The Sun.
London, England, 1840-07-30 00:00:00

EVENING EDITION.

THE BANK OF ENGLAND.

LETTER 111.
TO THE EDITOR OF THE SUN.
Sta,—ln performance of the promise made in my
last, I will now proceed with the inquiry into what are
the causes of the fluctuafd uncertain character of
our present circulating mm .
Coe of the charges very generally made and enter-
tained against the Bank of England is, that having the
power to make money plenty or scarce, it is in the
practice of abusing this power to the detriment of the
public. Now let us see on what authority this charge
rests ; and the only evidence that can be adduced on
either side I apprehend is, the returns of the circulation
of the Bank at different periods, and the reasons or
causes which led to an expansion or cont-action of its
issues. Whether these issues amounted to half a mil-
lion, or a million, more one month than another, is not
the question, for the payment of the dividends—the
state of the government accounts—payments made on
account of foreign loans, and several other incidents, will
occasionally produce this without the slightest action
on the part of the Bank of England, but what we have
to decide is, whether the Bank of England have at any
time sacrificed the public interests to the promotion of
their own by unduly expanding or contracting their
issues.
By the return made to the Bank Committee in 1832
the circulation from time to time is given, but without
troubling you with the fractions, it may be stated as
follows :
From 1778 to 1790 it rose from 7 to 10 millions.
1790 to 1800 10 to 16
1800 to 1810 16 to 21 --
1810 to 1817 21 to 29i
and this gradual and continuous increase appears
to have taken place collaterally with the extension
of our trade, and the consequent demand for discounts,
for by another return made to the same Committee, we
find the amount of commercial paper held by the Bank
under discount to be as follows :

From 1795 to 1800 from 2 to 6 millions.
1800 to 1810 6to 20
1810 to 1816 14 to 11

