The Sun.
London, England, 1848-08-03 00:00:00

No. 171427.] LONDON THURSDAY
. ,
MAI 1. 'r
, r
.• 9. AUGUST 3, 18480

TABLE LINEN WAREHOUSE, 261, Oxford-
s:reet, near North Audley-street.
Damask 'fahle-eloths, Napkins, I Nyley,, Slip-eloths, Worsted and
Cotton Covers, Plain and T willed Sheeting, Diaper and Iluckaback
Towelling, Glass Cloths, Ste., all made of the very best descriptions
of yarns.

COMMERCIAL DISTRESS.

REPORT OF THE SECRET CONINIITTEE OF

THE HOUSE OF LORDS.

By the Lors;6oininittees appointed a Secret Com-
mittee to inquire into the causes of the distress
which has for some time prevailed among the com-
mercial classes, and how far it' has been affected by
the laws for reeuiating the issue of bank-notes pay-
able on demand, and to whom were referred several
petitions and papers relating to the subject matter
referred to t hi in :
Oriiered to report, That the Committee have met. and
commenced their inquiries by calling for accounts illus- '
treeing the state of commercial affairs, and the Ilac•
tuatioes both in the circulation and in the value '
of securities for some years past. They have
subsequently examined witnesses, who, from their '
official positi ,n, their knowledge, and experience,
went able to give useful evidence, more particu-
larly respecting the pressure and alarm which prevailed
at the beginning. and towards the close of the last year.
The committee have also examined into the influence
of
the 7th and Bth of Victoria, c. 32, and the effect of the
letter of her Majesty's Government addressed to the
Bank in the month of October, at the moment when the
commercial panic was most severely felt.
A sudden and unexampled demand for foreign corn,
produced by a failure in many descriptions of agricultu-
ral produce throughout the United Kingdom, coin- 1
cided with the unprecedented extent of speculation
produced by increased facilities of credit and a
low rate of interest, and had for some time
occasioned over trading in many branches of commerce.
This was more especially felt in railroads, for
which calls to a large amount were daily becoming pay-
able, without corresponding funds to meet them, except
by the withdrawal of capital from other pursuits and
investments. These causes account for much of the
pressure under which many of the weaker commercial
firms were doomed to sink, and which were felt even
by. the strongest. To these causes may be added a con-
temporaneous rise of price in cotton; and, with respect
to houses connected wit the East and West India trade,
a sudden and extensive fall in the price of sugar, by
which the value of their most readily available assets
underwent great depreciation.
In what precise proportion these different causes
contributed to the common disaster there is some room
for difference of opinion, but that each had a consider-
able share in producing it no person has been found to
dispute.
Some of these causes are obviously beyond the
reach of legislative control. But upon those which
are connected with the extension of commercial
speculation, encouraged or checked by the facility
or the difficulty of obtaining credit, by the advance
of capital and the discount of bills, the powers and
position of the Bank of England must at all times enable
that corporation to exercse an important influence. The
committee have consequently felt it to be their duty to
inquire into the course pursued by the Bank acting under
the provisions of the 7th awl Bth Vic., c. 32, and they
have come to the conclusion that the recent panic was
materially aggravated by the operation of that statute,
and by the proceedings of the Bank itself. This effect
may be traced, directly, to the Act of 1844, in the legis-
lative restriction imposed on the means of accommoda-
tion, whilst a large amount of bullion was held in the
coffers of the Bank, and during a time of favourable ex-
change; and it may be traced to the same cause indirectly
as a consequence of great fluctuations in the rate of
discount, and of capital previously advanced at a low rate
of interest. This course the Bank would hardly have
telt itself justified in taking, had not an impression
existed that, by the separation .of the issue and the
banking departments, one inflexible rule for re-
gulating the Bank issues had, been substituted
by law in place of the discretion formerly
vested in the Bank. The banking department was
considered to be thus absolved from all obligation
but that which was connected with the pecuniary
interests of the proprietary. Though it may be true as
stated by the Governor and Deputy-Governor, " that if
they were to do anything for the interests of the pro-
prietors that was nut for the interests of the whole com-
mercial c immunity the evil would fall back on the Bank,
and, instead of having a beneficial effect, would have an
injurious one, as far as the Bank is concerned ;" yet
this principle dees not appear to have been practically
recognised in all cases, and the Act of 1844 avowedly
left the directors at full liberty to act according to their
own views of their corporate interests.
But before they pursue this subject further the Com-
mittee feel it their duty to lay before the House, from
the testimony of some of the witnesses examined, a more
full and distinct account of the causes, extent, and con-
sequences of the distress of the last year. This is neces-
sary, not only for a due appreciation of the facts them-
selves, but to enable the House to consider what remedial
measures may he required, whether by an alteration of
the law, by an altered system of administering the affairs
of the Bank, or by a combination of both. The following
is the statement made cn this subject by the governor
and Deputy-Governor cf the Bank.
SECT. I.—CAUSES AND EXTENT OF THE DISTRESS

