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example of France, which had twice been invaded by a foreign army, her capital had been taken, and she had been obliged to pay a large sum to foreign countries for corn, but she had a steady metallic currency, and, however much the great contractors might have suffered, the great body of the people had remained uninjured. This was due to the excellent footing upon which the currency of that country was established. If this measure was adopted, every country banker would be obliged to have as great a regard to the exchanges as the Bank of England, and be compelled to provide for his own safety, without leaning upon the Bank in times of danger. Now was the time to withdraw these small notes, when the bankers were smarting under the consequences of their over-issues. They had at present a large amount of gold and bank notes; if they allowed the favourable time to pass by, the small notes would soon be issued again. They had now got the gold in their coffers, and now was the time to provide that it should not be exported again. It would be advantageous to the public to have chartered joint stock banks, established under a proper system, with only a limited liability. This would, no doubt, induce many persons, of great fortune and credit, to take shares in them, but the Bank objected to the extension of limited liability, and had stipulated that the Banks of Scotland and Ireland should not have this privilege. Some thought that the currency should be even more purely metallic than was now proposed, and that notes of a higher denomination should be suppressed. For himself, he entirely differed from Mr. Ricardo, as to the true basis of the currency, and he believed that if Mr. Ricardo, ingenious as he was, had been sole Director of the Bank of England, it would before now have stopped payment. He thought Mr. Ricardo's view of the currency quite

erroneous

43. Sir John Newport, as a banker himself, considered the issue of small notes to be most injurious to all connected with them, as affording the most dangerous facilities for extravagant speculation. It had been said that a considerable part of the commerce of the country could not be carried on if these notes were abolished. He was quite willing to accept that alternative, and abandon a portion of our commerce, rather than continue

them. He did not believe that such would be the case. Now was the best time to abolish this pernicious system, when so many of the country bankers had failed

44. Mr. Secretary Peel was convinced that the root of the evil lay in the monopoly of the Bank of England, and that if in the year 1793 a set of banks had existed in this country on the Scotch system it would have escaped the danger it was then involved in, as well as the calamity which had just occurred. In 1793 upwards of 100 banks had failed. In seven years, from 1810 to 1817, 157 commissions in bankruptcy were issued against country bankers; in the crisis which had just occurred 76 failures had taken place. But, from the different ways of making compositions, etc., the number of failures should probably be estimated at four times the number of the commissions of bankruptcy. What system could be worse, or more prejudicial to every interest in the country, than one which admitted of such an enormous amount of failures? Contrast what had been the case in Scotland, under a different system. Mr. Gilchrist, a manager of one of the Scotch banks, had been asked by the committee of 1819 how many failures there had been in Scotland within his recollection, and said there had only been one, that the creditors had been paid 14s. in the pound immediately, and finally the whole of their claims. These facts were a strong presumptive proof that the Scotch system, if not quite perfect, was at least far superior to the one existing in England. The present system of country banking was most prejudicial in every point of view. He then described the terrible misery caused by the failure of the country banks. He trusted that the institution of Joint Stock Banks would place the currency on a firmer footing. He most sincerely trusted that the great obstacle to the proposed institutions, the want of a charter, would be removed. He hoped the directors of the Bank of England would seriously consider what advantage they would derive from refusing charters to these banks. He himself could not imagine what benefit they would derive from it; they no doubt had the right to prevent such charters being granted, but he hoped they would refrain from exercising their right. He eulogised highly the conduct of the directors during the late crisis; he could not conceive it possible for any body

of men to have acted better, or to have exercised more judgment, discretion and liberality than they had done-of which he hoped they would give a further instance by not opposing the grants of charters to the proposed new banks. He fully concurred with Mr. Huskisson, that it was impossible to maintain coin in circulation if paper of the same denomination were allowed to circulate along with it. Now was the most favourable opportunity of getting rid of the small notes. It would be impolitic and unsafe to wait the moment of returning prosperity, as the country bankers would be more reluctant to agree to it, and more able to oppose it. To stand gazing on the bank in idle expectation, now that the river was passable, would be an irreparable mistake. The ministerial propositions prevailed by a majority of 222 to 39, and a motion to continue the small notes of the Bank of England was rejected by 66 to 7

