be injurious. It would, however, be unimportant, if the enactment as to sixty-five miles distance in the case of banks with more than six partners, were altered to twenty-five. The allowing joint stock banks to make their notes payable in London would not be of material consequence, and be convenient to them. Witness does not think banking business will be so well conducted by joint stock as by private banks; not that they give the public a greater protection from loss; as thus: The public become the shareholders, and any loss that the establishment makes falls immediately upon the shareholders, without the intervention of the fortunes of individuals, as in private banks; and it is a system of banking under which loss is more likely to accrue; injury will also arise from trafficking in shares; persons become partners who are incompetent in respect of property, and very many will take shares who are ignorant of the responsibility they incur. There is no doubt that the public will lose greatly more under this system of banking than they have ever done under private banks. Many such banks will nevertheless be established and continue; because it is the interest of the agents alike to form and maintain them. Yet they will not turn out generally to the interest of the partners. The manufacturing, rather than the agricultural districts, are likely to exhibit the greatest results in this way; but whether mostly on the favourable side, time only will show. The shareholders ought to be made responsible in the same way as private bankers; no limited responsibility; some of the joint stock banks having a surplus of cash discount in London. And many of the most wealthy private bankers are accustomed to re-discount bills there. In both instances the lower rate of interest prevailing is the cause.

9. Country Banks cannot over issue.-Government ought not to interfere with the Issues of the Bank, &c. (p. 3745.)

If joint stock banks were established over the country, with power to issue 1. and 21. notes, witness thinks that danger of over issue would not be increased; for no country banking establishment can issue more notes than there is a demand for. If unnatural means are taken to force notes out they will come back again. There is clearly a danger that, if joint stock banks were numerous, they might be made objects of abuse by Directors; but it must be admitted that many of them are excellently well managed. Their number will increase gradually, but not rapidly. Many banks of issue in London would not lessen the danger of a general stoppage of cash payments, but the reverse; as the effect of one falling short would be to increase the pressure on the rest. Neither would it then be more difficult for government to tamper with the currency; because each establishment might be influenced separately. If joint stock banks were compelled to keep a third of their circulation in bullion, it would not answer their purpose; they would get no profit by it. What has been said of the impossibility of an over issue by country bankers does not apply to the Bank of England. To a considerable degree, the Bank's circulation is founded on government securities, which witness thinks the best foundation. It is desirable that there should be no improper interference

by government in the business of the Bank; but there may be a reasonable interference. Before the peace such doings took place, and were injurious; but as for the desire of government, acted on in the issues of 1821 and 1822, it arose from a mistaken, yet not an unnatural view of relieving agricultural distress. It was a dangerous mode of relief, and one of the causes of the panic in 1825; of which there were many not to be defined. The issue by country bankers cannot fairly be pronounced another cause; nor can the reduction of the dividends in 1823 and 1824, tending to throw extra money into the market, be specially implicated. It may be stated that every thing that caused unusual facilities for money transactions had a tendency that way; but such facility is the foundation of our financial prosperity, and it would be folly to annihilate the general good in order to çure a partial evil. In the opinion of witness, the Bank derives no advantages from its branches in the country, nor does their existence facilitate the transmission of money in London more than heretofore. Country bankers have been mutual agents for many years past, and can transmit money from town to town without the least difficulty. The general rate of discount in the country is four per cent. ; in London it is less; but many of the branch banks of England have lowered the rate of discount in their respective towns by doing it at three per cent. Witness thinks it would be an advantage to enable country bankers to discharge their liabilities in Bank of England notes; but that it would not answer to make the permission apply to their circulation alone, as they could hardly say, in dealing, "here is one kind of demand I will pay in coin, and here is another I will not." It would be just to give them the above power, because it would only be paying the individual in the coin in which he has paid the banker. No individual could ever be in difficulty, though his creditors had a right to demand payment in coin, and he could receive, in the country, only paper. The credit of the Bank of England would not be placed under suspicion by its notes being made a sufficient tender from country bankers, but the contrary; albeit, that the best way of allaying suspicion is to convince the holder of a note that he can always obtain what the note promises. The quantity of gold at present in circulation is very large; witness would not be surprised to hear that it amounted to 10,000,0007. He conceives that the vacuum created by the withdrawal of the 17. and 21. notes to have been more than filled up by gold. He thinks that the Mint regulations have not entirely the effect of causing the amount of circulating medium to be governed by the price of commodities and the activity of commerce, seeing that a large portion of the circulation of the Bank of England is fixed. There is no objection to their issuing on fixed securities; but thence prices only partially determine the quantity of circulating medium.

