The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1866-05-24
Ereuing TeIegraph
THURSDAY, MAY "a, 1866,
A Flexible Bank Charter.

THE Night-blooming Cereus reveals Its beauties
TO the world but once in a century; but that
flower of finance, the British banking system,
proves its perfection by blossoming every de-
Cade. In 1874 the PEEL act was passed. In
IS47 the bank broke its charter to avoid insol.
vency. In 1867 it did the same thing, and no "
again, in 1866, the operation is repeated for a
third time. On Friday, the 1lth instant, the
Bank OF England virtually suspended specie
payment, and its total ruin was only
prevented by gross violation of its
fundamental law. In order to give our
readers correct idea OF the causes which
lead to such catastrophe, 1t is necessary
for us to glance at the history ofthe institution.
In 1905, what Is now the Bank secured by
gigantic bribe, a monopoly as joint stock bank
ing association, which monopoly it has pre-
served by system of loans to the Government,
which candid people cannot but term bribes.
The accumulation by the Crown of the fearful
national debt in the early part OF the century
added greatly to the complexity of the science
of finance; and as each difficulty or demand
arose. Parliament fell into the habit of enacting
special law TO meet the emergency. The result
was that, by 1874, the privileges and the respon-
sibilites of the Bank had become so voluminous
that it really seemed impossible for the directors
to prevent forieting their charter by violating
some OF the restrictive acts.
1t was then that PEEL proposed a law which
he told the people would remedy all this evil,
and as not dozen men in the kingdom could
understand his remedy, the famous act which
bears his name became statute. 1t is this
remedy which has caused all the more recent
ills Of the institution, and which has originated
"a custom more honored in the breach than the OBJ
seTvance."
In order to give an idea of the seed from
which the present embarrassment springs, we
must dive into statistics. The liabilities of the
Bank amount to f4l, 100000 sterling, its assets to
eel ,OOO, ,OOO, leaving balance of f2O,OOO,OOO in
excess. In order to transact business, 1t is
necessary that it issue notes to the amount OF
G2l, ,OOO,O 600. A proyso of the PEEL act provides
that "for every note issued beyond the sum of
9l4, $50, 600 the Bank Is required to hold a cor
responding amount OF gold" There is, there
tore continually in the vaults OF the Bank at
least 97, 900, 900 lying idle, useless as if they
were kept buried by act oil Parliament beneath
the solid foundation OF the Bank 'Not par
tlcle of this specie can be used even to ward Off
bankruptcy" 1t may mortgage the building in
which it conducts business, but TO touch one of
those millions IS impossible. If, at any time,
the demand for notes exceeds the ave-
rage, the amount of waste capital
must increase, Tor every note issued must have
"a corresponding value IN gold deposited. Hence
as in the present case, when the emergency
calls for more notes to prevent general ruin, ii
the Bank has not gold to lay aside it cannot meet
the demand Its seven millions are useless, and
It's 914O0O,0OO of Government securities are
valueless as they cannot oe sold. Hence the
Bank may be called upon and compelled to VIC.
late its charter when it has Ell, 200, 900 in its
vaults Such asuppostitious case has now arisen.
1t arose ten years ago; it arose twenty years ago.
With one hundred millions OF dollars on hand,
it was Obliged either TO fail or break its charter
AS usual in such cases. it appealed to the Gov
ernment, ard so urgent was the demand, that
there was not time to draft even form of bill
to legalize its violation; but taking the Minis
ters' word, the Directors proceeded to issue an
extra supply of notes, without depositing the
corresponding value in gold. By such despe.
rate remedy was the evil arrested.
1t is only natural for Americans to ask why
such an arbitrary law was ever enacted. Sir
ROBERT PEEL believed that Ella 900, 900 of notes
would be amply sufficient for all the demands Of
trade. He made no allowance for the advance
Inent OF the age ne neNGI CdlCuldleu GndI Cne
time might come when f25, 900, 900 would be too
small; or, if he did, he believed that the nteli,
gence OF posterity would have suggested modi-
fication of his act Posterity, however, has not
kept march in intellect with the advance in trade;
and hence Great Britain has remained for
twenty years bound up by a law enacted
for days which are past, and which can only
hamper the present system OF finance. John
Bull has thought it easier to break the law, when
necessity demanded it, than to so modify the law
as to meet any necessities. We hope, however
that for the sake of the financial reputation of
our generation, Mr.. GLADSTONE will now pro.
coed to remedy the defects of the PEEL act We
referred yesterday 10 how it was that Sir Nor
TON PETo was competed to suspend specie pay
ments with f5,O00,00O at his control. This was
an evidence OF personal paradox in none
tary matters. The same case has occurred with
mighty corporation, and we have sought to
show how the Bank OF England, with f2O, OOO, 900
at its command, was obliged to virtually sus.
pend because OF the ignorance which, after
placing the wealth OF CRGsUs in its hands, has
il withdrawn when wanted, as the water receded
from the thirsty Tantaus.