7251. "In what way would you remove the inconvenience which you think now exists, arising from the operation of the Act of 1844? By getting rid of that portion of it in some way, and not binding the bank to a fixed amount."

7252. "Would you repeal the Act entirely as to that part? -I would repeal the Act entirely; I think putting an absolute limit, which is perfectly inflexible, is a very objectionable thing for the trade of the country. How that is to be got rid of, or how it should be provided against, I do not feel myself competent to say, but that is the portion of the Act that appeared to me likely to create injury; and, as far as my observation goes, I should say that it has produced considerable injury."

After a perusal of the "Reports" of the two Committees, and of the evidence of which I have endeavoured to give an impartial, although necessarily an imperfect compendium, it may really be asked, "What is the subject of inquiry?" "I promise to pay to the bearer on demand ten pounds" is a very simple proposition, and the obligation evident; he who promises must perform the promise. If the National Bank receives bullion in deposit for which it gives a credit, an engagement to deliver it on demand, that is a proposition equally simple; neither of these propositions can be the subject of inquiry.

Does not the difficulty in the inquiry arise from the attempt to reconcile "the great privileges and ex"clusive powers," the "special and exclusive privi"leges" of the Bank of England, with the welfare of the community, with security of property?

Adam Smith observes, b. iv. c. ii. v. 2. p. 243.:"The statesman who should attempt to direct pri"vate people in what manner they ought to employ "their capitals, would not only load himself with a "most unnecessary attention, but assume an authority "which could safely be trusted, not only to no single 66 person, but to no council or senate whatever, and "which would nowhere be so dangerous as in the "hands of a man who had folly and presumption "enough to fancy himself fit to exercise it.'

What shall be said of "powers" and "privileges unknown to the constitution, vested in an irresponsible corporation, not, perhaps, "to direct private

"people in what manner they ought to employ their capitals," but to control the commerce of a mighty empire by a reduction of the prices of commodities by a "stoppage of trade" and "of credit," † in order to protect that corporation, the Bank of England, from the foreign demand for bullion, and from the demand of payment of their promissory notes?

The Committee of the House of Commons do not make their report with a commentary upon the evidence of the witnesses in the same argumentative manner, or at the same length, as the Committee of the House of Lords.

Both committees concur in opinion that the commercial distress was occasioned, in a greater or less degree, by the failure of the potato crop, occasioning an unprecedented importation of food; by the deficient supply of cotton, by the diversion of capital from its ordinary employment in commercial transactions to the construction of railroads, and to an undue expansion of credit and overtrading.

The Lords' Committee attribute the distress partly to overtrading occasioned "by increased facilities of "credit and a low rate of interest;" and with respect to the houses connected with the East and West India trade, to a sudden and extensive fall in the price of sugar, by which the value of their most readily available assets underwent great depression.

Both committees repudiate the notion that the banking department is released from all responsibility, as to the effect of their management upon the public interest; both concur that the permanent interest of the Bank of England is identified with the interests of the country.

Both committees bear equal testimony to the integrity and disinterestedness of the Directors of the Bank of England; and the Committee of the House of Lords would enlarge their power by giving the directors a discretionary power to relax the rule of

* See antè p. 323. (3221.) † See antè p. 207. (2113, 2117.)

not exceeding a certain fixed amount of issue upon securities, to be exercised when the foreign exchanges are favourable. The Committee of the House of Commons "are of opinion that it is not expedient to "make any alteration in the Bank Act of 1844."

Both committees approve of the issuing of the letter of the 25th of October, under the existing

circumstances.

The witnesses dwell upon the peculiar circumstances of the time, the failure of the potato crop, the speculations, the large capital invested in railways, and the partial failure of the cotton crop, as accounting in a principal degree for the commercial crisis of 1847; this does not appear to me as a necessary consequence, or a cause why general distrust should prevail; great losses and great suffering would accrue to individuals; but when such immediate relief resulted from the letter of the 25th of October, it may well be doubted whether the present system of banking, and the Act of 1844, were not one principal cause of the commercial distress that letter could not supply the deficency of the potato crop, nor of the cotton crop, could not repair the losses already incurred by improvident importations of corn, by imprudent speculations, or by investments in railways.