possible
to sustain, the amount of the reserve having
been reduced, on the 2351 of October, to two
millions, including London and the branch banks.
Thus situated, notwithstanding the Bank had ad-
vanced the ra'e of interest, in August, Septem-
ber, and October, to five-and-a-half, six, seven,
and even nine per cent. per annum, the demand con-
tinued to increase until the 25th of October, when relief
was afforded by withdrawing the restrictive clause of the
Act of 1844, and by which the pressure was immediately
relieved, and credit has since been gradually restored.
During the whole period, from the middle of April to the
day of withdrawing the restrictive clause in the Act of
1844, the foreign exchanges were• in favour of this
country."
Mr. Samuel Gurney, the head of the house of Over-
end and Co., bill brokers, whose experience in money
affairs is universally known and acknowledged, gives the
following description of the events of 1847:
" The crisis in April, 1847, arose from several causes.
The failure of the potato crop and harvest of 1846, lead-
ing to an enormous importation of food coming upon
nn excited state of price and transaction, aided by the
Bank canvassing for discount, and 'fomenting trans- .
actions, under the new principle that in the bank-
ing department they are to act on tie same principle
as private bankers, may be considered as the causes
of that crisis. These led to an extent of de-
mand upon the Bank for discount and otherwise,
the yielding to which led them beyond the bounds
of prudence, seeing the early payment of the dividends
was at hand. Under the Currency Act they found
themselves under the necessity
suddenly of not only
withdrawing, their usual accommodation by way of
discount, but of calling in with a severe and unre-
lenting hand the loans they had made upon the security
of bills, Exchequer-bills, &e. The suddenness and
severity of this change was forced upon the Bank by
the Currency Act. Bad it not been for that, they
would have spread over months what they felt them-
selves compelled to do in a few days, to the serious de-
rangement of the money market, and. to much alarming
disaster. Is it queried, was this crisWowing to the Cur-
rency Act ? I think it cannot be fairly laid to the Act
only, but to the causes before specified. It may, how-
ever, with truth be asserted, that the force of it an\l the
evils of it were touch aggravated by the effect of This
Act, in the coursdOf action it forced upon the Bank."
Mr. G. C. GlynnOLP., a leading London banker, and
as such having an extended country correspondence and
connexion, was also examined by the Committee. This
witness had been frequently examined before both
Houses of Parliament on similar subjects, and his expe-
rience as a practical banker gives peculiar weight to his
opinions. His evidence was as follows:
" I consider that the pressure which occurred in April.
1847, arose principally from the large importation of
corn and other necessary articles of food, and I consider
also that the foreign exchanges having been affected by
the operation of those causes, the pressure in point of
fact was necessary, and was carried only to the extent
which was required for the proper re-adjustment of the
foreign exchanges. The foreign exchanges were re-ad-
justed, and in the course of the autumn set strongly in
favour of this country. The harvest turning out very
good, in the months of August and September large fail-
ures occurred amongst the speculators in corn. Those
were the first occurrences of that description that took
place in this country; subsequently they were followed
by large failures of other mercantile houses. That went
on down to the end of September, the pressure gradually
increasing, but not to the degree which it arrived at in
the course of the following month, when there was su-
peradded to all those causes which had been operating
before, a great degree of discredit and want of confidence
ihroughout the country, which was very much increased
by tehueufnatirl7 ueoud d
of banksuriu
g i n
theLiverpoolwee
k
endingand other
the
2 parts3d
the of
of
October by a general distrust that seemed to operate
amongst nearly all mercantile classes, and was rapidly
o u t extendingthe c
ouint eryl tvoe
rt
yh embuttenhk ing
resembling,
establishments
in point t h roofutgahc-t
at that time, what occurred in the year 1825. The
other
the middlesymptomsther of October
of 1847 hlaBd47been u t entirelyinthe I
dissimilarastweek h
upe
to
fore the issue of the Government Letter the symptoms of
want of confidence that presented themselves were very
much like those which occurred at the end of 1825. There
appeared a want of confidence in the country generally,
which caused country bankers to look for the assistance
of their London correspondents, and which apparently,
if it had not been for the letter of the Government, would
have gone to a very great extent. In point of fact, the
difference between the two periods of April and of Octo-
ber was extremely striking. The pressure of April was
very soon over, and the bank did every thing within its
power for the mercantile body at the time. Although
they had been obliged to restrict their operations very
much, yet they attended to the applications made to
them, particularly those from Liverpool and some other
places. But the pressure that occurred in October last
arose apparently from entirely different causes. It pro-
cei ded from an apprehension on the part of all mercan-
tile men that the want of confidence was becoming so
great, that atipct the reserves of the Bank would be so
very low, that, in point of fact, persons who were pos-
sessed of property would not be able to convert that pro-
perty into Bank of England notes."
The committee also examined Mr. George W. Nor-
man, a director of the Bank of England, a witness
friendly to the Act of 1844, and one who is unwilling
that any alteration should take place in its provisions.
He was asked (2,C80) what were the causes of the pres-
sure on commerce in the spring and autumn of 1847?
and his reply was to the following effect:—
" I consider that the causes which produced the pres-
sure upon commerce in the spring of last year and in the
autumn were the potato disease and the failure of other
crops, the vast absorption of capital arising from the
railways, and considerable over-trading in some branches
of commerce."

