THE BANK CHARTER ACT.
IT was an understanding, suggested by Sir George Cornwall Lewis last session, that if the Bank Charter Act of 1844 were not then discussed with a view to settle its continuance or repeal, the subject should be brought forward next session, in time to give ample opportunity for calm investigation and deliberation. Ac- cordingly, we find both sides in the ceaseless warfare upon the subject of the currency mustering for the combat, and in a man- ner which implies that the measure will be brought forward very early in the session. Such, too, is the 6,eneral impression of those who are versed in the official and Parliamentary ways. Among the evidences both of the forthcoming measure and of the conflict, is a letter published in the Times of Tuesday, with the signature of " Mercator,"—a signature which in connexion with this subject and in the columns of the Tithes is scarcely anonymous, for everybody knows that it means Lord Overstone, olim Jones Loyd. There is a striking difference in the manner of the two sides. During the alarmist period, some few weeks back, when people were talk- ing of suspension of cash payments by the Banks of England and France, the advocates bf relaxation were crying out that the danger was caused by the restrictions of the act of 1844. " See what the wicked act is doing," they cried : " the country is rapidly approaching a suspension of cash payments. We are, as people said in 1825, within an hour of a state of barter." A clamour was raised for consideration of the act the very earliest day of the session, with a view to its large niodification, if not its total repeal. Cash payments, however, were not suspended. The Bank of England, indeed, raised its rate of discount; but al- though the commercial world grumbled a little at the " tight- ness' which was felt in the money-market, people were able to compass the fulfilment of their engagements ; the alarming efflux of gold was corrected ; the Bank of England lowered its discount from 7 to 61-, and then to 6 per cent, to the surprise and almost the chagrin of the alarmists ; and now we find the advocates of the act of 1844 claiming a reconsideration of the measure with a view to its simple continuance. Thus, within a very few weeks we have passed from that state in which the opponents of the measure were demanding its repeal, to that state in which its friends are demanding its renewal. It is not by any means that opinions upon the subject are en- tirely uniferm. ()n the contrary, there are grand diversities, and the deviation does not exactly' coincide with the ordinary, political parties. Among the consistent opponents of the Bank Charter Act is the Morning Post, which, beaten from some of its strong grounds, finds a new and extraordinary position. The agitation against the Income-tax is becoming very formidable—Manchester, Bir- mingham, Leeds, and the other great towns, are joining it; yet the assessment has been such as conspicuously to favour the classes represented by those towns. So says the Morning Post. "The course of events in the money-market has been adverse to the dealers in produce to an e traordinary and in unusual d ee.." Something presses upon t producing and commercial classes. But " a tax professedly tem rary and in part actually expiring has the appearance of being ess of a fixture, and of being more- immediately removeable by a sudden exertion than an institution_ like the Bank Charter" and hence the traders of our towns, seeking relief, attack the Income-tax when they should attack the Bank Charter. Such is the position of the Post ; according to which, both charter and tax are the result of something like a conspiracy between Sir Robert Peel and Lord Overstone. No Government, says the Post, "would again be so foolish as to let a fire burn up to the point of 1847." But, unfortunately for this Anti-Bank-Cliarter-Act party, the pressure has passed; the rate of discount is falling ; and the pressure which does remain in force is that of the Income-tax. According to political dynamics, there- fore, the party of repeal in the matter of the Bank Charter is. decidedly losing influence. The division of opinion is not to be seen entirely out of doors. While the Globe stoutly defends the act of 1844, the Economist has repeatedly if not consistently assailed it. The Economist is popularly understood to represent Mr. James Wil- son, the Secretary to the Treasury ; who, so long ago as 1847, contended that a high aniount of circulation must be maintained. when trade requires it, even in the face of an adverse exchange and an export of bullion. Our purse must be full if we wish it, whether money be coming in or going out—whatever the law of supply as well as demand may say to it. It is to be inferred, therefore, that there is some difference of opinion among the ac-
tual members of the Government. Nevertheless, it is understood that Sir George Garnewall Lewis has no misgiving. It is evident that he will receive very strong support. Lord Overstone rallies with all the zeal of a parent to the defence of Peel's Act of 1844; and we may fairly calculate that the act will be continued with- out any material change in its principles or its essential pro- visions.
