29. The charge of the Circulation might be safely left to the discretion of the Directors under the review of the Government, (p. 658.) The amount of the circulating medium would (if the bank alone issued notes) depend upon the discretion with which that power was exercised. The security to the public would be confidence in the Bank Directors, and the knowledge of government, that they were guided by good sense and discretion. There is a free communication between the chair of the Bank and the government, of all the principles on which it is conducted. The government does not interfere or advise, but it asks and receives information, or that information is volunteered: there is no concealment whatever, Even on the secret and confidential part of the business, has information been tendered.

30. The state of the Foreign Exchanges will never produce Panic, Their effect upon the Circulation and Prices, (p. 673.)

The crisis of 1825 could never recur, from the state of the foreign exchanges, and it was owing in great measure to the effect upon the public mind of the reduction of interest by the government. Such steps on the part of the government would again derange the currency, but could not affect the issues of the Bank. A reduction of three millions and a half of the Bank circulation took place between August 1830, and February 1832; and this has probably limited commercial operations. The contraction of the circulation reduces the prices, and this brings back the gold; so that the reduction of prices is caused by an adverse exchange; and it is the action of the public, either foreign or domestic, that causes these changes in the issue by the Bank; the Bank itself does not act upon the market as from itself, its motions are regulated by the public. The restoration of foreign credit has increased the commercial transactions, and extended the imports so as to bring back the bullion without generally lowering prices and causing embarrassment or distress. The Bank is compelled by the operations of the commercial world and the course of the exchange, to contract or extend its issues, and fluctuations of price are the consequence but not the object.

FRIDAY, JUNE 8.

The amount of circulation in February, 1831, was twenty-one millions, and at the end of the year it was sixteen and a half millions, therefore the reduction was equal to that which it was said caused the panic in 1825, yet no panic followed in 1831. The supposed quantity of bank notes in circulation is no criterion of the state of public credit. Had a drain of two millions more bullion caused an additional contraction of so many more notes, the value of money must have been materially affected; but it does not follow that a crisis should have ensued, for if gold be bought from England, some equivalent for it must be imported.

31. Responsibility of Management of the Monetary System in the Directors (p. 712).

The Government is not responsible for the affairs of the Bank; the Directors are. The Government is informed of every step; it has no legal means of enforcing any change in the arrangement; but it is the duty of Government to express opinions on the management, and those opinions are always gravely considered. The affairs of the Bank, therefore, are under the control of persons not immediately responsible to the public for their management of the monetary system.

32. Publicity of Accounts (p. 723).

Publicity would be achieved if the Bank alone issued paper, or if every other body circulating paper published their accounts likewise, and provided these bodies had as much credit in the eyes of the public as the Bank of England has, and excepting in cases of political discredit. There have been periods when such publicity would have caused a total exhaustion of the Bank gold. În 1825, had the Bank of England been the sole body issuing paper, or had their paper been a legal payment for the notes of country bankers, the crisis could hardly have occurred. Again, in May, 1832, the public credit would have been endangered by the publication of the quantity of bullion in the hands of the Bank. Every sovereign might have been drained. There can never, by possibility, be any security against distrust of the Government, which is political discredit. The discredit in May might have been pushed by persons inimical to the Government, and anxious to distress the Bank, into absolute ruin. The average of a preceding period, however, might be published without danger. In 1825, in the then state of the paper money, if the Bank had been obliged publish its quantity of bullion, it could not have come forward with such boldness to the support of public credit. Country bankers, if prudent, would restrict their accommodation, and produce distress, when they saw published a low state of the Bank bullion. The publication could not safely be more frequently than twice a year. It remains clear, as it appeared at first, that one-third of the securities being in bullion, affords all requisite security against any demand that ought to arise. If other persons issue paper, they ought to have the same proportion of bullion to meet it, unless they arrange with the Bank. The Bank of France has no country de\mands to meet, but acts for itself only; this prevents any comparison being fairly made between the Banks of France and England. Again, if the Bank published its want of gold, that would be a warning to foreign markets to keep up its price; but, excepting political discredit, no circumstance could reduce the Bank of England to a quantity of bullion, which would look low in the eyes of foreign merchants. The exchange dealers, however large their dealings, cannot keep away a large quantity of gold, although, on one occasion, while the public took 675,000l. in gold out of the Bank, one individual took out 885,000l. The profit, howeveer, is so minute,

that the gold soon returns. If the present system continue, and other bodies besides the Bank are allowed to issue paper money, supposing a panic to occur, it is possible that there might be an interest powerful enough to operate dangerously on the Bank at the moment of its lowest amount of bullion, if that moment corld be ascertained, and supposing political or other causes for such conduct to exist. Persons might speculate to keep the Bank down; war might occur; in 1825 it was actually proposed to the Government of France to take measures for stopping the Bank of England. fact, many of the sovereigns which replenish the Bank coffers came from the Bank of France, after the run, in exchange for silver exported by the Bank of England, which was wanted by the Bank of France. It is barely possible that foreign capitalists by combination could lay up such stores of gold in the Banks of Amsterdan and Paris as to affect the Bank of England; but at the period of an internal discredit it might be possible.

