The Sun.
London, England, 1850-09-09 00:00:00

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gift

LONDON, MONDAY, SEPTEMBER 9, 1850.

The directors of the B ink of E igland were gene-
rally censured by the friends and supporters of the
Act of 1844 fur their management during the years
1846 and 1847. If the Act were to be defended, it
was absolutely necessary to transfer the blame to
some other quarter, to find a scapegoat; that should
bear the weight of its transgressions, and " the
Board" of Directors was selected as the victim. Even
the Governor of the Bank was ready to concur in the
arrangement, and to offer up the body, of which he
was an influential and leading member, as a willing
sacrifice. To a certain extent he pleaded guilty to
the charges that were preferred, and with becoming
humility acknowledged that " the Bank would have
acted more prudently had they sooner raised the rate
of discount." Sir CHARLES WOOD and Mr. JONES
LOYD were, however, the most unsparing in their ac-
cusations. The Right Hon. Baronet, when moving
for the appointment of the committee of inquiry,
made a fierce ons'aught on the directors, and
of all the witnesses examined during the
investigation Mr. LOYD expressed the most
unreserved opinions with respect to the course pur-
sued by the Bank, which he declared "to have been
extremely erroneous and detrimental to the public in-
terest," and which he asserted " was only stopped
by the positive provisions of the Act." The
Honourable Gentleman endeavoured to take credit to
his favourite measures for having arrested a system
of procedure that " must have ended in the most
disastrous consequences." He appeared, however, to
have forgotten the fact that it was the passing of the
Act that induced the directors to reduce the rate of
interest, which had never previously been below four
per cent., and the supposed freedom from the respon-
sibility under which they had previously acted, an
opinion which was strongly circulated by the leading
advocates of the measure. Sir CHARLES WOOD de-
clared that " the measure took away all discretion
from the directors as to the issues," and that the
" Bank department was, as it ought to be, perfectly
unfettered in its operations, sulject only to a weekly
publication of its accounts," and Mr. LOYD himself,
in his testimony, admitted that, "it was distinctly
stated by Sir It. PEEL, when introducing the Act, that
he left the Bank of England, in its banking
capacity, untouched and uninterfered with, to manage
its affairs according to its own discretion, like any
other banking concern." If the Bank, then, was left
"perfectly unfettered in its operations," if it was left
"uninterfered vvitb, to manage its affairs according to
its own discretion," why should it be censured for
availing itself of its liberty and endeavouring to make
the largest profits fur the shareholders, and looking
merely to its private interests ?
There was another ground that rendered the re-
striction on the issues not merely impolitic but unjust.
The Bank is considered bound to provide for the
wants of the Exchequer, to make such advances as
might be required for the liquidation of the public
liabilities, and the maintenance of the national estab•
lisbments. These advances are made on what are
termed " deficiency bills," which are subsequently
paid out of the accruing revenue of the country. On
these points the B ink has "no discretion." It must
give the required amount, whatsoever may be its
own exigencies. Fortunately there was no such
accommodation required by the Government in Octo-
ber, 1847. At the corresponding period in the pre-
ceding year, no less than 3,466,0001. had been ob-
tained from the Bank, and the payment of the divi-
dends, and, in fact, the maintenance of the national
credit, the preservation of faith with the public cre-
ditor, depended on the advance. AIr.LOYD, in answer
,to the pertinent inquiry, " What would have
been the condition if the average amount

---- - -
of the Government advances had been re
-

quired in October, 1847, when the Bank reserve
was reduced to its minimum ?" declared that " the
Bank, in that case, must have diminished its advances
in some' other form." other words, the commer-
cial community must have been sacrificed, by not
merely a limitation, but a total denial of discounts.
It must also be remembered that the necessities of the
Bank would have required this step as well as a sale
of Consols for its security. It was, in fact, the principal
mesas .by which it could have weathered the storm, and
the Lords' Committee did.not. "rely with any con-

fidence on either of the remedies, as likely to prove safe
or effectual," even in sustaining the bank, much less
in enabling it to advance some millions to the Govern-
ment out of a reserve amounting to 1,176,7401. only.
The Act of 1844 might, therefore, not only have oc-
casioned the over-payment of the bank notes, but the
nonpayment of the dividends also, and the violation
of the national faith with the national creditor.