Mr. Norman added, that he believed that the value o
foreign corn imported amounted to 30,000,0001., for
which payment must necessarily be provided. Mr.
Cotton, who, as well as Mr. Horsley Palmer, had twice
been elected Governor of the Bank, and from the same
motive, whilst he considers the distress to have been
" greatly exaggerated" (8,192), and
" nothing equal to
what had existed in 1825 and 1839," fewer banks and
solvent houses having in his judgment suspended pay-
ment, adds:—
" My impression is that there never was a time when
many parties had engaged in operations so much be-
yond what they ought to have done with reference
to their capital as in the year 1847. Considering
what occurred in 1847—the very large
payments for
food, the failures in the corn trade, the amount of
calls for capital for railways, and also the failure
of the India and other houses, and the exposure of the
very small amount of real capital, and in many cases
minus capital, under which they carried on a large
amount of business—l think we might have expected
many more solvent houses to have failed. There
was a very large, and, I think, indiscreet, exten-
sion of trade beyond the capital the parties had
to carry it on, in the corn trade, in consequence
of the profits which had resulted from the first im-
portation of corn. In the India trade there was a
larger extent of trade carried on than was justified by the
amount of capital, and which had been supplied by re-
newing bills. There was also a very large amount, far
beyond what the parties were justified in appropriating
on fixed securities in the Mauritius trade. After the
failure of one or two houses it appeared that credit had
been stretched tole most unreasonable :extent, larger
than I ever recollect."
The great majority of the witnesses denot concur in
Mr. Cotton's opinion, but unite in representing the in-
tensity of the pressure as more severe than the distress
of 1837 and 1839 ; many even consider it to have been
greater than that of the year of panic, 1825. The com.
mittee extract the following evidence to this effect ;--
" Has the distress and pressure upon the public been
greater or less during the last year than in any preced-
ing cases to which you have alluded?—l think it was
greater during part of the year 1847 than I ever re-
member.
on the
insolvency en
" With greater damage to commercial credit and for-
tunes than on any other occasiou?—l should say cer-
tainly.
" Do you apply that observation to the country gene-
rally, or to London ?—I apply it to the whole country,
place in this
especially to all the commercial parts of the country."
ey
contrary, ezexcept
Mr. Gurney's opinion on this subject is equally dis-
tinct and decided :
" Are there, in the history of the money transactions
of this or of any other country, circumstances that can
months ?—I think that the
catastrophes of last autumn were beyond
cboeuantt
rayl I
icnotmhpealraesdt ttowtehnots3e, that have tabs!,
as well as the witness
all parallel in
our monetary history, as far as I know."
Mr. George Norman concludes that in 1837 and 1839
the causes of pressure were much less extreme than in
the year 1847. In 1339 there was but little insolvency
Mr. Tooke,
pt in the
he stated
(2,702) that " every one seemed
ofrAe et any American
rle cc
at kendi n,
tdr.na
do
eI . n
considerablel
IBn
1847, the r e
would
afraid of his
neighbour ;" and, in the opinionof
" nobody
pay anybody." Another witness, was approaching when
Mr. Lister, states,
There was a panic through the country ; people
ht they were in an iron cage,thoug and could not get
of it; that iron cage was the .Act of 1844."
out
On the other hand, it is right to observe, that some
witnesses represent the pressure in 1847 to have been
than at several former periods.
less severe
the time
Governor The Governor and Deputy of the Bank, in
the following cinestions, state their impressions to this
effect, and as regards the comparative consequences of
the commercial distress in different Years:_
"You said that you thought that the Act of 1844 had
worked extremely well to secure the convertibility of the
notes; do you apprehend that there would have been any
danger of the notes of the Bank of England not being
convertible it it had not passed?—l think they would
have been in danger. On oae or two previous occasions
I think they were in danger—in 1825 and 1839.
" And you think that they would have been in danger
now but for this Act?—They might have been.
~ sir. Prescott—l agree with the Governor. I think
that the pressure was not so great in 1839 as it was in
1847, and therefore that the danger in 1847 would have
been greater but for this Act.
" Was not the pressure greater this year than you
have ever witnessed?—My own experience scarcely
carries me back t 9 1825, but I should conceive that the

