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

X
teil 1,547,276

~.Notes •••• ~.Notes
447,240..G01d coin •. 209,844..G01d coin .. 78,399
•Sllstr coin 104,045..5i1ver coin •• 34,958

£1,994,516

1,295,504
Country .. 659,012

£699,012

11,994,516
But on the 23d 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. Loudon. Country.
1847.

Oct. 30. Notes 1,177,740 .. Notes
Coln 429,384 .. Gold coin 151,053 .. Gold coin 119,554
.. Silver coin 105,787 .. Silver coin 5'4,990
£1,006,124 -- ---
82.5,310 £780,814
Country.. 780,814

£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
568,4701. was held in London, making, with the gold
coin in the banking department, 719,523/ At the same
time the private deposits for which the Bank was respon-
sible amounted to 8,580,000 L, independently of 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 2,000,000/.
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 depart:nett
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 be-
tween the two departments, and the Bank of England
had been conducted on its old principle, instead of
being
within ono million and a half of stopping, there
would
have been very nearly 8,500,000/. of treasure in your
vaults 7—We should have had 8,500,0001. in our vaults."
It is, :however, right to add, !that the same witnesses
state that they could not admit that the BankNv was in any
ou
dl da t
oo
danger of suspending its payments.
t
have been. able to give the same extent of accommodation
that. parties were requiring of us. We might have put
Consols. We
into account. a considerable sum by sell'
had going off weekly bills to the extelnnfgt of 1,500,0001.;
100,0001. 0 day
so that by discounting even at the rate
to give the public some accommodation,o
our reserve

"still have increased at the rate of 900,0004 a
It is certain that in a very short period we should
had as large a reserve as would be necessary for
Irposes, and therefore the Bank was never at any
in jeopardy."
correctness of this conclusion, however, depends
on the practicability of the remedial measures recom-
mended ; namely, first the sale of stock ; stud secondly,
the limitation of discounts. A further question also
remains, assuming these measures to have been practical
and successful, for the security of the Bank, in the first
instance, whether their consequences would not have
been ruinous both to public and private credit, and
ultimately fatal to the Bank of England itself. These
questions the Committee now proceed to consider.
1. Sale of Consols.—At the end of October, it appears
from the statement of the Governor of the Bank that the
amount of Stock held in Consols and Reduced was frost
two millions to two millions and a half ; the remainder
of the public securities held was the dead weight, being
annuities for terms of years, which are not always so
easily disposed of. The Governor considered that the
Bank might easily have availed itself of two millions of
Three per Cents. But the stock, even if it could be sold
to that extent, would not have strengthened the reserve
to the extent of amount sold. On this point the same
‘vitrieFs gives the following in3port,.nt information :
" Will you state what effect you conceive would have
been produced upon y, ur deposits if you had proceeded
at that time to sell securities to any considerable extent?
—My impression is, that supposing we had sold securi-
ties to the extent of about two millions, it is probable
that the deposits might have boll affected to the extent
of about one million, so that by selling two millions of
securities we might have strengthened the reserve by
about one million."

"The reason why it would have the effect of reducing
the deposits is, that the act of selling securities would
naturally make securities cheaper, and parties baying de-
posits at the Bank might be induced to employ a portion
of their deposits in the purchase of securities, in conse-
quence of securities being cheaper."
" If we had sold to the extent of two millions it might
have effected us to the extent of one million. But I
think we may assume that money upon the Stock Ex-
change is, generally speaking, cheaper than it is else-
where ; the consequence is, that we might take money
out of the Stock Exchange without its generally affect-
ing the country for some little period, and therefore the
action of drawing out the deposits might not be so rapid
as would otherwise be the case."

