mediately, and finally the whole of their claims. These facts were a strong presumptive proof that the Scotch system, if not quite perfect, was at least far superior to the one existing in England. The present system of country banking was most prejudicial in every point of view. He then described the terrible misery caused by the failure of the country banks. He trusted that the institution of Joint Stock Banks would place the currency on a firmer footing. He most sincerely trusted that the great obstacle to the proposed institutions, the want of a charter, would be removed. He hoped the directors of the Bank of England would seriously consider what advantage they would derive from refusing charters to these banks. He himself could not imagine what benefit they would derive from it; they no doubt had the right to prevent such charters being granted, but he hoped they would refrain from exercising their right. He eulogised highly the conduct of the directors during the late crisis; he could not conceive it possible for any body of men to have acted better, or to have exercised more judgment, discretion, and liberality than they had done-of which he hoped they would give a further instance by not opposing the grants of charters to the proposed new banks. He fully concurred with Mr. Huskisson, that it was impossible to maintain coin in circulation if paper of the same denomination were allowed to circulate along with it. Now was the most favourable opportunity of getting rid of the small notes. It would be impolitic and unsafe to wait the moment of returning prosperity, as the country bankers would be more reluctant to agree to it, and more able to oppose it. To stand gazing on the bank in idle expectation, now that the river was passable, would be an irreparable mistake. The ministerial propositions prevailed by a majority of 222 to 39, and a motion to continue the small notes of the Bank of England was rejected by 66 to 7.

45. The chief provisions of the Act (Statute 1826, c. 6) for prohibiting small notes in England are as follows

1. The Act repealing the Act (Statute 1777, c. 30) which prohibited promissory notes and bills under 20s. was repealed, thereby reviving the former Act; but all notes of private bankers stamped before the 5th of February, 1826, or of the Bank of England stamped before the 10th of October, 1826,

were exempted from its operation, and were permitted to be issued, re-issued, and negotiated until the 5th of April, 1829.

2. Any person after that date making, issuing, signing, or re-issuing any note or bill under £5, was subject to a penalty of £20.

3. Any person who published, uttered, or negotiated any promissory or other notes, or any negotiable or transferable bill, draft, or undertaking in writing, for the payment of 20s., or above that sum and less than £5, or on which such sum should be unpaid, should forfeit the sum of £20.

4. These penalties were not attached to any person drawing a cheque on his banker for his own use.

5. All promissory notes under £20, made payable to bearer on demand, were to be made payable at the Bank, or place where they were issued; and as many more places as the issuer pleased.

46. When the Government determined on suppressing the small note issues in England, they said that it was their intention to extend the measure in a short time to Scotland and Ireland. However much Scotland may have suffered from commercial overtrading, as every commercial country must occasionally do, no banking panic had ever occurred such as those which had so frequently desolated England. As soon as the ministerial intentions were known in Scotland, a great ferment was excited. Sir Walter Scott published three letters on the subject, under the name of "Malachi Malagrowther," which tended much to fan the public enthusiasm, and such an opposition was organised, that the Ministry were obliged to consent to appoint committees of both Houses on the subject. These committees sat during the spring of 1826, and investigated the whole subject of Scotch banking at great length, which had been very little understood in England before that time; and the result was so eminently favourable to the Scotch banking system, that the Ministry abandoned their intention of attempting to alter it. The evidence and reports of these committees will be noticed further on.

47. The year 1827 is memorable as the era when the principles of the Bullion Report were at length acknowledged to be

true, and professedly adopted by the Bank. Mr. William Ward stated in 1832 that there was not a single person in the Bank but who admitted that its issues should be regulated by the foreign exchanges and the bullion market, or disposed to act in opposition to it. That in 1819 the directors had forwarded a resolution to the House of Commons, denying that the exchanges were to be regarded in regulating the issues. Subsequently, however, to that year, opinions became changed, and they found the merits of the case such as they really were. He himself had always been convinced of the truth of Mr. Horner's principle, and, from his being connected with the exchanges, had many opportunities of observing the practical truth of it. The Bank Directors, however, were not convinced of it, because they found in practice, that the exchanges did not follow the issues of the Bank. But the truth was, that they neglected to consider the country issues, and it was only in 1819, that they obtained a correct account of the issues of country banks; when that was got, it was found that, taking the Bank and the country issues together, the principle was shown to be quite correct. The observation of these facts had gradually convinced the Directors, and, in 1827, he thought the court ripe for expunging the resolution of 1819, and it had accordingly been done. And in 1832 there was not a single director who disputed its truth.