pressure in one or two weeks in 1325 was greater than
I in 1847.
" Mr. Morris—l believe that the pressure probably
has been greater in London and in Lancashire, and pro-
bably in other pieces, but I doubt whether the pressure
genet ally throughout the country has been so great us it
was at the former periods.
" Do you consider that circumstance at all attributable
to the action of the Act of 1544 upon the private bankers
in the country ?—f consider that the action of the Act of
1844 upon the private bankers in the country must have
been of the greatest possible benefit.
" And to hare preserved the country from the failures
of country banks which took place in 1825 ?—To have
preserved the country from the misfortunes fallen into
in 1825.
"Assuming that the pressure in 1847 has been more
severe upon the commercial world in London then upon
previous occasions within your knowledge, should you
say, considering the distance at which we have now ar-
rived from the period of pressure itself, that the reco-
very from it has been more rapid, and that there has
been less subsequent pressure than upon former occa-
sions ? I think the recrvery from it has been much
more rapid, but it is difficult to say when the recovery
has taken place.
" Without assuming at the present moment that we
have actually recovered from it, but looking at the course
of affairs since October, should you say that there has
been less severe distress consequent upon the panic than
there has been upon previous occasions?—l think that
the reaction has taken place sooner than it otherwise
would have done.
" The question is, not as to what would have hap-
pened if the Act of 1844 had not passed, but merely as
to the matter of fact, whether the distress and the
sacrifice of capital, and the general damage, both to
the commercial character as well as the credit of this
country, has not exceeded in the last year any-
thing that in your experience you ever witnessed?-
1 think in the failure of large houses it has exceeded,
but whether it has as far as the whole country is con-
cerned, I am not prepared to say. My impression is.
that the damage to the country from the panic of 1825
was greater and more general then than any which has
taken place in 1847.
"Mr. Prescott—l think as many as sixty or seventy
country banks failed in the end of 1825, and now there
has not been a dozen.
And Mr. Jones Loyd will be found, in his evidence, as
follows, to express his opinion more strongly as to the
greater intensity of the pressure on several former occa-
sions than in 1847.
" Within your experience do you know any time in
which there was a greater disturbance of credit, so as to
necessitate an increase of the reserves, than there was
in that month of October, 1847?-1 believe that the dis-
turbance of credit was greater and more widely spread in
1825 than it was in 1847.
"Do you suppose that any evil can occur to a great
commercial city greater than that which happened
during the year 1847 in the city of London, or that
there ever were instances in which so complete a sacri-
fice of property and so complete an impoverishment of
commercial capital, has taken place in any country?—l
have no doubt that there existed much greater pressure
and that the evils alluded to in the question, occurred in a
severer form in this country in 1783, in 1793, and in 1825.
We are always apt to form an exaggerated estimate of the
present evil. This is the account given by Mr. Tooke of
what took place in 1783:—' This contraction of the cur-
rency was attended with a great rise in the rate of inte-
rest; Consols fell from 68 to 54; omnium from a premium
of 8 per cent. to below par. Every one (says Chalmers)
must remember how impossible it was to borrow money
on any security for any premium.' Then again, take
1793. Many houses of the most established credit
failed. Houses of undoubted solidity, possessing
ample funds, which actually did in a short time enable
them to pay every shilling of their debts,
were obliged to stop payment. Some bankers
who almost immediately on recovering from the
first panic resumed the regularity of their payments
were obliged to make a pause. Many whom the tern
porary assistance of even a moderate sum would have
enabled to surmount their difficulties could not ob-
tain any accommodation. Those who had any
money, not knowing where they could place it with
safety, kept it unemployed and locked up in their coffers.'
Such is the account given in " Macpherson's Annals
of Commerce" of the pressure in 1793. It would be a
most incorrect and exaggerated account of the state of
things in 1847. Then again, as regards 1825, we have
Lord Ashburton's account of 1325, as given in Sir Robert
Peel's speech, which taken as a description of 1847 would
be a great exaggeration."
Such is the description of the commercial world in
1347, given by well-informed witnesses; and the Com-
mittee consider that a more alarming picture of the
consequences of panic and discredit could not well
be given. It must also be recollected that in
some respects the conjuncture was favourable.
Had there been at this time any domestic political
alarm, had there been any foreign war, or any
speculation in foreign loans, or had the State
of the balances in the Exchequer been such
as to render necessary large advances from the
13ank on deficiency bills, and the extent and intensity
