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COPY of CORRESPONDENCE between the TREASURY and the BANK
DIRECTORS, relative to an Alteration in the EXCLUSIVE PRIVILEGES of the BANK of ENGLAND.
Copies of Communications be- tomed course, it becomes important
tween the First Lord of the to lose no time in considering Treasury and the Chancellor of whether any measures can be the Exchequer, and the Gover- adopted to prevent the recurrence nor and Deputy Governor of in future, of such evils as we have the Bank of England, relating recently experienced. to an alteration in the Exclusive However much the recent disprivileges enjoyed by the Bank tress may have been aggravated, of England.
in the judgment of some, by inciNo. I. Fife House, Jan. 13.
dental circumstances and particuGentlemen. We have the ho- that the principal source of it is to
lar measures, there can be no doubt nour of transmitting to you here
be found in the rash spirit of spewith a paper, containing our
culation which has pervaded the views upon the present state of the banking system of this coun- fostered, and encouraged, by the
country for some time, supported, try, with our suggestions thereupon, which we request you
will lay before the court of directors of evil, in future, must be found in an
The remedy, therefore, for this the Bank of England for their consideration. We have the ho improvement in the circulation of
country paper ; and the first meanour to be, gentlemen, &c.
sure which has suggested itself, to (Signed)
most of those who have considered LIVERPOOL. FREDERICK JOHN ROBINSON. circulation throughout the coun.
the subject, is a recurrence to gold The Governor and Deputy
try, as well as in the metropolis Governor of the Bank of
and its neighbourhood, by a repeal England.
of the act which permits country The panic in the money-market banks to issue one and two pound having subsided, and the pecu- notes until the year 1833; and by niary transactions of the country the immediate enactment of a prohaving reverted to their accus- hibition of any such issues at the 1
expiration of two or three years last thirty-five years, though Seotfrom the present period.
land during the whole of that It appears to us to be quite time has had a circulation of oneclear, that such a measure would pound notes; and the small pecube productive of much good ; that niary transactions of that part of it would operate as some check the United Kingdom have been upon the spirit of speculation, and carried on exclusively by the means upon the issues of country banks; of such notes. and whilst, on the one hand, it The issue of small notes, though would diminish the pressure upon it be an aggravation, cannot therethe Bank and the metropolis, inci- fore be the sole or even the main dent to an unfavourable state of cause of the evil in England. the exchanges, by spreading it over The failures which have occura wider surface; on the other red in England, unaccompanied as hand, it would cause such pressure they have been by the same occurto be earlier felt, and thereby en- rences in Scotland, tend to prove sure an earlier and more general that there must have been an unadoption of precautionary measures solid and delusive system of banknecessary for counteracting the in- ing in one part of Great Britain, conveniences incident to an export and a solid and substantial one in of the precious metals. But though the other. a recurrence to a gold circulation It would be entirely at variance in the country, for the reasons al- with our deliberate opinion, not to ready stated, might be productive do full justice to the Bank of Engof some good, it would by no means land, as the great centre of circugo to the root of the evil.
lation and commercial credit. We have abundant proof of the We believe that much of the truth of this position, in the events prosperity of the country for the which took place in the spring of last century is to be ascribed to 1793, when a convulsion occurred the general wisdom, justice, and in the money transactions and cir- fairness of the dealings of the culation of the country more ex- Bank; and we further think that, tensive than that which we have during a great part of that time, recently experienced. At that it may have been, in itself and by period nearly a hundred country itself, fully equal to all the imporbanks were obliged to stop pay- tant duties and operations confided ment, and parliament was induced to it. But the progress of the to grant an issue of Exchequer- country during the last thirty or bills to relieve the distress. Yet, forty years
, in every branch of inin the year 1793, there were no dustry, in agriculture, manufacone or two pound notes in circula- tures, commerce, and navigation, tion in England, either by country has been so rapid and extensive, banks or by the Bank of Eng- as to make it no reflection upon land.
the Bank of England to say, that We have a further proof of the the instrument, which, by itself, truth of what has been advanced, was fully adequate to former transin the experience of Scotland, actions, is no longer sufficient which has escaped all the convul- without new aids to meet the de sions which have occurred in the mands of the present times. money-market of England for the We have, to a considerable de
gree, the proof of this position, its own body in different parts of in the very establishment of so
the country. many country banks.
Secondly, That the Bank of Within the memory of many England should give up its excluliving, and even of some of those sive privilege as to the number of now engaged in public affairs, partners engaged in banking, exthere were no country banks, ex- čept within a certain distance from cept in a few of the great commer- the metropolis. cial towns.
It has always appeared to us, The money transactions of the that it would have been very decountry were carried on by supplies sirable that the Bank should have of coin and Bank notes from Lon- tried the first of these plans-that don.
of establishing branch banks upon The extent of the business of a limited scale. But we are not the country, and the improvement insensible to the difficulties which made from time to time in the would have attended such an exmode of conducting our increased periment, and we are quite satiscommercial transactions, founded fied that it would be impossible for on pecuniary credit, rendered such the Bank, under present circuma system no longer adequate, and stances, to carry into execution such country banks must have arisen, a system, to the extent necessary as in fact they did arise, from the for providing for the wants of the increased wealth and new wants of country. the country.
