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

ordered to be granted to her Majesty in accordance with sidered by the other House of Parliament, and the
Comm tear
the terms of her Majesty's speech. matter underwent their full consideration when those mix.
oleveu;shitoainiacamets occurred. I have taken the liberty of recur.
THE BANS CHARTER. ring to these events for the purpose of sue estin
The CHANCELLOR of the EXCHEQUER- I eke to house that, inasmuch as the effects of the gcrisisgoftelth4;
make the motion of which I have given notice for the ap- were very fully investigated at that time, there imam ,o
p.l3oseuntttoformtotee atpoporienintmyeesntitgaotte atheeomei
pointment of a select committee to inquire into the opera-
sl perces of that period, or to do anything more than to
tion of the Bank Act of 1841, and of the Bank Acts for Ire_
the act at that time, as shown iu the
and Scotland for 1845 ; and also to inquire into the law eider the ofoperationnthe
end 1847 ulnp totetleneis the
e
relating to joint-stock banks. In order to understand the
sreurer,tst of that period in estimating its general policy.' The
of dihe.cothmat peratiou of the two acts of 1844
iwtill more justly engage the detailed attention
operation of the act of 1814 it is necessary to go back to the
peace. ' We hay© also bad'
of bullion for foreign sera,' service. We
ail:
iuerdi
:nog g thatreat e intervaliportati
owl:
time of bank restriction, and to consider the policy of the
twhaermteonetary system in some of the continental
taoveeead a transition from
act proposed by Sir R. Peel in 1819. By that act the value have leaden arnuousTasee•at
nco ie nt o r changeseo untri
countries,
of the currency was restored after a long period of suspen-
vig(ji!ifnor a silver currency. The
sion of cash payments during the French war, and the cur-
which have substituted
ttealy, and France this
rent y was fixed upon a firm and legitimate basis. The
has led to a great increase ina,
principle established by that act was the convertibility of failure of the silk crop ,
bank notes for gold at a certain fixed value, and I trust year importations of silk
that the time will Deveraeome when that principle will bo from the East, and has rendered necessary
in the ',exportation of bullion. All these a great increase
called in question by this house or by the country. (Hoer, causes of the first magnitude, arid were disturbing
hear.) The question has sometimes been asked—What is the currency of this country 1.1, nderytleit we
have found that
the moaning of a pound-note? and it bas been thought the act of 1844 has remained in a seehthu)tielary influence of
that some difficulty exists in finding an answer credit of the Bank has never for a moment been in that the
and that it has not experienced any real or Preinasziuestn,
to that question. But it appears to nee, with great defer- and
in maintaining the lateen reserve of bullion wfiichffii
mice to the various able and accomplished persons who have dy stated to the house. In estimating the effect
discussed the matter, that no interrogatory admitting of a loifallaatlra'cat I trust that the house and the committee
more simple and satisfactory answer ever was asked. What . bear in mind that it has had no ordinary aellgc"u1.7,1;11.1;
is the metering of a pound-note ?It is simply a promise to to contend with— (hear, hear)—that this has not been what
pay on demand to the bearer, at the place where the note is is called a normal period; that it has not been an ordinary
, state of peace, but that our currency has not been exposed
issue 1, the sum of one sovereign. No mystery is involved 1 to severe trials, and that out of those trials it has
in the answer to that plain question. A bank note is a pro- . emerged triumphant. (Hear, hear.) le ow, sir, having in
wise to pay a definite sum in coined money of a known view the renewal of the privileges of the Beek of England
weight and value, and if that promise is not fulfilled a con- for another period in the course of the present session, and
! the expediency of either allowing the provisions of the act
tract is broken and a fraud is committed. I think therefore, , I of 1841 to remain unchanged, or of introducing certain
it cannot be denied with truth that the convertibility of a
amendments in those provi ions in the course of the autumn
I
bank note is a plain question of contract, that it rests upon I placed myself in coinneunicatiOn with the Governor of the
principles of honesty which must be recognised not only 1 Bank of England, in order that I might ascertain whether
by every speculator, not only by every political economist, I he or his colleagues were of opinion that any amendments
practically
ihe made in the existing act. Being themselves
but by every man of plain sense and understanding; ,anuctei
especially of
day by day with the working of the
and I cannot believe that the time will ever come when ract, of its restrictive provisions, they cannot
any large, when even any small portion of this house, be considered as other than fair and competent judges of
