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House, was principally devoted to general disquisitions on the history and fluctuations of the currency, the sources of the existing distress, the other remedies which might be applied, and the conduct and influence of the country banks. Lord Liverpool, while he admitted that the measures which government was now carrying through were far from being perfect, and, in some individual details, might even be thought hard ones, begged the House to recollect, that the chartered privileges of the Bank of England stood in the way, and prevented government from going farther. Government, he had no hesitation in saying, ought to go farther, and would go farther, but, at the present moment, it could do no more. The law as to the constitution of banks was absurd and ridiculous in its nature, futile in its construction, and dangerous in its effects; but it had gradually grown up into what it was, and could be reduced only by time and trouble within reasonable dimensions or sound proportions. One of two systems might be adopted. One was, to allow only a limited number of banks, or to exact from such as were permitted to exist, securities for their solvency. This was in itself a wise and salutary system, and might be profitably followed, if circumstances would admit of its adoption. It prevailed in Massachusets, one of the most settled and best-established states of America. That state allowed only twelve chartered banks; and so soon as any one of them became unable to pay in specie, its charter was forfeited. The other system was one of unlimited liberty, which was thought to be less objectionable in itself, and to gain equally the same end; because, when all re

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striction was removed, the solid and more extensive banks would not fail, in time, to expel the smaller and weaker. In London, for example, no paper circulation existed, except that of the Bank of England. Yet this was not the effect of law, for no enactment prevented private bankers from circulating their own paper; but they knew, that, if they issued notes, these notes would immediately be presented for gold, or Bank of England paper, and, therefore, they declined the issue of them altogether. But in this country, the free and the restricted systems were united; we were in a state of restriction as related to every thing good and substantial-in a state of liberty as to every thing rotten and bad. The law said to any shop-keeper, however limited his means, you may establish a bank;" but, to persons of capital, willing to engage in a similar undertaking, it said, "your company shall not consist of more than six partners." We ought either to impose wholesome restrictions, or leave banking in full and complete liberty; and the present measure was an approach towards a system of the latter kind. It might, no doubt, be represented as a half measure. Imperfect it certainly was; and imperfect it must remain, till the country should be freed from its engagements with the Bank, or the Bank should step forward to release the country from such parts of its charter as impeded the establishment of a substantial system. It would be short-sighted in the Bank of England to imagine, that its interests were engaged in retarding this desirable consummation. If the Bank were to limit the circulation of its notes to London and the

vicinity, no banks now existing, or hereafter to be created, could interfere with its prosperity; while such a step would be attended with incalculable benefits, and would enable government to place the banking system of the empire on a more secure foundation.

The Earl of Lauderdale opposed the bill, and said that it was impossible to trace the late, and the existing embarrassments, to any excess of paper currency, or to any speculations arising out of such an excess ; and that there was no circumstance connected with them which might not as well have occurred, even if the circulation had contained as much gold as ministers now seemed to desire. Their true origin was in the state of the money market, and in the fall in the rate of interest, which, from the anxiety to employ money profitably, naturally led to speculation and overtrading. The commissioners of the Sinking Fund purchased annually about 5,000,000l.: every visit they made to the Stock Exchange threw additional capital into the market, created an increase of employment, and a rise of prices; for the inevitable effect of the operation of the Sinking Fund was, the noble lord maintained, to diminish the interest of capital. Such an influx of capital resembled the coming of a lottery prize of 30,000l. into a country town; it animated the whole district with a rage for scheming and speculation; and both argument and authority shewed, that to this cause the existing difficulties of the country must be, in a great measure, if not altogether, ascribed. The proposed remedy, therefore, by allowing banks to consist of an unlimited number of partners, would not be efficient, and was not necessary, VOL. LXVIII,