There remains, therefore, only The matter of regret is, not that the other plan the surrender by country banks have been suffered to the Bank of their exclusive priviexist, but that they have been suf- lege, as to the number of partners, fered so long to exist without con- beyond a certain distance from the trol or limitation, or without the metropolis. adoption of provisions calculated The effect of such a measure to counteract the evils resulting would be, the gradual establishfrom their improvidence or excess. ment of extensive and respectable
It would be vain to suppose, banks in different parts of the that we could now, by any act of country ; some perhaps with charthe legislature, extinguish the ters from the Crown, under cerexisting country banks, even if it tain qualifications, and some withwere desirable ; but it
be out. within our power, gradually at Here we have again the advanleast, to establish a sound system tage of the experience of Scotof banking throughout the coun- land. try; and if such a system can be In England there are said to be formed, there can be little doubt between 800 and 900 country that it would ultimately extin- banks; and it is no exaggeration guish and absorb all that is objec- to suppose that a great proportion tionable and dangerous in the pre- of them have not been conducted sent banking establishments. with a due attention to those pre
There appear to be two modes cautions which are necessary for of attaining this object :
the safety of all banking establishFirst, That the Bank of Eng- ments, even where their property land should establish branches of is most ample. When such banks stop, their creditors may ulti- The Bank of England may permately be paid the whole of their haps propose, as they did upon a demands, but the delay and shock former occasion, the extension of to credit máy, in the mean time, the term of their exclusive privi. involve them in the same diffic lege, as to the metropolis and its culty, and is always attended with neighbourhood, beyond the year the greatest injury and suffering 1833, as the price of this concesin the districts where such stop- sion. pages occur.
If this be the case It would be very much to be where the solidity of the bank is regretted that they should require unquestionable, what must it be any such condition. when (as too often happens) they It is clear that in point of serest on no solid foundation. curity they would gain by the con
In Scotland there are not more cession proposed to them, inasmuch than thirty banks; and these banks as their own safety is now neceshave stood firm amidst all the con- sarily endangered by all such convulsions in the money-market in vulsions in the country circulaEngland, and amidst all the dis- tion as we have lately and formerly tresses to which the manufactur- witnessed. ing and agricultural interests in In point of profit, would they Scotland, as well as in England, lose any thing by it, for which have occasionally been subject. they are entitled to demand com
Banks of this description must pensation ? necessarily be conducted upon the It is notorious, that at the pregeneral understood and approved sent time their notes circulate in principles of banking.
no part of England beyond the Individuals are, from the nature metropolis and its neighbourhood, of the institutions, precluded from except in Lancashire; and perhaps speculating in the manner in which for that district some special propersons engaged in country, and vision might be made. even in London banks, speculate But as it is the interest, so it in England.
has been, and ever will be, the enIf the concerns of the country deavour, of the country bankers to could be carried on without any keep the Bank of England notes other bank than the Bank of Eng- out of circulation in those parts of Tand, there might be some reason the kingdom where their own cirfor not interfering with their ex- culation prevails. In this they clusive privilege; but the effect of must always be successful, whilst the law at present is, to permit public credit continues in its ordievery description of banking, ex- nary state, and the exchanges not cept that which is solid and se- unfavourable to this country. The
consequencesare, that in such times Let the Bank of England reflect the Bank of England becomes in on the dangers to which it has a manner the sole depository for been recently subject, and let its gold; and in times of an opposite directors and proprietors then say, tendency, the sole resort for obwhether, for their own interests, taining it; that at one period their such an improvement as is sug- legitimate profit is curtailed by an gested in the banking system is accumulation of treasure beyond not desirable and even necessary. what would be required by a due
attention to their own private
Should the Bank be disposed to safety as a banking establishment; consent to a measure of this nature and at another period they are ex
in time to enable the government posed to demands which endanger to announce such a concession at that safety, and baffle all the ordi- the opening of parliament, it nary calculations of foresight and would afford great facilities to the prudence.
arrangement which they may have If, then, the Bank of England to propose for ensuring the stability has no country circulation, except of private credit, in which the
supin the county above named, the port of public credit and the mainonly question for them to consider tenance of public prosperity are is, whether, on the ground of pro- so materially and closely involved. fit, as well as security to them- No. II.-At a Court of Direcselves, the existing country circu- tors at the Bank, January 20: lation shall or shall not be improved. This Court having taken into
With respect to the extension of consideration the important paper the term of their exclusive privi- received from the first lord of the leges in the metropolis and its Treasury and the chancellor of the neighbourhood, it is obvious, from Exchequer, have resolved, what passed before, that parliament That, however: essentially they will never agree to it.
may differ on certain views and Such privileges are out of fa- sentiments therein laid down and shion ; and what expectations can expressed, it is not for the court at the Bank, under present circum- the present moment to offer any stances entertain, that theirs will opinions of their own,
paper be renewed ? But there is no rea- appearing to be intended as declason why the Bank of England ratory of the grounds on which should look at this consequence his majesty's ministers have come with dismay. They will remain to the determination to require the a chartered corporation for carry- Bank to give up its exclusive priing on the business of banking. vilege as to the number of partners In that character they will, we engaged in banking, except withtrust, always continue to be the in a certain distance from the mesole bankers of the state, and with tropolis. these advantages, so long as they It cannot, however, be consiconduct their affairs wisely and dered inconsistent with this forprudently, they always must be bearance, to state the apprehenthe great centre of banking and sions of the court of circulation.
that. confidence is not so fully reTheirs is the only establishment stored as lord Liverpool and the at which the dividend due to the chancellor of the Exchequer seem public creditor can by law be to imagine. paid.
Though the panic has subsided, It is to be hoped, therefore, that credit, both public and private, rethe Bank will make no difficulty mains in a very uncertain and anxin giving up their exclusive privi- ious state, leges, in respect to the number of That the country circulation is partners engaged in banking, as to in many parts extremely defective,
miles from the cannot be controverted;, and the metropolis,
Bank would very reluctantly op