CHAP. XLIII. 103. on this change. "chequed out," in mercantile phrase, by the drafts of the London bankers. The Bank was authorised to issue notes beyond the limit prescribed by the Act, and in the mean time the rate of interest was fixed at 8 per cent. Thus did the famous Bank Charter Act, after having Reflections been three years in unrestrained operation, break down from the effect of its own provisions; but not until it had brought the country to the very verge of ruin! In the first two years of that period, it had inflamed to a most perilous degree the prevailing passion for speculation, and set on foot undertakings of the most gigantic kind, which required all the disposable capital of the country to carry forward and complete. During the last year it acted not less powerfully in contracting the circulation and suspending credit, at the very time when both were most imperatively required to carry forward the undertakings which itself had set on foot, and meet the effects, in the drain of gold, of the combined operation of the system of Free Trade recently introduced, and the Irish famine then in its full intensity. At this critical juncture, when, beyond any other recorded in British history, liberal paper advances were most called for to however, been disappointed, and her Majesty's Government have come to the conclusion, that the time has arrived when they ought to attempt, by some extraordinary and temporary measure, to restore confidence to the mercantile and manufacturing community. "For this purpose, they recommend to the Directors of the Bank of England, in the present emergency, to enlarge the amount of their discount, and advance upon approved security; but that, in order to restrain this operation within reasonable limits, a high rate of interest should be charged. In present circumstances, they would suggest, that the rate of interest should not be less than 8 per cent. If this course of dealing should lead to any infringement of the existing law, her Majesty's Government will be prepared to propose to Parliament, on its meeting, a bill of indemnity. They will rely upon the discretion of the Directors to reduce, as soon as possible, the amount of their notes, if any extraordinary issues should take place within the limits prescribed by law. Her Majesty's Government are not insensible to the evil of any departure from the law which has placed the currency of the country upon a sound basis; but they feel confident that, in the present circumstances, the measure which they have proposed may be safely adopted; and that, at the same time, the main provisions of that law, and the vital principle of maintaining the convertibility of the Bank of England note, may be firmly maintained."-We are, &c., JOHN RUSSELL, CHARLES WOOD.-TOOKE, iv. 449, 450, sustain the credit and currency of the country, now strained to the uttermost by so many concurring causes, the bank-notes in circulation in the two islands were, by the operation of the Bank Charter Act, CONTRACTED TO THE EXTENT OF EIGHT MILLIONS below what they had been less than two years before. It may safely be affirmed, that a more ruinous and suicidal act never was perpetrated by any government on any country, and it is no wonder that it produced the most disastrous effects. And at last Sir R. Peel and the Ministers were compelled, by sheer necessity, to repeal their own Act, and do that which had been the one thing needful from the beginning, viz. authorise the Bank Directors to "enlarge the amount of their discounts and advances upon approved security," beyond the amount authorised by law.* СНАР. XLIII. 1847. 104. immediate letter. Never was a step taken by Government attended with such immediate and beneficial effects as this was. It never Great and required to be acted upon the knowledge that it had effect of this been granted was of itself sufficient to dispel the panic. The statement which the Chancellor of the Exchequer said had been constantly made to him for a few days before, "Let us have notes; charge 10 or 12 per cent upon TABLE SHOWING THE WHOLE BANK'S AND BANKERS' NOTES IN CIRCULATION 1844. June 22 20,634,000 4,743,057 3,665,104 8,408,161 3,117,988 3,488,300 2,080,277 37,728,726| Dec. 7 20,986,000 4,442,725 3,086,676 7,529,401 3,486,818 3,900,275 2.945,046 38,847,540 1845 June 21 21,277,000 4,398,833 3,131,109 7,529,942 3,485,531 3,882,600 2,736,432 38,911,505 Dec. 622,015,000 4,569,278 3,221,883 7,791,161 3,804,031 4,404,975 3,311,855 41,327,022 1846. June 20 20,553,000 4,456,629 3,128,185 7,584,814 3,508,655 4,119,850 2,852,176 38,618,495 Dec. 5 21,055,000 4,596,549 3,190,417 7,786,966 3,996,861 4,375,025 3,464,505 40,678,857 1847. June 19 19,078,000 4,385,608 3,088,327 7, 473,935 3,647,314 3,327,400 2,137,551 35,664,200 Dec. 420,161,000 3,691,304 2,576,686 6,267,990 3,732,585 3,175,400 2,147,341 35, 484,316 1848. June 17 18,683,000 3,628,563 2,598,625 6,227,188 3,437,587 2,863,800 1,797,546 33,009,121 Dec. 218,702,000 3,703,728 2,727,165 6,430,893 3,570, 126 2.851,750 2,117,300 33,672,069 1849. June 16 19,312,000 3,540,417 2,661,300 6,201,717 3,380,902 2,481,775 1,564,700 32,941,094 Dec. 119,244,000 3,676,728 2,703,093 6,379,821 3,500,186 2,656,225 2,017,906 33,798,138 1850. June 15 20,401,000 3,552,821 2,745,227 6,298,048 3,471,528 2,530,125 1,711,686 34.412,387 Dec. 28 19,757,000 3,450,811 2,685,543 6,136,354 3,345,649 2,647,600 2,209,359 34,095,962 1851. June 14 20,154,000 3,513,765 2,805,280 6,319,045 3,474,171 2,460,900 1,808,018 34,216,134 Dec. 27 19,899,000 3,370,976 2,678,391 6,049,367 3,356,974 2,470,225 2,256,542 34,032,108 " -Statistical Abstract, No. IV., 1842-56, p. 34. VOL. VII. Y XLIII. 