or when any considerable portion of the people of this its operation. With the exception of, I think, not more
country will contest the validity of those principles. I can than one director, they have given their opinion that it
conceive that a Government may overcome a temporary de- is not expedient to make any material alteration in the
fi elency by issuing for a time inconvertible paper, by dis- provisions of the act. I therefore, Sir, assume that the
charging its engagements in promises to pay, which pro. principle established by that act—viz., the im g
miees it does not fulfil, but I confess lamat a loss to uu- of some legislative limit upon the issue of the Bank
deretaiel the opinions of those persons who believe that of England, is taken as established. Those who contest
the wealth of a eountry can be increased, and that the the policy of the act admit in general terms that P rin-
trade of a country resting, as it does, upon credit, can be ciple. I may refer particularly to a gentleman of whom I
benefited by the increase of mere promises to pay, which speak with very sincere respect, Mr. Tooke, the author of
promises the issuer is not bound to fulfil. I trust therefore the well-known book on prices, which is a most valuable
that the principle upon which the act of 1819 is founded, of economical histe ry of this country. Well, Mr. Tooke is
a
rue'
the convertibility of paper for gold, will never be seriously strong opponent of the act of 1841. He proposes, it is true,
contested by any party or person in this house. But in the a principle of limitation upon different data from those re-
course of time it was found that the act of 1819, although cognised by law, but still he is in favour of a restraint being
it established this important principle, did not in all cases Put upon the discretion of the Bank. And lam unable to
provide effectual securities for its enforcement. Excessive find that there is any considerable number of practical
issues of peter were made from time to time by country persons engaged in banking or mercantile affairs, and ac-
banks, and although notes were always convertible by law, qv. Linton with the operations of the act, who propose to d 3
it happened in many cases, upon the failure of country away with all legislative limit, and to return simply and
banks, that they were not convertible in fact. The credit of without qualification to the act of 1819. Well, then, if we
the Bank of England was never in truth impeached, but it assume that that principle is granted, there are certain
was contended that its issues were sometimes excessive,
other points which are fairly open to consideration before
that its reserves of bullion were not always sufficiently gle at
another period. It has been said that through the ,theindis-
privileges of the Bank of England are renewed for
to support public confidence, and accordingly Sir R. Peel,
c
acting under the advice of a committee presided over by cretion of the Bank directors, or in consequence of the
my right hon. friend the First Lord of the Admiralty, pro- operation of the act, there leas been an inconvenient
posed in 1814 the act which lam about to ask the house to fluctuation in the rates of discount, and that that has
refer to a select committee. The policy which Sir R. Peel been produced by circumstances which legislation could
announced that he intended to enforce by that act was not have prevented. Now, sir, I must be permitted to state
merely the convertibility of bank notes and the legal liebi-
my very confident opinion that the Bank of England diree-
lity of their issuers to pay them, but also, by imposing err-
tors are not answer able for the inequalities in the rate of
taro conditions as to their issue, the provision of effectual discount—(hear)—that the rate of discount is regulated by
secuenties against their depreciation. I freely admit that, in causes over which they have little control ; and that in
raising and lowering of the rate of discount the Bank di-
proposing the restrictions embodied in the act of 1844, Sir
R. Peel sought to establish a principle upon which the pre- rectors follow and do not lead. They are not the regulators
eemption lay against him. He attempted to impose restric-
of the rate of discount in this town. The amount of bills
tions upon the banking trade, and I concur with those per-
discounted by them is in the aggregate less than those dis-
sons who hold that any one who seeks to impose limits and counted by private houses. They have it not in their power
either to increase or diminish the rate of. discount. It is
restrictions upon the banking trade conies forward with a
something which is governed by a cause which is peculiar
I against his policy, and is bound to establish a
to itself. It does not vary according to the gore ral rate of
strong case of expediency or necessity. In my opinion Sir
R. Peel die establish a strong case. His view, I apprehend, the interest of the country, as some persons suppose. If
was this when a bank such as the Bank of England is em-
anybody will take the trouble to compare the price of Con-
powered ,
