The Sun.
London, England, 1844-05-21 00:00:00

tune to his relatives, and in 1840 the nephew committed
suicide when the frauds were about to be disco-
vered. In the eighth case, a bank failed with
liabilities to the amount of 157,950/.—no dividends.
How much did the assets amount to ? Just 20'.—
(Laughter, and cries of " Hear, hear.") And yet there
were persons to he found who would stand up and say
this system was perfect, and required no change. Now
it might be thought that it was impossible to exceed this,
but he would give them one case more. In the ninth in-
stance, the fiat was made out on the 12th of July 1942 ;
no dividend had yet been made ; but the creditors had
this consolation, that 750/. had been made by race-
horses.—(Great laughter.) Now he proposed to take
sonic steps to purify this system. He did not wish to
injure existing interests • but if the safety and welfare of
the community required a change, he thought the
present proprietors of private banks would have no
just right to protest against the establishment of
joint-stock banks on a safe and sure foundation on paid-
I up capital. lie had shown the House that it was im-
possible to allow the present system of unlimited com-
petition to go on. He did not object to increased com-
petition, but to the principle of coining mere credit into
money without depositing security.—(Hear, hear.)
Such a system he believed was not in anywise inter-
woven with the prosperity of this country. It was said
that great inconvenience would be suffered from the pro-
posed restriction—perhaps there might be some, but
that would be but a slight argument against any change.
It was further urged that the people were not habituated
to the Bank of England; that there would be a great
objection to take Bank of England notes; and that agri-
cultural prices would fall if accommodation could not be
obtained from the country banks. He apprehended that
these fears were merely visionary. Now at present
the Bank of England had a monopoly of circula-
tion and issue within sixty-five mil(s of the
metropolis. Now this radius included most of the im-
portant agricultural districts, either all or a portion of
the following agricultural districts:—Essex, Kent, Suf-
folk, NOrfolk, Hampshire, Oxfordshire, Northampton-
shire, Buckinghamshire, and dfordshire. Now the

total amount of issue within this district, by banks, other
than the Bank of England, was 1,000,3291., which showed
that no great advantage had been taken of private banks.
He had now laid down the principles on which her Ma-
jesty's Government had determined to act. The time

