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metropolis, and induced them to keep in flore larger quantities of fpecie, than before the year 1793, in order to make their payments, if fiich fliould be required of them. Mr. Thornton confirms in general this account given by Mr. Ellifon. He agrees alfo with Mr. Ellifon with refpeel to the demand for cafh made on the metropolis by the country bankers, for the purpofe of being fent to different parts of the kingdom, where it is partly kept by the country bankers, for the ufes before mentioned, and partly drawn out of their hands by individuals, to be hoarded.
It appears by the evidence of Mr. Thornton, that there was, at this time, alfo a demand of cafh to be fent from the metropolis to Scotland.
But thofe demands for cadi, from the diftant parts of the kingdom, were not the only caufes of the embarrafTments of the bank of England, at this period. It is ftated in an account delivered by Mr. Puget, one of the directors of the bank of England, and agent for the bank of Ireland, that in the commencement of the year 1797, there was an unufual demand of cadi made on the bank of England, to be fent to Ireland; and that there was an expectation of a loan being intended to be raifed in Great Britain for the fervice of Ireland, which would have neceflarily occafioncd the exportation of a considerable quantity of coin from the metropolis to the latter kingdom. It is proper to add, that the kingdom of Ireland appears, for f'ome weeks previous to the ifluing the order of council of the 26th of February, 10 have experienced a great want of cafh, fimilar to that which was experienced in Great Britain.
There is a circumftance that
throws a coi.fiderable light on one at leaft of the caufes which produced this great demand for cafh on the bank. It appears by the account of the ftate of the cafh at the bank, at different periods, as laid before the committee, that the greateft drain of cafh which the bank has experienced, fubfequent to the year 1783, was in March and June .1795, that is, a fhort time after the failure of the country banks in that year; and in the commencement of the month of February of this year, that is, a fhort time after the Newcaflle banks flopped payment in cafh, and when the alarms before flated produced great demands for cafh, from different parts of the country: fo that, in both thofe periods, the fame caufe appears to have produced an effett nearly fimilar, that is, a very unufual drain of cafh from the bank.
The increafed demand for cafh mufl bear a proportion to the decreafe of any other fort of circulation that is a fubftitute for it. The committee will prefently fhow, to what degree the circulation of tbe notes or the bank of England had been diminifhed, immediately previous to the 26th of February lafl. With refpeft to the decreafe of country bank bills in circulation, Mr. Thornton, who appears to have collected his evidence from feveral parts of the kingdom with great accuracy, was defired by tbc committee to deliver in an account of the proportion in which, according to his information, country bank bills circulated in different parts of the kingdom, before the failures in 1793; at a period fubfequent to that year; aud at tbe prefent time. This account may be feen at large in tbe evidence; but the refult is, that at the prefent Cent rime, the circulation of thefe bills is in one part of the kingdom not more thai) about a third; in another, not more than half; and in a third, but a fixth, of what was in circulation before the year 179}: and the committee have already endeavoured to fhow, in a former part of this fummary, to what degree the means of coining, tnd, in confequence thereof, the regular fupply of new coin (which alone could fill up the void occaiioned by this decreafe of circulating paper) had diminiflied of late years.
From the evidence of the governor of the bank, and from the report of the laft fecret committee, which has been bid before this committee, it appears, thst it was not fingly the diminiihed ftate of their calh, which gave the directors any great alarm; the governor and Mr. Bofanquet rather impute this alarm to the progreflively increasing demands for ca(h upon them, particularly in the week preceding the 26th of February, and to the reafons they had to apprehend that thefe demands, and the confequent progreflive reduction of cafli,would continue, and even increafe; and they add, that this drain was in great part owing to demands for cam from the country, fuch demands being made upon the bank indirectly from the country, but dire&ly from the bankera of London, who were to fupply the counThe directors of the bank, under the impreffion which thefe alarms and embarraflments had occafioned, appear to have judged it prudent to diminim their notes in circulation, and the confequent demands that might come upon them, fo as to make the demands more nearly- correspond with the (late of their cafh. In will be feen, in the
accounts prefented to the committee, of the' amount of bank notes in circulation, at different periods, that the average amount of thefe notes in circulation, forfeveralyears previous to the end of the yeaf 1796, may be flated at between io,ooo,oool.and 1 i,ooo,oool. hardly ever falling below 9,000,0001. and not often exceeding, to any great amount, 1 i,ooo,oool. It will appear by one of the afore-men* tidned accounts, that in the lattef end of the year 1796, and in the beginning of 1797, the amount of the bank notes in circulation was left than the average before ftated r and on the 25th of February laft, it was reduced to 8,640,2 coL
It is true, that in an account prefented to the committee, of the amount of bank notes in circulation in the years 1782, 1783, and 1784, the quantity was then generally even lefs than the fum laft mentioned; but at that time the' foreign commerce of the kingdom was not even one half of what it is at prefent, as will be feen in the account of imports and exports inferted in this report.