by the Legislature to issue notes, when those notes sols with the Bank rate of interest he will find that when
circulate freely from hand to hand, when they are invested Consols remain stationary, when the rate of money lent
by Act of Parliament with the attribute of being a legal upon real securities remains quite stationary, the Bank
tender, when the Legislature, in fact, confers upou the bank rate of discount and the general rate of interest in this
the
town may undergo very considerable fluctuations. It is a
say,ppractically discharges the functions
which whatever theorists may ,
ctions of money, the Le-
mode of employing money which is liable to certain iefln-
gislature is justified in imposing certain conditions upon omens; it hss a territory of its own which is governed by
the exorcise of that power. That was the principle by causes, I will not say independent of, but to a great extent
1 which Sir R. Peel justified the restrictions he imposed by unconnected with, those which regulate the general rate
the act pf 1844. A subtle discussion has been raised on the
of interest iu this country. I have before mo a very do-
question of what is money—whether bills of exchange and tailed account of the fluctuations in the Bank rate of die.
count. It is impossible for me to read the whole of it to
die-
commercial instruments of that nature are to be considered
the house, but I will state what appears to me to be the
money—whether the term should be confined to paper in-
struments such as bank notes, and whether even the title general result, which is that when the Bank rate of die-
of money should be refused to bank notes, being count is the highest the amount of bills under discount is
legal tender. It would be quite out of place for the most part very large ; and when the Bank rate of
discount is low the amount of bills under discount at the
for me in a practical assembly such as the House of
Bank is for the most part less considerable—a fact which
Commons to occupy time upon the discussion of such
shows that pressure is male upon the Bank when its rate of
questions ; and, I trust, the house in debating this subject
discount is high, and that far less pressure is made upon it
will not think it necessary to go into questions of the
when its late of discount is low. The result seems to me
inform
theory o
lion. f curren
members a very with respectlarge collection of volumes
to which I need scarcely
clearly to establish that the Bank is not the regulator of
exists. But I may be permitted to say that it seems to me the rate of discount. If the greatest number of applications
a practical question whether or no a banknote does not do- are made to it when its rate of discount is highest, it is clear
serve the name of money. If a banknote enables a person. th it it is because the general rate of discount is high, that,
of
i desrous having their bills
who is unknown, to offer wherever he goes in the country personsdiscounted cannot get
a legal teeder without reference to his individual credit or more fay* stable, or as favourable, terms elsewhere, and
character, it appears to me that such an instrument de-
L Bank of England rate is low the rate elsewhere may perhaps therefore they crowd to the Bank of England. When the
serves the arne of meney, and practically discharges the
same functions of sovereigns. If that be the character
be even somewhat lower. The fact, I think, must be con-
of the banknotes issued by the Bank of England, a sidered as conclusively exonerating the Bank from the
justification arises for the Legislature to impose such charge of having augmented commercial distress by their
restrictions as the public advantage may demand on the indiscretion with respect to the management of the rate of
extent to which such banknotes may be issued. Sir R. disdount. It shows that, whatever faults the present act
Peel, by the act of 1844, for the first time placed on the may have to bear, it cannot be justly blamed for having
discretion of the Bank of England certain limits with re-
created any unnecessary hardship with regard to the thetas,-
spect to the issue of banknotes. The Bauk was by that act
lions of the rete of discount in those times. The next ques-
restricted to the issue of 14,000,0001., represented by tion which ought to engage the attention of the committee
securities, and so much more as might be equal to the is that of the precise limit which should be fixed upon the
quantity of bullion in possession of the Bank. Beyond issue of notes on demand. The limit was originally fixed
these limits the Bank of England under the present act is at 14,000,C00/. ; but since that time an order of Conn-
not entitled to go, with the exception of a small addition cil has been made, under a clause in the act, by which
which I shall afterwards mention. The policy of the pet the Government is empowered to authorise the Bank ter
of 1811 was, therefore, in general to impose such restric- issue an addition to the 14,090,009/. upon securities two-
Lions on the discretion of the Bank of England as would thirds .;f the amount abandoned by the country banks.
