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

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means of employing. He thought it very desirable with
respect to the security of three millions, that the Bank
should have the power of depositing other securities
than those deposited originally. He did not see any dis-
advantage in that as regarded the security afforded to
the public. He apprehended that the Bank would, in
fact, perform all the functions which it had hitherto per-
formed. There was one point to which he must advert
for one moment, to which he attached some importance,
namely, the desirableness of introducing a principle of
greater permanence into the direction. He was not at
all desirous of imposing a Government officer on the di-
rectors, but he thought that no one, who was
so well acquainted with the subject as the
Chancellor of the Exchequer, could fail to see
the necessity for alteration. The amount of issue was
fixed at the average of the last two years. That ave-
rage was low, and he thought this was in its favour. A
great deal had been said as to the extreme hardship to
country banks of being tied down to the average circu-
lation of the Bank of England. It was said that the
circulation varied very much. Now he had taken the
trouble of examining the variation for the two last
years, and he had found that the average difference was
about 800,000/. The Right Hon. Gentleman had re-
ferred to country bankers who considered an unlimited
issue absolutely necessary for the farmers and the agri-
cultural interest generally in this country. The grounds
of this objection appeared to him altogether absurd.
The evidence on the subject was contradictory.
It was contended that it would be impossible
for the banks to make advances to the farmers
unless they had this power of issue. An Ipswich banker
was asked in what half-year his circulation was the low-
est. His reply was In the half-year ending in
March." He was asked whether the period when he
advanced most to farmers was the period of the lowest
circulation ; and he replied, " Certainly it is." There
There was other evidence to the same effect. The next
assertion was, that it would be impossible for the country
banks to 'afford to the farmers the means of paying their
rents. They had the power of obtaining Bank of Eng-
land notes, in addition to their own circulation, to any
amount they pleased. Mr. Gill was asked whether he
apprehended that any inconvenience had arisen to bank
customers from the substitution of Bank of England
notes for country notes ; and his answer was, that the
only inconvenience eonsisted in the banks being
more liberal than they otherwise would have been.
With regard to the Scotch banks, he apprehended that
they were to be subject to the same regulation of issue
and the same publication of accounts as the English
banks. But he could have wished that their publica-
tions -of accounts could be made to correspond more
closely with those of the English banks. In England
the returns by the banks to the Government included
the whole amount of their stamped notes; but this was
not the case with the Scotch banks, and he understood
that the difference in the mode of making the return made
the circulation of the Scotch banks about thirty per cent.
less than it would be if returned on the same principle
that was adopted-in England. With regard to the effect
of the measure, he thought it might perhaps produce
some degree of pressure ; but if the present system was
insecure, the price they must pay for greater stability
and security was the loss of the present facility. He
believed that the advantages to trade and commerce of
the accommodation afforded by the Bank of England had
been much overrated. He was supported in this opinion
by no less an authority than Mr. Ricardo. Having read
the opinion of that writer on this point, in which he
states that the effect of this accommodation is often very
insignificant compared with the accommodation from pri-
vate sources, he gave as an illustration a•case that oc-
curred in 1829, a year of great pressure, in which all
the accommodation that could be procured at the Bank
was:300001., to be rppaid in one month. This was
utterly inadequate for the purpose of the parties, who
raised from private sources the sum;•• of 800,0001.
for an unlimited time. He also read- a statement
of the circulation of the Bank of England
during the same year, and of the amount of its dis-
counts fur the same period, in order to show that the
restriction of its issue did not produce a diminution in
the amount of its aceomodation, but the, reverse. In
April, 1829, the circulation of the Bank of England was
18,000,000/. ; the bills it 'discounted in the same
month, amounted to 3,500,0001. In July its
circulation was 17,500,0004 and the bills it dis-
counted, 6,700,000/. In October its circulation
was 16,500,000 L ; ha discounts, 7,700,0001. In
December its circulation had fallen to 16,000,000/. •
and the amount of bills it discounted was 8,500,0001.
This disproved the assertion that the power of the Bank
to accommodate the public depended on the increase of
its issues. He believed that the preknt measure would
effect good by checking the drain of gold at a compara-
tive early period of its tendency to leave the Bank, and
thus lessen the ultimate shock such drains occasioned.
The experience for the last twenty years proved that
monetary embarrassments paased over quietly in propor-
tion as the paper of the country was diminished in com-
parison with the circulation' of "the country. Such he
took to be the principle of the Right Hon. Gentleman.
He believed it would not only check the tendency to a
drain of gold, but go far to prevent the necessity of its
occurring at all. He read an extract from the evidence
given before the Committee by Mr. Kennedy, a Scotch
banker, to prove that it was usual for banks to restrict
their issues according'as the rate of the exchanges created
a drain of bullion from the Bank, and that such a restric-
tion in the issue did not cause a loss to Vie Bank on ac-
count of the increased rate of interest the Bank ob-
tained. He did not think 'that any Bill, or any plan,
would put an end to all speculation and over-trading, and
rashness in commercial matters. But because he could
not do that, it was no reason he should not
try to do all in his power to •check it, which could only
be done by a proper regulation of the circulation of the
country. Experience proved that the convertibility of
notes alone was not sufficient to check this over-specu-
lation ; their system of currency must, from time to
time, be regulated in 4, amount. Such an operation,
and such an operation alone, would provide for their
permanent security ; and as far as the measure of the
Right Hon. Hon. Gentleman was based on this principle,
he should, 'as approving that principle, give it his un-
qualified support.
