The Liverpool Standard and General Commercial Advertiser.
Liverpool, Merseyside, England, 1848-08-01 00:00:00

THE BANK ACT OF 1844.

The Lords Committee have condemned the working of
this act. One novelty, one peculiar feature of the Act of
1844 was, that it tied up the bank issues by a rule drawn
from the quantity of bullion in hand. This was a sort of
finishing-touch of the great bullionist-statesman. But
hear how the practical men of the city—men who under-
stand what they are talking about—hear how they speak
of this last freak of Sir R. Peel.
Mr. HORSLEY PALMER thus describes the whole crisis
of last autumn—tracing it in a great degree to the absurd
restrictions of the Act of 1844 :

v" The bank was compelled under the Act of 1844 for-
cibly to contract, in order to regain its position, and which
forced proceeding caused a very severe pressure for the
time upon the money market. Extensive suspensions
caused a general discredit, and an abstraction of bank-
notes and coin from circulation to a very material amount,
thereby creating a largely increased demand upon the
reserve of the bank, which under the Act of 1844 it was
found most difficult and indeed impossible to sustain, the
amount of the reserve having been reduced on the 23d of
October to £2,000,000, including London and the branch
banks. Thus situated, notwithstanding that the bank
had advanced the rate of interest in August, September,
and October to 51, 6,7, and even 9 per cent. per annum,
the demand continued to increase until the 25th of Octo-
ber, when relief was offered by withdrawing the restrictive
clause of the Act of 1844, and by which the pressure was
immediately relieved, and credit has since been gradually
restored. During the whole period, from the middle of
April to the day of withdrawing the restrictive clause in
the. Act of 1844, the foreign exchanges were in favour of
this country."
Mr. SAMUEL GURNEY and Mr. G. C. GLYNN gave
similar testimony.
From Liverpool, the following evidence is given :--
"The state of things immediately previous to the pro-
mulgation of the government letter of 25th October was
perfectly fearful, and, I believe, without precedent in the
commercial history of this country. Bills of exchange of
the first quality in themselves, and to which this and other
banks were willing to add their endorsement, were abso-
lutely inconvertible into cash; and it is my firm belief
that many houses, who were not merely solvent but able
to pay 40s. and 60s. in the pound, must have stopped had
the government letter not been issued. Immediately on
the issue of that letter the whole difficulty was removed.
Not only were our bills available at the Bank of England,
but with all the discount brokers ; they were, I may say,
eagerly sought for by the country banks. and by private
monied parties seeking for investments, at even lower
rates than the Branch Bank of England here were willing
to discount at. This showed, beyond dispute, I think,
that the scarcity of money was artificial, not real, and that
the panic was a moral one, caused by the mischievous and
whimsical provisions of the Bank Act of 1844, and not by
want of confidence in the securities (the bills of exchange)
themselves, for the securities remained of course precisely
the same after the 25th October as before that date. I

have no hesitation in stating that, in my opinion, the
letter of 25th October virtually annulled the till of 1844,
and saved the country from an almost universal stoppage
of payments, in which the banking department of the
Bank of England would have been included."
As a general conclusion the Committee thus expresses
its own opinion :
" Many other statements, authorities, and illustrations
might be given, exemplifying the same principles, and
proving the evil consequences of disregarding them ; but
enough has been stated to prove, in the judgment of the
committee, that the inflexibility of the rule prescribed by
the restrictive clauses of the Act of 1844 is indefensible,
when equally applied to a state of varying circulation ;
and that its enforcement in 1847 was an aggravation of
the commercial distress, and was therefore wisely set aside
by the authority of the government on the 23rd and 25th
of October."
Another circumstance to which the committee most
properly draw the attention of Parliament is this, that the
Act of 1844, having first imposed these absurd shackles
on the Bank, next proceeds to set that corporation free
from all responsibility, and to encourage it to speculate
like any private firm. The result is, that, without stint
or remorse, the directors lower their rate of discount when
money is abundant, and raise it enormously when money
is scarce, thus always exaggerating the existing evil.
Hence has resulted this frightful fluctuation :
" Mr. Cotton states (3246), that in his commercial ex-
perience he never knew such a fluctuation in the rate of
interest as occurred in 1847.
" Your lordships will bear in recollection that the years
1837 and 1839 were years of peculiar pressure.
" The following table. extracted from the evidence of
Mr. Browne, exhibits the contrast between those years
and 1847 :

Lowest rate. Highest rate. Difference.
1837
1839 3 .
1847
He adds—' this does not give an accurate view of what
the interest of money was in 1847, because persons
frequently paid a commission which made it amount to
10, 20, and 30 per cent., depending on the time the bill
hal to run, and the pressure of money at the moment
The commission charged in 1837 and 1839 was by no
means to the same extent. The Governor of the Bank
states, that on the 23rd of October £225,000 was dis-
counted by the Bank in the London market at rates
varying from 51 to 9 per cent.' Afterwards he added, in
reply to the question, whether, within his own experi-
ence, or within his own knowledge, he was able to refer
the committee to any period when the variations in the
rate of interest were so considerable as they were during
the period to which his evidence applied—' I have no re-
collection of a period in which the variations in the rat*
of interest have been so great.' "

On Saturday night a man, in a drunken fit, leaped
from the upper window of a shop in Whitechapel, his
back catching a sign-post in his fall. Although the leap
was from a window three stories high, on reaching the
ground,, he got instantly up, and walked into the shop !
He had sustained serious injuries, however, and is now
c,onfined to Lie bed, scarcely expected to recover.