It would not be easy to form such' establishments; for people, in general, would be averse from engaging in speculations, in which every one would be liable jointly and severally to the last shilling of his fortune. It was natural that a bank consisting of a few partners, each of whom could attend to some department of the business, should be better conducted than a more unwieldy establishment, the most interested members of which were sleeping partners; and it could not be doubted, that, badlymanaged joint-stock banking companies would produce as much mischief and misery, as any system of currency, however vicious. The example of Scotland proved demonstrably how unnecessary it was to seek for security in a large number of partners. Scotland possessed thirty banks; of these seven were chartered banks; of the remaining twenty three, only seven were joint-stock companies, and the rest, with one or two exceptions, did not consist of more than four, six, or eight partners. Yet the solidity of the latter had never been more questioned than that of the former; their notes were as well established in circulation, and they had stood the storm with as much vigour. He could not conceive it, therefore, to be just, or necessary, or expedient, to interfere in the present state of the country, with the exclusive privileges of the Bank of England. Lord Ellenborough, likewise, could not anticipate much good from joint-stock companies; and expressed his apprehensions lest, in 1833, when the Bank charter would expire, great embarrassment,` as to the course which it might be deemed advisable to pursue, should arise from the existence of these establishments. [D]

House, was principally devoted to general disquisitions on the history and fluctuations of the currency, the sources of the existing distress, the other remedies which might be applied, and the conduct and influence of the country banks. Lord Liverpool, while he admitted that the measures which government was now carrying through were far from being perfect, and, in some individual details, might even be thought hard ones, begged the House to recollect, that the chartered privileges of the Bank of England stood in the way, and prevented government from going farther. Government, he had no hesitation in saying, ought to go farther, and would go farther, but, at the present moment, it could do no more. The law as to the constitution of banks was absurd and ridiculous in its nature, futile in its construction, and dangerous in its effects; but it had gradually grown up into what it was, and could be reduced only by time and trouble within reasonable dimensions or sound proportions. One of two systems might be adopted. One was, to allow only a limited number of banks, or to exact from such as were permitted to exist, securities for their solvency. This was in itself a wise and salutary system, and might be profitably followed, if circumstances would admit of its adoption. It prevailed in Massachusets, one of the most settled and best-established states of America. That state allowed only twelve chartered banks; and so soon as any one of them became unable to pay in specie, its charter was forfeited. The other system was one of unlimited liberty, which was thought to be less objectionable in itself, and to gain equally the same end; because, when all re

striction was removed, the solid and more extensive banks would not fail, in time, to expel the smaller and weaker. In London, for example, no paper circulation existed, except that of the Bank of England. Yet this was not the effect of law, for no enactment prevented private bankers from circulating their own paper; but they knew, that, if they issued notes, these notes would immediately be presented for gold, or Bank of England paper, and, therefore, they declined the issue of them altogether. But in this country, the free and the restricted systems were united; we were in a state of restriction as related to every thing good and substantial-in a state of liberty as to every thing rotten and bad. The law said to any shop-keeper, however limited his means, "you may establish a bank;" but, to persons of capital, willing to engage in a similar undertaking, it said, "your company shall not consist of more than six partners." We ought either to impose wholesome restrictions, or leave banking in full and complete liberty; and the present measure was an approach towards a system of the latter kind. It might, no doubt, be represented as a half measure. Imperfect it certainly was; and imperfect it must remain, till the country should be freed from its engagements with the Bank, or the Bank should step forward to release the country from such parts of its charter as impeded the establishment of a substantial system. It would be short-sighted in the Bank of England to imagine, that its interests were engaged in retarding this desirable consummation. If the Bank were to limit the circulation of its notes to London and the

vicinity, no banks now existing, or hereafter to be created, could interfere with its prosperity; while such a step would be attended with incalculable benefits, and would enable government to place the banking system of the empire on a more secure foundation.

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The Earl of Lauderdale opposed the bill, and said that it was impossible to trace the late, and the existing embarrassments, to any excess of paper currency, or to any speculations arising out of such an excess; and that there was circumstance connected with them which might not as well have occurred, even if the circulation had contained as much gold as ministers now seemed to desire. Their true origin was in the state of the money market, and in the fall in the rate of interest, which, from the anxiety to employ money profitably, naturally led to speculation and overtrading. The commissioners of the Sinking Fund purchased annually about 5,000,000l.: every visit they made to the Stock Exchange threw additional capital into the market, created an increase of employment, and a rise of prices; for the inevitable effect of the operation of the Sinking Fund was, the noble lord maintained, to diminish the interest of capital. Such an influx of capital resembled the coming of a lottery prize of 30,000l. into a country town; it animated the whole district with a rage for scheming and speculation; and both argument and authority shewed, that to this cause the existing difficulties of the country must be, in a great measure, if not altogether, ascribed. The proposed remedy, therefore, by allowing banks to consist of an unlimited number of partners, would not be efficient, and was not necessary, VOL. LXVIII,