It is not, however, to be assumed that there will be a simple continuance act; for some changes might be made 'Without essen-
tially altering it: The object of the act was to provide that the current money of the realm should be sovereigns of the proper weight and quality ; that if notes were circulated for convenience, they should be absolutely convertible, and therefore absolutely of the same value—in all respects but substance identical with sove- reigns. To carry out this principle, the act fastened upon
certain country banks which had been in habit of issuing
notes, and prohibited them henceforward from extending their circulation. They-might die out, but they must never grow
any more. Several have died out, with a consequent abstraction from the note-currency, to the extent of something over half-a- million ; and last year the deficiency was supplied by an exten- sion of the Bank circulation to the amount withdrawn. The act also prescribed that the Bank should issue upon securities to the amount of 14,000,0001.—whereof the Government permanent debt (11,000,0001.) should form part ; all other notes to be issued upon gold actually lodged in the Bank. Now these limits were ar- bitrary. They were of course regulated by reasoning, but there was no special virtue in any particular sum. The average addi- tion to the circulation during recent years may be stated at two millions ; and it is conceivable that upon a renewal of the act, it might be possible to add two millions to the amount of "se- curities eze." upon which the Bank is authorized to issue notes. At a particular moment this change might cause a sensation of relief ; and in abstract calculation there might be some conve- nience to trade in the increased facility for the use of notes ; but practically, and on general grounds, no such measure could greatly alter the quantity of money in the country, which is determined by the law of supply and demand. England has in fact become the reservoir between the Gold Colonies and the Continent of Europe. The gold comes here first, as to the most certain market, and then flows out towards the countries which want it more, in accordance with the actual demand of the time. We have a vantage-ground, therefore, higher than that which any Bank of England could by itself secure : we have se- curities apart from those of legislation ; the object of the act of 1844 being solely and wholly to establish a fixed relation between the paper and the gold, so that it should be a matter of perfect indifference to the holder whether he held in his hand a five- pound note or five sovereigns.
The Times, unable to hold back from a controversy so interest- ing in the City, cuts in with an old speculation. Admitting the general principles of the existing act to be correct, it starts the collateral question, whether the Bank, as a private institution, does not receive more from the public than it deserves. • Why should the Government delegate to the Bank of England its own prerogative of issuing notes, while it pays to the Bank the interest of the eleven millions of permanent loan ? The question is put in such a manner as to suggest, either that the Issue Department might be not only separated from the Banking within the Bank, but taken from the Bank altogether, and made a Government office,—under the Treasury, the Commissioners of the National Debt, or some other Currency Commissioners ; or that, in continu- ing this privilege, perhaps in extending it as we have indicated above, a new bargain might be made, getting for the Government better terms from the Bank ; saving, for instance, the interest upon the additional two millions at 3 per cent, 60,0001. As to better terms, we do not know that the public would gain much by small chaffering bargains with public institutions. Liberality from the Government, and a strict enforcement of public duties, appear to constitute the true policy: and although it might be possible for Government to take away the Issue Depart- ment and hand it over to some office in the neighbourhood of Whitehall, wo do not believe that Parliament would sanction any creation of Currency Commissioners. If it did, assuredly the public, even in ordinary times, would have no such confidence in a mere bureau as it has in an institution identified with com- merce; and we cannot but foresee that in times of trouble, of " emergency," the department would be pliant to the wildest ex- pedients of the most transitory Cabinet. Small changes might be made in this branch of the subject; but the measure of the Govern- ment will not be judged by trivial details, and certainly no perma- nent credit will be gained by petty savings. As to the 11,000,0001., the Bank is, towards the Government, simply a congregation of stockholders to that amount. In the other capacity of note- issuers to the amount of 14,000,0001., it merely receives from the Government a voucher of its ability to pay. The only ground upon which such a privilege should be given to the Bank is the public convenience. The desideratum is, some great establish- ment in which we can all have the confidence acquired by custom and experience ; and in this way perhaps the Bank gives to the public an equivalent for the privilege accorded. We have also heard objections made to the stringent rules re- specting the admission of bullion at the Bank, as causing incon- venience and needless expense. Ricardo's plan of gold in bars for large sums is not forgotten, but it remains to be carried out. Such matters may very properly be pondered when the statute is under reconsideration, but they do not affect the main principles. Since Sir George Lewis gave his pledge that the subject should be brought forward next session, we have had a year full of ex- periences most valuable as a further test of the act of 1844. The act left trade perfectly free, while it introduced absolute fixity in the money standard. The effect has been, that our mer- chants have been untrammelled in their commercial arrange- ments, while they have not been deranged by any want of fixity in the standard. They have been relieved from temptations to hide their difficulties with an appearance of surmounting them, when they were only increasing them by mingling kite-flying and..money. The general impression is, that this experience of the act of 1844 has so satisfied mercantile minds as to have created a great public support for the measure and for the Govern- ment which stands by it. Thus, Sir George Lewis has gained everything by the delay, and fortune has given him in the closing year a budget of facts and evidence to stand upon.
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