But this is strongly controverted by many of the most
intelligent witnesses, who doubt whether securities to
this amount could have been found saleable at all, at tho
period referred to, except to an enormous loss. Mr.
Horsley Palmer was asked,
" What would have been the difficulty of effecting the
sales of securities P—The difficulty would have been in
finding Bank-notes to pay for them. I think the
Governor did try to sell a small amount of funded pro-
perty at a reduction of two or three per cent, about the
2lat of October ; but it would have been quite impossi-
ble in the state of public feeling that then existed to
have gone into the market with a million or a million
and a half of securities, and have found Bank-notes for
them."

" Would it not have been attended with great distress
to many parties ?—Unless the prices had been forced
down to 60 or 65, or some enormous reduction, Bank-
notes could not have been procured."
It should be borne in mind, in reference to this evi-
dence, that the witness examined is a leading director
of the Bank of England, and one who was specially con-
versant with all the events of 1837 and 1839, with the
extent and resources of the Bank, and the possibility
of making these resources available at a time of com-
mercial pressure, This opinion was carried still fur-
ther in this subsequent examination, which was as
follows

" Supposing that in the month of October, when
the reserve of the Bank was low, and when the public
were aware that the reserve was low, the Bank had pro-
ceeded to sell stock to the amount of 2,000,0001., do you
skink that would have had any material effect upon the
funds or not ?—I think it would have forced the price
of Three per Cents. to CO. There is no price that I
can name that they might not have fallen to. If any
violent measure of that sort had been taken, no one can
say what might have been the consequence. I do not
believe that the Bank could have got two millions ster-
ling of notes by selling stock towards the middle and end
of October."

This conclusion is borne out and fully confirmed by
the evidence of Mr. Glyn at a subsequent period. Mr.
Glyn may be taken as a fair representative of the Lon-
don bankers, and as giving the result of thirty years of
experience in the money market.
" You said that it would not have been possible for
the Bank to sell stock to any great amount at the pe
riod of panic?—l believe not. On the 23d of October
200,000/. was sold with some difficulty.
" Are you aware that it was the opinion of the Bank
broker that a very large sum might have been sold with-
out materially affecting the price of stocks ?—I was not
aware that the Bank broker had stated that. I should
say, from what I saw at the time, that the sale of a
million or two millions, which were the figures talked
of, would have been almost impossible without knocking
down the funds to such a price as would hare created a
further panic."
Mr. Browne, M.P., an extensive American mer-
chant, expressed the same opinion in still more unqua-
lified terms.

" Supposing they had not taken that course, but had
felt it necessary to recruit their reserve by the sale of
s(curitiQs, do you think that the .circumstances of the
Stock Exchange at that time would have -admitted of
the sale of a million or two millions of stock or Samba-
qui,r do not think it wottld; without very great
sacrifices; and if the panic had blO equal to what we
might suppose it might have ' under such circum•
stances, I doubt whether theyAuld have been sold
at all.
"But even assuming that theriepuld have been sold at
a considerable sacrifice, would nukshat have entailed the
consequence, not only of a sacrifice to the Bank, but of
a sacrifice to all the holders of public securitiesY—Cer-
tiinly. I think the remedy would have been worse
than the disease."

The attention of Mr. Tooke was called in the follow-
ing manner to the evidence given by the Governor of
the Bank on this subject, and the questions and the
commentary are so important that the Committee think
it right to bring the whole passage under the observation
of the House:—