of suffering, great as they actually were, would have
been rendered still more formidable. But from these
sources of danger the country was happily exempted.
Still it is clear to your Committee that the difficulties and
dangers of the case were such as to require a remedy,
prompt, decisive, and effectual.
SECT. IL—TREASURY LETTER, 25TH OF OCTOBER, AND
ITS EFFECTS.
That remedy was sought and found in a departure
from the restrictive principles of the Act of 1844, autho-
rised by the following letter of the First Lord of the
Treasury, and of the Chancellor of the Exchequer,
dated the 25th of October:—
" Downing-street, Oct. 25, 1847.
" Gentlemen,—ller Majesty's Government have seen
with the deepest regret the pressure which has existed
for some weeks upon the commercial interests of the
country, and that this pressure has been aggravated by
a want of that confidence which is necessary for carry-
ing on the ordinary dealings of trade.
" They have been in hopes that the check given to
transactions of a speculative character, the frosafer of
capital from other ccuntries, the influx of bullion, and
the feeling which a knowledge of these circumstances
might have been expected to. produce, would have re-
move I the prevailing distrust.
" They were encouraged in this expectation by the
speedy cessation of a similar state of feeling in the month
of April last.
"'These hopes have, however, been disappointed, and
her Majesty's Government have eome to the conclusion
that the time has arrived when they ought to attempt,
by
some extraordinary and temporary measure, to restore
confidence to the mercantile
and manufacturing com-
munity.
" For this purpose they recommend to the Directors
of the Bank of England, in the present emergency, to
enlarge the amount of their discounts and advances upon
approved security, but that, in order to retain this ope-
ration within reasonable limits, a high rate of interest
should be charged.
‘ In
present circumstances they would suggest that
the ‘ rate of interest should not be less than 8 per cent.
" If this course should lead to any infringement of the
existing law, her Majesty's Government will be prepared
to propose to Parliament, on its meeting, a Bill of In-
demnity. They will rely upon the discretion of the
directors to reduce as soon as possible the amount of
their notes, if any extraordinary issue should take place,
within the limits prescribed by law.
" Her Majesty's Government are of opinion that any
extra profit derived from this measure should be carried
to the account of the public, but the precise mode of
doing su must be left to future arrangement.
" Her Majesty's Government are not insensible of the
evil of any departure from the law which bas placed the
currency of the country upon a sound basis; but they
feel confident that, in the present circumstances, the
measure which they have proposed may be safely
adopted, end at the same time the main provisions of
that law, and the vital principle of preserving the con-
vertibility of the bank note, may be firmly maintained.
" We have the honour to be, Gentlemen,
"Your obedient humble servants,
(Signed) " J. RUSSELL,
"C. WOOD.
" The Governor and the Deputy-Governor
of the Bank of England."
It should be remembered that the insertion of a
clause in the Bill of 1844, investing the Government
with such a relaxing power, had been discussed, and re•
jected. The committee consider that the step so taken
by her Majesty's Government, in the exercise of such
authority, was wise and successful.
The House of Commons have resolved, during the
present session, " That in the peculiar circumstances of
the period the Government were justified in this extra-
ordinary exercise of power." But, in assuming the re-
sponsibility of authorising the relaxation of the Act, the
Government, in fact, " dispensed with the express pro-
visions of an Act of Parliament." The interposition of
the Treasury has been thus understood, and explained
by many of the witnesses. The Governor of the Bank
considered that when once the Government letter issued,
the Bank was no longer responsible; he considered that
he bad authority to " break through the Act." The
" Responsibility of the Bank to provide for the security
of the banking department ceased after the 22d of Oc-
tober." On the 23d it was intimated that the Govern-
ment letter was to be issued on the 25th; and it was un-
derstood that the Bank was to act on that day (the 23d)
according to the spirit of the Government letter. Con-
sequently the accommodation given on the 23d, was
"given on that understanding," Mr. Glyn observes, "the
letter of the Government stopped the crisis, and abro-
gated the Act." Mr. Browne (2,359) considers the letter
to have " virtually condemned and annulled the Act of
1844." Another witness apprehends " that the hank
would have had to shut its doors in a week unless the
law had been violated."
On the other hand, Mr. Samuel Jones Loyd states his
opinion, that " although the letter was a departure frorm.
the positive provisions of the Act, it was
otaadi i:teamc-
ture from the principles of the Act."
lion which the Committee cannot recognise. "The force
of the enactment was clear and intelligible. The Trea-
sury letter authorised a departure from that principle,
and even recognised the possible necessity of_ applying
to Parliament for indemnity. A sanction was thus given