At this time the Bank of England carried on a very
arge proportion of the entire discounting trade of the
kingdom, and there can be no question that these were
the palmy days of the Bank of England ; and it is not
a matter of much wonder that during such a period
the Bank should have been able to divide bonuses, and
to make additions to their capital out of their profits,
amounting to no less a sum than 17,318,070/.
The capital of individuals found employment, and
was absorbed in the immense loans required by the Go-
vernment, aliol6 the prosecution of a trade which we
were then carrying on to the exclusion of almost all
other nations with nearly the whole world.
But a new state of things was now about to arise.
The war, whose end and object was our utter extermin-
ation, was decided in 1815, by the glorious results
of a Waterloo,—the Government no longer
required loans ; a large portion of the taxation
of the country was instantly repealed, and left to
fructify in the pockets of the public. and the channels
of private wealth soon began to overflow, and to enter
into active competition for employment with that of the
Bank of England, having the effect of actually return-
ing the issues of the Bank upon itself ; and to such an
extent did this proceed, that we find the circulation of
the Bank of England reduced in
1818 to 27 millions
1819 25
1820 23
1821 2:3
1822 18
1823 18
and notwithstanding this continual withdrawing of the
circulation of the Bank of England, such was the over-
whelming amount of private capital seeking for em-
ployment, that foreign loans to an immense amount were
contracted for, money speculations of every quality and
character embarked in, and hundreds of the wildest
schemes that ever entered the heads of nsen to devise
became itle order of the day, until, in 1824 and 1825,
it reached its climax, and produced one of those con-
vuliive re-actions which shook society to its centre.
Now, I would bee to ask, how it can be charged to
the Bank of England, that up to this time it had made
money plenty, when it had gradually reduced its cir-
culation front nearly 30 millions to 18. The dis-
counts of the Bulk had in like manner fallen cff, and
from 11 trillions in 1816 it fell in 1817 to three mil-
lions, and for some years continued at tour, three, and
two millions, until in 1830 it was no more than 918,9001,
in fact it may be said to have disappeared altogether.
A new race of men, called bill brokers, who twenty
years before were " few and far between," sprang up
like so twiny mushrooms, became a numerous and im-
portant body, entered into an active and determined
co;npetition with the Bank, and established a kind of
usage to discount the general run of commercial papi.r
at a half per cent under the fixed rate of the Bank, be
that what it might ; and paper of the first class I have
known to be dune by them at 2A per cent. under the
price of the Bank ; so that instead of the Bank of Eng-
lapd being as formerly the principal channel of discount,
this extraordinary fact is now self-evident, that applica-
tion its only made to the Bank in the last instance, and
whenever any presetre for discount is felt in that
quart& it is a sure and certain evidence " that some-
thing ia etaten in the state of Denmark," that some
pante-, have been going a head a little too fast ; that
ape many millions have been embarked in railroads, in
American bonds, in cotton, and other speculations, and
that the public purse instead of being in its usual
plethoric condition, shows evident symptoms of distress,
and calla for the nursing assistance of the Bank of Eng-
land.
And in the hour of its need it has never looked to the
Bank of England in vain, for the Bank has never hesi-
tate,' an instant in unlocking its coffers and making any
aeleances which the urgency of the moment required.
Witness the panic of 1825 and the commencement of
182 u, when the Bank of England fearlessly increased
its circulation from twenty millions to twenty-five mil-
lions, to cure evils and relieve distress, which all their
previous efforts in reducing the circulation had been
unable to repress or prevent. Tao language of the
Bank Directors, on that and every other occasion, has
been in substance this, " Notwithstanding this fearful
crisis, brought on by your own improvidence and folly,
has arrived, and the storm out of doors appears to be
raging in a most pitiless manner, we know too well our
own situation to be doubtful for an instant of the re-
sult. We know that we are ourselves in a solvent con-
dition—that we have a surplus of seventeen millions of
the property of the nation as secure as it every shilling
of it was in gold and in our coffers, and only satisfy us
that vou have sufficient assets to meet to meet the
claims against you, and although at the moment these
assets may not be convertible, we will carry you through
the tempest at all haiards."
Such was the substance of the language employed
by the Directors of the Bank of England in answer
to the applications of Sir P. Pole and others, in 1825,
and at a stiltlater date to the four American houses,
and the conduct of the Bank of England on these oc-
casions reflects not only the highest honour on them
for theirapirited conduct as a public body, but the ex-
traordinary expose of the affairs of those houses confirms
in the most astonishing manner, the wisdom and the cor
rectness of the decision which the Directors of the Bank
of England came to respecting them.
The infatuation of these Anglo-Americans in incurring
liabilities to the extent of seven, eight, and ten times
the amount of any capital ever possessed by them, de-
served the whipping-post for their presumption, and (not-
withstanding the result of their affairs,) was a more re-
markable instance of the abuse of public confidence than
any on record.
The fact is, and it cannot be disguised, the Bank of
England has been struggling for years for its very exist-
ence. The country Banks fell in 182.5 and 1826, and
for a time a great amount of private business was trans-
ferred to the Bank, but gradually there has arisen in the
place of the country banks a system of Joint Stock bank-
ing, professing to offer additional ultimate security to the
public with additional facilities for the transaction of
business, and notwithstanding tho Bank of England re-
volutioaized its mode of conducting the ordinary routine
of its business,--established Branch Banks with the
view to fill up the circulation withdrawn by the failure
of the country banks with their own paper, and by a
late concession have abolished its antiquated mode of
discounting bills, still it is with difficulty that it can
keep its paper in circulation, amounting at present to
little more than sixteen millions, or about one-half what
it was in 1837. For men of capital the Joint Stock
Companies will give interest for his deposits,--for the
merchant, manufacturer, and tradesman, the familiar
and easy intercourse with the manager and clerks of a
banking-house is preferred to a formal interview with
the Bank parlour, and for those who have bills to dis-
count, the ready answer of our friends in Lombard-
street, "They'll be done, friend, we thank thee;' is doubt-
less entitled and receives a preference over the official
delay of such a concern as the Bank of England.
Such, then, is the present position of this Bank, from
which it is clear, that if it did nut derive an immense
profit from the Government business, and enjoyed .ex-
clusive privileges, it could not continue to exist ; and
even with the possession of these, it would appear to
be extremely doubtful whether it can keep its paper in
circulation without great alterations in the system of our
currency do take place.
That the Bank of England and the Bank Committee
now sitting a-e contemplating an extensive change is cer-
tain ; whether they will succeed in effecting it remains to
be seen. But, at ad events, it becomes our duty to
watch narrowly their proceedings, and to strictly in-
quire how far the present privileges of the Bank of
England and those additional ones which it is reported
it is in contemplation to confer upon her—one conserve-
tiap of the public interest.
Having now disposed of the charge that the Bank of
England has been either principal or accessory to the
making of money either plenty or scarce, I propose in
my next to show who it is that does, and what are the
causes which operate to produce this continual fluc-
tuation,

A COMMERCIAL TRAVELLER.
July 25, 1840.