" You alluded to the jeopardy in which you conceived
the banking department of the Bank to have been placed
in September, 1847. Your attention is requested to an
answer which was given by a witness before this Com-
mittee. I cannet allow that the Bank was in any dan-
ger of suspending its payments. I will take the reserve
as it read upon the Friday night previous to the letter
being issued upon the Monday. I did not take the
Saturday, because we wore then acting under the ex-
pected issue of the letter. The Bank reserve at that pe-
riod, the Friday, was 2,376,000/. We should have had
no difficulty whatever in meeting all our liabilities. We
should not have been able to give the same extent of ao•
commodation that parties were requiring from us. Par-
ties came, and thought they had only to ask for money,
and they would have it at once. We might have put
into the account a considerable amount by selling Con-
sols. We had going off weekly bills to the extent of
1, 500,0001.; so that by discount-bills to the extent of
100,0001. a-day, to give the public some accommodation,
our reserve would still have increased at the rate of
900,0001. a week. It is certain that in a very short pe-
riod we should have had as large a reserve as would be
necessary for our purposes; and, therefore, I maintain
that the Bank was never at any period in jeopardy.
If you were told that such was the opinion of the
Governor of the Bank of England, would you say that
he took a very erroneous view of the situation of the
Bank at that moment?—lt would entirely depend upon
what is meant by the term, jeopardy. I did not go the
length of saying that I thought they could not maintain
their payments, but I considered they would be in very
great difficulty in doing so. Ido not imagine that the
Governor of tho Bank or any body could form an ade-
quate conception of what might or might not have been
tee Governor
thetalws
of sellingfollowingeek
consols. the
o fmoi ;tt o tr..
But I can easily conceive a state of things in which the
Bank could
Bank-notes-could nothave
from the public theextent
soldoconsol sat t 1. If they had
withheld
Ind
hthaavat allsewnefrounlddoto
pnaoyt
fboeriithoves
twhhaitcßh Bank-notessewdoui

consols."
2. Limitation of Discounts—The remedy of diminish-
ing the discounts would have led to many of the same
consequences with those attending a forced sale of
securities. This measure would undoubtedly have in-
creased the panic by aggravating the pressure, and
owfithtobuot
de
euppopsoistoinrgs
to any combined movement on the part
call up their deposits, necessity
and private interest must have led to that result.
The deposits available on demand must, to a certain ex-
tent, have been called for to supply the place of the dis-
counts reduced or withheld, and the Bank would have had
to encounter an inevitable loss on the one hand, whilst
fruitlessly endeavouring to secure a contingent advan-
tage on the other. In the course of this • •
process, it is
scarcely necessary to point out how much the commer-
cial difficulties must have been aggravated. This can-
not be denied even by those who anticipate that the
gre
elan db
13ank might have been relieved and the Bank reserve
strengthened. But if the effect had been to increase the
alarmypretsseurleialwietrae-
odfettohebreserve, the con-
alhaermpinegri,loaunad world
mitigatedtt pressureon ot t h and
bn
ydd i alarmtshcoeoanut
augmentation
o,mtaebn- toatt greateribo ant
dbiatvioennooofetshsearßilaynbkeacolrmeaedsytislihomwomures
words of a wit-
otorse than the disease."
nreemsseadlyremadigyhgtohoatveed,p.r‘osvteildio,'w'
relying
proposed°t eb
Oenitbtheerseotgrtobuendrso,
maneddinest with any confidence
on
likely to have proved safe or effectual 'andy the Batik, as
even if adequate for the special believing that,
they would have entailed uonh interests of the Bank,
the commercial classes, discredit,i)t
the
public, as well as on
loss, and suffering, the
Committee again repeat their
letter of the 25th of October, approval of the Treasury
assumption of responsibilit,y, which,dispensing with the as an extraordinary
re-
strictive provisions of the Act, of 1844, and inconsistent
with them, would not otherwise have been justifiable,
but, on the contrary, would haveto exposed the Govern-
ment well-deserved censure. •
SECT. 111.--EFFICIENCY
OX TEM CiRcuLATIOX NOT

IDENTICAL WITII ITS MONEY AMOUNT.
The Committee have hitherto confined their observa-
tions to the practical effects which the Act of 1844 has
had upon the commercial distress of 1847. They feel it
their duty to consider, likewise, some more general ques-
tions, which, whilst they have essentially affected the
period of distress, are also of more permanent and uni-
versal application. The inflexible rule, considered to be
invariable and self-acting, and adopted by the Legisla-
ture as connected with and comsequent upon the sepa-
ration of the departments of issue and of banking, and
the regulations provided for both, is founded on certain
principles which, beforo they can be adopted, demand
very serious examination. The Act appears to ammo

~' ~f

"“ •