to a course unwarranted by law. No issue, it is true,
was made beyond the powers of the Act of 1844, but
that issue, it it had been made, was authorised by the
letter of the Government ; and, practically, the conse-
quences were precisely the same as if the Bank had
made such issue. Mr. Loyd states (1.500) that the
" Bank did nothing under the letter; the amount of notes
with the public was not increased ; that power was not
exercised." The letter was nevertheless actively and
powerfully operative. "The issue of the letter to a consi-
derable degree relieved the money market," observes Mr.
Norman "by holding out to persons the certainty that
they might get accommodation, whereas before they
feared that they should not." The amount of notes
hoarded by bankers and commercial men was at once
released. These notes have been estimated by Mr. S.
Gurney at about 4.000.0001.; and this acted as effeetu-
ally as if an additional issue on securities had been made
by the Bank.
This effect is well described in the following extract
from the evidence of Mr. Glyn:—
" It produced the same effect as if the Bank of Eu,2land
had made an issue; because it brought °tit the hoards of
notes, and they went into circulation. It thereby added
to the circulation of the country, and it removed the cause
of the panic, which is stated to have arisen from the Act
of 1844.

" Looking at the state of the reserve after the letter of
the Government came on the 233 of October, through
October, November, and December, and seeing that the
reserve constantly rose, and that at the same time the
bullion rose with it, did not that favourable turn in the
affairs of the Bank, and in the facility of the circulation
of the country arise from the Act of 1844 being set aside
by the letter of the Government? I consider that the
letter of the Government of the 25th of October having
in effect got rid of the clause in the Act of 1844 which
limits the amount of the circulation to 14,000,0001., pro-
duced the effect alluded to,"