JULY 10.

THOMAS TOOKE, ESQ.

A London Merchant.

1. Transactions of the Bank from 1782 to 1824, and Defence of Opinions published by Witness thereon. (p. 3809.)

1783 and 1784 were considered years of great commercial distress. The transition from war to peace and the demand for gold were the causes. In 1782 there was a considerable increase. In 1779 and 1780 the amount of bank-notes in circulation was about six millions. They were increased in March, 1782, to 9,600,000l.; and decreased in December, 1782, to 5,994,000l. In 1813, the banks refusing to make the usual payments upon the omnium, effected a great and sudden reduction. The reduction of the treasure of the Bank to 473,000l., as stated in witness's work to have taken place in October, 1783, was taken from other publications, the key to which was furnished by Mr. Morgan, the actuary. But Mr. Bosanquet stated, in 1797, that the treasure in 1783 was very low. It was stated in witness's work on the currency, that the drain of cash in 1783, which was considered the effect of extended commerce consequent on the peace, might more justly be referred to a previously enlarged issue of bank notes, and a considerable importation of grain. It might have been attended likewise in 1782-3 by large speculations, upon the recurrence of the peace, in unusual exports and an extension of credit to make them. The extended issue in March, 1782, caused mainly the necessary contraction in December, and aggravated the distress of 1783 and 1784, arising probably from over-trading. Many country banks failed in 1793. There was an enlarged issue of notes in 1791 coincident with a tendency to a great reduction of interest and to extensive speculations. There was a great extension of country banks and enlargement of transactions on credit, likewise a very great circulation of paper with the continent; some considerable checks to the speculations at the close of 1792 caused great commercial revulsion. The amount of notes in circulation in 1787, was 8,600,000l.; in 1789, 9,900,000l.; in 1791, 11,700,000l.; in 1792, 11,585,000l. Such an increase of issue, coincident with circumstances, favouring speculation, increases the tendency to over-trading, and aggravates the consequent revulsion. It was stated in witness's work, that previously to the addition to the circulation of Bank of England notes, the country bank issues were greatly increased. This fictitious increase of nominal monied capital, coming into competition with the pre-existing real monied capitals seeking investments, reduced the rate of interest, so that the discount on good bills fell to three per cent. The Bank might have been justified in enlarging the circulation in 1792, as the increase was in payment for gold brought in. It was stated in witness's work, that in 1790 the cash and bullion in the Bank coffers amounted to

