the direc-
tors, and from it the merchants and the Government bor-
row, and by it is the rate of discount settled, loans made,
Sic. For the proceedings of the issue department the Legis-
latura is responsible ; for the banking department the
directors must answer. _ _

The law directed the Bank to place in the issue depart-
ment 14,000,0001. of securities, and so much of the gold
coin and gold and silver bullion then in the Bank as was
not required in the banking department, The directors
were permitted to diminish these securities and to restore
the amount to 14,000,0001., but were prohibited to aug-
ment them beyond 14,000,0001. except in case of some pri-
vate bank ceasing to issue notes, when, by consent of her
Majesty in Council, the Bank might increase its securities
to the extent of two-thirds of the amount of bank notes
the private bank was authorised to issue. The Bank was
prohibited from having in its issue department more silver
than one-fourth part of the gold hold at the time by the
Bank. Having thus provided a fund in the issue depart-
ment, the act directed that an amount of notes equal, with
the Bank of England notes in circulation, to the aggregate
of this fund, should be created and issued to tho banking
department. Thus the issue of notes by the issue depart-
ment is always to be equal to the aggregate of its securities
and its bullion. _ _

The Act authorised all persons to demand notes of the
issue department in exchange for bullion of standard value
at the rate of 3t. 17s. 9d. per ounce ; and of course persons
holding bank notes are entitled to demand of the Bank
coin of equivalent value. Thus as gold is carried to the
issue department, whether by the banking department or
the public at largo, notes equivalent to the gold in value at
the above rate are issued, and as gold is withdrawn notes
are cancelled. Only as the aggregate fund varies can the
issue of notes vary. Thus the amount of the fund and all
the proceedings of the issue department aro prescribed by
the act. Under the influence of a false theory, and an
ambitions desire of regulating credit money, the Legisla-
ture was induced to take on itself the duty of prescribing
the issue of bills and notes payable on demand. The Bank
was used as its instrument, and was a part of the Govern-
ment. The Act of 1844 incorporated the joint-stock bank
with the public administration for the regulation of the
currency, and from that time the ministers became as much
responsible for the issue of bills and notes payable on de-
mend as for any other department of administration regu-
lated by law, and placed under their sunerintenilence.
For the public the issue department is intern esting only
as the gold goes out and comes in. As the rule the amount
of securities in this department remains unchanged, and,
in fact, has not been changed since the act cause into opera-
tion. At its commencement the bullion in the issue de-
partment was 14.300,0 AV., making, with the securities,
an aggregate of 28,300,0001., and the issue of notes was equal.
Since that time the extreme variations in the aggregate
fund and in the notes have been from 22,506,585/. in May
to 35,838,000/. in September, 1852. These are enor-
mous variations in credit money by no means in accord-
ance with the steady increase of trade and population, and
they are ordained by the law. Remotely they may be
caused by bullion flowing into or out of the Bank of Eng-
land, but immediately and directly they are caused by the
regulations of the Legislature, ordaining the issue of notes
by the Bank in proportion to its securities. As it is pretty
well established that other money dealers and money cor-
porations follow the Bank, finding or making money scarce
or plentiful as the gold flows in and fresh notes are issued,
the quantity of bullion in the Bank is watched with con-
tinual anxiety by persons connected with trade, and de-
pendent on credit for success. For this continual
anxiety the Legislature is exclusively to blame, and
all the sufferings now occasioned by continued variations
in the abundance or scarcity of money, which is equiva-
lent to variations in the standard of value, are due to its
regulations for the issue of notes and bills.
The Act of 1814 ordained the publication of tho Bank
accoeuts weekly, but left the day to be fixed by the
Stamp-office, which deserves all the blame for the delay of
the publication. It settled the sums the Bank are to pay
for the profit of issuing the notes, and exempted its notes
from stamp duties, and made a variety of other regulations
concerning it. The business of the banking department,
however, it no further interfered with, except to remove
from it to the issue department its superfluous bullion. It
further gave a privilege to banks within 65 miles of Lon-
don, though composed of more than six partners, to draw,
accept, or indorse bills of exchange, not being payable to
bearer, which had beforo been denied them for behoof of
the Bank of England. Finally, so far as the Bank is con-
cerned, it fixed the possible termination of this law at
twelve months after the Ist of August, 1855.
If the Act had done no more than this, it would not
have carried out the wish of the theorists to control bills
payable on demand. A portion of the Act concerns the
business of private banking. It prohibits the establish-
ment of any new bank of issue ; it prohibits any existing
bank from increasing its issues of notes ; and it imposes
several restrictions on the banks it permits to continue to
issue notes. It prohibits banks which cease to issue notes
from resuming the issue; it subjects the accounts of all
banks issuing notes to examination ; it requires them to
be licensed, and places the business of a banker under nu•
merous restrictions, like the business of a cabowner or a
publican. It is a grievous interference with a great and
growing business for a Minister who has earned the repu-
tation of a freetrader. The Act was a daring violation of
the principles ho professed, but it was acquiesced in and
even promoted by many other freetraders, who preferred
following a man to acting on a principle. Many plan
s -
indeed, were, and still are, urged in its behalf,n,
but the experience we have since had of free trade
_ beoz
infinitely more advantageous than any restorriic ttihnat these, h
over skilfully devised, warrant the assert
plausibilities are destitute of foundation. Free trade has
sanguine advocates, prior to expe
from
ayanalogy, that
conferred more benefits on the community than most
dreamed of
course for the public, as period
the only safe and sure co .
•with the Charter arm'. , •
es is to demand free
for dealing
—Daily News.
d money.
sad sure
entitle
trade in banking