2. Practice of Banking in Manchester. (p. 3327.)

The Manchester bankers allow two-and-a-half per cent. on money deposits; they charge three per cent. on trading accounts upon both sides, charging a quarter per cent. commission; they also discount bills, which are principally on London, at various rates, according to circumstances, giving liberal accommodation. There is no local issue in Manchester; the circulation is Bank of England paper and bills of exchange. Before the establishment of the branch bank there four per cent. was charged; about that period the terms of business were lowered, but it is doubtful whether that did not result from a general depreciation. The branch bank facilitates and cheapens the transfer of money. Neither the system of private banking, nor of commercial dealings, appears to be materially altered by the branch bank. In 1824 and 1825 accommodation was too lavish; since that time it has been contracted, but it is doubtful whether the branch banks produced that effect. The substitution of cash for credit is attributable to the increased facilities of obtaining discounts in London, and of converting bills into money at a lower rate: the branch banks contributed to that effect only as respects the sending of money down from London. It is true that some of the best customers of the private banks now send their bills to a London broker, who pays the proceeds into the Bank of England to the credit of the branch bank, but that is referable principally to the reduction of the rate of interest. It is done where branch banks do not exist. The branch bank has interfered with the private banker, but not very materially; it saves him the trouble and risk of sending money from London, which the Bank supplies without charge weekly to a very large extent. The mode is, for a London banker to pay a sum to the branch bank to the credit of a party in the country, who applies, and gets it. It does not make much difference in the reserve of cash held by the private banker, who could not derive any profit from adopting the branch bank system. No commission is charged on simple discount transactions; they have grown up within six or seven years, since money became comparatively cheap. The sole profit derivable from merchants' accounts is the commission. The lowering in the rate of profit of private banks took place before the establishment of branch banks. The Bank allows profit to other bankers at Manchester than those that issue its notes. It does not appear that specie is more abundant in Manchester now than before the branch banks existed. A great amount is paid in wages. Witness's house issues about 25,000 sovereigns weekly, of which the average fresh supply is about 10,000. That issue was formerly in 17. notes. Of the 25,000 about 15,000 come back; the rest is paid by the work people for clothes, provisions, &c., thence passing into other districts, and finally to the country bankers, who, as it may be, send them to London or Manchester; the circulation of Manchester, therefore, does not increase by the amount of the weekly fresh supply. If Bank of England notes formed the entire circulation of the country, and local circulation were destroyed, the country

bankers would discontinue business, which would be a great injury. There is no difficulty in Manchester in supplying accommodation; but there may be a difference between agricultural and trading districts. There is no local issue in Lancashire.

3. Principles on which Banks of Issue are conducted. (p. 3376.) Banks conducted on sound principles reserve adequate capital in London, and do not invest in business the capital from the issue of notes. The securities for the paper circulation are also available for deposits and accounts. It would be impossible for a banker to keep an amount for deposits, &c. without a reserve for contingencies. The funds for the issue of notes are quite independent of the rest of the business.

4. Publication of Accounts recommended. (p. 3383.)

The first great alteration in the plan of the Bank of England ought to be the publication of their accounts. The publication of their bullion would be better than the suppression of it. There are certainly states of the bullion, the insulated knowledge of which would be attended with evil; but as the public become acquainted with the system, regular information would rather produce confidence-assuming the Bank to deserve confidence. The publication of the accounts would have the effect of so lowering the amount of bullion as to endanger the Bank. The publication of the bullion would have the double effect of inspiring confidence and making the Bank watchful. The publication of the bullion three or six months after the time would be better than no publication, but would scarcely be sufficient.

5. The present System of the Bank nearly what it ought to be.

(p. 3393.)