1 Parl. Deb. xcv. 399. CHAP. them; we do not care what the rate of interest is; we do not mean to take the notes because we shall not want 1847. them, only tell us that we can get them, and that will at once restore confidence."1 In Mr Huskisson's words, on a former occasion, "the stagnant and straitened circulation of the country wanted life and aid, and became every day more embarrassed, whilst each new calamity produced by such a state of things contributed to spread and increase the general apprehension." In this disastrous state of things, the knowledge that the Bank Charter Act, which was the principal cause of the embarrassment, had been set aside, acted at once as a charm in restoring the suspended vitality of the country. The barrier which cut off the bullion in the issue department from the banking department having been removed, the pressure and apprehension which had existed for some weeks, owing to a knowledge of the smallness of the Bank's reserve, and of the bullion available for banking purposes, were at once removed. Eight millions of bullion being, if required, let in to the banking department, the general terror was at an end. Hoards of bank-notes and coin which had been secreted during the panic, immediately came forth; and although the high rate of interest was not immediately reduced, yet merchants in good credit no longer found any difficulty in getting their notes discounted. In a word, the crisis was at an end, and the Directors were ere long able to reduce the rate of interest charged at the Bank, till, on 27th January 1848, just three months after Lord John Russell's letter was written, it was lowered to 4 per cent 2*-a decisive proof that the previous high rates had been entirely owing to a want of currency, and not of capital; for unquestionably, as will immediately appear, during 2 Tooke, iv. 319, 330. *The rate of interest charged at the Bank was reduced as follows:- 22d November 8 per cent. 27th January 1848, 4 per cent. 31 3 -TOOKE, vol. iv. p. 330; vol. v. p. 238. the intervening period the available wealth of the country, CHAP. so far from increasing, had undergone a serious diminution. XLIII. 1847. 105. Parliament, Nov. 23. As a matter of course, Parliament was called together, after this severe crisis, earlier than usual, both to deliberate Meeting of on the state of the country, and to interpose the necessary and Queen's sanction to the deviation authorised by Ministers from the Speech Bank Charter Act. As might have been expected, the leading topic in the Queen's Speech, and in the debates which followed upon it, were the monetary crisis, and the working of that Act. The Speech said, "Her Majesty has seen, with great concern, the distress which has for some time prevailed among the commercial classes. The embarrassments of trade were at one period aggravated by so general a feeling of distrust and of alarm, that her Majesty, for the purpose of restoring confidence, authorised her Ministers to recommend to the Directors of the Bank of England a course of proceeding suited to such an emergency. This course might have led to an infringement of the law. Her Majesty has great satisfaction in being able to inform you that the law has not been infringed, that the alarm has subsided, and that the pressure on the banking and commercial interests has been mitigated. The abundant harvest with which this country has been blessed, has alleviated the evils which always accompany a want of employment in the manufacturing districts. Her Majesty, however, has to lament the recurrence of severe distress in Ireland, owing to the scarcity of the usual food of the people. Her Majesty trusts that this distress will be materially relieved by the exertions which have been made to carry into effect the law of last session for the support of the destitute poor. The Lord-Lieutenant has employed with vigour and energy the means which the law places at his disposal to detect offenders, and prevent the repetition of offences. But she feels it her duty to ask the assistance of Parliament in taking further precautions against the xev. 14; perpetration of crime in certain counties and districts of 1847, 188. Ireland." 1 1 Parl, Deb. Ann. Reg. CHAP. 106. statement Charter xliii. § 83, et seq. Foreseeing that, in the agitated state of the commercial classes in the country, it would be impossible to prevent 1847. inquiry into the working of the Bank Charter Act, MinisSir R. Peel's ters wisely resolved to take the matter into their own on the Bank hands, and thereby secure the appointment of the comAct. mittee of inquiry in both houses. A long and important debate, which was continued through three nights, took place on the motion made by the Chancellor of the Exchequer for the appointment of a committee, but as the 1 Ante, c. topics and arguments were the same as those of which an abstract has already been given on a recent occasion,1 they need not be again recapitulated further than to notice the very important admission of Sir R. Peel on the working of the Bank Charter Act. The Right Honourable Baronet said: "I do not deny that one of the objects contemplated by the Act was the prevention of the convulsions which have hitherto occurred in consequence of the neglect of the Bank of England to take early precautions against the withdrawal of its treasure. I am bound to say that in that hope I have been disappointed. Looking to recent events, the depression which has since prevailed, and the numbers of houses which have been swept away, I am bound to admit that that purpose of the Bill of 1844, which sought to impose, if not a legal, at least a moral obligation upon the Bank, to prevent the necessity of extreme measures of stringency by timely precautions, has not been fulfilled. But the Bill of 1844 had a triple object. Its first object was that in which I admit it has failed, namely, to prevent, by early and gradual, severe and sudden contraction of the currency, and the panic and confusion inseparable from it. But the Bill had two other objects of at least equal importance the one to maintain and guarantee the convertibility of the paper currency into gold, the other to prevent the difficulties which arise at all times from undue speculation being aggravated by the abuse of paper credit in the form of promissory-notes. In these two objects my belief is, that the Bill has completely succeeded. My belief |