The salutary consequences of this step were recog-
nised gratefully by almost every witness, even by those
most favourable to the Act of 1844. " All alarm ap-
peared to have ceased on the issue of the letter," ob-
serves the Governor of the Bank; and subsequently he
adds, "what restored confidence was the letter of the
Government, allowing the Bank to make any advances
without reference to the Act, at a given rate of interest.
We did not so much want the money, but we wanted a
certainty that if we did want it we should get it." The
opinion of Mr. Horsley Palmer is equally decisive. "In
autumn of 1847 the demand for assistance was so much
increased as to place the Bank in imminent danger by
granting it, and which nothing could have relieved short
of the relaxation of the law which took place." Mr.
Samuel Gurney illustrates this statement by his own
case. He observes: --

" We required about 200,0001., and had it at 9 per
cent. On the Monday morning we had again a very
heavy demand upon us; and we applied to the Governor,
and said that to supply Lombard-street with what was
wanted we should require 200,0001. more. It was a case
of difficulty for the Bank under its reduced reserve, and
under the limitation of the Act. The Governor post-
poned a decision on the application to two o'clock. At
one o'clock, however, the letter from the Government,
authorising relaxation, was announced. The effect was
immediate. Those who had sent notice for their money
in the morning sent us word they did not want it, that
they only ordered payment by way of precaution. And
after the notice we only required about 100,0001., instead
of 200,0001. From that day we had a market of com-
parative ease. The alarm lessened; and by the end of
the week we had to ask as a favour of the Bank to be
allowed to repay the money which we had borrowed of
them."

Nor was this immediate and effectual relief confined
to the metropolis. As the pressure had been general,
so likewise was the relief. The Committee have had a
letter given in evidence, from which the following extract
will strikingly exemplify the effects of the Government
interference as felt in the great commercial town of Li-
verpool:—
" The state of things immediately previous to the pro-
mulgation of the Government letter of the 25th of Octo-
ber was perfectly fearful, and, I believe, without prece-
dent in the commercial history of this country. Bills of
exchange of the first quality in themselves, and to which
this and other banks were willing to add their endorse-
Monts, were absolutely inconvertible into cash; and it is
my firm belief that many houses, who were not merely
solvent but able to pay 40s. and 60s. in the pound, must
have stopped had the Government letter not been issued.
Immediately on the issue of that letter the whole diffi-
culty was removed. Not only were our bills available at
the Bank of England, but with all the discount brokers;
they were, I may say, eagerly sought for by the country
! banks, and by private moneyed parties seeking for in-
vestments, at even lower rates than the Branch Bank of
England here were willing to discount at. This ihoYied,
beyond dispute, I think, that, the scarcity of -nt ney
was artificial, not real, aviALth at the panic was a
moral one, caused by the mVtlhievous and whimsical
provisions of the Bank AcC of 1844, and nut by
want of confidence in the securities (the bills of ex-
change) themselves, for the securities remained of course
precisely the same after the 25th October as before that
date. I have no hesitation in stating that in my opinion
the letter of the 25th of October virtually annulled the
Bill of 1544, and saved the country from an almost
universal stoppage of payments, in which the banking
department of the Bank of England would have been in-
cluded."

It should not be forgotten that the recommendation of
the Treasury, though imposing the condition of a mini-
mum rate of interest of 8 per cent., was wholly unre-
stricted as to the amount of advances authorised. Unless

it had been so unrestricted in amount it would probably
have failed. It placed the Bank, so far as the authority
of the Government could do so, in the position in which
it would have stood if the restrictions of the Act of