No other alterations in the charter appear necessary. The method of electing the Directors is not good as it works; but the proprietors can change it, which they ought to do. The bank issues the public currency, and also performs banking business. The public ought to have security for the management of the currency; but the administration of the Bank is so near what it ought to be, that it would be a hazard to risk a change. The principle upon which the circulation has been conducted has undergone considerable changes, and the Bank has improved its system within the last five or six years. Vacillation would be pernicious, but adaptation to increasing intelligence is better than remaining still. The Bank may have an interest distinct from the country the advance made on the dead-weight was injurious both to the Bank and the country. If the Directors, instead of recommend. ing candidates, were not to interfere in the election, it would be an important alteration: whether it would produce a more intelligent direction requires consideration.

6. Publication of Accounts recommended. (p. 3408.)

The frequently communicated knowledge of the affairs of the Bank would prevent alarm, even when its supply of treasure happened to

F

be inadequate. A demand for bullion, under such circumstances, would be less serious than under the present system, which engenders suspicion and alarm. At the close of 1825, the people would have been calmed materially by such knowledge. When the Bank's treasure runs low, it generally becomes notorious; but if there had been a regular publication of their accounts, even the refusal of gold, had they been obliged to resort to it, would not have been so seriously felt in the panic of 1825. The more immediate control of government over the circulation would produce better management. It never would be desirable that the public journals should agree upon any thing doubtful; but public discussion, in the end, produces right impressions. Any fallacy in favour of bullion, or otherwise, would ultimately be removed by discussion. The extent of Bank capital, and not the amount of treasure, produces confidence: of the former, the public have some general, but not accurate, knowledge. People in the monied world believe the Bank to be solvent; but the community, for want of information, entertain doubts which are erroneous: at the same time, such doubts at particular times might be right. The repetition of circumstances proving the solvency of the Bank is not sufficient to allay doubts, so long as it is believed that some important information is suppressed, even if the information actually conveyed showed a surplus of assets. Of course, the class of persons not pervious to reason never could be satisfied. The existence of a considerable quantity of gold in a country is the best preventive of panic. The Bank should always be prepared to meet ordinary emergencies, but circumstances might arise to render it impossible to reserve a sufficient store without sacrificing the advantages of a paper currency. It is clear a paper currency cannot answer its own objects unless a moderate proportion only is in reserve in metallic money. Commercial discredit does not necessarily affect the establishment itself-instance 1825. A prudent reserve for the Bank depends upon the experience of its own demands. If the fact that the drain on the Bank in May last left its coffers very low were made suddenly known, it might have produced alarm, but following a series of information, it would not. Supposing one-half of the treasure to be withdrawn, and the balance even known to inquisitive persons to be very small, it depends upon the causes of the withdrawal, and the popular confidence, whether such balance might not also be withdrawn. If the Bank temporarily stopped paying in specie, it would not produce inconvenience or alarm, if the public did not doubt its ultimate solvency. If a wealthy banker were occasionally endangered by low reserves, his course would be either to adopt steps to prevent a recurrence of the evil, or to increase his reserves. It would be absurd to new-cast the amounts, and give new names to securities, and say, this bank is no longer in danger.

The discredit of 1825 did not spring from doubts as to the Bank's solvency, for the people freely took one pound notes, when the sovereigns were exhausted. It would be inconvenient to establish a London bank that could not issue notes in London, but with the power of issuing in the country through branches. Such a bank might increase the number of issuers, and take the place of existing paper. The

country banking system may not be perfect; some banks may not have sufficient capital. The limitation of the distance with which the Bank of England exercises its privileges is not of much importance. It might be good to have but one bank of issue throughout the country, but the expediency of the change now is questionable. It might be best to combine that system, as far as possible, with the interests of the country bankers. The extent of the capital of a new bank would only affect the extent of confidence in its solvency. A joint stock bank in the metropolis, with country branches, would diminish the number of issuers; but then, as before stated, it would drive out the most solvent. It requires great consideration to decide whether greater fluctuations of price take place under our present system than under one purely metallic, or what system would prevent such fluctuations; or whether a metallic currency, with bills of exchange, might not produce great fluctuation. There were plausible grounds in 1825 for believing that we were approaching a state of barter, in which there would be no coin or acceptable paper: we were then near the stopping of issues in coin as it happened in 1797, which would have produced transient inconvenience; and probably the fact that gold was exhausted might have shaken the Bank. The mischief arose from the errors of the government and the Bank. Such mischief must always arise when a bank issues paper instead of gold, without gold to represent it, and is only remediable by constant publicity.