practically secure its maintaining such a reserve of bullion The additional sum which the Bank can issue in conse-
as should at all times be equal to the demands of the pub- quence of that order of December, 1855, is 475,000/.. '
•
lie for the conversion of its notes into gold. I think a fairer therefore it is at present empowered to issue notes the
test cannot be taken of the practical success of that act amount of 14,475,0001. It has been suggested that this
than by comparing the quantity of gold held in reserve limit is too narrow, and that it might be increased or en-
by the Bank of England for 10 years prior to 1844, and larged, Now, sir, with regard to the point at which nu.
for 10 years subsequent to that act. If the house should merical limits are fixed, it is very difficult to give an
find that there has been a great increase in the average
answer which shall be conclusively in favour of any pre-
quantity of gold held by the Bank of Eugland in reserve else amount. (Hear.) When it is once admitted that a
since 1811—if the house should find that the maximum limit is to be adopted it is necessary tolfix upon some sum
at which the line shall be drawn, but it would be very
quantity and the minimum quantity and the averages
difficult to give a reason why it should not be a little more
also have been greater, the conclusion must naturaly
be arrived at that that act had accomplished the or a little less. In the case of a duty of ls., it would gene-
object for which it was designed. The contrast is so decided rally be difficult to show why it should be that precise
and immediate on the change of legislation that it could atnount,.and not either ild. or 13d. In the present instance
not be attributed in any considerable degree to an increased the amount of 14,000,0001. was taken as representing the
supply of the precious metals, and of gold principally, in lowest amount to which it was thought the currency might
late years. It was quite conceivable that, though the sup- descend, and I believe it has, in the operation of the act,
ply of gold increased, the Bank might not have thought it Le found not an inconvenient amount. Those persons
who desire to raise this limit to about 16,000,000/. have it,
necessary to keep a larger reserve unless the legislative re-
I apprehend, in view that such an alteration would enlarge
stifiction, to which I have already alluded, had been in ope-
the issue of the Bank and the paper currency of the coun-
ration. I hold in my hand a statement of the highest,
try by the amount of about 1,50 ON/. My belief is that
lowest, and average amount of bullion in the Bank of Eng-
an extension of the limit to that evtent would have no
land fymn the year 1834 to the present time, and I will read
such effect—(hear)—but would simply enable the Bank to
to the house sorry of the principal results. In 1313, the
keep a million and a half less gold. The issues would not be
leverage amount was 11,700,000/. in round figures, being
increased, because they are already sufficient to meet the
the highest amount during the 10 years prior to the act of
wants of the trade of the country. In any measure which
1811. The average amounts for the other years were in
I have now in contedeplation it is not my intention to pro-
-1831, 8,000,000/. (omitting all the figures after the millions),
pose any alteration of the limit which is now fixed by law,
in 1835, 6,000,000/. ; in 1836, 6,000,0001.; in 1837,
5,000,0001. ; iu 1838, 9,000,0001.; in 1839 reel 1810, and. whichi In ay, in ruen.dtenunbers be takenit. at 14,500 0001.
admit that. is a subject fairly
4,000,000/. ; in 1812, 8,000,0001.; and in 1813, 11,000,000/. A
within the trieoen sitireeraticionlof the committee, and I need not
Well, in the first year after passing the act to which I have
s that if I tun appointed a member of that
committee I
referred `the average amount of the bullion in the Back of
shalla be fully prepared to go into the inquiry with
England was 15,003,0301., and in 1855 it was 14,000,0001.