1844 had never been enacted, or had been repealed.
" The remedial character of the measure," observes Mr.
Loyd, " was not the discounting at 8 per cent., but the
declaration to the public that at 8 per cent. interest
there was an unlimited supply of Bank notes at their
command. The Bank could not possibly make that offer
without the sanction of the Government." It was

knowledge on the part of the public, that there was ac-
tually the " power given to the Bank to advance any
quantity of notes without limit, that produced the effect.
Without the authority of the Government the Bank
could not have produced that confidence."
It is true that the Governor and Deputy-Governor of
the Bank ate inclined to think thst the letter of the 25th
of October might have been dispensed with, so far as
they were concerned, and that the Bank of England
might have been placed in a position of safety by pre-
cautionary measures; and a resolution was entered into,
on the 25th of October, by the Court of Directors, ex-
pressing an opinion " that no deviation from the provi-
sions of the Act of 1844 regulating the currency was
required in consequence of any difficulties on the part of
the Bank;' but that they consented to the treasure re-
commended by her Majesty's Government on the
grounds of public necessity urged by the First Lord of
the Treasury and the Chancellor of the Exchequer." It
becomes, therefore, essential to consider the actual state
of the Bank of England at that time, to ascertain whe-
ther that was a state of safety or not, and whether any
remedial or precautionary measures have been suggested
which, by rendering the Bank secure, would have made
the suspension of the law by the authority of the Go-
vernment unnecessary, for unless a step involving such
extraordinary responsibility and so undisguised a de-
parture from the law were indispensable, it could not be
justifiable. Its absolute necessity was its sole justification.
The state of the Bank reserve on the 23d October is
shown to have been as follows :
Date. Reserve. London. Country.
1847.
Oct. 23. Notes 1,547,276 • • Notes .... 981,615.. Notes .. 565,655
Coin 447,240.. Gold coin.. 209,544—G01d coin .. 78,399
.Silver coin 104,045.-Silver coin .. 54,954

£1,994,516

1,295,504
Country .. 6',9,012

£699,012

Xt,994,516
But on the 23l of October it had been intimated that
the Government letter was to be issued on the 25th, and
it was understood that the Bank was to act on the 23d
according to the spirit of that Government letter. The
accommodation given in consequence on the 23d of Oc-
tober was on that understanding, and the reserve was
necessarily to some extent diminished. On the 30th of
October the account stood as follows :
Date. Reserve. London.
1847.

Country.
:£
.605,270

Notes

Oct. 30. Notes 1,176,740 .. Notes 5G8,470 _ _
Coin 429,384 .. Gold coin•• 151,033 .. Gold coin 119,554
Silver coin 105,787 .. Silver coin 52,990

£1,606,124

825,310
Country.. 780,814

£780,814

X 1,606,124
Thus the reserve of notes, which had been 2,630,000/.
on the 16th of October, had fallen on the 23d to
1,547,0001., and to 1,176,000/. on the 30th of October,
having decreased nearly 1,500,0001. within the short
space of fourteen days. At this last period, of the total
reserve of notes, amounting to 1,176.7401., no
more than
ld
568,4701. was held in London, making, with the go
coin in the banking department, 719,523 Z At the same
time the private deposits for which the Bank was respon-
sible amounted to 8,580,0001., independently f'
upwards
of 4,766,000/. of Government deposits. The total depo-
sits on the 30th of October were 14,500,000/. ; the depo-
sits of the London bankers being more than 2,000,0001.
at the same time. In reference to this state of things
the following important evidence was given by the Go.
venor and Deputy-Governor of the Bank of England.
" You had only 1,600,0001. in the banking department
for the payment of your liabilities 7—Yes,
" If anybody had called upon you for anything beyond
that million and a half you must have stopped payment?
—Yes, we must.
"At that time, if there had been no separation
ld
be-
tween the two departments, and the Bank of E
had been conducted on its old principle, instead of being
within one million and a halt of stopping, there wouldl
have been very nearly 8,500,0001. of treasure in your
vaults ?—We should have had 8,500,0001. in our vaults."
state lt is, ;however,
at theyco ulrdi gnhotttaodamdidt,
that(that t
the
the
,B same
ank witnesses
same e payments,xt extant o f CVCOO al shouldal ocl a tni ()out
(biaansegebreeorif
asbulsepteon suspending dites
extentu of
.5h0a07007;
intothat
account . parties a were
considerable requiring
sum
mu s .
by
selling Consols. We
the e.
at the the
shado
that o
bn
yg
discountingff ek y
evenbills
rate of 100,000/. a day
to give the public some accommodation, our rvserie