The Sun.
London, England, 1841-01-20 00:00:00

HONEY MARKET and CITY NEIV,

(TUESDAY. EVENING.)
TlMES.—Attacks have been made from time to
time in this journal upon the principle, and still more
upon the practice, of the various loan societies which
have sprung up in the metropolis under the recent Act
of Parliament by which they are authorized and regu-
lated. In doing so, many facts which are not to be
controverted were adduced to show that these socie-
ties are susceptible, at least, of great abuse ; that
they are a cover to great extortion, and oppress the
classes they were Intended more especially to relieve.
These attacks have been felt, and are complained of,
as would naturally be anticipated, by the parties
suffering under them ; and as they have a fair claim,
under such circumstances, to be heard in their de-
fence in the same channel from which the attack
proceeded, it is proper to notice what the arguments
ire which are set up by their defenders, i. e., the
oarties interested in their behalf. A long letter, under
the signature of " Veritas," is as well calculated for
this purpose as any we have seen. The writer, after
adverting to the injury done to the loan societies by
the attacks referred to, denies that the Acts of 5 and 6
William IV., by which they arc authorised, were in-
tended merely to enable benevolent individuals to ad-
vance small temporary loans to the humbler class, while
he has no doubt that this was among the objects de-
signed. On the contrary, he considers that the altera•
tiono the Bill underwent in its progress through the
I-louse prove that it was considered a trading, not a be-
nevolent measure—that is, one that would give an op-
portunity of assisting worthy persons at a small risk,
while those who wished to invest capital might, find a
remunerating profit by advancing sums not above 151,
to persons who would prefer borrowing on the pay-
ment of a per centa,,ac to receiving charitable aid
If 5 per cent. had been the maximum of interest
allowed, he says the law would have been inope-
rative, and that in London, out of 120 enrolled
societies that existed in June, 1840, with -an aggre-
gate capital of 500,0001., only one—namely, the
Friendly Loan Society"—was established on the
benevolent principle, the capital of which net er
amounted to 3,000/., while even that sum could not, be
employed, though the other societies had applications
beyond the power of their funds to supply. The in-
sufficiency of five per cent. profit to pay the working of
this society is considered by this writer as an argument
in favour of the increased rate, and he says that the
parties connected with it, who gave a great portion of
their labour gratuitously to save expense, hailed as a
great benefit the raising of inter. st under the;Aet.
Such means as were possessed by that society could
not, he thinks, have annihilated the old money-clubs,
which have gradually died away since the establishment
of the present loan societies. As for the enormous
profits said to be made by loan societies, he considers
that competition with one another will be a sufficient
check to any excess of that kind. The large nomi-
nal rate charged by loan societies is, on the whole,
according to the statement of this writer, no more
than is counterbalanced by the risk of loss which
these societies run, and they are altogether use-
ful assistants to the poor, protecting them from
the grasping avarice of private money-lenders.
With respect to the arguments above stated, it is evi-
dent that they, in reality, amount to no more than to
show that a loan society, conducted on fair principles,
will be a good rather than an evil—a fact which can
hardly be denied, the only difficulty being the obtaining
of a guarantee that these fair principles will be adhered
to. It will be seen that competition is the only cheek
against extortion mentioned above, but it is hard to dis-
cover how that should operate more in the case of so-•
eieties than in that of private individuals, the extortion
of who:n is admitted as one of the great evils against
which the societies are to afford protection. Societies,
it is well known, are not accustomed to be more scru-
pulous than individuals, where their interest is concerned,
and the doubt whether the removal of restriction on the
rate of interest, as far as regards small loans, does not
operate injuriously on the poor, who; inexperienced in
money matters, would least of all pause to balance the
advantages offered by different lenders of money, seems
just as much to apply to societies as to private money
lenders.

