The Sun.
London, England, 1857-02-07 00:00:00

served the consideration of the Chancellor of the Exchequer.
Whey they considered the nature of the inquiry which was
to be submitted to the committee, including the embarrass-
ing question of the whole currency of the United Kingdom,
and involving the nicest points of law, and when they re-
flected that the committee would be called upon to lay
before the houses new commercial code affecting the whole
banking business of the country, he thought it would be
evident that an investigation ofsnch
conducted
magnitude would
two
dboe
much more satisfactorily and Speedily
committees than by one. (Hear, hear.) The Chancellor of
the Exchequer had referred at some length to the question
of convertibility. He (Mr. Glyn) had always considered
that. the question of the currency and of the Bank privi-
leges was most unnecessarily mixed up with the question
of convertibility, with the intention, as he thought, of
throwing a slur upon those who did not assent to the act
of 1844, but whose object was, if possible, to improve the
principle laid down in that act by extending rather than
diminishing its operation. He would not enter at length
ito a consideration of the act of 1844, for no doubt the house
would assent to the motion of the Chancellor of the Exche-
quer, and the subject itself WWI very dry one. He might
observe, however, that he had always regarded the act of
1844 as dividing itself into three parts, distinct from each
other, and operating very differently with regard to the
public welfare. The first important portion of the act pro-
vided for the separation of the issue and banking depart-
ments; the second for the limitation of the amount of cir-
culation advanced upon securities • and the third laid
down regulations affecting country banks. With regard
to the first of these provisions he did not hesitate to say,
although he knew it was rather an unpopular doctrine,
that, though he had always been an advocate for the
separation- of the two departments, he regretted that
the machinery for regulating those departments had not
been left in the hands of the Bank of England. If
there had been no statutory enactment giving to them
the management of the circulation of the country the duty
might have been still in their hands. Their power was
great, and having the command of the Government ba-
lances they would have been in circumstances to carry on
all the necessary operations. Bat the Bank of England
themselves rejected that view of the matter, and by ac-
cepting the act of 1844 they had prevented all chance of a
return to that state of things. The question could no longer
be argued as it was in 1844, for there were now other bodies
who might step forward and say, " Why not entrust the
duty to us as well as to the Bank of England ?" As to the
third point (which he would notice before the second), viz.,
the regulation of the country bank issues, he was not aware
there was any such compact entered into with them as the
hon. member opposite (Mr. Baillie) alluded to. But,
whatever the case might be, the renewal of the Bank Act
could not alter the position of the country bankers ; nor
did he see that they had any claim whatever. He had
always thought the arrangement with the country bankers
one of the best provisions of the bill. It provided a ma-
chinery by which, in point of fact, they might substitute
other paper for their own at a great advantage, and many
of the country banks availed themselves of the option thus
afforded them. Bat, after all, the most important point was
the second, which referred to the limitation of the amount
of notes. It was impossible to advert to this without bear-
ing in mind what took place in 1847, and it was remarkable
how very anxious the advocates of the bill were to get over
the events that occurred in that year. The right hon. gen-
tleman the First Lord of the Admiralty told them last
year that what had occurred in 1847 was entirely to be at-
tributed to the state of the commercial body ; but he found
that another advocate of the bill, in some remarkably lucid
letters which had lately appeared, took another view of the
matter. He attributed the events of 1817 not to the com-
mercial body, but, in a great extent, to the prejudice and
want of prudence of the Bank directors, who ought to have
raised instead of reducing the interest. But the writer
made a mistake in the matter of fact. The Bank directors
did not reduce the rate of interest in 1817. They reduced it
in 1846, acting upon the doctrine laid down by their
friends, that they should look to their own reserve merely
as bankers, and not to the amount of bullion. Accord-
ingly, when they found their own till full in 1846 they re-
duced the interest. At the same time they were entitled to
do so, for the bullion was increasing in the Bank. The
fault of the Bank directors in 1847 was, that they did
not in time raise the rate of interest, and when they did
so they did it in a gradual way. With respect to the limi-
tation of the issue of notes to 14,000,0001., the rest of the
issue being based on bullion, he had never heard any rea-
son assigned for that limitation. The Chancellor of the
Exchequer had told them that, under this system, the
bullion at one time in the Bank amounted to 20,000,0001.