45. The chief provisions of the Act (Statute 1826, c. 6) for prohibiting small notes in England are as follows—

1. The Act repealing the Act (Statute 1777, c. 30) which prohibited promissory notes and bills under 20s. was repealed, thereby reviving the former Act; but all notes of private bankers stamped before the 5th of February, 1826, or of the Bank of England stamped before the 10th of October, 1826, were exempted from its operation, and were permitted to be issued, re-issued and negociated until the 5th of April, 1829

2. Any person after that date making, issuing, signing or re-issuing any note or bill under £5, was subject to a penalty of £20

3. Any person who published, uttered or negociated any promissory or other notes, or any negociable or transferable bill, draft or undertaking in writing, for the payment of 20s., or above that sum and less than £5, or on which such sum should be unpaid, should forfeit the sum of £20

4. These penalties were not attached to any person drawing a cheque on his banker for his own use

5. All promissory notes under £20, made payable to bearer on demand, were to be made payable at the Bank, or place where they were issued; and as many more places as the issuer pleased

46. When the Government determined on suppressing the small note issue in England, they said it was their intention to extend the measure in a short time to Scotland and Ireland. However much Scotland may have suffered from commercial overtrading, as every commercial country must occasionally do, no banking panic had ever occurred such as those which had so frequently desolated England. As soon as the ministerial intentions were know in Scotland, a great ferment was excited. Sir Walter Scott published three letters on the subject, under the name of "Malachi Malagrowther," which tended much to fan the public enthusiasm, and such an opposition was organised, that the Ministry were obliged to consent to appoint committees of both Houses on the subject. These committees sat during the spring of 1826, and investigated the whole subject of Scotch banking at great length, which had been very little understood in England before that time; and the result was so eminently favourable to the Scotch banking system, that the Ministry abandoned their intention of attempting to alter it. The evidence and reports of these committees will be noticed further on

47. The year 1827 is memorable as the era when the principles of the Bullion Report were at length acknowledged to be true, and professedly adopted by the Bank. Mr. William Ward stated in 1832 that there was not a single person in the Bank but who admitted that its issues should be regulated by the Foreign Exchanges and the bullion market, or disposed to act in opposition to it. That in 1819 the directors had forwarded a resolution to the House of Commons, denying that the exchanges were to be regarded in regulating the issues. Subsequently, however, to that year, opinions became changed, and they found the merits of the case such as they really were. He himself had always been convinced of the truth of Mr. Horner's principle, and, from his being connected with the exchanges, had many opportunities of observing the practical truth of it. The Bank Directors, however, were not convinced of it, because they found in practice that the exchanges did not follow the issues of the Bank. But the truth was that they neglected to consider the country issues, and it was only in 1819 that they obtained a correct account of the issues of country banks; when that was

got it was found that, taking the Bank and the country issues together, the principle was shown to be quite correct. The observation of these facts had gradually convinced the directors, and, in 1827, he thought the court ripe for expunging the resolution of 1819, and it had accordingly been done. And, in 1832, there was not a single director who disputed its truth

48. Although the Act of 1775 had forbidden notes under £5 to be issued in England, it did not prohibit the circulation of the Scotch £1 notes in England, and they had always circulated in the districts adjacent to Scotland, and even as far South as York. When the English £1 notes were suppressed, it seemed naturally to follow that the circulation of the Scotch notes in England should be forbidden. But the districts in which they had always circulated, were as unanimous as Scotland itself against the measure. In 1828, the Ministry brought in a bill to restrain the circulation of Scotch bank notes in England. Sir James Graham presented a petition from the borderers, deprecating, in the most earnest terms, the withdrawal of the Scotch notes to which they had been so long accustomed. For seventy years, they said, they had possessed the advantage it was now sought to deprive them of-the advantage of the Scotch currency. Seven-eighths of the rents of estates were paid in the paper currency of Scotland, and no loss had been sustained in consequence of it. After a debate of two nights, the motion was carried by 154 to 45. The Act (Statute 1828, c. 65) provided that after the 5th of April, 1829, no corporation or person whatever should publish, utter, negotiate, or transfer in any part of England, any promissory note, draft, engagement, or undertaking in writing, payable to bearer on demand, for less than £5, or upon which less than £5 remained unpaid, which should have been made or issued, or purport to have been made or issued, in Scotland or Ireland, or elsewhere out of England, under a penalty of not less than £5, or more than £20. The same exemption as to cheques as in the former Act

49. In 1832, during the crisis of the Reform Bill, a runupon the Bank took place, which lasted for about a fortnight; but, as it was merely from political feeling in London, and did not extend into the country, no serious result ensued

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