was
w now come when some check must be placed to pre-
vent the recurrence of those evils. The proposed
measures would be adopted with a perfect regard to the
convenience of the subject, and a perfect cmisistency with
liberal treatment to existing interests, but, above
all, to prevent those shocks upon the commerce
and agriculture of the country which had hitherto
proved so ruinous. He trusted tkat the sense
and feeling of the House would be entirely with him in
making a just compromise, and in placing this check
upon the recurrence of those evils which, he trusted,
would tend ultimately to the establishment of sound and
just legislation —(Cheers.)
Mr. C. WOOD said that, as he had been chairman of
the Committee of Banks of Issue, he would say a few
words to the House. He thought it was of the highest
importance that a principle should be laid doe n
by which the monetary system should be
guideal.—(llear, hear.) The last time an attempt
had been made to regulate the currency was in 1819.
By that measure a return was made to a metallic
standard, and he hoped it would continue. None of the
metals was so unchangeable as gold, and that alone was
a reason with him why he preferred a gold standard to
any other. Ile believed those who were anxious for a
silver standard were so with a view to depreciation, for
silver had fallen more in proportion than gold. At the
present moment there was reason to believe the supply
of gold was increasing faster than the supply of
silver, and if that were so, those who were anxious
for a depreciation ought to be cautious how they
changed the standard from gold to silver. The ounce
of gold was at present valued at 31. 17s. 101 d., and the
pound in gold contained 123 grains and a fraction, and
by that he hoped they would abide. The Hon. Gentle-
man referred to some evidence which had been given
before the Bank Committee, of which he was chairman,
and said that the system of free trade in banking had
been followed by the most disastrous consequences in
America.. In 1830 there were 329 banks in the United
States, with a capital of 145,000,000 dollars, and an
issue of 61,000,000 dollars. In 1837 it had in-
creased to 677, being more than double ;
the capital was 378,000,000 dollars, and the circulation
had more than trebled, being 186,000,000. But in the
May of that year cash payments had been suspended
through the Union. All the evils against which they
were anxious to provide had desolated that country from
one extremity to the other. But if they looked to what
had taken place in this country in 1839 it would show
they wore not quite so far off from such a state of things
themselves, and it was only by adopting the unusual
course of applying for foreign credit—a course not very
honourable to the character of the country—that they
were able to avert those evils which took place in America.
This was owing to the unlimited circulation of paper ;
and it was worthy of remark that, previous to this time,
the circulation was greater than at any former period.
Ile did not mean to deny that the circulation of paper
was a great benefit, but, in order to render it safe, proper
securities should be taken. Those precautions were
such as would give paper as much as possible the value
of gold, by subjecting it to the same regulations. There
should be as much paper as was just necessary, and no
more, and previous deposits of bullion equal to the
amount of paper required should be made. This
would ensure convertibility ; but something more than
convertibility was required. That would provide means
of circulation, but it was inadequate to check paper be-
ing put into circulation. There were other checks, no
doubt, such as the fear of consequences ; but there
were not the same checks as existed in a metallic circu-
lation, for bullion had to be taken to the Mint, and if'
they applied the same chock to paper, they took all the
security that could be required. The most proper course
they could adopt was, in his opinion, to require deposits
of bullion previous to the increase of the paper circulation,
ITp to 1833, all that the Bank of England required was
to have good commercial securities ; but, in 1833, a new
rule was adopted, which was a nearer approach to sound
principle, and it was, in point of fact, that which the
Right Hon. Baronet adopted. Beginning from the year
1832, during the eight years in which that rule was in
operation, the difference between the highest and lowest
amount of security was 10,804,0001., and that between
the highest and lowest amount of bullion was 8,178,0001.,
and the difference between the highest and lowest
amount of circulation was 3,334,0001. That which
ought to vary, varied to the amount of three millions ;
and that which ought not to vary, varied to the
amount of 10,800,000/. The rule, which was suited to
ordinary circumstances, was found to be broken through
when a pressure came. He was convinced of the in-
justice of the attacks which had been made against the
Bank directors. Whatever they did, it was from a con-
viction that it was the best for the public, uninfluenced
by any consideration of private interest. Still less did
he blame the issuers of country banks. They acted
upon no rule. They did not profess to regulate their
issue by any particular rule. Mr. Hobhouse, in his
evidence, stated of the country bankers that they never
pretended to exercise any power over the circulation.
The consequence was, that while the aggregate
circulation increased largely only from March,
1838, to September in the same year, the
country issues increased largely from the former period
up to June 1839. They were at a minimum when
bullion was at a maximum, and they were at a maximum
when bullion decreased six per cent. He believed that
the principles laid down by the Right Hon. Gentleman
were sound as far they went, and the questien really
was by what means they could introduce principles still
sounder. He believed that the power of the public over
a paper circulation would be just what it was over a
metallic circulation. But he was bound to say the Right
Hon. Gentleman was entitled to the credit of having
brought forward an eminently practical plan. There
were other considerations connected with the matter,
but taking the plan as far as it went, he was
bound to say it was eminently practical.—(hear
•)
was impossible that a drain should happen when t
bullion was so low, although the knowledge that it w
so might tend to increase the drain. On the svholaes
taking all the circumstances of the case into considera-
tion; he felt bound to say that although eattalfilrsptrehpeafreeld
It felt
some doubts upon the subject, he was n
to quarrel with the amount of security. was exceed-
ingly desirable that persons should be aware what was
the first apparent drain in the returns of the circulation,
least any alarm should be excited in the public mind.
Ile believed there were about twenty-one millions of notes
in circulation—he believed rather more indeed. The
first returns for the issuing department would show an
apparent increase of bank notes to the amount of nine
millions. That amount would rather startle the public
unless they were apprised that the increase would be
more in appearance than in reality. What each depart-
ment did with these notes would, of course, appear in
the returns ; he was only anxious that the public should
be apprised that there would be an increase of
nine, millions in the Bank circulation.—(llear.)
He now came to the exceptional power of increasing
the issue upon depositing security, and he was willing
that this should take place in the cases stated by the
Right lion. Gentleman. The House was willing that, so
long as the Right. lion. Gentleman Was Prime Minister
uf this country. This power should remain with him
—(lleer, hear)—but before he had got out of doors,
after listening to the Right Hen. Gentleman's proposal,
he was told that this was considered in the Bank parloar
an exceedingly convenient mode of increasing the issue
whenever the Bank might desire. lie thought that was
a most serious objection to the proposal, and the objec-
tion was stronger when the power was in the hands of
the Government than when it was in the hands of the
Bank. Let them only imagine a weak Government pro-
ceeding to exercise the power, and he felt sure they
would conclude that must be most dangerous ; in fact, it
might take away the very essence of the present plan,he
which was itself a check to issue. llo‘i:ever,__
thought the alteration proposed by the . Right on.
II
Gentleman tended materially to remove
an
arrangement.. he
It did
w.
lle confessedasngotnitseeeelethare
that necessitys n
ithisnp for
g as
substi-
tution objection.dsuch
was made out of the reserve the nl'
the whole profit of the transaction,
but li3laiti4w'aosuoblftraelda
whole profit would o to t
tthoe g
obtain notes by_depositing a lartig:rGamovoeurnntmoefnstecuTihtye
Bank had
adthnaot
poindeecremsaenitentgo
asc theyome
had in their ownto the Government
to obtain
hands a sufficient supply of notes to enable them to make
the substitution. He quite agreed with the Right Hon.
Gentleman as to the propriety of the Government in not
communicating with those parties whose own interests
were more immediately concerned, and he thought it
highly creditable to the Right Hon. Gentleman and his
colleagues that they had shown every disposition to
amend the law as far as amendment was required. He
thought it was exceedingly desirous that banks should
know what was the amount of the notes in reserve it
the Bank of England. There was an immense money
power in the Bank at that moment, if it
had in reserve nine millions of money in notes,
There might be immense bunsis of money which it bad ci