The effect of such an accumulation was to raise great ex-
pectations in the country, to inflate prices, give encourage-
ment to speculation and the creation of new companies, all
which was sure to be followed by a commercial crisis, and
thus drive the country from one extreme to another. This
was the result of having a fixed sum of 14,000,0001. as the
limitation of the issue of notes. They had been told that,
as a certain consequence of having this fixed amount of
circulation, whenever the bullion began to give way the
notes in circulation would be diminished; but nothing of
the kind had occurred. Take last year. There was a dimi-
nution in the amount of bullion of 3,900,000 z., but the notes
in circulation continued the same as before. There was no
corrective for this in the existence of the limit. The truth
was that in framing the bill the fact was totally forgotten,
that the moment money became more valuable that instant
the Bank reserves were acted upon. He could not conceive
how such a system should be thought necessary, or how the
idea bad been lost sight of that the rate of interest should
be determined by the amount of bullion, and not by the
state of the Bank reserve. He did not wish to go into de-
tails which would hardly be understood, but the general
principle on which we should proceed was something like
the following : Don't allow the amount of notes issued ou
securities to be a fixed amount. Let a certain amount be
fixed, but all above that issued at given ates of interest,
and let these rates ofinterest be determined by the amount
of bullion in the Bank, making the amount of notes in cir-
culation always to bear a necessary proportion to the
amount of bullion in the Bank coffers ; if, for expample,
there should be one million of bullion, let there be two-
thirds of notes, or some proportion of that kind. He hoped
his right hon. friend would not give up the committee, as
perhaps something might transpire there which would lead
him to change his mind on this question. He thought
it was possible to improve the machinery of 1811 very
materially. He had great doubts whether the time
had not come when all this machinery show(' be place(
in other hands—whether the day had not come when we
should have not Bank of England notes, or notes of Go-
vernment circulation, but what might be called Mint notes,
or something of that sort. Let it be an issue founded on
the receipt of bullion by the Mint, and they should then
have a currency free from all chance of risk, and establish a
system which would assist most materially the commercial
interests of the country.
Mr. HENLEY hoped that the Chancellor of the Exche-
quer would divide the inquiry into two, dealing separately
with the question of the Bank charter and that relating to
joint-stock banks. The country took a great interest in
both questions, but especially in the latter. It was highly
desirable, as the Chancellor of the Exchequer had truly
said, to reconsider the mode of winding up joint-stock
banks ; but that was a matter different from banking, and
one which ought to be investigated by different members.
On the committee charged with the inquiry into joint-
stock banks they ought to have members of the legal pro-
fession. It was a very intricate subject, upon which great
difference of opinion existed, and it was desirable that
legislation should follow the report of a competent commit-
tee. Now, nothing could be more general than the terms of
the reference to the committee. The Chancellor of the Ex-
chequer seemed to wish that they should not go into the
operation of the act in 1847 ; but the terms of the reference
would not exclude that year from the inquiry, and that
right hon. gentlemen might depend upon it that when the
committee came together they would examine into the
whole operation of the act from the beginning to the present
time. Well, that would open up no inconsiderable field of
inquiry ; the investigation would necessarily be a length-
ened one ; and in these circumstances he would ask, was it
fair or prudent to postpone the consideration of the joint-
stock-bank question till the fag-end of the session, when
everybody would be wearied out and legislation hopeless ?