the view of seeing whether any public benefit would arise
In 1847, which was the year in which the average was
from the enlargement of the limit. (Hear, hear.) There is
lowest, the average amount was 10,600,0001., and the mini
another point which is referred to in the report of the corn-
mum amount was never under 8,000,0001. After that year d 'dittee
of
1818, and which is generally mentioned in con-
the average amount rose to 14,000,0001., 16,000,0001., and '
nection with the policy of this act. I mean the • question
in 1852 to 20,000,000/. In 1853 it was 17,000,0001., and in
whether, as a legislative limit is to be imposed upon the
1851 14,000,000/. . Since 1843 the lowest average was
discretion of the Bank with respect to the issue of paper,
10,600,0001., and the highest 20,500,0001., whereas before
power should not by law be vested in the Government to
1813 the highest average was 11,700,000/., and consequently despense with the restrictions and enable the Bank in ex-
the lowest aver Age since 1843 did not very much differ from
traerdinary circumstances to depart from the provisions of
the highest average before. These figures could not fail to
the act. rf I co. ess
that
I am entirely hostile to any such pro-
convince the house that, assuming that the act of 1844 was
vision. It appears to me that not only is the Government
to increase the average reserve of bullion in the Bank of
d enntewere , lint it is required by the maxim "Salina po-
England, that object had been very completely attained.
p ili supra= lee"—by the duty incumbent upon all govern-
There is another part of that act to which I must
meets to interfere at all critical moments—to depart from
felvert briefly a separation of the issue and bank the provisions of the law, and afterwards to come to Parlia-
ing &pal talents was then effected. That separa-
mem for an indemnity—the course which was taken in the
tion was an eesential part of the act of 1814, and was
oar 1817. In support of that opinion I will take the liberty
then introduced for the first time. The effect of that sepa- y
ration is, that the accounts of those two departments are of referring the house to a remarkable precedent in the
year 1797 on the occasion of the Bank restriction,
thePi
kept separately, and that for practical purposes, while the
management of the Bank proceeds in its ordinary manner, consequence of the demands which were made.upoenle
Bank for foreign loans and for the military service f the
other. two departments are managed independently of each the commencement
other. With respect, however, to the legal effect of the year, the bullion in the Bank was at
The demands;
of the year 17'37 reduced to a very
act of 1844, I may as well in passing state,—though itsa not ebb.lowofbullion diminished
certainly aj practical question,—that, in the event of the upon the Bank increased ; the resertiv_eat
the
end
of
a certain
during the month of Februntry,u 1
insolvency of the Bank of England,—a contingency notfoundethat matters had become
that month it was but Mr. Pitt
very likely to occur,—it is held by those most competent to week in sitting at the time,
form an opinion on the subject, that all the creditors, both urgent. Parli auie ens," was sitting
that, after communicating
thought the 'San- p
note holders and depositors, would have equal rights and Bank authorities on the Saturday, he convened a
with the Bank
the qunday. On a certain Sunday in the month
equal claims on the general assets of the Bank. In such a
contingency the funds of the Bank would be considered as
()Council on
Feb., 1197, an order in Council was agreed to, restrain-
one, though, for the practical management of the Bank,
lifietließank from paying in specie ; and on the following
and for the purpose of measuring its issues, which was the e
deg Monday, Mr. Pitt brought down a message from the
object the framers of the act had in view, the separation of
Clown informing Parliament of the step which had been
the two departments was made. I now come to the effects of
.taken,aand explained it to the house. 1 think that prec,ce
this act as developed in successive years since its Passing; dent, ane legality of which has never been questioned, el-
and, fired, I will venture to call the attention of the hole though the policy of the Bank restriction has been much
to who emeee in 1847. In that year the operationroetstono; disputed—an example set by Mr. Pitt, who was VO • ear •
act under went an important trial. Commercial_ t
eld-jeand the fill of constitutional preeedents—must convince the house
a very aggravated kind was then experience.);
sure
for that there does inhere in the executive Government a
Bank of England was then subjected to a heavy e
1 nice and (IN- power of meeting emergencies of this kind which
.. they are
the pnrpoee of inducing it to exteud its a+ va h .