It is not probable that the reduction of bank notes to 8,640,250!. immediately previous to the ifluing the order in council of the *6th February, was owing to any diminution of the demands for them; for at that time the merchants of London were Subject to difficulties, from not being able to get their bills difcounted.
The directors of the bank had, on the 31ft December, 1795, come to a refolution todiminifh their discounts; but notwithstanding that refolution, thev did not diminifli the amount 0/ their difcounts in the courfe of the year 1796, compared with what they were in 179;, but had rather increafed them, not however to fuch an extent, as to (P 3) make make them corrcfpond with the Vmit.s of the coninicrcial world. A considerable degree of diftrefs confequently enfued, which diftrefs may alfo be imputed to another caufe, in evidence before the commitlee. By law, no man is to take more than 5I. percent, intereft for money lent or advanced by him; and this reftriifiion is underftood to apply to bankers in the bufincfs of discounting; fo that in time of war, when a much greater intereft than el. per cent, can be made of moncv, upon government fecurities, the discounts which merchants obtain from b.inkers and other individuals, are neccffHnlv much diminifhed, and they arc forced, on that account, to relort directly to the bank.
Some of the perfons whom the committee examined on this part of the fubjecr, have expreffed a ftrong opinion of the inconvenience produced by the conduct of the bank, in diminifiling their notes in circulation, and in reftricting their difcounts.
One c» thefe perfons is of opinion, that an incrtafed quantity of bank notes, proportioned to the increafed occafiou for them, mud tend to prevent a demand for guineas rather than to promote it; and that if the quantity of notes iflued is very conliderably lefs than the occafions of the mercantile world require, a run upon the .bank will be the confequence. He is of opinion alfo, that the directors of the bank do not avail themfelves 'of the full extent of their credit; and that the camion neceflary to be obfcrved by private bankets in the amount of their bills, does hot apply to .the cafe of the bank of England, for feveral reafons which he affigns. A great quantity of bank notes, in his opinion, is absolutely
necefTary for the circulation of the metropolis ; and that in this refpeft, it is immaterial whether thefe notes are ifliied for advances made to government, or in difcounts to private perfons, except that in the' laft cafe, thofe whofe bills are difcounted to a greater extent, may fuppofe that more relief is granted to them. He allows, however, that as ih'e bank difcounts, even in time of war, at 5I. per cent, there may be a greater difpofition to borrow of the bank at 5I. percent, than it may be prudent always for the bank to comply with.
Another of thofe gentlemen is of opinion, that the refolurion of the bank to reftrift their difcounts, excited an alarm and diftruft that led to an increafe of the drain of their cafh; that it has contributed alfo to the forced fale and depreciation of public fecurities, and to other embarraffinents occasioned by an infufficient fupply nf bank notes and cafli; which fupply hn not kept pace with the demand arifing from the employment and circulation of active capital, particularly for the laft fifteen months: and healfo isof opinion,that it would not Signify materially to the public, whetlierthe quantum of bank notes introduced into circulation, was created by discounting bills for the merchants, or by advances to government.
The committee have judged it right to ftate the caufesaffignedby thefe gentlemen, of the diftrefs that has lately .prevailed from the want ■of Sufficient means of circulation in commercial transactions: the committee, however, do not mean to decide whether the bank directors might not have folid reafons for their conduct in this relpecl, or to convey any opinion On thw doubtful and delicate queftion; but conceive conceive it their duty to call the attention of the houfe to a point of fo great importance, and refer the houfe to the arguments rtated more at large in the evidence.
The committee have thus gone through the chief points which have occurred in their inquiry refpecting the caufes which produced the order in council of the 26th of February laft, as refulting from the evidence taken by them, and the accounts laid before them." They fubmit the fame to the confkleration of the houfe; but as the minutes of their proceedings are inferted in the formerpart of this report, and as the houfe is thereby pofleffed of the evidence on the whole of this fubjeet, in great detail, the members of it will be enabled to fupply any omifiions, and to correct any defects which may be found in this fummary.