At present the interest in the question of joint-stock banks
sod their insolvency was immease—m uch greater than that
in the general subject of banking. Joint-stock banks when
prosperous were closely allied to banking, but directly
they came to deal with insolvency the question then as-
sumed a very different aspect from that of the Bank of
Englaed. He thought that, upon reflection, the Chan-
cellor of the Exchequer would say that each of the com-
mittees would'have quite enough to do—probably as much
as would permit them to report in time for legislation to
follow during the present session. (Hear.) He would not
at that moment offer an opinion on the act of 1844, but he
did not think that the labours of the committee would be
of a very agreeable nature if they were to commence their
investigation under the notion that the Government had
come to a conclusion—as might be inferred from the speech
of the Chancellor of the Exchequer—with respect to the
most material parts of the subject. (Hear, hear.)
Mr. MALINS concurred with the last speaker in wishing
the Chancellor cf the Exchequer to divide the inquiry into
two. Considering the disasters which had taken place
during the last few years, involving points of the highest
importance, nobody could doubt that the whole question
of joint-stock banks should undergo the most rigid investi-
gation in regard both to management and mode of wind-
ing-up. The house was aware of the decisions which bail
recently been given in the case of the Royal British Bank,
and of the misfortunes to which the shareholders in that
concern were exposed. He hoped that the present session
would not come to an end without an enactment being
passed providing that after the winding-up of a joint-stock
bank, or any joint-stock company, whether in the Court of
Chancery or the Court of Bankruptcy, creditors should not
be at liberty to sue individual shareholders to any extent
they pleased. The proceedings in the case of the Royal
- British Bank were a disgrace to a civilised country. Debts
had been bought up by litigious persons for the sole pur-
pose of suing the shareholders. Now, if after the winding-up, the privilege of suing individual shareholders
were
abolished, and contributions to pay the debts of the bank
or company obtained by means of calls, he had no doubt
that the shareholders in every joint-stock concern
would
ho found abundantly competent to meet all the demands
made upon them. There was thus no necessity for suing
individual :shareholders. He believed it had been ascor-
tained that the shareholders in the Royal British Bank
were able to pay the debt three times over by the system
of calls ; but as long as they allowed shareholders to be
sued by any creditor who chose to raise an action, the
consequent litigation would cost more than the entire
liabilities of the concern; and the shareholders, instead of
meeting their responsibilities at home, would fly to escape
the monstrous cost of legal proceedings. With regard to
the main subject of debate—the Bank Charter, he agreed
with much that had been said by the last speaker but one.
He had been disappointed with the speech of the Chan-
cellor of the Exchequer, because, when he saw the notice
on the paper, be did trust that the members of the Go-
vernment would enter upon the inquiry with a mind open
to coaviction. But the Chancellor of the Exchequer had
expressed his satisfaction with the act of 1841, as being a
piece of absolute wisdom ; and, therefore, if the Govern-
ment were to have a preponderance in the committee, it
would be vela to proceed with the investigation. He
trusted, however, that when the Chancellor of the Exche-
eller went into the committee ho would be joined by men
who had not so made up their minds ; and, if that wore
eras
sot right hon. gentleman would find that the question
tlensan thenaleraes. of made by the
so B 1
1 discount had very little
,Ile appeared to imagine. One of the
many surprising statementsl
d nriug the whole of llttholB"s"ech that the
was rate
with the act of 1844. Now,
asn,(stetirititer, we had what might be
called a money panic;
August had been as high as 7e rate of discount, which since
genof
moment 6 per cent. at the BanTr cent"
was at the present
of England. According to
the Gazette of last week the a
gold now
up
pn theth e
ed to the imagi-
amountßank was 10,000,000 e whichnVert of
t
nary 14,000,0001. mentioned! in th'eg
on which notes could be issuelacctlio
believed that the public had in their hands2ra' tnhoetr7sleasi.othtlahine°
20,000,0001., leaving reserved or anew 1 p.oye4
amount
had stated that in 1842 the gold in the Bank of England
rose rose to 20,0ii0,000/., which, added to the 14,000,s0iitnodS
the act, made a total of 34,00.4000/. At that time the ac-