Sir W. CLAY said, that he should have thought the
monetary conditi©n of the country, as well as the state
of public opinion,anight have justified the Right Hon.
Gentleman in carrying out his principles more boldly,
by extending the:, measure to Scotland and Ireland, and
applying regulations, there with regard to the small
notes, But he -I was willing to admit that the
Right Hon. Gentleman was better qualified to
form an opinion on this point than himself.
He agreed with the Right Hon. Gentleman in thinking
that if they left the country banks without control, their
circulation would expand as the Bank of England
contracted, which was formerly the case. The measure
of 1819 established as a basis of the monetary system
the principle of the constant and unvarying convertibi-
lity of the paper currency. The proposed measure re-
cognised the same principla, but enforced the necessity
of the issues being placed under strict control, and not to
be entrusted to those who might profit by its abuse.
The Hon. Member then quoted extracts from the letter
of the Secretary of the Treasury of the United States to
Congress in 1836, showing how great the circulation of
paper was immediately before the great stoppage of cash
payments-in that country. In 1830 the notes in circu-
lation amounted to 60,000,000 of dollars ; in 1834
to. 75,000,000; in 1835 to 87,000,030; in 1836 to
106,000,000 dollars, and in 1837 it reached the enor-
mous extent of 120,000,000 dollars. The lion. Member
also read an extract from the President's Message, in
which he noticed the over.action in every department of
trade—the excessive speculation;and the increased issue
of paper money—which latter the President assigned as
the cause of the two former results, saying that in
America,as in England, the excessive issue of Bank
paper bad been the cause of the great monetary embar-
rassments which had at different periods happened in
both countries. He (Sir William Clay) did not think
it necessary that one of them of the amount circulated
by the country banks should be held in bullion at pre-
'sent. The security against over-convertibility must rest
upon other grounds. He would suggest that it be al-
lowable to the bank of issue to give bullion at something
less than 3/. 17s. 10Id. To the merchants who wished to
export gold in ingots, this would be very desirable; be-
sides, some allowance should be made for the expenses
of coining, which were considerable. He did not agree
with some Hon. Gentlemen in thinking that any addi-
tional power would be conferred on the Bank of Eng-
land by the present measure, which he thought would
rather diminish than augment the power it at present
possessed. At a certain appropriate time he intended to
introduce a resolution for the consideration of the
House—that it be permitted to create and charter country
banks, on condition cf their paying up three-
fourths of the capital they proposed to commence
upon; and that• there be an annual or semi-an-
nual publications of the accounts of such Bank.
Ile would only repeat what he had already stated, that
this plan had, generally, his cordial approbation.
-Mr. S. WORTLEY expressed his almost entire con-
currence in the plan proposed by the Right Hon.
Baronet,
Fritc the object of which was, as stated by his Hon.
trodTthe Member for Halifax (Mr. C. Wood); to in-
ice additional security for the amount of the
invariable standard. He was strongly of opinion
that of all the measures which had been proposed, that
of the Right Hon. Gentleman
best that could be adopted Thewas, on the whole, the
great feature is this
plan 'was the separation of the Bank of England into two
departments. This was the more necessary, as it was
sometimes difficult for the management at the Bank to
dbVide*between its duty to the public and its private
interests. It was impossible to invest the Bankave it
of Eng-
land with the power which this measure g
it was rendered independent of those influences to,, uw nhliecsist
it might be subjected as an ordinary banking establish-
ment. He alluded to the separation of the issue depart-
ment from the banking department., and ren-
dering the former a self-acting institution, by
which the amount of exchanges would be
regulated. His Honourable Friend, the Member for
Halifax; had very properly observed that the amount of
circulation would be increased apparently by.this plan,
because the whole' of that amount of treasure in reserve
by the Bank, which exceeded the present amount of cir-
culation, would be transferred to the issue department
from the deposit department, so as to be exchanged into
Dotes. The Right Hon. Baronet alluded to the subject
of branch banks, with regard to which lie (Mr. S. Wort-
ley) put a question to him on a former occasion. He
was sorry to find that the Right Hon. Baronet did not
think proper to interfere to prevent the extension of
branches. He knew no greater source of risk
than the extension of branch - banks, and not
only of branch banks, but what were called
agencies," which were in many cases at a great dis-
tance from the central issuing bank. The Right
lion. Baronet proposed that there should be a
payment or. 301. on the establishment of every branch
bank. He• did not think that would be any effectual
check, and he thoughtlii,ht
be thatsome more powerful check to be and
devised. He wished to call
the attention of the Government to another point,
tivin..
iz.,
that he thought they ought-to hold out some greater