10,097,000%., and their notes in circulation to 10,217,000l., and that the increased issues were made to get rid of the treasure and avoid the loss in holding it. The issues between 1794 and 1797 were excessive, as is proved by their reluctance to consent to the requisitions of the administration of that period, to grant the accommodation for the public service. If the Bank had not been restricted from continuing its cash payments, the run would have ceased. The value of the remaining paper had so increased, and interest had so risen, that the great object was bank notes. The treasure was not so low as it had been in 1783, or as it is surmised to have been in 1825. The drain by hoarding had abated, and there was no longer a demand for gold for export. It is the business of a bank administering a paper currency in lieu of gold, to have no other end in view, but to preserve its paper correctly and invariably on a level with the value of gold. The treasure of the Bank continued to increase till late in the autumn of 1817; the whole increased issue of 1816 and 1817 was in payment for gold; but the increase, inciting to speculation and coinciding with foreign demands for loans, contributed to the rise of prices and the distress of 1818. In 1815 and 1816 the distress was greater than in 1818 and 1819, owing to the speculative exports of 1814. Exportable commodities, especially colonial, rose above one hundred per cent. between 1811 and 1814. A revival of confidence and spirit of speculation led to an increase of country bank paper. The great fall in agricultural produce occasioned the distress of 1815, which extended to the commercial and manufacturing classes, and involved the failure of country banks. The increased issue of more than three millions in 1814 was coincident with great fall of prices, rapid advance of exchanges, and fall in price of gold. That increase tended to fill up the chasm formed by the failure of country banks. Mr. Mushet's opinion that the speculations of 1815 were caused by the extension of paper in 1813 and 1814, the derangement of credit, and the contraction of the currency to twenty-three per cent. in 1815 and 1816 is incorrect. Over trading and mischief might exist independently of the state of the Bank circulation. Extraordinary speculations have taken place without any increase whatever. As in 1798, when after the Bank restriction the exchanges turned in our favour, the treasure increased, the scale having risen from 182 in 1797 to 1,200 in 1798; the whole amount of issues, including 17. notes, amounting to a million and a half, was 12,850,000l. In February 1797, the circulation was reduced by 200,000l. below that of 1798. A very large class of commodities advanced above one hundred per cent. (Witness instanced the prices of produce.) Witness considers, with Mr. Mushet, that the Bank should suppress the paper as they are called on for gold. The Bank of England issues are not the origin of the rise of prices. The Bank issues rose from 17,000,000l. in 1808 to 24,000,000l. in 1810. From the close of 1807 to the commencement of 1809, European raw produce rose nearly one hundred per cent. The prices that had risen in 1808 fell below the level to which they had risen, yet the payments to the continent reduced considerably the Bank's treaIf the leading articles of produce should accumulate beyond

sure.

consumption, caution would prevent speculation; and if the Bank issues five millions additional paper, it would not affect the prices for some time. The increase between 1807 and 1810 depressed the exchanges and caused a rise of gold. The discount on bank paper from 21. 13s. 2d. in 1807, rose to 3l. 9s. 6d. in 1810. A fall in the price of commodities, tending to increase consumption, took place in 1822. In 1823 commenced a reduction of the stocks, and a disposition to speculate. The interest had fallen.

2. Conduct of the Bank immediately preceding the Panic. (p. 3849.) In 1824 several speculations extended transactions on credit. At this time there was an increase of the Bank issues greatly in the purchase of gold. In 1824, the drain on the Bank's treasure should have caused the contraction, and not enlargement of their issues. The fear of the withdrawal of the 17. notes produced a fall in prices in 1822, and the enactment in June for their ten years' continuance did not raise the prices. The Bank are not bound, in the regulation of their issues, to look to any thing but the amount of their treasure and the exchanges. Its treasure might be at par, yet the exchanges might indicate the commencement of a drain. The Directors might, as mercantile men, consider the state of trade as a guide in their issues. If they had added to the circulation, it would have been beneficial to the public and themselves. The conduct of the Bank, from the close of 1824 till the panic, was perfectly unjustifiable. In 1790 and 1791, there was a great accumulation of bullion in the hands of the Bank. If that bullion had circulated in the country, the effect would have been the same as if, in case the Bank received it, they issued notes to meet it. If no Bank had existed, that accumulation of bullion in the country would have had the same tendency to affect the circulation. Any evils arising from the issue of notes at that time are not attributable to the Bank, as they issued paper only in exchange for gold. The indications at the end of 1824 were sufficient to have shown that the Bank ought to have contracted their issues.

3. One Bank of Circulation preferable to more Banks than one. (p. 3866.)

The Bank of England, properly conducted, is of great advantage to commerce. If the usury laws did not exist, the circulation should not be connected with assisting commerce, if the usual amount of the circulation be enlarged by such assistance. Had the continuance of the pressure caused the Bank to stop payment, a restriction would have taken place, and meetings of the merchants, declaring their disposition to take notes in payment. The embarrassment would have been but momentary, as the metals were flowing in largely. If the Bank had reserved their own bullion, without attending to the distress of the mercantile classes, there would have been a further depression of the funds. Enormous private distress, but of very short duration, would have followed. The substantial resources of the country would not have been impaired. There exists no more reason for two or more banks than for two or more mints.