Sir Robert Peel observes, (7606,) that the loss on keeping thirteen millions of gold "must be borne by "the United Kingdom collectively." It seems extraordinary that any stress should be laid upon the loss of interest on this gold, when the depreciation on certain descriptions of property is so considerable; if it be meant that the pressure upon commerce, with the consequent depreciation in the prices of merchandise and securities, is for the general good, and should therefore be borne by the United Kingdom collectively; this is not the case; it is not borne generally; creditors are benefited, the exporters of the cheapened commodities are benefited, the money lenders are benefited; and the sellers of merchandise and the borrowers of money are injured; and the mode of levying a general

contribution would be by taxation: but I submit that the United Kingdom collectively "should not bear "the loss of interest on keeping thirteen millions of "gold: "-those who are benefited by the circulation of promissory notes should bear any loss or expense attending the circulation of those notes: and those who are benefited by the trade in bullion should bear any loss or expense attending the bullion.

It is not the efflux of bullion either from the country or from the bank that impoverishes the country, or occasions the pressure or increased rate of interest -it is only when the efflux becomes inconvenient to the bank; the present system is artificial, and it is the poverty of the bank, and not the poverty of the country that induces the stringent measures: not the poverty of the bank in property or assets, but a deficiency in the quantity of bullion—not a deficiency in the confidence of the public to obtain coin for bank notes, but a deficiency of merchandise, of that most commodious commodity, the bullion, which is wanted for exportation, and which, I submit, ought to be entirely removed from the custody of the Bank of England, and of all other banks.

66

The Governor of the Bank observes, (p. 325 antè,) 3432, "I consider that the object of the Act of 1844 was to allow the circulation of the country to be "acted upon by the exports and imports, in the same way as the currency would have been acted upon, "supposing it had been entirely a metallic currency;" and 3445, "I think it is desirable that the "circulation should be placed on such a footing, as "that it should expand and contract in the same way as a metallic currency would do; I cannot vary from "that."

Sir Charles Wood also says, (p. 240 antè,) "It is "not enough, then, to enact that the bank notes shall "be convertible. The paper circulation must not "only be convertible, but must vary in amount from "time to time, as a metallic circulation would vary.”

and justification of the present system, that by the Act of 1844, the paper circulation is made to vary in amount as a metallic circulation would vary, and that if the circulation were wholly metallic all difficulty and inconvenience would be done away with: but the grievance would still exist. The mischief arises not from the circulation of promissory notes, but from the Bank of England undertaking more than it can perform, from its inability to discharge its obligations as a banker, and as the treasurer of the international bullion. Supposing that the Bank of England did not issue promissory notes, and continued to have the custody of the gold and silver required for foreign commerce, it would then discount bills payable after date, as at present, but without the intervention of bank notes: those who wanted to export gold and silver would discount their bills as they do now, but instead of receiving from a separate department the bullion in exchange. for bank notes, they would receive it immediately from the banking department; the bullion would be the property of the depositors, or their representatives, and the bank would be trading with their bullion and not with its own property. It must be remembered that the bank is equally bound to deliver coin for bills at present, if required; and as the treasurer of the precious metals, it would be bound to deliver bullion for exportation, if required, in discounting bills, if there were no promissory notes. The bank having no commodities wherewith to purchase the bullion with which it traded, and which it would hold on trust, would be still obliged to derange commerce and lower prices, as at present, in order to check the exportation, or promote the importation of the precious metals: if the bank were required to deliver more gold than was considered consistent with its safety, it would limit its accommodation or charge a higher rate of discount, giving a shock to credit as at present, and forced sales would take place, and merchandise and produce would be exported as at present, and the demand for gold would cease.