48. Although the Act of 1775 had forbidden notes under £5 to be issued in England, it did not prohibit the circulation of the Scotch £1 notes in England, and they had always circulated in the districts adjacent to Scotland, and even as far south as York. When the English £1 notes were suppressed, it seemed naturally to follow that the circulation of the Scotch notes in England should be forbidden. But the districts in which they had always circulated, were as unanimous as Scotland itself against the measure. In 1828, the Ministry brought in a bill to restrain the circulation of Scotch bank notes in England. Sir James Graham presented a petition from the borderers, deprecating, in the most earnest terms, the withdrawal of the Scotch notes to which they had been so long accustomed. For seventy years, they said, they had possessed the advantage it was now sought to deprive them of-the advantage of the Scotch

currency. Seven-eighths of the rents of estates were paid in the paper currency of Scotland, and no loss had been sustained in consequence of it. After a debate of two nights, the motion was carried by 154 to 45. The Act (Statute 1828, c. 65) provided that after the 5th of April, 1829, no corporation or person whatever should publish, utter, negotiate, or transfer in any part of England, any promissory note, draft, engagement, or undertaking in writing, payable to bearer on demand, for less than £5, or upon which less than £5 remained unpaid, which should have been made or issued, or purport to have been made or issued, in Scotland or Ireland, or elsewhere out of England, under a penalty of not less than £5, or more than £20. The same exemption as to cheques as in the former Act.

49. In 1832, during the crisis of the Reform Bill, a run upon the Bank took place, which lasted for about a fortnight; but, as it was merely from political feeling in London, and did not extend into the country, no serious result ensued.

50. The Bank charter expired at the end of one year's notice, to be given after the 1st August, 1832, and this time the Bank had done no such services to the Government as to be in a position to demand from it a renewal of its monopoly several years before it expired. Moreover, these exclusive privileges, as Lord Liverpool said in 1825, were out of fashion. Many great monopolies were now on the eve of breaking up, and the public mind was more roused and enlightened on the subject of banking, from the discussions caused about the severe distress of 1825. Before taking any steps towards a renewal of the charter, the Government determined to have an inquiry before a Secret Committee of the House of Commons, which was appointed on the 22nd of May, 1832, and consisted of the following

members

Lord Althorp, Sir Robert Peel, Lord John Russell, Mr. Goulburn, Sir James Graham, Mr. Herries, Mr. Poulett Thompson, Mr. Courtenay, Colonel Maberley, Sir Henry Parnell, Mr. Vernon Smith, Mr. John Smith, Mr. Roberts, Sir M. W. Ridley, Mr. Attwood, Sir J. Newport, Mr. A. Baring, Mr. Irving, Mr. Warburton, Mr. G. Philips, Lord Morpeth, Mr. Morrison, Mr. Heywood, Lord Ebrington, Sir J. Wrottesley, Mr. Lawley, Mr.

Cavendish, Alderman Wood, Mr. B. Carter, Mr. Strutt, Mr. Stanley, Alderman Thompson.

51. The Committee was appointed during the height of the political excitement attending the passing of the Reform Bill, and sat for some months, and did not make any report till the end of the Session. The inquiry was extremely incomplete. Many of the most interesting subjects connected with it were scarcely touched upon. But the close of the Session made them report the evidence to the House as far as it had gone. It was expected that a new committee would have been appointed in the new Parliament to continue the inquiry, but the Government in the meantime made up their mind as to the changes they intended to make in the Bank monopoly, and dispensed with any further inquiry.

52. Although the inquiry was left in a very incomplete state as to many branches of the subject, the evidence given embraced many interesting points. The most important of which were, the rules adopted by the Bank for regulating their issues -the expediency or the contrary of publishing their accountsthe expediency or the contrary of establishing Joint Stock Banks, or of having one or more Banks of Issue in the metropolis-the causes of the panic of 1825, and the action of the Bank during that period-the advantages, or the contrary, of making Bank notes legal tender, and the effects of the usury laws on com

merce.

53. The great truths regarding the regulation of a paper currency, which had been approved of by the Bullion Committee were now unanimously recognised by the directors, and Mr. Horsley Palmer, the Governor of the Bank, being asked by what principle, in ordinary times, the Bank was guided in the regulation of its issues, said, that in a period of full currency, and, consequently, with a par of exchange, the Bank considered it desirable to invest two-thirds of its liabilities of all sorts in interest-bearing securities, and one-third in bullion. The circulation of the country being then regulated by the action of the foreign exchanges, the Bank was extremely desirous to avoid using any active power of regulating the