Another grievous mistake committed by the framers
of the Act was the limitation of the amount of silver
bullion against which notes may be issued. Without
any adequate reason, it was provided that one-fifth
only of the amount of bullion can be kept in silver•
This absurd restriction has been almost unanimously
condemned even by those whose opinions are in other
respects favourable to the Act. The Governor of the
Bank, one of its most unflinching advocates, spoke
strongly of the inconvenience and positive injury occa-
sioned by this most un wise regulation. The Hon. Gentle-
man said, " I consider silver quite as available a means
for the convertibility of the note as gold. We have been
limited to keeping one-fifth of our amount of bullion
in silver. I think that limitation is too restricted.
The silver can be readily sold in the market, and
bank notes obtained for it. There is no merehandize
that will sell easier than silver. By drppping a frac-
tion in price, we could get bank notes out of the
market immediately." Mr. COTTON, another sup-
porter of the Act, did not think " there was any
public advantage in the restriction," and that it
would be wiser and more prudent " if the Bank were
left unfettered in that respect," adding that "if the
drain had been for any place but America the silver
would have gone first, and they could not have had a
surplus quantity." Mr. Hoasmer PALMER was even
more decided. The Honourable Gentleman, who had
twice filled the office of Governor of the Bank, thought
"there was a very material inconvenience attending
the regulation," explaining that " silver being equally
available for continental payments as gold, and per-
haps more so, it was desirable that the Bank should
not be restricted in the purchase of that description
of bullion which was always marketable, and
answered every purpose of correcting the foreign ex-
changes." It also appeared that this regulation led
to even a greater reduction of the circulation in case
of a run on the Bank than had been generally ima-
gined ; for if there had been a reduction of the gold
bullion to the extent oi 400,0001., notes to the extent
of 500,0001. would have been cancelled, viz , 400,0001
against the gold, and 100,0001. against the silver that.
would become practically useless, being in excess of
the proportion allowed by the law. The effect of
this preposterous regulation was, that during
the crisis a merchant, with a large amount
of silver bullion in his possessi-m, was un-
able to sell it, or even obtain an advance upon
it, and parties trading with the Pacific were generally
compelled to sell the silver bullion to the continent,
and not only sustain a very serious pecuniary loss,
but be kept out of their resources about six weeks.
From the evidence under this head it was manifest
that the object of the Act could not be merely the
securing the convertibility of the bank note, for, if so,
there would be no restriction on the amount of silver
held, which would in fact afford an additional gua-
rantee for the payment on demand, but that it was
also to render money scarce, and increase its value
very materially, and thus to increase the liabilities of
debtor and the demands of the creditor. It was not
justice to the latter that was required, but justice and
something more. No wonder that the Gazette con-
tains such formidable lists of bankrupts, or that so
large an amount is lost by bad debts, in each and
every year. A more merciful policy might be found
more beneficial to the creditor class, as it would be
equitable to the debtor. It is not always advisable
" to kill the goose that lays golden eggs."

A very important judgment was pronounced by
Mr. Commissioner FANE in the Court of Bankruptcy,
Basinghall-street, on Friday last, by which a much-
disputed question will, we trust, be henceforward set
at rest. This decision will be the more valuable in-
asmuch as another of the Learned Judges of that
court had previously arrived at a different conclusion,
and there is but tGo much reason to suppose that in
consequence of he prevailing opinion the court was
often resorted to for the purpose of vexation and an-
noyance, and compelling the debtor to submit to ex-
tortionate demands.

A claim had been filed under the sth and 6th Vic.,
cap. 122, for the purpose of compelling the de-
fendant to give security for payment of a demand
for about 1,300/. A preliminary objection was taken
by Mr. LINICLATER, who represented the defendant,
to the jurisdiction of the Court; the Learned Gentle.
man contended that his client was not a trader
within the bankrupt laws, and that proof to that effect
should be admitted, as a sufficient answer
to the summons, and that the Court had
no authority to require a person who was not a
trader to find security. On the other side, it was
very ably argued that the only question into which
the Court should inquire was the existence of the
debt, and that the affidavit of the creditor, as to his
belief in the trading, should be deemed sufficient in
that stage of the proceedings; that the trading might
be disputed if a petition for adjudication were pre-
sented, but not until then, and the deci-
sion of Mr. Commissioner GouLnuax, to
which we have already referred, was cited
in support of that view. Mr. Commissioner
FAN 6, however, considered the objection well founded,
and it appearing by the evidence that the alleged
debtor had not been in trade during the last ten years,
the petition was dismissed with costs.
A slight consideration of the circumstances under
which the enactment was sanctioned, and of the re-
medy given against the debtor in the event of his not
complying with the order of the Court by giving
the required security, will clearly show the justice
and propriety of the recent decision. On
the abolition of arrest on mesne process, in
1838, a clause was introduced, which it was hoped
would have answered the purpose of bringing insol-
vent traders within the operation of the bankrupt
laws, as effectually as the old system of arrest, whereby
a person who lay in prison a certain time was deemed
to have committed an act of bankruptcy. After some
time, however, it was asserted that the then provision
was practically inoperative, and that the effect
of the indulgence was to make parties take vexatious
defences for the purpose of delaying the fist, and
enabling the debtor to make away with his assets,
and thus to defraud the general body of his creditors.
In order to remedy this grievance the sth and Gth
Vic , cap. 122, was passed, which enacted that if the
creditor of any trader should make an affidavit of his
debt, and of his having delivered an account and
required payment, the Court should summon
the trader to appear, to inquire of him whether
he admits or denies the asserted debt, or
any part of it ; and any trader not attending
on such summons, or refusing to admit the demand,
and not making a deposition on oath of his belief of
having a good defence against the claim, or not pay-
ing, securing, or compounding within a certain time,
&c., &c., shall be deemed to have committed an act of
bankruptcy, provided a fiat shall issue within two
months from the filing of such affidavit. Here, then,
it appears that the object of the statute was to pro-
vide against frauds by insolvent traders.
The word " trader" is everywhere used
as the party who can be proceeded against
in this summary manner. It is an essential feature
in this case that he should be such trader, and the
-nature of the penalty, viz., " that he shall be deemed
to have committed an act of bankruptcy," showed
that no other class could possibly be within the pro-
vince of the statute. What consequence would it
be to a person not within the operation of the bank-
rupt code whether he had committed an act of bank-
ruptcy or not ? He might deny himself to his cre-
ditors, or leave the kingdom with impunity. The
creditor could derive no advantage from the fact by
vesting his estate in an official assignee. The former
judgment, however, left the most important fact—
the trading of the alleged debtor, which was the very
foundation and basis of the entire jurisdiction, in doubt
to the very last. It considered the belief of the creditor
sufficient against the most conclusive testimony that
could be adduced on the other side, and compelled a
troublesome and vexatious inquiry into the existence
of the debts, that ;night eventually be rendered ut-
terly useless.
This inconvenience the judicious and equitable de-
cision of Mr. Commissioner FANG will remove ; and
it will remove another evil that was beginning to
attain very formidable dimensions, viz., a recklessness