As we expected last week, the Government empowered the Directors
of the Bank early last Saturday morning to advance on As we expected last week, the Government empowered the Directors of the Bank early last Saturday morning to advance on sound securities beyond the limit prescribed by the Bank Charter Act, promising if they exceeded the law to apply to Parliament for an indemnity. In point of fact the law has not been broken, but the reserve of notes has been very nese indeed to a vanishing point. On Wednesday it was only 730,8301., showing a decrease in the week of 4,219,495/. Much more than this has been advanced to the public on securities and as discount,—as much, Mr. Gladstone tells us, as twelve millions sterling in five days,—of which more than half has come back again to the Bank as bankers' balances, and the remainder gone to strengthen the position of the country banks. In former panics the mere suspension of the Act nearly stopped the demand for advances, but in this case it was far otherwise. The rather foolish reluctance of the Bank to make advances on the best possible security, Government securities, has partly aggravated the pressure. Mr. Gladstone said on Thurs- day night that no difficulty of this kind was made till Monday,— but we believe that there he is in error, the Bank having urged holders to sell, rather than ask advances on, Government securities on the great day of panic. We believe the theory was that the Bank should reserve its resources for the best paper, and not waste them in advancing on securities so good that they would sell in the open market. But of course no one wanted to press a sale at a considerable sacrifice, and the only effect was, that the doubt being once started as to the feasibility of getting advances on Government securities at pleasure, a great many more who held them pressed for advances upon them than otherwise would have done.