The committee being defirous of confining themfelves to thofe matters on which they have thought proper to call evidence, and fenfible of thp difficulty (even at all times) of appreciating the extent and influence of alarm, forbear from adverting to the effects produced upon the ftate of pecuniary tranfaetions and circulation, by the apprehenfions of invafion generally prevalent towards the clofe of the laft year, and in the beginning of the prefent, but of which the operation muff doubtlefs have been confiderable. Nor will they attempt to eftimate how far the interruption given to the banking operations of many great commercial cities, by the troubles and calamities which. have agitated Europe, and the entire ruin of many commercial houfes and ,• eftablifhments, may have tended to derange the accufiomed courfe and confidence of general circulation.
The committee think it fufficient merely to enumerate confiderations of fuch general notoriety, and to fubmit them, without farther obfervation, to the wiidum of the houfe.
Copy of Refolutions moved by the Duke of Bidfoid, May I 5, 1797, in Confequence of the abirje Report— The previous queftion was carried on the whole Series.
i. " THAT it appears to this houfe, that fubfequent to the month of June, 1795, and during the year 1796, a great diminution was experienced in the Ipecie of the bank of England.
2. That the governor and deputy governor of the bank did, at various times, reprefent to the chancellor of the exchequer the danger to the bank, from t'e diminution of its fpecie, particularly at the following periods:
nth December, 1794,
10th October, 1795,
23d October, 1795,
18th November, 179J,
3d December, 1 795,
1 cth and 16th January, 1796,
28th January, 1796, ,
5th and 8th February, 1796,
nth February, 1796,
8th, loin, and 21ft February,
'797- , .
3. That it appears, that during
thefe periods the directors of the bank frequently remonftrated with the chancellor of the exchequer on the magnitude of their advances to government, anxioufly requiring payment, or a confidersbie reduc- , tion of the fame; but that neverthclefs the chancellor of the exchequer not only neglected to comply with the object of thofe reinonftrances, but ufually, under pre(P 4) tence
fence of the neceflity of the public . fervice, renewed his demands for farther aid; and that under the exigency of the cafe, as fin red to them by the chancellor of the exchequer, the directors of the bank were, from time to time, induced to confent to farther accommodation.
4. That it appears that the chancellor of the exchequer frequently folicited fuch farther accommodation in the moft anxious and prefixing terms; declaring, that it was impoflible to avoid the moft ferious embarrafihients to the public fervice, unlefs the bank directors afforded the afliftance he required.
5. That it appears, that although by thefe means the directors of the bank were induced to comply with his demands, they generally exprelTed their reluctance in ftrong language; and that they at laft, that is to fay, on the 28th of Julv, 1796, thought it neceflary for their own juftification, to requeft the chancellor of the exchequer to lay before his majefty's cabinet, their moft ferious and folemn remonftrance j in which they declare, that, "fenfibte of the alarming and dangerous ftate of public credit, noth'ng could induce them to comply with the demand then made upon them, but the dread that this refufal might be productive of a greater evil."
6. That it appears, that during the above period, a confiderable portion of the bank advances was occafioned by payments of bills of exchange drawn on the treafury from abroad.
7. That it appears, that it had feldom been the cuftom of the bank of England to advance, on the account of fuch bills, more than from 20,000!. to 30,000.; and that even during the American war, fuch bills never exceeded at
any one time the fum of 150,000!. the wifdom of our anceftors having forefeen and provided againft the mifchief of fimilar advances, by a claufe in an aft paffed in the 5th year of William and Mary, by which the governor and company of the bank of England were reftrained from advancing any funis of money, other than on fuch funds on which a credit is granted by parliament.
8. That it appears, that from and after the vear 1793, at which time an aft of parliament pafled, containing a claufe, by which the directors of the bank are indemnified for the advances they had made on bills drawn from abroad, and exempted in future from the penalties of the faid aft of William and Mary refpefting fuch advances to government, the amount of trea» fury bills paid at the bank continued progreffively to increafe; and that between the ift of January 1795, and the 25th of February 1797, funis to the amount of upwards of 15,000,000!. were at different periods advanced to government upon this head.
9. That it appears, that thei directors of the bank did, at various times during the years 1795, i/9^» and 1797, apply to the chancellor of the exchequer for re-payment of fuch advances, and reprefent to him the ruinous confequences to themfelves and to the public, of continuing the fyftem of making treafury bills payable at the bank: and that they even declared they conceived it to be "an unconftitotional mode of raiGng money, and what they were not warranted by their charter to confentto."
10. That it appears, that the chancellor of the exchequer did, at various times in that period, undertake to reduce the advances on