REPORT OF THE BANK COMMITTEE.
THE report from the Select Committee on the Bank Charter Acts whiSh has recently been issued ought to form a new starting-point for the discussion of the quintuple question which it was the duty of the Committee to investigate. Here indeed, lies the novelty of the report. In regard to the arguments the principal facts stated, and the conclusions laid down, we arguments, said that the re- port has been anticipated in our own pages. It was necessarily so ; since the principal facts were before the world during the crisis, the principles by which we judged them were those which have been adopted by the highest existing authorities on subjects of banking ; and reviewing both the principles and the facts, with- out bias or apprehension, we inevitably arrived at the same con- clusions which the same facts and the same principles would pro- duce with persons in the main of the same opinions. In regard to this part of the subject the chief novelty of the report consists in the official and practical affirmation of those principles and conclusions. The Committee was upon the whole rather fairly constituted ; there were in it both the late and the present Chan- cellors of the Exchequer ; many of the ablest existing financiers and commercialists, such as Sir James Graham, Sir Charles Wood, Sir Francis Baring, Mr. Cardwell, and Mr. Wilson ; gentlemen connected with the Bank of England or great banks, Mr. Weguelin, Mr. Hankey, and Mr. Glyn; and gentlemen of special opinions, such as Mr. Spooner and Mr. Cayley. The Com- mittee was "appointed to inquire into the operation of the Bank Act of 1844 (7 and 8 Viet. c. 32) and of the Bank Acts for Ire- land and Scotland of 1845 (8 and 9 Viet. c. 37 and 38,) and in- structed to inquire into the causes of the recent Commercial Dis- tress, and to investigate how far it has been affected by the Laws for regulating the Issue of Bank-notes payable on demand." The questions which the Committee did consider nevertheless Were, the supply of precious metals to the world, with the conse- quent effect on commerce ; the conditions of our currency ; the !aws and practice of banking, the relation of the Bank of Eng- land, to the currency and to the state ; and the commercial ex- cesses, with their results. The inquiry also touched upon some
other questions ; and the report comprises interesting statistics and a useful compendium of authorities.
The conclusions of the Committee are not final, and are most in- teresting as the starting points for further discussion of the sub- ject. Nothing is more remarkable than the contemporaneous in- crease of commerce under the impulse of free trade, with the grow- ing intercourse of nations, and the new supplies of gold from Cali- fornia and Australia. It is estimated that the stock of gold in Europe has been increased by about 80,700,000!.; and the total gold circulation of the United Kingdom is now estimated by Mr. Weguelin at 50,000,0001. The Committee disposes in very sum- mary but sufficient style of the confusion which has existed on the subject of the currency ; explaining away, for the country gentle- men, the delusion that "the price" of gold has been fixed. The evidence taken before the Committee most completely settles the question whether the total of paper issued by the Bank of Eng- land in excess of the gold deposits should be increased or not ; the Committee adopting the opinion of Mr. Weguelin, that if 2,000,0001. were added to that portion of the currency, the effect would be that it would be either held in reserve in the Bank, or, if there were an adverse exchange, "would be exported from the country, and all the other figures would remain precisely the same." It is also shown that in ordinary times, notwithstanding the great in- crease of trade, the whole amount of Bank-notes has actually diminished, since 1844, from 20,241,000/. to 19,467,000/. This is the effect of the many increased facilities for banking and for the balancing of accounts without money passing. "There is no cog- nisable advantage to be obtained by the commercial interests from the power of increasing the amount of notes which may be issued without the deposit of bullion." The Committee think that if a power of excess were statutably reposed in the Executive, it would not be a violation of the principle of the Act of 1844, which was not propounded by Sir Robert Peel as theoretically perfect ; therefore they do not preclude new provisions " at any future time "; but they do not suggest change now. Neither do they recommend any change in the relations, whether topographical, financial, or administrative, of the Bank of England., with the Executive.
A good deal of the evidence taken by the Bank goes to show, in the first place, that the panic had subsided in Scotland before the general measures had been adopted to allay it ; and it continued in London after the issue of the Treasury letter ; circumstances which corroborate the opinion that the panic was not caused by anything peculiar in the nature or state of the currency. But they trace the crisis to the commercial excesses, which were principally developed abroad, and which had far more gigantic and disastrous effects abroad than in this country. Here the most striking effects occurred through two causes, both of them "abuses of the system of credit." One was the system of "open credits" granted by banks like the Borough Bank of Liverpool and the Western Bank of Scotland, or the great discount houses of London ; some banks actually allowing persons abroad to draw against them merely for the commission on the money, without having the slightest deposit, consignment, or security against the drafts. The other abuse was overtrading upon a minimum of capital, and here lay the grand distinction between the crisis of '47 and '57. Two eminent accountants, Messrs. Coleman and Ball, say that "many of the houses which fell in 1847, had once been wealthy, but had long ceased to be so. Those of 1857, had, with few exceptions, never possessed adequate capital, but carried on extensive transactions by fictitious credit. In 1847, for example, one house, which had been originally wealthy, failed with liabilities amounting in the whole to upwards of 1,800,000/., of which not quite 1,000,000/. were to be paid by other parties, leaving more than 800,000/., the direct liabilities of the house." One house at the time of its suspension was under obligations to the amount of 900,000!.; its total capital at the last time of taking stock was 10,000/. But "the great abuse of credit was a feature common to the two years-1847 and 1857." It will be observed that the Committee defer to a future day the discus- sion of changes in the Act of 1844, and any change in the relation of the Bank of England to the State ; and they break off the discussion of the commercial excesses without any inquiry into the predisposing causes. They take only the causes on the surface, the open credits, the over-trading, or the general "abuse of credit." They do not attempt to ask what there is in the state of our commercial law which encourages this "abuse of credit." They do not so much as touch upon the question, whether the laws for the protection of credit, which evidently fail to realize that object completely, do not perhaps, like so many " protective " laws, increase the abuse they are intended to check. The principal use of the report will be that much beneficial discussion may hereafter be carried on without the necessity of looking further back than this volume of twenty- eight folio pages, and the evidence which, we presume, will be published, though it is not yet annexed to the report.
Previous page