n.t).l.
iced by t e lir i , called upon to exercise upon their •
over painful that responsibility may b
responsibility, how-
counts. The Bank found itself rostra ,
the Government on
tions of the act of 1844, and applied twoht,r
for London, was Peal's to me that it will be better to leave thee ;andt
tt%
d spatter in .
the subject. The noble lord, the ru
telesd the present First state than, by attempting to allow discretion by the ant
then at the head of the Gover:nen
luPaction which I have tho itself, to conifer upon the executive a
Government a danger-
Lord of the Admiralty filled theteSrl
f much deliberatioe they ones power of at any timeinterfering with its operation.
honour to occupy now; and Bank of England to increase Therefore, although I fully admit that the subject is one
issued a letter authorising the
and assuring the which may
roved severities,
its advances sweat app
led to any infrinement of
try, by this committee
directors that if that course
1. t • d vis th
would apply to Par iamen fors n iin men vi e° thorn to recommend. Therefore, the course which lam
Government
the act were never infringed,
preps' ed to adt is this, subject to any amendments of the
However, the provisions of
consideration,
England never being called on to extend law which the
. . committee should suggest for
the
eta Bank of
settled
' beyond the limits
its issues a bill renewing the
and the Government were. never necessitated, cones- Proper season, be prepared to introduce
apply to Parliament for a bill of intim privileges of the Bank of England for another period of 10
quently, to 1
on themeeting n.
to the Bank of Ireland,
pity. Noverthe eTs,
that country a d •
n in
committee of inquiry into the matter was proposed, and the and the operation of the act of 1845 in
subject underwent a full discussion iu this house for seve- Scotland. The Bank of Irelandpeculiar )1' •
Possessgs no I eve-
cor orate charac-
ral nights. A committee, composed of some of the ablest loges; all that it seeks is a renewal of its. p
members, sat and examined witnesses, and came to a report ter, together with the removal oef n restriction imposed upon
to which I will refer. The committee reported as follows • it by an act passed in the reign f G
igi.ijl 1., which
seems
e Your committee have had. under their consideration ito rue quite unnecessary—veto, a sii;
joile anon against the
whether it is advisable that powers should be conferred by le I ding of money upon mocri ge. Bank of England
i 3 empowered by law to.e.,stes Ice moneY upesu real securi-
law upon tine Government to enable them to meet the occur- tier which power it exeici. up to a certain limit. It is
rence of any circumstances which may call for extraordinary
well known that loanstupon real securities are not in gene-
interference ; but they have come to tine conclusion that,
ilt prudent investmen ti for a Bank. The Bank of Ireland
looking to the possibility of f • oreseemg what the precise cha-
dues not wish to exercise this power to any large amount.
ratter of the circumstances may be, and also what may be They seek relief from a restriction are now
to which theyeasenable
the measure best calculated to meet them, it is more expedient d"e•' nd the demand
subject, seems to me to be
ect'd,'ided that the amount shoauld lend in
to leave to those with whom the reeponsibility of the Govern-
one provided that . which they
With regard
merit may rest at the time to adopt such measures as may aP- such a manner should be limited b the act.
pear to them best suited for the emergency. Your commit- to the Scotch Banks, I have commaicated with the three-
tee, therefore, after a careful review of all the evidenbe, are
tore of the six priucialtoint-steck banks in Scotland, with
of opinion that it is not expedient to make any alteration in the view of ascertaining - b they
whet er can suggest any
received from theta
the Bank Act of 1844." f alterations in the law. I have not .
do not find that the opera-
A committee was also appointed by the other Sense o
any material suggestions ;Ind
Parliament, which did not, I, believe, recommend any
tion of the act has been complained of, I have now called
was Con-
alteration of the act. The question, at all events,