In

Instead of publicity, government might be vested by parliament with a controul over the Bank, to compel it to increase its stock of bullion when to them (the ministers) it might appear too small; but on the other hand there are no means of enabling the Bank to comply with such an order, except by contracting the circulation or buying a large stock of silver in exchange for gold. There is no means of supplying the Bank with gold, excepting only the diminution of the amount of bank notes, which immediately contracts the currency, and lowers prices, by increasing the value of money. If publication be resorted to, all other banks would be bound to publish their liabilities, their securities, their cash reserves, and their capitals. The Bank could not carry on business if compelled to publish all its accounts, while the other banks were allowed to keep theirs secret. There would be no advantage from any publication of the past, and decided objections exist to a periodical publication of the Bank affairs for the future. There is no controul over the report of the present evidence becoming public; but the governor of the Bank of England, as such, does not voluntarily accede to its publication. Certainly the Bank of England, under the charter, claims privileges unknown to private bankers; but this appears no reason why they should be differently treated with regard to the publication of their accounts. There are always forgeries on the Bank of England, but not to any extent at present. Publicity would check the opening of banks on speculation, where there is no capital. Country bankers, however, might be subject to a drain, for the mere purpose of embarrassing them, during any rage of local politics or combination. If banks were compelled to keep a large quantity of gold, the inconvenience might be still more injurious by raising prices. The witness offers no opinion upon the propriety of compelling publicity, either on the part of the Bank or the country bankers; but he contends that the Bank of England ought not to be compelled to publication unless the private banks were so bound also. Every bank of issue should be above suspicion; and it is the knowledge on the part of the public that the

capital of the Bank of England is much above its liability, and in the hands of government, that raises it in estimation.

33. All excess of Issues eventually prejudicial (p. 883.) You cannot divide banks into banks of circulation, banks of discount, and banks of deposit. A bank of circulation has a small amount of deposits. All banks are discount banks more or less. The present system gives the amplest means of local expansion or contraction. The country banker has money to the amount agreed between him and the Bank on his application, and the London money market is directly open to him. Bankers ought not to discount except upon negociable securities. Excess of issue on the part of the bankers may occur, and yet the banker may not be chargeable as the cause. If he be a person of property, he can meet the demand caused by the excess of issue; but all issues in excess are eventually prejudicial. "Excessive issues" mean such excess as has been exhibited by a state of prices higher than those in other countries, thereby rendering the exchanges unfavourable, and causing the exportation of bullion, which being bought of the Bank with its own notes (not re-issued), contracts the circulation. When gold is at the standard price, the Bank must be prepared to meet any demand for coin or bullion to be exported.

34. Conduct of the Bank both before and subsequent to the return to cash payments defended; and all errors attributed to the Government. (p. 69.)

MEMORANDUM.

With reference to the action of the Bank prior to the year 1819, and subsequent to that period, the governor begs to submit the following memorandum for the consideration of the committee. The reports of the committees of parliament of 1797, 1810, and 1819, are before the public. Whatever faults were committed prior to those respective periods, they were more the acts of government than the Bank, by forcing upon the latter exchequer bills, in opposition to the repeated remonstrances of the Directors of the bank.

By the resolution of the House of Commons of 1819, the Bank were required within four years to pay off in gold the amount of their 17. notes then in circulation (about 7,500,000); further, to provide the coin for paying off the country small notes in 1825 (about 7 or 8,000,000 more); in addition to which, the necessity was imposed of providing the requisite surplus bullion for insuring the convertibility of all their liabilities; which addition of bullion to their then stock could not be estimated at less than 5,000,000, making, in the aggregate, 20,000,000 of gold as necessary to be procured from foreign countries within the space of four years from 1819.

That supply of gold could only be purchased by reduced prices

of commodities, the Bank withdrawing a given amount of securities in the first instance, the notes for which might be re-issued in payment of the gold as imported. The low prices, and general state of trade from 1819 to 1821, and the withdrawal of the Bank's securities, enabled the Bank to cancel their small notes in the latter year; and in that following (1822), three years prior to the time fixed by parliament, they were in a situation to furnish the gold for paying off the country small notes, when, without any communication with the Bank, the government thought proper to authorize a continuance of the circulation of the country small notes until 1833. The consequence of that measure was, to leave in the possession of the Bank an inordinate quantity of bullion (14,200,000l., in January 1824), and further to afford the power of extension to the country bankers' issues, which, it is believed, were greatly extended from 1823 to 1825.

Notwithstanding that vacillation on the part of government in 1822, and the events which followed, the Bank took no measures from January 1822 to April 1824 to increase their circulation; the increase at the latter period was forced from the Bank by the increased amount of bullion held in 1824 over that of 1822.

being less by 500,000l. than the increase of bullion.

£1,600,000

Between January, 1822, and October, 1824, the Bank only invested in securities the amount of deposits which had accumulated in their possession during that period: viz., six millions and a half; they had in February preceding, in order to facilitate the reduction of the four per cents., engaged to pay off in October, 1824, the dissentients, under a stipulation that such advances should be repaid by quarterly payments from the sinking fund of 500,000l. each. This latter engagement was made when the Bank held an inordinate stock of bullion, and while the exchanges were in favour of the country; and it was not until 18th November, 1824, that any direct evidence was afforded to the contrary. In consequence of the advances made to pay the dissentients in October, 1824, the issues of the Bank were increased, in January, 1825, to the extent of 1,300,000l., which advance was the only amount of increase of circulation with which the Bank can be charged, but which was justified by the Bank then holding an amount in bullion very nearly equal to one-third of its total liabilities.

During 1825, the bullion exported from January to November extended to seven millions, and which of itself effected every degree of contraction through the bank notes and deposits which could be reasonably required or endured by the public. The nconvenience finally sustained, towards the close of that year,