7. Observations relative to a Paper System, and to the Usury Laws. (p. 3463.)

It is fallacious to suppose that a failure of the Bank must immediately fall on the public creditor, who, whenever gold shall fail, must suffer the inconvenience, no matter who pays the dividends. In 1797 there was a real deficiency of gold, which affected the government perhaps more than the Bank: in 1825 the difficulty was if a person had a number of 51. engagements with only 1007. note to pay them. After 1797 the state continued to pay in paper, maintaining that it was of the same value as coin. The state of things in 1825 was principally caused by imprudent transactions on the part of the Bank, urged by government: such as the purchase of the dead weight, advances on mortgages, &c. The usury laws are unreasonable; they interfere with the value money ought to bear, and interrupt freedom in transactions. When the general value of money is above five per cent. they cause the refusal of discount, otherwise the rate would be continually raised, and a diminution be produced by the more natural process; in which way the diminution would be gradual, and not sudden. To repeal those laws, so far as bills of short date are concerned, would be only an imperfect, instead of a perfect measure of good. It would enable the Bank to raise the rate of interest, but it would not answer all the purposes of an entire repeal. As far as banks of issue are concerned, the question requires consideration.

JULY 7.

SAMUEL GURNEY, ESQ.

Bill Broker in London.

1. Exclusive Privileges of the Bank have been favourable to the Money Markets and to the Country. (p. 3486.)

The exclusive privileges of the Bank of England have been beneficial to the money market, and to the country generally. The fluctuations experienced in the circulating medium have arisen partly from the management of the Bank, and partly from causes out of their control. They have occasionally taken steps for the specific object of increasing their circulation, by advances on mortgage; by the purchase of exchequer bills; and by throwing open their doors out of the regular course for the discount of bills. These fluctuations are by no means disadvantageous to all persons, and witness does not think there is any occasion to take measures upon them; indeed he doubts that the thing can be remedied. They may, to a certain extent, make commercial speculations precarious, and introduce a spirit of gambling, but much less so than is imagined. Variation in the value of money, except in one or two instances under peculiar circumstances, have not been very extensive since the peace. The plan of the Bank of England, of advancing money a certain number of days before the quarter day, tends very materially to equalize the value of money. Preventing any change in the value of money from month to month is convenient to the money dealers; but whether it benefits the mercantile interest is doubtful.

2. On the Enlargement of Issues from 1822 to 1825. (p. 3500.)

The difference in the amount of currency between 1822 and 1824 was a gradual fluctuation. In that period the value of money varied from two and a half to three and a half per cent., which is not much in two years, and very little affecting mercantile transactions. It was a time of rise in the price of most articles of commerce: that of foreign commodities became considerably enhanced in the beginning of 1825. The advance did not arise from a wholesome state of trade; there was then great excitement in the country, which tended to advance the value of all kinds of property; this was in a degree the cause of the panic. The Bank had also made large advances, by paper issues, to Government; the necessity of contracting these would tend to the same effect; but there were other causes operating. In case of a renewal of the Bank Charter it may be prudent to fix precautions against great over issues; but it is difficult to regulate all issue. The high issues, at the time alluded to, very much arose from a long continued importation of gold.

3. On the Exchanges.-Their effect upon the Circulation, and the Effect of the Circulation upon them, &c. (p. 3509.)

There is no other conceivable mode of controlling paper issues excepting that arising from their being convertible into gold. An excess