CHRONICLE.—It being true that the Bank Di-
rectors arc not legally responsible for their mismanage-
ment of the circulation since the last renewal of their
charter, and that they cannot be punished for having
departed from the contract with Parliament, under
which their privileges were then continued as a single
bank of issue,—it being undeniable that subsequent to
October 1833, we very seldom find the published ac-
counts of the Bank in unison with the principle on
which the Bank was bound to be guided in ordinary
times, with regard to its issues,—we must repeat our
question to the people of this country, and again ask if
the Bank of England should be rewarded by a
new lease of its privileges and profits, as the na-
tional bank of issue. Lord Althorp, " good easy
man," void of all suspicion himself, and judging of
others by himself, said, " I feel confident that per-
sons standing so prominent as the Bank Directors
will be as completely controlled by public opinion as if
they were acting under a legal responsibility." Tie
test of time and experience has shown that the
Bank Directors have made the observance of the con-
dition relied on by his Lordship the exception, in-
stead of their rule of management. It is admitted
by Mr. Norman that it was deviated from in the
years 1886,1837, and 1839 ; and he even declares that
it was not founded on a correct principle. That is
a separate point altogether. The question first to be
considered is, whether the Directors were justified
in departing from the declared rule? Mr. Norman
declares that it was necessary to depart from it on
account of adverse circumstances, and to render as-
sistance to commerce ; but the evidence adduced
would seem to prove that, after last renewal of
their charter the Directors were obliged, in order
to keep up the former rate of dividends, to enter upon a
course of action hostile to that .ihich they were bound
to observe, and for their observance of which they had
prevailed on Lord Althorp to stand forward in Parlia-
ment in the character of their surety. But while we
thus find that his Lordship has been completely deceived
in his reliance upon the controlling influence of public
opinion, and that the publicity of accounts.,—lame, un-
satisfactory, and imperfect as that publicity is—has
proved that the Directors have most widely deviated
from that which his Lordship considered to be a
" wholesome principle," we are not sanguine that any
legal responsibility, by means of penal clauses, would
be efficacious in obtaining better conduct for the
future ; nor is it expedient that the contract, bur-
dened by such safeguards, should be renewed. The
governing machine itself must be reconstructed, and
subjected to the action of a new element of power.
Lord Althorp adduced one strange argument for doubt-
ting the efficacy of Government control, which was,
that in the years 1797, 1822, and 1825, when the Bank
was charged with mismanagement, the Directors had
acted with the cognizance of the Government. That
very fact proves the viciousness of the existing sys-
tem ; for we thus see that the currency of the coun-
try is conducted by two irresponsible parties—the
Crown and the Bank Directors ; the beautiful absurdity
being that the Bank, being a private corporation, is
not bound to account to the public, and that the Go-
vernment is in no way answerable for the conduct of
the Directors of the Bank, as they are not chosen by,
nor subject to, the interference of the Clown. Both of
the offending parties thus escape scot free from the con-
sequences of their misdeeds, and it is impossible to fix
the burden upon either. Although it is as clear as the
sun at noon-day that the Bank parlour acts in concert
with the Government, yet it is absurdly supposed by
the constitution of the Bank that the Directors and the
Government act entirely independent of each other ;
and yet we see that the Directors are justified in their
past errors, on the very ground that they were influ-
enced by the Minister, Th s readers it imperative on the
Legislature to see that the Minister of the day, whether
Whig, Tory, or Radical, should be made responsible to
Parliament for his dealings with the Bank, and, for that
purpose, the Crown should have a controlling power in
the management of the Bank parlour. Sir Robert Peel
justly remarked on this subject, that "all depended on
commercial confidence." The sure way to produce
that confidence is to procure efficient Parliamentary
controul over those who are entrusted with the P-ower
of creating paper money, and to submit the;:r transac-
tions to the test of frequent and full publicity. By
these means the country would e
,:otain the benefit of
steadiness of prices, and 0.-
culation of a truly -
e security attending the cir-
convertible paper currency. The
nation would °..non 'place full confidence in such a sys-
t,e,m, ar.'je thus the principle contended for by the Right
leonourable Baronet would be obtained. In cases of
great political excitement there might be some trees
riser at first. In such circumstances it is impossible
to guard against results in all respects, but certainly,
if the people knew that the paper currency was as
good as gold ; that is, if they knew that they could
geti
gold in exchange for the asking, the .
extent of t
alarm
would necessarily be limited, and if happLen,eli
Sydenhain observed, "It was imp
once, would never likely occur a second,.
of any county could made per-
fectly e: that the
paper currency oset b
secure against periods of political alarm when
convertible into gold," because there was no bank,
except the Bank of France, which did not circulate its
paper with a view to profit ; that is, no bank that re-
tained gold in its coffers to the full amount of its notes
in circulation. This leads to a consideration of the
very important question of the profits on issues derived
by the Bank of England and other banks of issue. But
is also bears upon the soundness of the principle for
na
mtheelyP that to obtain con-
fidenceublic must feel that
whie h w
ine hoauvre
paper
money,contended,
as such, is really and truly
it is equivalent to, and,
convertible into gold. That is the true definition of
a sound national paper currency ; and, if that rule
were acted upon, political excitement would not
destroy, nor even disturb to any great extent con-
fidence in such a system of paper money. "In
order," says the reporter on the Bank of France,
" that paper without any intrinsic value, and deriving