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It would not be easy to form such' establishments; for people, in general, would be averse from engaging in speculations, in which every one would be liable jointly and severally to the last shilling of his fortune. It was natural that a bank consisting of a few partners, each of whom could attend to some department of the business, should be better conducted than a more unwieldy establishment, the most interested members of which were sleeping partners; and it' could not be doubted, that, badlymanaged joint-stock banking companies would produce as much mischief and misery, as any system of currency, however vicious. The example of Scotland proved demonstrably how unnecessary it was to seek for security in a large number of partners. Scotland pos sessed thirty banks; of these seven were chartered banks; of the remaining twenty three, only seven were joint-stock companies, and the rest, with one or two exceptions, did not consist of more than four, six, or eight partners. Yet the solidity of the latter had never been more questioned than that of the former; their notes were as well established in circulation, and they had stood the storm with as much vigour. He could not conceive it, therefore, to be just, or necessary, or expedient, to interfere in the present state of the country, with the exclusive privileges of the Bank of England. Lord Ellenborough, likewise, could not anticipate much good from joint-stock companies; and expressed his apprehensions lest, in 1833, when the Bank charter would expire, great embarrassment, as to the course which it might be deemed advisable to pursue, should arise from the existence of these establishments.

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In the committee, lord Liverpool called the attention of the House to the expediency of inserting a clause, authorizing the Bank of England to establish branch banks throughout the country. There was no doubt that such a power was vested in the Bank by their charter; but a question had arisen as to the extent of discretion with which they could clothe their agents. He did not think the establishment of branch banks would take place to any great extent; yet it was but right and prudent to give the Bank the opportunity of trying the experiment. He therefore proposed a clause allowing the Bank of England to carry on branch banks for the purpose of issuing cash notes, and bills of exchange.

The adoption of this clause rendered another proviso necessary, viz. a clause making the notes is sued by the branch banks payable at the place where they were is sued; for, to lay individuals under the necessity of bringing or sending their bank paper to London, before receiving gold for it, would be both inconvenient to the public and discreditable to the Bank. Something of this sort had recently occurred in Ireland. The Bank of Ireland had established branch banks in different parts of the country; a number of its notes had been presented at these new establishments to be exchanged for coin, and, for a while, were paid in coin, till the Bank, finding this inconvenient, refused to pay any where but in Dublin. The consequence was, that some of the notes were protested, and legal measures adopted to recover the amount. Being satisfied, however, that, the contract expressed on their notes being a general one, they were bound to pay wherever they

had agents, they had recourse to another expedient: they made an alteration in their notes, by inserting the word "Dublin," thus limiting the payment in specie to that city alone. Moreover, as the country banks were to be compelled to pay their notes in gold at the place where they were issued, it would be invidious not to lay the same obligation on the branch banks. The only difficulty was, that it would be necessary for the Bank so to frame its notes, as to ascertain at what particular place they had been issued: otherwise a person taking a note to a branch bank might be told, that it had not been issued there, and that there he could not have gold for it; but this obstacle, it was suggested, might be surmounted by the Bank adopting a note of a particular deseription for each of its branches; and perhaps to give the notes this local character, would tend to lessen in some measure the inducements to forgery. Lord Liverpool readily assented to the proposed clause, both because he thought it likely to prove a check on over-issues by the Bank, and because it was necessary to take every precaution to prevent the pos¬ sibility of discredit being thrown on any of these branch establishments; for the slightest imputation on the security of a branch of the Bank of England would be attended with far more serious consequences than even the failure of a private bank.

A greater degree of opposition was manifested to the bill, when it came down to the House of Commons. It was there resisted both by those who were hostile to the whole system on which ministers were proceeding, and by those who were over-chary of the privileges of the Bank. The clause, it was said,

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